New Developments in Anti-Spam Law – Spam Plaintiff Ordered to Pay Spam Defendant’s Attorneys’ Fees under CAN-SPAM

Under CAN-SPAM, courts have discretion to award a prevailing party defendant its attorneys’ fees incurred in defending a case brought under that law. In a decision issued on August 1, 2007, in Gordon v. Virtumundo, the United States District Court for the Western District of Washington awarded Virtumundo, see previous post, more than $100,000.00 in attorneys’ fees and costs incurred in defense of that suit. The Court, however, only awarded Virtumundo approximately 20% of the more than $500,000.00 that its counsel requested. The opinion is accessible here.

In ruling on the request for fees, the Court took into account the fact that Gordon had not claimed that he had suffered any actual injury, that Gordon actually benefitted from receiving spam, and that Gordon appeared to be in the business of collecting email in order to bring lawsuits. The Court commented that:

First, it is obvious that Plaintiffs are testing their luck at making their “spam business” extraordinarily lucrative by seeking statutory damages through a strategy of spam collection and serial litigation. Plaintiffs are parties to ten additional cases similar to the instant case in the Western District of Washington alone, see Case Nos. C06-1118-MJP, C06-1129-JCC, C06-1210-TSZ, C06-1284-TSZ, C06-1348-MJP, C06-1350-JCC, C06-1469-MJP, C06-1537-JCC, C07-222-RSM, and C07-386-MJP, as well as at least one “spam” case in the Eastern District of Washington, see Case No. C05-5079-FVS. The Court is not merely speculating on Plaintiffs' motives or assessment of potential profits. In analyzing Plaintiffs' CAN-SPAM standing, this Court noted that Gordon testified that the “benefits” of receiving spam can be quantified in terms of his dissertation research, as well as “settlement agreements for people who have said that they wouldn't spam me any longer.” (May 15, 2007 Order 7.) The Court recounted the lists of Gordon and Omni “clients,” more than half of whom share the “Gordon” surname. (Id. at 6-7.) The Court recognized that Gordon took over control of e-mail accounts for “gordonworks” clients in order to continue collecting spam. (Id. at 7.) The Court noted that none of the Omni or Gordon clients has paid Plaintiffs for their services. (Id.) Gordon testified that all of Plaintiffs' income or revenue for 2006 and 2007 has been from settlements and disputes. (Id. at 7-8.) Gordon also testified regarding the “time-consuming process” of collecting, sorting, and compiling spam regarding these and other defendants. (Id. at 8.) Clearly, Plaintiffs are assembling a litigation factory, which, if successful, could net millions of dollars in profit, at least theoretically.

Moreover, after assessing the utter lack of evidence going to any technical impact or financial harm due to the alleged illegal spam, this Court found it significant that Gordon did not seek actual damages in the instant litigation, because none exist, and that he is instead seeking solely statutory damages for each e-mail sent. (Id. at 8.) Plaintiffs admitted that they benefit from receiving spam, and this Court concluded that “Plaintiffs' continued use of other people's e-mail addresses to collect spam and their undisputed ability to separate spam from other e-mails for generating lawsuit-fueled revenue directly contradicts any hint of adverse effect that otherwise might exist.” (Id. at 15.) Not only are Plaintiffs “ not the type of entity that Congress intended to possess the limited private right of action it conferred on adversely affected bona fide Internet access service providers” (id. at 15), they are not the type of plaintiff that should be allowed to pursue the strategy outlined above without financial cost.(emphasis added

In light of the August 1st decision in the Gordon v. Virtumundo case, professional spam collecting plaintiffs (like Beyond Systems in its dozens of Maryland cases) need to beware that they may be subject to paying the legal fees incurred by those that they choose to sue in baseless cases.

Interesting Developments in Anti-Spam Law – Gordon v. Virtumundo – CAN-SPAM Preempts Washington State Anti-Spam Law Causes of Action

The law in regard to CAN-SPAM’s preemption of state law causes of action continues to develop. On May 15, 2007, the United States District Court for the Western District of Washington at Seattle decided the case of Gordon v. Virtumundo, Case No.: 06-00204, the Court held that CAN-SPAM preempted a plaintiff’s claims under Washington State’s Commercial Electronic Mail Act: WASH. REV. CODE §§19.190.010–.110. The Court relied, in part, on the decision of the Fourth Circuit in the Omega World Travel v. Mummagraphics case. The Court specifically held that:

This Court agrees with the Omega court's assessment of congressional purpose as well as its preemption holding. Applying the Omega analysis here, the Court finds the following. Plaintiffs' allegations here are that “from addresses” ending, for example, with “vm-mail.com” do not suffice to make the header not false or misleading because they require one to figure out to whom or what “vmmail.com” refers-i.e., the message is not obviously from “Virtumundo.” The parties agree that identification can be achieved by reverse-look-up using, for example, the “WHOIS” database, which “is an Internet program that allows users to query a database of people and other Internet entities, such as domains, networks, and hosts.” Definitions, Implementation, and Reporting Requirements Under the CAN-SPAM Act; Proposed Rule, 70 Fed.Reg. 25,426, 25,446 n. 233 (May 12, 2005). The WHOIS database is maintained by domain registrars and “includes the registrant's company name, address, phone number, and e-mail address.” Id. Plaintiffs do not dispute that WHOIS data can identify Defendants, and they have pointed to no e-mails that fail to provide information useful to a correct WHOIS look-up. Plaintiffs instead contend that this extra step should not be required of consumers. Regardless of the merits of that argument, the Court cannot find that “from addresses” ending with a domain that facilitates an accurate identification of Defendants could in any sense be found “false” or “deceptive.” Accordingly, while claims actually alleging falsity or deception under CEMA would not be preempted, Plaintiffs' claims here-for, at best, “incomplete” or less than comprehensive information-are for immaterial errors that may not be litigated under state law. Plaintiffs have not raised any issues of material fact that could prove Defendants' e-mails materially “false or deceptive” as those terms are used in the CAN-SPAM Act. Accordingly, Plaintiffs' CEMA claims are preempted by CAN-SPAM.

It seems that a consensus is building in regard to CAN-SPAM’s preemption of state law causes of action that are not based on traditional fraud claims of actual injury suffered by the plaintiff seeking to enforce the law.

Business Litigation - New Case on CAN-SPAM's Preemption of State Anti-Spam Law Claims

Another case in the burgeoning case law in regard to CAN-SPAM’s preemption of state law claims for alleged spamming activity has been decided. In Kleffman v. Vonage Holdings Corp., decided on May 23, 2007 by the United States District Court for the Central District of California, the Court held that a plaintiff’s claims that he received 11 emails advertising Vonage’s telephone service in violation of the California Business and Professions Code Section 17529.5 were preempted by CAN-SPAM.

Specifically, the Court held that Kleffman’s claims were “clearly preempted” because “He does not allege a traditional tort theory at all, or even that he was at any point misle[d] by any of the eleven Vonage emails.”

The decision is based on reasoning similar to that set forth in the case of Omega World Travel v. Mummagraphics see earlier post here a 2006 decision by the United States Court of Appeals for the Fourth Circuit (which is the Federal Appeals Court for, inter alia, Maryland and Virginia). Even though the Kleffman Court’s opinion relied on the same underlying authorities as the Mummagraphics opinion, the Court distinguished Mummagraphics and seemed to try and limit its holding. The Kleffman case is now on appeal to the United States Court of Appeals for the Ninth Circuit. A copy of the Court’s opinion will be made available soon.