Death of the Spam Wrangler: Can-spam Private Plaintiffs Required to Show Actual Harm

• Jurisdiction: United States,Federal
• Publication year: 2010
• Citation: Vol. 6 No. 2

Washington Journal of Law, Technology and Arts Volume 6, Issue 2 Autumn 2010

Death of the Spam Wrangler: CAN-SPAM Private Plaintiffs Required to Show Actual Harm

Susuk Lim (fn*)

Abstract

In Gordon v. Virtumundo, the United States Court of Appeals for the Ninth Circuit published its first opinion on private plaintiff standing requirements for actions under the federal CAN-SPAM Act. The court strictly interpreted CAN-SPAM's enforcement language, rejecting attempts by professional litigants to insert themselves into CAN-SPAM's limited private right of action. This Article analyzes Gordon's treatment of CAN-SPAM's private right of action and federal preemption provisions. It concludes by assessing the decision's expected effect on future spam-related litigation.

Table of Contents

Introduction....................................................................................156

I. The can-spam Act of 2003..................................................156

II. The Gordon Decision................................................................159

III. Gordon's Effects on Future Spam Litigation............................161

A. Higher Threshold for Internet Access Service (IAS) Status.................................................................................162

B. The "Adversely Affected" Test and Required Showing of Actual Harm......................................................................165

C. CAN-SPAM Preempts Overlapping State Law.................167

D. Prevailing Defendants May Be Awarded Attorney's Fees 168

Conclusion......................................................................................168

Practice Pointers..............................................................................169

Introduction

The public furor over unsolicited commercial e-mail, known as spam, has fed a cottage industry dedicated to profiting from statutory damages codified in the CAN-SPAM Act of 2003.(fn1) Uncertainty about the scope of CAN-SPAM's private right of action and limited precedent left courts largely powerless to dismiss such claims without expending significant resources on evaluating their individual merits. In its landmark Gordon v. Virtumundo decision, the Ninth Circuit erased many, but not all, of these ambiguities. It derived eligibility from legislative intent and held that CAN-SPAM's private standing requirements should be narrowly construed.(fn2) The court also held that eligible private plaintiffs must demonstrate actual harm of a specific type and causation.(fn3) Finally, the court determined that CAN-SPAM's preemption clause was broad, only allowing spam-related litigation under state law if the violation materially and intentionally references the state law at issue and the law itself specifically relates to falsity or deception.(fn4) Gordon largely shuts out professional plaintiffs from CAN-SPAM eligibility. It also modifies the requirements for legitimate claimants, necessitating a change in litigation approach.

I. The can-spam Act of 2003

Unsolicited bulk and commercial e-mail messages, knowwn as spam, are sent in large quantities to indiscriminate sets of recipients. During the first half of 2009, spam constituted 85.5% of all e-mail traffic.(fn5) This ever-rising tide of spam has caused public consternation and high business spending toward network and business asset protection.(fn6 )Legislators balanced this public sentiment with the economic and marketing utility of legitimate commercial e-mail when they drafted and subsequently enacted CAN-SPAM in 2003.(fn7)

CAN-SPAM governs the content, representation, and delivery of commercial e-mail.(fn8) It does not outlaw unsolicited e-mail outright. Commercial e-mail is only unlawful if it does not allow for verifiable and timely user-initiated unsubscription,(fn9) contains inaccurate or misleading sender information,(fn10) or is sent under or through falsified means.(fn11) CAN-SPAM also limits standing to governmental and regulatory bodies, but provides a limited private right of action to a class of plaintiffs it terms Internet access services ("IASs").(fn12) The term "Internet access service" is statutorily defined as "a service that enables users to access content, information, electronic mail, or other services offered over the Internet, and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers."(fn13) In the absence of precedent, this language was sufficiently ambiguous to cause most courts to construe the definition very broadly.(fn14)

lASs are only granted CAN-SPAM standing if they suffer adverse effects as a result of a substantive CAN-SPAM violation.(fn15) The courts generally construed CAN-SPAM's "adverse effects" language to require a showing of both sufficient extent of harm as well as type of harm generally suffered by lASs.(fn16) However, the courts broadly refused to require a showing of any connection between specific violations and alleged harm.(fn17)

The Act provides for statutory damages of up to $100 per violating message(fn18) and $1,000,000 in aggregate.(fn19) It allows treble damages for aggregated or willful violations.(fn20) The Act also preempts related state law that "expressly regulates the use of electronic mail to send commercial messages, except to the extent that [it] prohibits falsity or deception."(fn21) State laws not specific to electronic mail are saved from preemption, as are laws addressing fraud or computer crime.(fn22)

Between CAN-SPAM's steep statutory damages, the ease of meeting its standing requirements, and widespread public hatred for spam, it is easy to see how an unscrupulous private plaintiff could make a significant amount of money by manipulating the previous regime. One CAN-SPAM defendant complained somewhat prophetically that such "a broad interpretation [would] create a flood of suits by 'spam litigation mills.'"(fn23)

II. The Gordon Decision

The Ninth Circuit chilled the potential anti-spam litigation industry with its decision in Gordon.(fn24) Appellant James S. Gordon was variously described as an "anti-spam enthusiast" and "professional plaintiff," whose sole source of income was monetary settlements from his litigation campaign.(fn25) His technique was to configure several Internet domains and e-mail inboxes under his control to not only passively accept spam but also to actively seek it. Once spam messages began arriving, Gordon would sue the senders or relaying providers. One such provider was Virtumundo, Inc., an e-mail marketing firm.

The district court determined that Gordon lacked CAN-SPAM standing and granted Virtumundo's motion for summary judgment.(fn26 )It held that while Gordon qualified as an IAS under the prevailing definition of the term,(fn27) he failed to show adverse harm because any harm he suffered was the same as that suffered by ordinary e-mail users.(fn28) The court further held that since Virtumundo did nothing to hide its e-mail domains from end-users, it did not materially falsify or deceive, thus...