A case for national e-mail regulation: state UCE statutes have infirmities: no matter how you test state UCE statutes, they are ineffective to stop spam and many are invalid under the dormant commerce clause.

• Author: Booher, Troy L.

BY April of this year, 30 states had enacted statutes to combat the growing number of unsolicited commercial e-mails (UCE), better known by the term "spam." A list of the statutes appears in the box on page 361.

Unfortunately, insofar as UCE statutes provide a cause of action for individuals, they do not deter those who send the most bothersome barrage of (usually sexually explicit) unwanted e-mail because the majority of those senders are virtually impossible to locate or are judgment proof, or both. Individual plaintiffs, as opposed to state attorneys general or Internet service providers simply do not have the resources to combat the real problem. (1) Thus, these statutes are seldom effective. (2)

Because the worst offenders generally are unreachable, UCE statutes are used primarily against reputable companies-Internet service providers and telecom companies--that, typically unknowingly, violate them. One disturbing trend is for plaintiffs' attorneys to send a settlement letter along with a complaint when a company with sufficiently deep pockets arguably violates the statute, knowing that most companies would rather settle for a few thousand dollars than incur the costs of answering. (3) How to defend against this?

HOW TO CHALLENGE

The most (cost) effective defense against this practice, aside from amending the UCE statute to make it less useful to this type of plaintiffs' attorney or pushing through federal legislation that pre-empts the statute, (4) is to persuade a court to strike down the statute on constitutional grounds. Because UCE statutes seek to regulate commercial e-mails, one obvious avenue of attack is the "dormant commerce clause" of the U.S. Constitution. (5) This specific constitutional challenge makes, or at least ought to make, sense.

The dormant commerce clause is the name given to what courts take to be the "negative implication of the commerce clause." (6) This implication is that states lack the power to regulate interstate commerce because Congress possesses it. The doctrine, however, rests on a fiction--the dormant commerce clause cannot simply forbid states to regulate whatever the federal government could regulate under the commerce clause because Congress's power (since the New Deal anyway) is so expansive that this would leave states effectively powerless. An independent test, not simply a negative implication, is necessary to determine when states have overstepped commerce clause boundaries.

Consistent with this, the U.S. Supreme Court has "articulated a variety of tests in an attempt to describe the difference between those regulations that the Commerce Clause permits and those regulations that it prohibits." (7) These tests include: (1) whether a state statute explicitly favors in-state over out-of-state economic interests (the "protectionist test"); (8) (2) whether a statute's practical effect is "to control conduct beyond the boundaries of the state" (the "extraterritorial effect test"); (9) (3) whether a sufficiently negative "effect would arise if not one, but many or every, state adopted similar[, but inconsistent,] legislation" ("the inconsistent regulation test"); (10) and (4) whether the benefit the state receives from the statute is clearly outweighed by the burden that it imposes on interstate commerce (the "undue burden test"). (11)

Because UCE statutes do not typically or expressly discriminate openly against out-of-state interests, the protectionist test is not practical. Moreover, because in the UCE setting states are not "market participants," one must ignore that aspect of the dormant commerce clause doctrine. (12) Thus, UCE statutes will be examined under only the last three tests.

STATING THE TESTS

The notion that UCE statutes violate the dormant commerce clause is straightforward and convincing.

1. Extraterritorial Effects Test

   First, these statutes fail the extraterritorial effects test because they regulate activities that occur wholly outside the state that has enacted such a statute. "The critical inquiry," the Supreme Court said in Healy v. Beer Institute, "is whether the practical effect of the regulation is to control conduct beyond the boundaries of the state." (13) There can be little doubt that UCE statutes have the practical effect of regulating extraterritorial conduct--every one of them, with the exception of Maryland's, applies to non-residents.

   * Seven (Arizona, Arkansas Idaho, Louisiana, Missouri, Nevada and Wisconsin) apply up to the limits of the state's long-arm statute.

   * Five (Connecticut, Iowa, Oklahoma, Utah and Virginia) apply to any e-mail sent through a network within the state.

   * Nine (Delaware, Indiana, Kansas, Maryland, Rhode Island, South Dakota, Washington, West Virginia and Wyoming) apply to e-mails where the sender knows or has reason to know that it will reach the state' s residents.

   * One (Louisiana) applies when the email is sent to more than 1,000 recipients.

   * One (North Carolina) applies to any e-mail sent into or within the state.

   * One (Utah) applies to any e-mail sent to a resident of the state.

   * One (Ohio) applies when e-mail is sent to an e-mail address normally accessed by a resident of the state, to an email address normally accessed from a computer in the state, or to an e-mail address for which the bills from the e-mail service provider are sent to a physical address within the state.

   * One (Missouri) applies to e-mails sent by a person or entity conducting business in the state.

   * Five (California, Colorado, Illinois, Minnesota and Tennessee) apply to e-mail that travels through a provider's server or equipment in the state to a resident of the state.

   The diverse ways in which UCE statutes reach out-of-state senders make it virtually impossible for senders to know with how many statutes govern their conduct, if any, because it is impossible to know, or prohibitively expensive to ascertain, a recipient's physical location from an e-mail address alone. There is no practical way for a sender to know simultaneously the states through which any given e-mail will traverse a computer network, the states in which an e-mail may end up, and the state of residence for each e-mail recipient, regardless of where recipients may be located at the time they open their e-mail.

   As a result, to ensure compliance with UCE statutes, senders will be forced to assume that all statutes apply, no matter where the e-mail actually travels and no matter its destination. To be safe, even when the sender is in, say, Colorado and the recipient, unbeknownst to the sender, is in Vermont, which has no UCE statute, the sender will have to comply with Utah's UCE statute to be safe. So, states with the most restrictive UCE statutes effectively regulate the conduct of all senders and require e-mails to take a particular form even though many states have elected not to regulate UCE at all. Thus, many UCE statutes have the practical effect of regulating conduct that occurs wholly outside the states borders.

2. Inconsistent Regulation Test

   Second, the statutes fail the inconsistent regulation test because they potentially expose those who send UCE to inconsistent regulatory regimes. Twenty-five states prohibit commercial e-mails if the information is falsified; (14) 18 require opt-out instructions or certain contact information, or both; (15) nine require "ADV:" in the subject line; (16) one requires "ADV" in the subject line; (17) and one requires either "ADV" or "ADVERTISING" in the subject line. (18)

   For UCE with adult-oriented content, two states require "ADV-ADULT" in the subject line; (19) six require "ADV:ADLT"; (20) one requires "ADV:ADULT"; (21) and one requires "ADULT ADVERTISEMENT." (22)

3. Undue Burden Test

   Third, most UCE statutes fail the undue burden test because the benefits they provide are clearly outweighed by the burdens they impose on interstate commerce. Because of senders of commercial e-mail do not know which UCE statutes may apply, if any, they must attempt simultaneously to comply with every statute, a task that significantly raises compliance costs. At the very least, the higher costs of doing business on the Internet create lost opportunity costs to consumers. (23)

   Coupled with this burden is little, if any, foreseeable benefit to the states. The worst offenders will not be deterred by lawsuits brought by individuals, who have almost no actual damages and generally have very limited statutory damages available. It is simply not worth their time to go after this type of offender. Moreover, for companies that comply with, for example, the subjectline requirements, their e-mails will be readily identifiable as advertising, which leaves consumers...