e-Mail Troll Hushed

The Ninth Circuit in Gordon v. Virtumundo, 575 F.3d 1040, 1052 (9th Cir. 2009), held that the plaintiff lacked standing to sue under CAN-SPAM because the plaintiff did not “operate as a bona fide e-mail provider.” In Gordon, the plaintiff alleged it was an “Internet access service” provider adversely affected by spam, and sued under CAN-SPAM and the Washington Commercial Electronic Mail Act (CEMA), Wash. Rev. Code '19.190.010 et seq. While the defendant did not contest plaintiff's standing to bring state law CEMA claims, the defendant did contest plaintiff's standing to maintain its CAN-SPAM claims because the plaintiff undertook efforts to receive spam and sue over it.

In light of these and other facts, the Ninth Circuit held that plaintiff lacked standing to sue under CAN-SPAM because plaintiff was not a bona fide Internet access service provider. Central to its holding, the Ninth Circuit found that plaintiff “has purposefully avoided taking even minimal efforts to avoid or block spam through a variety of means for the purpose of facilitating litigation.” Id. at 1052. The Ninth Circuit did not decide whether plaintiff also lacked standing to maintain its state law CEMA claims.

Standing under MD and'CA State Law

Maryland's anti-spam statute is based on the Washington state anti-spam statute, CEMA, at issue in Gordon. Like CEMA, the Maryland anti-spam statute allows an “interactive computer service” provider or recipient of fraudulent spam e-mail to sue over such e-mail. See, Maryland Commercial Electronic Mail Act (MCEMA), Md. Code (1975, 2005 Repl. Vol.), '14-3001 et seq. Likewise, California's anti-spam statute allows an “electronic mail service provider” or recipient of fraudulent spam e-mail to sue over that e-mail. See, Cal. Bus. & Prof. Code 17538.4. The Maryland and California statutes each allow a service provider to obtain $1,000 for each unlawful e-mail.

In 2008, Beyond Systems, Inc. (BSI) sued Kraft Foods and Connexus Corp., and claimed that it was an “interactive computer service provider” and an “electronic mail service provider” that received alleged fraudulent e-mails. BSI is owned by Paul Wagner, the brother of Joe Wagner, owner of another anti-spam plaintiff, Hypertouch, Inc.

When it became clear that BSI was primarily and substantially engaged in filing lawsuits and provided services at most as a secondary purpose, the judge ordered a trial on the issue of whether Beyond Systems was a bona fide service provider under the California and Maryland statutes.

After the first phase of the trial, the jury first found that BSI met the technical definitions of the statutes. Then, during the second phase, defendants presented the jury with evidence showing that BSI did everything it could to trap spam; agreed to receive vast amounts of spam from plaintiff's brother, Joe Wagner of Hypertouch; filed dozens of lawsuits across the country over alleged spam based on the spam that BSI trapped and alleged spam that Joe Wagner of Hypertouch sent to BSI; generated revenues from litigation that far exceeded alleged services provided to customers; and otherwise functioned to file lawsuits and not act as a legitimate service provider.

When confronted with this evidence, the jury found that BSI was not a bona fide “electronic mail service provider” under California's anti-spam statute or an “interactive computer service provider” under Maryland's anti-spam statute. Instead, BSI functioned to “primarily or substantially” file anti-spam lawsuits.

Following extensive post-trial briefing by the parties, United States District Judge Peter J. Messitte issued a 37-page memorandum opinion finding that BSI lacks standing and could not pursue its claims. Considering “the Plain Meaning Rule of statutory interpretation; the matter of how legislative intent should be discerned in the interpretation of statutes; the ancient maxim of tort law volenti non fit injuria; federal preemption law; concerns of public policy; and ' no less ' the common sense that ought to inform the analysis of any legal question (emphasis added),” Judge Messitte found that BSI must be a bona fide Internet service provider to have standing to sue under the statutes, and that it lacked standing because “there was unquestionably sufficient evidence from which the jury could infer that BSI is not bona fide.” Among other things, “virtually all of BSI's time is spent in litigation,” “BSI chose to structure its e-mail routing and servers for the purpose of accumulating and trapping suspected spam (including creating bogus e-mail addresses) and in order to maximize the number of lawsuits it could generate based on the offending communication,” and “BSI has made over three times as much money in suing on spam as it has on any sort of valid business operation.”

Judge Messitte ruled that BSI also lacked standing for failure to show “injury-in-fact” because it affirmatively sought to collect as many e-mails as possible to sue over them, and that “a party may not deliberately act to cause injury to itself, then rely on that injury to satisfy standing requirements” under the state statutes.

Plaintiff Consented to'Receive e-Mails

Judge Messitte also ruled that BSI cannot sue under the state statutes because it consented to receive the e-mails over which it sued. According to Judge Messitte, it is “a fundamental principle of tort law that '[o]ne who effectively consents to conduct of another intended to invade his interests cannot recover in an action of tort for the conduct or for harm resulting from it.'” Judge Messitte noted that “the undisputed facts here show that BSI consented to the alleged harm about which it complains,” and that “[t]he evidence from Phase II of the preliminary trial was overwhelming to the effect that, either through Hypertouch or independently, BSI actively sought to receive and trap Kraft's Gevalia e-mails.” Further, “the trial testimony was explicit that BSI (Paul Wagner) knowingly consented to accept what it believed was spam from Hypertouch (Joe Wagner)” and that “as to all the e-mails in this case, it need only be recalled that BSI created hundreds of fictitious e-mail addresses and essentially maintained no filtering devices, while engaging in a pattern and practice of suing multiple mailers of suspect commercial e-mail.” Thus, “[t]he Court concludes that consent to harm precludes any claim for the harm and that BSI's consent to ('solicitation of' says it better) harm precludes it from going forward with the present action.”

Only bona fide service providers ' and not service providers that primarily or substantially sue over alleged illegal e-mail ' can sue under California and Maryland statutes. Further, plaintiffs cannot pursue claims under either statute if they consented or undertook actions to receive the e-mails.

Conclusion

This ruling confirms what the law and common sense already dictated: Plaintiffs cannot cause their own injuries and then seek millions from genuine companies under statutes designed to protect real business and consumers. The ruling thus provides a complete defense to legitimate companies targeted by opportunistic plaintiffs that exist solely to recover for claims they conjured out of thin air.

Ari N. Rothman is an attorney at Venable LLP who represented Defendant Connexus Corp. at trial along with Venable attorneys J. Douglas Baldridge and Lisa Jose Fales.

A federal judge in Beyond Systems, Inc. v. Kraft Foods, Inc., No. 8:08-cv-00409 (Dist. Ct. Maryland) recently ruled that an Internet service provider is barred from pursuing claims for alleged violations of the California and Maryland anti-spam statutes because it existed primarily and substantially to collect e-mails it believed to be spam and sue over it, and because it consented to receive the e-mails over which it sues. This ruling confirms that plaintiffs cannot cause their own injuries to extract millions in statutory damages, and will prevent serial plaintiffs from abusing statutes designed to protect genuine companies and individuals. Simultaneously, it allows legitimate companies to send lawful commercial e-mails without the threat that opportunistic plaintiffs will manufacture claims to game the system.

Standing under CAN-SPAM

CAN-SPAM (15 U.S.C. ”7701 et seq.) is the federal law that regulates commercial e-mail, and prohibits certain types of commercial e-mail identified by the statute. CAN-SPAM expressly allows an “Internet access service” to sue for violations of the statute. 15 U.S.C. '7706(g).

The Ninth Circuit in Gordon v. Virtumundo, 575 F.3d 1040, 1052 (9th Cir. 2009), held that the plaintiff lacked standing to sue under CAN-SPAM because the plaintiff did not “operate as a bona fide e-mail provider.” In Gordon , the plaintiff alleged it was an “Internet access service” provider adversely affected by spam, and sued under CAN-SPAM and the Washington Commercial Electronic Mail Act (CEMA) , Wash. Rev. Code '19.190.010 et seq. While the defendant did not contest plaintiff's standing to bring state law CEMA claims, the defendant did contest plaintiff's standing to maintain its CAN-SPAM claims because the plaintiff undertook efforts to receive spam and sue over it.

In light of these and other facts, the Ninth Circuit held that plaintiff lacked standing to sue under CAN-SPAM because plaintiff was not a bona fide Internet access service provider. Central to its holding, the Ninth Circuit found that plaintiff “has purposefully avoided taking even minimal efforts to avoid or block spam through a variety of means for the purpose of facilitating litigation.” Id. at 1052. The Ninth Circuit did not decide whether plaintiff also lacked standing to maintain its state law CEMA claims.

Standing under MD and'CA State Law

Maryland's anti-spam statute is based on the Washington state anti-spam statute, CEMA, at issue in Gordon. Like CEMA, the Maryland anti-spam statute allows an “interactive computer service” provider or recipient of fraudulent spam e-mail to sue over such e-mail. See, Maryland Commercial Electronic Mail Act (MCEMA), Md. Code (1975, 2005 Repl. Vol.), '14-3001 et seq. Likewise, California's anti-spam statute allows an “electronic mail service provider” or recipient of fraudulent spam e-mail to sue over that e-mail. See, Cal. Bus. & Prof. Code 17538.4. The Maryland and California statutes each allow a service provider to obtain $1,000 for each unlawful e-mail.

In 2008, Beyond Systems, Inc. (BSI) sued Kraft Foods and Connexus Corp., and claimed that it was an “interactive computer service provider” and an “electronic mail service provider” that received alleged fraudulent e-mails. BSI is owned by Paul Wagner, the brother of Joe Wagner, owner of another anti-spam plaintiff, Hypertouch, Inc.

When it became clear that BSI was primarily and substantially engaged in filing lawsuits and provided services at most as a secondary purpose, the judge ordered a trial on the issue of whether Beyond Systems was a bona fide service provider under the California and Maryland statutes.

After the first phase of the trial, the jury first found that BSI met the technical definitions of the statutes. Then, during the second phase, defendants presented the jury with evidence showing that BSI did everything it could to trap spam; agreed to receive vast amounts of spam from plaintiff's brother, Joe Wagner of Hypertouch; filed dozens of lawsuits across the country over alleged spam based on the spam that BSI trapped and alleged spam that Joe Wagner of Hypertouch sent to BSI; generated revenues from litigation that far exceeded alleged services provided to customers; and otherwise functioned to file lawsuits and not act as a legitimate service provider.

When confronted with this evidence, the jury found that BSI was not a bona fide “electronic mail service provider” under California's anti-spam statute or an “interactive computer service provider” under Maryland's anti-spam statute. Instead, BSI functioned to “primarily or substantially” file anti-spam lawsuits.

Following extensive post-trial briefing by the parties, United States District Judge Peter J. Messitte issued a 37-page memorandum opinion finding that BSI lacks standing and could not pursue its claims. Considering “the Plain Meaning Rule of statutory interpretation; the matter of how legislative intent should be discerned in the interpretation of statutes; the ancient maxim of tort law volenti non fit injuria; federal preemption law; concerns of public policy; and ' no less ' the common sense that ought to inform the analysis of any legal question (emphasis added),” Judge Messitte found that BSI must be a bona fide Internet service provider to have standing to sue under the statutes, and that it lacked standing because “there was unquestionably sufficient evidence from which the jury could infer that BSI is not bona fide.” Among other things, “virtually all of BSI's time is spent in litigation,” “BSI chose to structure its e-mail routing and servers for the purpose of accumulating and trapping suspected spam (including creating bogus e-mail addresses) and in order to maximize the number of lawsuits it could generate based on the offending communication,” and “BSI has made over three times as much money in suing on spam as it has on any sort of valid business operation.”

Judge Messitte ruled that BSI also lacked standing for failure to show “injury-in-fact” because it affirmatively sought to collect as many e-mails as possible to sue over them, and that “a party may not deliberately act to cause injury to itself, then rely on that injury to satisfy standing requirements” under the state statutes.

Plaintiff Consented to'Receive e-Mails

Judge Messitte also ruled that BSI cannot sue under the state statutes because it consented to receive the e-mails over which it sued. According to Judge Messitte, it is “a fundamental principle of tort law that '[o]ne who effectively consents to conduct of another intended to invade his interests cannot recover in an action of tort for the conduct or for harm resulting from it.'” Judge Messitte noted that “the undisputed facts here show that BSI consented to the alleged harm about which it complains,” and that “[t]he evidence from Phase II of the preliminary trial was overwhelming to the effect that, either through Hypertouch or independently, BSI actively sought to receive and trap Kraft's Gevalia e-mails.” Further, “the trial testimony was explicit that BSI (Paul Wagner) knowingly consented to accept what it believed was spam from Hypertouch (Joe Wagner)” and that “as to all the e-mails in this case, it need only be recalled that BSI created hundreds of fictitious e-mail addresses and essentially maintained no filtering devices, while engaging in a pattern and practice of suing multiple mailers of suspect commercial e-mail.” Thus, “[t]he Court concludes that consent to harm precludes any claim for the harm and that BSI's consent to ('solicitation of' says it better) harm precludes it from going forward with the present action.”

Only bona fide service providers ' and not service providers that primarily or substantially sue over alleged illegal e-mail ' can sue under California and Maryland statutes. Further, plaintiffs cannot pursue claims under either statute if they consented or undertook actions to receive the e-mails.

Conclusion

This ruling confirms what the law and common sense already dictated: Plaintiffs cannot cause their own injuries and then seek millions from genuine companies under statutes designed to protect real business and consumers. The ruling thus provides a complete defense to legitimate companies targeted by opportunistic plaintiffs that exist solely to recover for claims they conjured out of thin air.

Ari N. Rothman is an attorney at Venable LLP who represented Defendant Connexus Corp. at trial along with Venable attorneys J. Douglas Baldridge and Lisa Jose Fales.