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ELECTRONIC MESSAGING
Gordon v Virtumundo Inc.
No. 07-35487 D.C. No. CV-06-00204-JCC 6 August 2009
A US court of appeals holds that the federal CAN-SPAM Act preempts state legislation
on electronic commercial messages except in the case when state law specifically
prohibits fraud in such messages.
On 9 August 2009, the US Court of
Appeals for the Ninth Circuit (‘the
Court’) issued an opinion in
Gordon v. Virtumundo, Inc., et al.1
which limited future causes of
action under the federal Controlling
the Assault of Non-Solicited
Pornography and Marketing Act2
(CAN-SPAM) and dismissed claims
based on the Washington state laws,
including the Commercial
Electronic Mail Act3 (CEMA) which
was intended to target deceptive
advertising. Looking beyond the
case’s significance for the litigants,
the decision may result in fewer
available forums for anti-spam
activists and may also present
obstacles for legitimate claimants
seeking relief under CAN-SPAM.
Enacted by Congress in 2003,
CAN-SPAM is intended to protect
consumers from deceptive
electronic marketing by commercial
advertisers, known as ‘spammers’.
CAN-SPAM requires spammers to
make certain marketing-related
disclosures, to properly scrub
against relevant do-not-contact lists
and to provide an opt-out
mechanism that allows consumers
to elect not to receive future
electronic communications. CANSPAM is enforced by state and
federal regulators, but also provides
a narrow private cause of action for
internet access service providers
adversely affected by a violation of
the Act. CAN-SPAM allows for
injunctive and monetary relief4.
Case snapshot
In 2006, James S. Gordon, Jr., and
his company, Omni Innovations
LLC, filed suit against Virtumundo,
Inc., an online commercial
advertising company, alleging
violations of CAN-SPAM and
CEMA. Mr. Gordon requested
injunctive relief and claimed
millions in damages resulting from
his experiences with spam.
The Court dismissed all of Mr.
Gordon’s claims, holding that he
e-commerce law reports volume 09 issue 04
did not qualify for CAN-SPAM’s
narrow private cause of action. The
Court found Mr. Gordon to be an
opportunistic plaintiff based on the
manner in which he had
orchestrated his suit. Mr. Gordon
hosted an internet domain and had
created multiple email accounts on
this domain for family and friends.
Mr. Gordon proceeded to request
that he receive commercial emails
from a number of businesses. Some
such businesses then began to send
email advertisements, including
Virtumundo. Refusing to utilize
spam filters or any other spamblocking tools, Mr. Gordon took no
efforts to prevent the commercial
emails from clogging the various
email boxes5. In fact, Mr. Gordon
welcomed the spam to build legal
suits against Virtumundo and other
online advertisers6.
Standing threshold
CAN-SPAM provides for a private
cause of action only for plaintiffs
that are providers of internet access
service (IAS) and are adversely
affected by a violation of CANSPAM7. The Court considered
whether Mr. Gordon was a proper
plaintiff under this criterion. Upon
review of the record and the
relevant case law, the court
determined that Mr. Gordon did
not qualify as an IAS provider and
that he was not ‘adversely affected’
by violations of the Act so as to have
standing under CAN-SPAM8.
The Court determined that
Congress intended the CAN-SPAM
private cause of action to be limited
to bona fide IAS providers, which
did not include Mr. Gordon
because he did not operate an
authentic internet service9. The
Court pointed out that IAS
providers, such as Verizon, and
social networking sites, such as
Facebook, could be legitimate IAS
providers under certain
circumstances10. Merely providing
email accounts is not adequate,
although providing email accounts
and email access may be sufficient11.
This implies that individual
consumers - even those managing
email accounts for others - do not
have standing to sue under CANSPAM12.
The Court likewise found that Mr.
Gordon did not suffer an adverse
effect sufficient to make a private
claim under CAN-SPAM. The
Court determined that Congress
intended an adverse effect to
include more than a mere
nuisance13. The harm must be real
and beyond that typically
experienced by IAS providers,
including operational and technical
problems and associated financial
burdens14. Such damage must be
caused directly by the presence of
spam. However, the Court noted
that spam does not generally cause
network crashes and other such
disasters15. Thus, an IAS provider
must suffer seriously debilitating
network, infrastructure and
bandwidth-related impairments
directly attributable to the presence
of unwanted spam to have standing
under the Act16.
The opinion instructs lower court
judges to review standing for CANSPAM claimants with an extremely
critical eye, taking note of whether
the plaintiff appears to operate a
valid internet service business or if
the plaintiff has other motives17. The
opinion suggests that serial litigants,
such as Mr. Gordon, should not be
eligible for the vast statutory
damages contemplated by CANSPAM. By largely eliminating such
individuals from the pool of
potential plaintiffs, the Court left
CAN-SPAM enforcement to
regulators, states and legitimate
ISPs.
Federal preemption
Mr. Gordon made additional state
law claims under CEMA, which
were dismissed by the Court as
preempted by CAN-SPAM. The
09
ELECTRONIC MESSAGING
Court examined Mr. Gordon’s
claim that Virtumundo’s emails
concealed information related to
the email header or sender’s
information18. Mr. Gordon argued
that an email sender’s name should
be explicit in the header of the
email, an argument that the court
found unconvincing based at least
in part on the fact that a simple
internet search would have
provided Mr. Gordon with the
sender’s information19.
CAN-SPAM expressly preempts
state laws regulating the use of
electronic commercial messages,
except to the extent that any such
law prohibits falsity or deception in
such messages20. Interpreting this
exemption narrowly, the court
determined that Congress intended
for CAN-SPAM to regulate
commercial email messages on a
nationwide basis and to exempt
only those state laws that specifically
target fraud or deception in
commercial emails21. Upon
reflection, the court dismissed the
CEMA claims because they did not
fall under this narrow exemption.
The Attorney General of
Washington opposed the court’s
ruling and submitted an amicus
curiae brief arguing that CEMA was
narrowly tailored to prohibit
deceptive electronic mail and
therefore should not be subject to
preemption22. CEMA targets
deceptive practices by prohibiting
commercial email messages that
‘misrepresent’ or ‘obscure’
information identifying the email
sender or transmission path23. The
Court analyzed these terms and
found the state law to have an
expansive reach beyond false and
deceptive practices24. As a result,
CEMA did not fall within the
preemption exemption set forth in
CAN-SPAM.
In recent weeks, internet chatter
on Gordon has focused on possible
implications of the new standing
threshold and how CEMA’s
10
preemption may impact anti-spam
legislation in other states.
On standing, individual anti-spam
activists have attempted to use
CAN-SPAM litigation as a tool to
discourage spammers25 and such
litigation has proven to be
financially successful for many
litigants26. In fact, according to court
documents, Mr. Gordon reported
that all of his income from 2006
and 2007 was from settlements and
litigation27. However, as pointed out
by Eric Goldman, Associate
Professor of Law at Santa Clara
University School of Law, the
Gordon standing requirement may
discourage activists from initiating
CAN-SPAM litigation in the
future28. Without standing, the
litigation ‘business model’, as Mr.
Goldman refers to it, is not lucrative
considering litigation costs and
expenses29. For instance, Mr.
Gordon was ordered by the district
court in 2007 to pay more than
$100,000 in legal fees to
Virtumundo30, only to be rejected
by the Ninth Circuit on appeal and
face potential liability for appellate
fees as well31.
Another interesting question is
whether the newly articulated
standing threshold could be high
enough to deny standing to a
traditional internet service provider
or whether the line is truly drawn
between large businesses and
individuals hosting a few personal
email accounts32. Mr. Goldman
recognized this duality in the
Court’s analysis in suggesting that
perhaps the Court intended for
anti-spam litigants to be left in the
cold while commercial email
providers are presumed to have
standing33.
With respect to federal
preemption, Gordon reiterates a
lesson from a line of recent cases,
namely, that state anti-spam
legislation cannot regulate trivial or
innocent irregularities in email.
Rather, although state laws such as
CEMA may provide for a private
right of action and enhanced
statutory damages, they may not
create actionability for emails that
would otherwise not be considered
false or deceptive under CANSPAM.
On standing and federal
preemption, Gordon presents a
setback for individual plaintiffs
attempting to be professional antispam litigants. The extent of this
impact, however, remains
unknown.
Marc S. Martin Partner
David A. Bateman Partner
Lauren B. Pryor Associate
K&L Gates LLP
marc.martin@klgates.com
david.bateman@klgates.com
lauren.pryor@klgates.com
1. No. 07-35487, 2009 WL 2393433 (9th
Cir. 2009).
2. 15 U.S.C. § 7702 (2003).
3 . Wash. Rev. Code §19.190.010 et seq.
4. 15 U.S.C. § 7706(g).
5 . 2009 WL 2393433 at 10506.
6. Id.
7. 15 U.S.C. § 7706(g)(1).
8 . 2009 WL 2393433 at 10493.
9. Id. at 10493-94, 10496-97 (emphasis
in original).
10. Id. at 10498-500.
11. Id. at 10499-500.
12. Id. at 10502.
13. Id. at 10502-03.
14. Id. at 10502-03.
15. Id. at 10504.
16. Id. at 10502-03.
17. Id. at 10503.
18. Wash. Rev. Code §19.190.010 et
seq.
19. 2009 WL 2393433 at 10521.
20. 15 U.S.C. § 7707(b)(1).
21. 2009 WL 2393433 at 10517.
22. Id. at 10513, FN 17.
23. Id. at 10512.
24. Id. at 10513.
25. www.martindale.com/internetlaw/article_Davis-Wright-TremaineLLP_777438.htm.
26. Id.
27. http://directmag.com/email/news/
judge_anti-spam_virtumundo/.
28. http://blog.ericgoldman.org/
archives/2009/08/an_end_to_spam.htm.
29. Id.
30. http://blog.ericgoldman.org/
archives/2007/08/canspam_defenda.htm
31. Goldman, supra at FN 28.
32. http://blog.wordtothewise.com/tag/
anti-spammers/
33. Goldman, supra at FN 28.
e-commerce law reports volume 09 issue 04
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