California's Anti-Spam Laws May Provide a Potent Weapon for Private Parties to Wield Against Spammers (Eventually)
Private parties frustrated by spam often face significant legal hurdles to bringing suit against the spammer. Businesses and individuals, except for internet service providers, cannot sue under the main Federal anti-spam statute -- CAN-SPAM. 15 U.S.C. § 7706. Some state anti-spam laws do permit email businesses and individuals to bring suit. For example, California's anti-spam laws permit any email recipient to sue. Cal Bus. & Prof. Code § 17529.8. However, CAN-SPAM also unfortunately provides that all state laws regulating commercial emails are preempted (can't be enforced), except to the extent that such laws prohibit "falsity or deception." 15 U.S.C. § 7707(b)(1). This rule has often meant that businesses and consumers seeking to sue spammers under state laws are out of luck.
The reason for their ill-luck is that courts have generally interpreted the terms "falsity and deception" in CAN-SPAM to refer to common-law fraud. This means that the state law is invalid except to the extent that it merely prohibits common-law fraud. So to bring suit under a state anti-spam statute that prohibited falsity or deception, the plaintiff would have to prove that the spammer intentionally made a misrepresentation of material fact, on which the plaintiff actually relied and which caused him actual damages. See, e.g., Omega World Travel, Inc., 469 F.3d 348, 353 (4th Cir. 2006).
To penetrate anti-spam defenses, many spam emails contain false "header" information -- in which a "friendly" email address, from an organization that the email recipient will not block -- is substituted for that of the actual sender (the spammer). Sometime the "from" box in a spam email will contain a variant of the recipient's email address, an email address of another person at the recipient's firm, an email address of another legitimate business, or a misspelled email address from any of the foregoing.
Spam emails also often contain deceptive information in the reference line, such as "A free gift for you", or "You have been selected for a cruise", etc. This material convinces the recipient to open and read the file.
While this header information may be false, it may be difficult for the recipient to argue that this false header information gives rise to the common-law tort of fraud. The false information may have permitted the spammer to get around the recipient's anti-spam software, or the recipient may have been induced by a false reference line to open the spam email. However, the recipient may have never relied on this false information to enter into a transaction in which he lost money. There lies the rub: if there was no actual reliance and no damages caused by the reliance -- then there is no cause of action for common-law fraud. This eliminates most private suits against spammers.
However, some recent decisions regarding California's anti-spam laws have begun to question the standard interpretation of "falsity and deception."
One such case is Kleffman v. Vonage Holdings Corp., 551 F.3d 847 (9th Cir. 2008) -- a case which is still pending in the Ninth Circuit and California Supreme Court. In this case, the Plaintiff Kleffman received 11 emails messages from Vonage, seeking to sell him broadband services, including VOIP. To send these emails, Vonage used 11 different domain names, including superhugeterm.com, formycompanysite.com and countryfolkgospel.com. Kleffman claimed that the use of these domain names permitted Vonage to circumvent the anti-spam filters used by his internet service providers. Kleffman claimed that this practice violated California's anti-spam laws. For example, California Business & Professions Code § 17529.5 prohibits email advertisements where "the email advertisement contains or is accompanied by falsified, misrepresented or forged header information."
Vonage sought summary judgment, based on the theory that CAN-SPAM invalidates any state law regulating commercial emails for reasons other than common-law fraud. The District Court agreed with Vonage, and granted its motion to dismiss. Kleffman v. Vonage Holdings Corp., 2007 WL 1518650 (C.D. Cal. 2007). However, on appeal, the Ninth Circuit has indicated that it may reach the opposite conclusion. On December 19, 2008, it certified to the California Supreme Court the following question: "Does sending unsolicited commercial e-mail advertisements form multiple domain names for the purpose of bypassing spam filters constitute falsified, misrepresented, or forged header information?" Kleffman v. Vonage Holdings Corp., 551 F.3d 847 (9th Cir. 2008). This is a solid indication that the Ninth Circuit is ready to find that state laws prohibiting false or deceptive statements in commercial emails are not preempted by CAN-SPAM -- even if they don't support a claim for common-law fraud.
In April 2009, in Asis Internet Service v. ConsumerBargainGiveaways, LLC, 2009 WL 1035538 (N.D. Cal. 2009), in a similar case, a Northern District of California judge reached the same conclusion. In a case brought by two internet service providers against alleged spammers who sent their customers hundreds of emails with false header information, the Court held that §17529.5 was not preempted by CAN-SPAM: "this order will not confine the phrase "falsity or deception" to strict common-law fraud such that anti-deception state actions not insisting on every element of common-law fraud are preempted. Plaintiffs' claims are not preempted merely because the complaint fails to plead, or Section 17529.5 fails to require, reliance and/or damages."
Unfortunately for potential plaintiffs, this is not the end of the story. While the federal courts are moving in the direction of finding no preemption, at least one lower California court has moved in the opposite direction. In May 2009, in Hypertouch v. Valueclick, Los Angeles County Superior Court, Case No. LC08100, the Court held that "falsity or deception" is generally used in California law to refer to common law fraud. The Court also agreed with the Fourth Circuit in Omega World that permitting the statute to cover other kinds of falsehood "would undermine the express federal preemption, including allowing claims based on negligence and inadvertence" including allowing lawsuits involving the "misspelling of names, improper links and using old addresses where there was no intent to deceive."
From my point of view, the Ninth Circuit's interpretation of "falsity and deception" is more convincing. If Congress had intended to prohibit all state laws but those dealing with common law fraud, it could have easily just used the word "fraud." By using "falsity and deception", Congress intended to permit all state laws prohibiting false statements to be enforced, such as laws prohibiting false advertising.
I also think that the claim in both Omega World and Hypertouch that expanding the definition of "falsity and deception" beyond common-law fraud will open up commercial email to suits involving unintentional or negligent "misspelling of names, improper links and old addresses" is a red herring. I would suggest that "falsity and deception" be limited to knowing or intentional false and deceptive statements. After all, the term "deception" generally refers to an intentional falsehood. This would permit enforcement of state laws against false advertising, without creating liability for mere mistakes by commercial emailers.
The California Supreme Court did accept the Ninth Circuit's certification of a matter of state law in the Kleffman case. Briefing is still in progress before the California Supreme Court. This will be followed by further briefing before the Ninth Circuit -- and then a decision by the Ninth Circuit on the preemption issue.
In my view it is likely that the Ninth Circuit will ultimately find that California's anti-spam laws are not preempted by CAN-SPAM. If that occurs, then California's anti-spam laws could provide some very potent remedies for private parties troubled by spam, including: (i) actual damages, PLUS (ii) liquidated damages of $1,000 per incident, PLUS (iii) attorneys fees and costs.
Of course, if my prediction is correct that the Ninth Circuit will reach a different result in Kleffman than that reached by the Fourth Circuit in Omega World, this could create a Circuit split that could ultimately lead to a hearing before the U.S. Supreme Court. (Now I'm really out on a speculative limb. But we'll see).
David D. Johnson is a business lawyer whose practice focuses on litigation and other issues relating to digital media and consumer electronics companies. David can be contacted at (310) 785-5371 or DJohnson@jmbm.com.
