Plaintiff Wins $7,000 Following Bench Trial on Claims Under California Anti-Spam Statute — Balsam v. Trancos

[Post by Venkat]

Balsam v. Trancos, Inc., Cal Sup. Ct. Case No. (Civ.) 471791; March 10, 2010 [scribd]

Although spam lawsuits have not gone particularly well for individual (non-ISP) plaintiffs, Dan Balsam recently took a case to trial in San Mateo Superior Court and was awarded $7,000 in damages.

Balsam sued under the California Legal Remedies Act (1750) and California’s anti-spam statute (section 17529). The court held that Balsam could not maintain an action under section 1750 because he was not a “consumer” and did not sustain any damages, and dismissed the 1750 claim. His claim under section 17529 was tried to the bench and he was awarded $1,000 in statutory damages per email.

Background: Defendant Trancos registered numerous domain names through DomainsByProxy. Through Defendant’s “Meridian” division, Defendant entered into a deal with Hi-Speed Media/ValueClick under which Defendant “managed” several email lists and sent out emails. Trancos and Hi-Speed Media shared revenues generated from transmission of the emails. Trancos discontinued this conduct in 2007 and according to the court had “stopped the allegedly wrongful conduct of which [Balsam complained].”

The Emails: The trial was over eight email messages. The emails were sent through various domain names (privately) registered to Trancos: misstepoutcome.com, modalworship.com, moussetogether.com, mucousmarquise.com, minuteprovenance.com, minecyclic.com, mythicaldumbwaiter.com, and nationalukulele.com. (How on earth did Trancos come up with these domain names!) The subject lines of the emails were typical unsolicited email fare, and ranged from inviting people to take surveys and get paid (“Get paid 5 dollars for 1 survey”) to dating-related invitations (“It’s a Great Time to Say Hello to Someone New!”; “Date Single Christians”). The emails did not purport to be from anyone particular. The “from” email addresses were from accounts such as “franchisegater@modalworship.com,” and “dating@mythicaldumbwaiter.com”. The emails contained varying opt-out text and (in some cases) links.

The Court’s Ruling: The court held that Balsam’s claim under section 17529 was not preempted under federal law. Defendant pointed to Virtumundo and argued that CAN-SPAM preempts state email statutes which reach immaterial errors in emails. The court rejected this argument noting that in Virtumundo, the plaintiff did not put forth any evidence that the emails at issue rose to the level of “falsity and deception” excluded from CAN-SPAM’s preemption clause, and on the basis that the Washington statute was different from the California statute (nothing in the Washington statute required any misrepresentations to be “material”).

The court looked to the “from” addresses in the emails and held that the “‘senders’ identified in the headers of the . . . emails do not exist or are otherwise misrepresented . . . [i]n those same headers reflecting the ‘from’ line of the email, the referenced sender email is a non-existence [sic] entity using a nonsensical domain name reflecting no actual company . . . .” The court also relied on the fact that the address at the end of the email messages (a PO Box in Santa Monica) was registered in the name of a non-existent entity.

Although the plaintiff “was not tricked into believing that [the] emails were anything other than commercial advertisements . . . and was not tricked into seeking to purchase any goods or services,” the court held that seven of the emails violated 17529.5(a)(2) because the emails had “falsified, misrepresented, or forged header information.” The emails came from Trancos, “but none of the emails disclose[d] this in the header.”

Observations: The two significant preemption CAN-SPAM cases (Mummagraphics and Virtumundo) both held that state laws which prohibit immaterial misstatements in emails are preempted. There’s another district court case which went beyond this and held that a plaintiff had to satisfy the “actual fraud” standard in order to successfully assert a spam claim under state law (Reunion). The cases in this context often look to whether the plaintiff could have easily ascertained where the email came from. In Mummagraphics the court relied on the fact that the plaintiff could have easily determined where the email originated from in finding the error immaterial (and the claim preempted). In Kilbride, a criminal case, the court imposed liability, finding that the sender’s use of GoDaddy’s privacy protection services was evidence of the sender’s intent to mislead the recipient. In this case, there were similar facts. None of the emails at issue in this case stated where they originated from (or on whose behalf they were sent). Defendant used a lot of names of companies that did not exist, and got a PO Box for the company in the name of another non-existent company. That said, the violations didn’t fit nicely within the statute.

17529.2: The court quoted section 17529.2, which is a blanket prohibition on the transmission of unsolicited email to or from a California email address. This section of the statute is obviously dead on preemption grounds and can’t support liability.

17529.5: The court also looked to section 17529.5 which is similar to the anti-spam statutes of many states, including Washington. This section prohibits the transmission of email that (1) “contains or is accompanied by” a third party’s domain name without permission; (2) “contains or is accompanied by falsified, misrepresented, or forged header information;” or (3) has a misleading subject line. The court found that the subject lines were not likely to mislead and in fact Balsam was not misled by the subject lines. The court didn’t expressly find that the emails contained or were accompanied by a third party’s domain name without permission. There was no violation of this provision since there was no dispute that Trancos owned the domain names at issue.

The court found that Trancos violated the header information prong, because there was no such person or entity referenced in the “from” line. It’s tough to see how this is the case, since the header information was not forged. If you own or control a domain name, you are free to create any number of email addresses that can send emails through the domain name, and no one sees anti-spam statutes as requiring the reference in the from line to refer to an actual living person. I have received numerous emails from “customer support” or “orders” at Amazon.com and I’m fairly confident that there’s no such person at Amazon.

What this section of the statute actually gets at is the transmission of emails that appear to come from someone when they actually don’t, or the obfuscation of header information. There was no evidence of either in this case. The plaintiff in Virtumundo raised somewhat similar arguments, which were rejected by the trial court. On appeal, the court found that the claims were similar to the ones raised by the plaintiff in Mummagraphics (arguably because accurate WHOIS information could have readily identified the sender of the emails) and held that the claims were preempted under Washington’s email statute. There’s a colorable argument to be made that nothing in Virtumundo precludes a claim under 17529.5(2), but the differences in the statutory language cut against Balsam’s claims. The California statute prohibits “falsified, misrepresented, or forged header information,” while the Washington statute prohibits emails where the sender “misrepresents or obscures any information in identifying the point of origin or the transmission path.” The Washington statute incorporates a “point of origin” concept that makes it easier to argue that a violation occurs if you include an email address in the from line that’s related to a non-existent company.

The final point to consider is that Balsam admitted that he didn’t suffer any “adverse effects” of the sort that the court held were required to support a claim under CAN-SPAM. Balsam didn’t expend any funds on bandwidth, filtering, infrastructure, etc. His sole injury was the fact that he mistakenly opened the message, and presumably, expended sums litigating his claims.

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As the court notes, the California Supreme Court is currently considering Kleffman v. Vonage, a case that deals with the scope of California’s anti-spam statute. Also, the Reunion case, dealing with the scope of CAN-SPAM preemption, is still stuck in the district court (in the Northern District of California). It’s likely to be appealed to the Ninth Circuit.

It will be interesting to see how this plays out. In the meantime, kudos are due to Balsam and his counsel, who unlike James Gordon, Asis Internet, and other spam plaintiffs, are at least generating positive cash flow (if Trancos ever pays up).

Added: “Save the Mail Blog” asks whether it was worth it (“Lawyer Awarded $7k in Spam Suit: We do the Math“). SFGate also covers the ruling (“S.F. lawyer awarded $7,000 from e-mail spammer“).

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