April 16, 2010
Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com
[Post by Venkat]
Hoang v. Reunion.com, No. C-08-3518 MMC (March 31, 2010)
Reunion.com is a long-running case that's been blogged extensively by Ethan and others. A group of plaintiffs who received emails through Reunion's alleged "invite your friends whether you like it or not" program sued under California spam laws. They alleged three claims: (1) a subject line claim that the emails misleadingly said "[Your friend] is looking for you"; (2) a from line claim that the from lines of the emails contained an email address (e.g., firstname.lastname@example.org) through a domain that the sender did not have permission to use; and (3) a from line claim that the emails misrepresented that they were from specific individuals (i.e., friends), rather than from Reunion.
The Court Dismisses the Amended Complaint: The court (in December 2008) dismissed the amended complaint on the basis that CAN-SPAM preempts all but "torts" involving misrepresentations. Plaintiffs failed to allege that they relied on any of the misleading statements in the emails to their detriment so they failed to state a claim under state law. The court cites to CAN-SPAM's legislative history, noting that CAN-SPAM's preemption clause was designed to ensure a "national standard," and thus only laws that touch "fraud or deception" would be left surviving under the preemption clause. As an alternative argument, the court found that plaintiffs lacked standing to sue in federal court.
[The complaint asserted state law causes only but is in federal court under the Class Action Fairness Act of 2005.]
The Court Reconsiders Its December 2008 Order: The latest order (issued on March 31, 2010) focuses on Gordon v. Virtumundo, a 9th Circuit case many thought would sharply curtail spam litigation. (Prof. Goldman's post: "An End to Spam Litigation Factories?--Gordon v. Virtumundo".) The court "reads [Virtumundo] as implicitly finding [that the Washington email] statute was intended to confer standing based solely" on receipt of emails. [The discussion about Virtumundo and standing is somewhat confusing to me.] Ultimately, the court concludes that in light of Virtumundo, in order to have standing under state law, a spam plaintiff need not allege reliance and actual damage.
The court tackles preemption next. The court relies on the presumption against preemption (citing Virtumundo) and relies on CAN-SPAM's legislative history to find that the plaintiffs' claims against Reunion are not preempted. The court's order almost reads like an opposition brief to its earlier order. The court concludes that "plaintiffs' failure to allege they relied to their detriment on the alleged false statements in defendant's emails does not constitute a ground for dismissal of their claims."
Finally, the court addresses defendant's materiality argument. The court compares the misstatements in Virtumundo to the misstatements here. In Virtumundo, the plaintiff complained that he received emails from addresses such as "Criminal Justice@vm-mail.com," while in this case, plaintiffs allege they received emails which appeared to be sent from people they knew. Given these differences, at least at the pleading stage, the court could not conclude that the misstatements were not material.
What to Make of the Latest Reunion.com Order?
2. It's tough to figure out the current state of CAN-SPAM preemption. One way of looking at it is that Mummagraphics and Virtumundo involved claims based on state email statutes for emails that were not misleading. Reunion.com emails, on the other hand, are arguably misleading. (Are reasonable people really misled by "your friend is looking for you" emails?) The big question is: where is the line? Of course, email marketers would benefit from having a bright line which they can adhere to without fear of getting sued in any one of the fifty states.
3. There's a discrepancy between how California plaintiffs are faring versus how plaintiffs in other states such as Washington are faring. John Levine notes at Circle ID that another Washington spam case - this one brought by Bennett Haselton and Peacefire - was recently dismissed: "Another Spam Case Lost in Washington, or Gordon Strikes Again." The plaintiff in Virtumundo (James Gordon) has also had a slew of Washington spam cases recently dismissed. Although the most recent court order in the Peacefire case focused on the CAN-SPAM claims and not on state law claims (the court in footnote 1 notes that "it [appeared] plaintiffs . . . abandoned" their state law claim), the fact that similar lawsuits are moving ahead in California but failing in Washington is problematic. [Correction: it looks like Peacefire is pursuing a claim under the Washington spam statute as well as a claim under Washington's consumer protection statute. The court indicates that he abandoned the CPA claim but not the claim under the Washington spam statute.] This is one of the things preemption is designed to avoid.
5. On the bright side, we should hopefully get some clarity soon. Kleffman v. Vonage, another California spam case which raises similar issues (which the 9th Circuit certified to the California Supreme Court), is scheduled for argument in front of the California Supreme Court on May 6. Also, Reunion.com moved for a stay and permission to file an interlocutory appeal. It's a long shot, but who knows, maybe this case will end up sooner rather than later in front of the 9th Circuit? I was unpersuaded that the standards for reconsideration were satisfied here. The court pretty much did a 360 on its earlier ruling, and the court should recognize this when it considers defendant's request for leave to file an interlocutory appeal.
6. Finally, it's worth noting that counsel for the plaintiffs here are on the defense side in Asis Internet v. Subscriberbase, a case which raises similar preemption issues which I blogged about last week ("N.D. Cal Rejects Preemption and Standing Defenses Against Claims Under CA Spam Statute"). The defendant in Reunion devoted some energy to raising this issue to the court and trying to argue a conflict, but Judge Chesney wasn't swayed by this. (see page 3, footnote 3)
Related: See additional coverage from Wendy Davis here: "Judge Brings Reunion.com And Spam Suit Together Again".
Also, Tagged.com, a company that allegedly scrapes the contact lists of people who join to invite other potential members to join, recently settled up with the San Francisco DA's office by paying $650,000. This comes on the heels of other similar settlements between Tagged.com and regulators.
Posted by Venkat at April 16, 2010 09:30 AM | Spam