Asis Internet Awarded $2.5mm on CAN-SPAM Claims — Asis Internet v. Rausch

[Post by Venkat]

Asis Internet Servs. v. Rausch, Case No. 08-03186 EDL (N.D. Cal.) (May 03, 2010)

Asis Internet was recently awarded summary judgment on its CAN-SPAM claims which it brought against a business known as “Find a Quote.” Although not technically a default judgment, the defendant against whom summary judgment was entered did not respond to Requests for Admission (or otherwise participate). This may blunt the value of the ruling. Regardless, Asis certainly hit the jackpot, at least on paper.

Facts: Some facts about Asis and the case:

- it has “just under 1,000 internet access and email customers”

- four employees

- it receives 200,000 spam emails a day

- it costs Asis approximately $3,000 per month to “process” spam emails

- it maintains agreements with Postini, Falcon Knight and other vendors

- it brought claims based on 24,724 emails

- the emails were received “first on its filtering services . . . then transferred, processed and stored . . . ”

Asis issues RFAs to defendant Heckerson, who failed to respond. Asis sent a follow up letter which also prompted no response. The court deems the facts that are the subject of the RFAs admitted and grants summary judgment.

The Court’s Ruling:

Standing: The court concludes that Asis has standing. Unlike Gordon from Virtumundo, Asis actually has assets and provides a service, even if it’s to a small group of people. (Gordon’s “service appeared to be limited to using a control panel via an ordinary Internet connection through an ISP to set up email accounts . . . he had a nominal role in providing internet services.”)

Adversely Affected: On the question of whether Asis was adversely affected, the court acknowledged that while Virtumundo did not decide whether there needed to be a “direct causal link” between the emails and harms, the court stated that there must be some sort of showing of relationship between the email and the harm (or that the emails contribute in the larger sense to ISP-type harms). Asis satisfied this element by showing that it paid $3,000 per month to “process” spam, it experienced network slow downs, its employees spent time assisting customers with the spam issue (22 hours), and Asis lost customers and revenue.

The CAN-SPAM Claims: Asis had included questions in its RFAs which pretty much went to the core question of whether defendants violated CAN-SPAM. The court relied on these facts. By failing to respond to the RFAs, Heckerson admitted that he “knew his affiliates were sending or hiring others to send commercial electronic mail advertisements with misleading information.” He also admitted that he engaged in “a pattern and practice of using spammers to acquire sales leads.” (Asis has litigated the affiliate liability issue before, and lost, against Epic Advertising (formerly Azoogle). See this article from MediaPost discussing the summary judgment ruling against Asis, where the court also found that Asis lacked standing.)

Damages: The damages were the most interesting part of the ruling. Asis sought $3,090,500.00 in damages (!) The court looked to the ruling in Facebook’s case against Sanford Wallace where Facebook was awarded $711,237,650.00 for 14 million emails (or violations). The court also looked to the recent Tagged case where the court awarded Tagged $25 per violation for a total of $151,975. (The Tagged lawsuit drew this humorous response: “The Supreme Court of Irony Investigating Tagged.com Lawsuit.”) The court found the Tagged scenario more analogous and awarded Asis $25 per violation of section 7704(a)(1) and $10 per violation of section 7704(a)(2), for statutory damages of $865,340.00. [The court briefly notes that it's not considering the issue of whether the statutory damage award would violate due process.]

The court also found that Asis put forth persuasive evidence that it is entitled to treble damages. First, it put forth evidence that defendant had to have engaged in harvesting emails because defendant obtained the names of email account holders, and the names or customer information attached to the emails did not exist anywhere else. This satisfies one of the aggravating factors under section 7704(b)(1)(A), entitling Asis to treble damages under 7706(g)(C). Asis also puts forth evidence that defendant used automated scripts to create email accounts from which it sent spam messages. This is an aggravating factor under section 7704(b)(2).

When all is said and done the court awards Asis a whopping $2,596,020.00.

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This is more or less a default judgment so it’s tough to know what to make of it. There are probably collectability issues lurking in the background that could turn this into a pyrrhic victory.

The fact that Asis “received the emails first on its filtering service operated by Postini, then transferred, processed and stored the emails on its server . . . ” is interesting. So Postini does a fine job filtering out the spam received by Asis (maybe spam is not the grave $2.5 million problem Asis claims?). And Asis actually moves the messages from the spam filter to its own folder where the messages are “processed”? This brought to mind Judge Gould’s concurrence in Virtumundo, which talked about how the common law “did not develop remedies for people who gratuitously create . . . circumstances that would support a legal claim and act . . . with the chief aim of collecting a damage award.”

Either way, Asis deserves credit for soldiering on.