Idaho District Court Dismisses CAN-SPAM Claims Due to Non-ISP Status — Melaleuca, Inc. v. Hansen

[Post by Venkat]

Melaleuca, Inc. v. Hansen, Case No. CV 07-212-E-EJL-MHW (D.Id; June 29, 2010)

A federal magistrate judge in the District of Idaho dismissed spam claims brought by Melaleuca, Inc., in a (recommended) decision that’s not particularly noteworthy, except for the fact that it’s a carbon copy of Gordon v. Virtumundo.

Background: Hansen was an “independent marketing executive for a multi-level marketing company called ITV.” Melaleuca was and is engaged in a similar business. Melaleuca “encourages its customers to become marketing executives by referring family and friends to Melaleuca to purchase its products and allowing them to earn commission on any orders made by the referred individuals.” (Sounds Amway-like, from what little I know of Amway, but that’s neither here nor there.) Hansen sent out emails while working for ITV inquiring as to whether the recipients “would be interested in hearing about a new business opportunity.” Some of his emails were sent to Melaleuca marketing executives.

Melaleuca used an email service called “iglide.net,” through which it provided email services to its customers. Melaleuca also used an ISP called “IP Applications,” through which it provided internet access to its customers. It did not have control over (or even access to) the hardware that enabled the internet access. According to the court, Melaleuca was a customer of IP Applications and iglide.net, and simply made the services provided by these companies available to its customers.

Discussion: The court holds that Melaleuca did not fall under the definition of an “internet access provider,” citing to the fact that Melaleuca did not play more than a “nominal role” in providing internet-related services. The court also finds that even if Melaleuca falls under this definition, it could not maintain claims under CAN-SPAM because it was not “adversely affected.” In Virtumundo, the court noted that Congress intended private CAN-SPAM plaintiffs to be able to sue only when they suffer the type of harm that is “uniquely encountered by IAS providers.” Typical consumer harm – such as calling technical support and having to undergo the inconvenience of deleting unsolicited emails – did not suffice. Melaleuca did not put forth evidence that it required hardware upgrades or even more bandwidth due to the emails at issue (or as a result of increased spam in general). No luck for Melaleuca.

Melaleuca argued that it obtained an assignment of claims from its ISP, but the court found that the assignment could not rescue Melaleuca’s claims. The assignment occurred more than a year after the case was filed. (The precise nature of the relationship between Melaleuca and the ISP is unclear, but if nothing more, the assignment shows that they are friendly parties.)

The court declines to address Hansen’s preemption arguments as to the state law claims, leaving those to be addressed in state court. While Melaleuca has another shot at its state law spam claims, it may have to contend with some sort of adverse fee award, which the court may well award to Hansen.

Related: Professor Goldman previously posted on another dispute involving Melaleuca, this one involving an expedited DMCA subpoena which also touched on the copyrightability of a take-down letter: “Co-Blogger Identity Isn’t Disclosed via 512(h), but Takedown Letters Are Copyrightable.”

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