Following in the expected path of her earlier ruling, District Judge Maxine Chesney again dismissed an anti-spam lawsuit against This time, the Judge also threw in a tenuous constitutional holding for good measure. Count this ruling as yet another one muddying the distinction between fraud lawsuits and anti-spam lawsuits and undermining the reasonably clear preemption provisions of the CAN-SPAM Act.

By Ethan Ackerman

On Dec. 23, 2008, federal District Judge Maxine Chesney issued what the defense attorneys in Hoang v. will likely view as a welcome, if foreseeable, Christmas present – another conditional dismissal of the plaintiffs’ class action lawsuit. I’ve previously blogged about the first dismissal here, with an important follow-up regarding the amended complaint here. Reading those posts first to get some important context will help in following this post.

Falsity is still not the same thing as fraud, especially when Congress distinguishes between them, unless a federal judge says it is.

Judge Chesney’s first dismissal ruling focused on the absence of fraud allegations in the plaintiff’s complaints, ultimately holding that in order to escape preemption by the federal CAN-SPAM Act, plaintiff’s’ state law claims had to include, above and beyond the falsity violations of the California anti-spam laws, some or possibly all the additional elements of a fraud claim. I criticized that holding in the prior post because that’s not only not what the CAN-SPAM Act requires, but it was actually adding four additional elements to the Act that Congress considered but didn’t include. Falsity is one of five elements of fraud under California law. California is hardly alone in having consumer protection laws that require a lesser standard than fraud. Adding four additional elements by judicial decision would be like a judge requiring a prosecutor to prove each of the elements of premeditated murder when she’s only charging involuntary manslaughter – and in this case it would be like judicially requiring them even after the legislature considered and rejected the additional elements.

Sticks and stone may break my bones, but misleading emails alone don’t really hurt anyone.

My prior disagreement with the first dismissal was its inconsistency with the falsity standard of the CAN-SPAM Act, and its reliance on the similarly mistaken 4th Circuit Mummagraphics opinion. This dismissal repeats that problem and then raises the stakes by suggesting that it would be unconstitutional for the court to even hear the case if the complaint wasn’t amended to allege at least several of the additional elements – reliance and damages.

Specifically, Judge Chesney states

[In] the absence of an allegation that each such plaintiff incurred some type of injury or damage as a result of his having taken action in reliance on defendant’s assertedly false use of a third-party domain name in the email, [the] action is subject to dismissal.

Failure to do so, Judge Chesney holds, would not only result in preemption under CAN-SPAM, but also run afoul of the case-or-controversy requirement of the US Constitution’s Article III.

Actual Injury Standing, or Wait, spam’s not illegal until someone actually wires the $10,000 to Nigeria?

Prior court disagreements over whether falsity must also be material or intentional look pretty minor compared to this Constitutional “no harm, no foul” holding, so what’s going on here?

By way of background, Article III of the US Constitution requires a “case or controversy” before a federal court may rule in a case, and this provision has been interpreted by the Supreme Court to mean that a plaintiff must suffer an “injury in fact” to have standing in a federal court. This is the principle underlying Judge Chesney’s holding, but it’s quite a stretch to apply the principle to dismiss a case brought by admittedly aggrieved plaintiffs directly covered by a state’s consumer protection statutes.

The requirement that an individually identifiable “injury in fact” be shown by someone before they can bring a lawsuit prevents judges from having to make hypothetical rulings or issue advisory opinions without the benefits of specific facts. This lack of standing is the reason any given citizen can’t sue the government for spending tax dollars in a way they don’t like, or a mob boss can’t preemptively sue for an unlawful wiretap before it’s actually installed, or more specific to this case, why someone who hasn’t actually received a misleading email from couldn’t sue it for violation of CAN-SPAM or California law even if’s practices clearly violated the laws.

There are even particular types of cases where “injury in fact” standing is commonly a close question; (until recently) qui tam lawsuits were often challenged on “injury in fact” grounds. Similarly, environmental organizations bringing suits against government actions (and inactions) often succeed or fail based on standing, and are the source of much of the standing caselaw. Although not relevant to this case’s constitutional holding, there is also a good deal of action on issues of injury standing at the statutory level. More than one CAN-SPAM lawsuit has been dismissed on the grounds that a plaintiff lacked standing under the “adversely affected” requirement of the statute. [Author’s note: While it is debatable whether this element of the statute acts as a pleading requirement or functions as a prerequisite for statutory standing, courts have used it that way. I suspect Judge Chesney may ultimately rule similarly, thus avoiding an unnecessary constitutional ruling. That would definitely be the better of these two disagreeable choices.]

Similarly, some state consumer protection laws have been amended by legislatures to remove or add a specific injury pleading requirement, alternately making some consumer protection act violations “strict liability” laws or making suits for violation more complex to prove by adding another statutory element. Two notable examples of such trends are the addition, by Proposition 64, of such a requirement to the California laws, and the removal of such a requirement in the District of Columbia’s Consumer Protection Act.

Based on this quick treatment, Judge Chesney’s holding seems plausible. This “injury in fact” doctrine really does exist and some cases do turn on it. But, while the Constitutional requirement that there be an “injury in fact” keeps hypothetical cases out of federal court, it is a fairly low threshold for those cases actually brought under a federal or state law directed against a certain type of behavior Congress or a state legislature has already found to be damaging. But this dismissal ruling departs from other court rulings on standing by blowing past legislative determinations of just what is “damage.”

So your real beef is not the result, but that the Judge had to ignore the damage determinations of the legislatures to come to such a holding?

In a word, yes. The California anti-spam act included specific findings of costs and damage to the end-user, findings that even the federal CAN-SPAM Act echoed. This frustration is perhaps amplified by the practice of Judge Chesney in other contexts to accept and defer to Congressional policy decisions, an important and correct skill needed when interpreting nuanced statutory provisions. In other contexts, Judge Chesney has cited with clear approval the notion that a court “was not at liberty to second guess congressional determinations and policy judgments.”

Perhaps this holding is explicable because the statute’s lower pleading standard is unique to spam laws?

In a word, no. There is no shortage of laws requiring some lesser standard of falsity than fraud at the federal and state level. Similarly, many laws provide for liability based on a statutory presumption of reliance. In some other cases, mere or factual error is sufficient to trigger liability regardless of materiality or reliance. These laws are so common and numerous that the term “strict liability laws” is a frequently used term describing just one subset. Let’s explore in more detail just how large a majority of federal and state suits are brought under these laws…

Most analogous to anti-spam lawsuits are other consumer protection laws against unfair or deceptive practices where committing a prohibited practice triggers a right to sue, regardless of any monetary damages. For example, the federal Fair Debt Collection Practices Act prohibits a range of collection practices and gives debtors subjected to the illegal practices a right to sue for statutory damages, regardless of whether the unfair dunning results in a collection or not. Wisely, courts, including Circuit Courts of Appeal, have held that the illegal threats to collect constitute an “injury in fact” regardless of whether or not the debtor heeds them and pays up. Similarly, “It is well settled, however, that proof of actual deception or damages is unnecessary to a recovery of statutory damages” under the Truth in Lending Act, according to the Second Circuit in Gambardella v. G. Fox & Co.

There are also a whole host of civil laws ordering business structures and transactions where committing a prohibited practice triggers a right to sue and provides for statutory damages regardless of any monetary damages. Trademark law contemplates lawsuits over trademark use violations that in some cases don’t even require an actual showing of confusion, merely the (by definition speculative) “likelihood of confusion.” Touching close to the current case (and presumably different only in having more complete damages pleading) Judge Chesney apparently had no problems with the Article III standing of some recent trademark plaintiffs, allowing summary judgment under the statute in favor of an initial-interest-confusion plaintiff based only on the likelihood of initial interest confusion.

But perhaps the most dramatic examples of laws permitting civil suits to recover money even absent any measurable or conceivable or alleged harm are the IP laws, copyright and patent. The patent holder’s right is fundamentally the right to exclude others from practicing her patent, and a non-practicing patent holder who has never made, sold, licensed or marketed a single product, and thus lost not a single penny in sales or licensing fees to the infringer, or indeed suffered under any cognizable theory of harm, may still bring suit to recover the wrongful profits of the infringer. Similarly, a copyright holder with an unpublished manuscript or suffering from an infringement occurring in an entirely different media is still entitled to sue for statutory damages, even in the absence of any actual damages. Indeed, many of these laws even provide statutory damages as a measurement of harm precisely because the actual harms are variable, need to be deterred, or are hard to assess.

Some parting words from the controlling courts

Suits of this type, where a legislature has already found an injury in a certain prohibited practice or behavior and passed a statute granting particular individuals a right to sue in response to that practice, are precisely the suits the Supreme Court was contemplating in Lujan v. Defenders of Wildlife when it said the “injury required by Art. III may exist solely by virtue of ‘statutes creating legal rights, the invasion of which creates standing.”

The Ninth Circuit also has a particularly lenient view of what constitutes damage for Article III purposes. So if Judge Chesney had accepted the damages findings of the California legislature, she would likely have to find those enumerated damages were of the types (time, money) that the Ninth Circuit has previously identified in various cases as being Constitutionally sufficient.

Concluding thoughts

As Venkat’s timely post on this case notes in conclusion, several related cases raising some of these issues are in the process of being decided by the California Supreme Court or Ninth Circuit Court of Appeals. Those decisions have the possibility of perpetuating or correcting several of the trial court errors I’ve discussed in prior posts. Also, in this particular case, Judge Chesney did graciously grant another opportunity to amend, meaning there may be yet another opinion in this case. Finally, and most simply, an amendment to the complaint could just recite the harms identified in the California statute and allege that plaintiffs have suffered them.