New York Court Dismisses Putative Class Action Brought Under California Spam Statute — Bank v. Hydra Group, LLC

[Post by Venkat]

Bank v.Hydra Group LLC, 10-CV-1770 (JG) (E.D.N.Y. Sept. 24, 2010)

Todd Bank brought a putative spam class action against Hydra Group. The court dismissed the lawsuit for lack of subject matter jurisdiction.

Bank alleged that he received three pieces of spam:

[the] subject lines all contained the phrase “ATTN: Your Auto Insurance Renewal Reminder,” but the bodies contained only advertisements for an auto insurance broker.

Claiming that his was one of a million pieces of spam sent out by defendant Hydra Group, Bank styles his lawsuit as a class action. (But see footnote 1 of the order, where Bank admits this number is based on his “‘general knowledge’ of the industry.”) Hydra Group, which is headquartered in California, brought a motion to dismiss for lack of personal jurisdiction and for failure to state a claim. The court on its own motion raises the issue of subject matter jurisdiction, and dismisses the lawsuit for lack of subject matter jurisdiction.

Bank asserted the Class Action Fairness Act of 2005 (which requires the amount in controversy to exceed five million dollars) as the basis of subject matter jurisdiction. However, the statute he sued under had a cap of $1 million per “incident.” (Cal. Bus. & Prof. Code § 17529.5(b)(1)(B)(ii) (“A person or entity bringing an action . . . may recover . . . [l]iquidated damages of . . . up to one million dollars ($1,000,000) per incident.”).) The statute defines incident as “a single transmission or delivery to a single recipient or to multiple recipients of an unsolicited commercial e-mail advertisement containing substantially similar content.” Bank argued that the cap was a limit on the recovery per plaintiff and not an aggregate cap on a defendant’s liability. The court disagreed:

First, if the liability-limiting provision is interpreted as Banks suggests it should be, it would rarely, if ever, limit a plaintiff’s recovery. A plaintiff would have to receive more than 1000 unsolicited messages of substantially similar content from the same defendant in a single transmission to trigger the provision. On the other hand, if the provision is read as a cap on a defendant’s per-incident liability, it would be triggered more frequently — whenever a defendant sent more than a thousand messages of substantially similar content in a single transmission, whether the messages went to one recipient or many more.

Furthermore, the statute evinces an intent to limit a defendant’s liability even further if the defendant has made efforts to comply with it. In the case of a defendant that has “established and implemented, with due care, practices and procedures reasonably designed to effectively prevent unsolicited commercial e-mail advertisements that are in violation of this section,” the statute limits liquidated damages to $100,000 per incident. Id. § 17529.5(b)(2). This reduced cap would provide far less of a reward, and therefore far less of an incentive, for defendants to avoid sending spam if, instead of limiting a defendant’s total liability for each transmission, it merely limited the amount a defendant had to pay to each plaintiff. For this reason as well, the damages provision is best interpreted as a limit on total liability rather than individual recovery.

At first glance, this may seem like a harsh turn of events for a pro se plaintiff. However, Bank is far from the typical pro se plaintiff who is typically accorded some leeway by courts — he is a lawyer. In a previous case, Bank (or someone who shares his name, including his middle initial) tried to assert a section 1983 claim in federal court based on a state court judge’s denial of his request to wear jeans and a hat in court: “Lawyer Has No First Amendment Right to Wear Hat in Court, Federal Judge Decides.”

Throwing out the dispute on subject matter (rather than personal jurisdiction) grounds, kicks the lawsuit out of the federal system. In the process, the court expresses some skepticism at Bank’s claims for damages:

I have difficulty conceiving of a statutory provision, concededly intended to limit liability in at least some cases, that nevertheless fails to operate in this case — thus permitting the recovery of $3 billion in damages for the receipt of misleadingly labeled insurance advertisements. The inartful drafting of the provision is no justification for such a bizarre result.

Added: In 2008, Bank suffered a loss in the Second Circuit, which affirmed the dismissal of his claims under the Telephone Consumer Protection Act: “2nd Circuit Rejects Lawsuit Over Unsolicited Fax Ads.” (h/t @LearnedElbow)

Other cases involving subject line claims under California’s spam statute:

Email Header Information Claim Preempted by CAN-SPAM, But Subject Line Claim Not Preempted — Asis Internet Servs. v. Member Source Media, LLC Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM — Hoang v.