Court Says CAN-SPAM Plaintiff Can’t Take Second Bite at the Apple — Melaleuca v. Hansen

[Post by Venkat Balasubramani]

Melaleuca v Hansen, 10-cv-00553 (D. Idaho; Apr. 15, 2011)

This is a case where Melaleuca – a large multi-level marketing company – asserted spam claims against Daryl Hansen. That’s probably a charitable way of putting it. Melaleuca looks like it had motives other than its injuries from allegedly receiving spam, and went after Melaleuca with legally unsustainable claims under CAN-SPAM.

Hansen, proceeding pro se, defeated Melaleuca’s claims against him the first time around. The court concluded that Melaleuca was not a bona fide ISP and did not adequately allege damages (i.e., that it had suffered “adverse effects”) as a result of the alleged spam. Melaleuca also argued in the first lawsuit that, even though it was not an ISP, it had obtained an assignment of claims from the ISP who received and processed the spam. The court was skeptical of this assignment, since it was procured after Melaleuca filed its complaint. (Here’s the earlier blog post on the case and the court’s rulings: “Another Federal Court Dismisses CAN-SPAM Claims Due to Lack of Standing – Melaleuca, Inc. v. Hansen.” My instinct was the the district court’s dismissal should have been with prejudice, but it turned out to not matter.)

Undaunted, Melaleuca filed a second lawsuit against Hansen. Hansen (again proceeding pro se) moved to dismiss, this time on the basis that the second suit was barred by preclusion principles. The court agrees with Hansen and dismisses the case. Melaleuca argued that the first decision was not a final decision on the merits, but the court rejects this argument. Both parties had the opportunity to brief the standing issue and the court issued a definitive order the first time around that was appealable (indeed, as the court notes, it was on appeal at the time of the second lawsuit). Melaleuca also argued that the deficiencies in its complaint were “curable,” and it should be allowed to proceed. The court finds that while Melaleuca could have cleaned up the assignment (and obtained the assignment of claims prior to filing the complaint) it “alleges the same damages/types of harms as were raised in Melaleuca I that the court deemed insufficient to meet . . . CAN-SPAM . . . standing requirements.” Regardless of whether Melaleuca should have been able to “cure” this deficiency, the court says Melaleuca did not bother to adequately allege injury the second time around!

The court was way too lenient with Melaleuca here. Maleleuca deserved a smackdown. I’m surprised the court did not consider sanctions, or at least a strong statement that sent a message to Melaleuca. Courts should do their best to strongly discourage this type of litigation. (CAN-SPAM has a fee-shifting provision (seeCAN-SPAM Defendant Awarded $111k in Fees/Costs“), but I’m not sure if Hansen can take advantage of it as a pro se defendant.)

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.”