Senders of Email Not Liable for §17529.5 Violations?

Earlier this year, a federal district court in California dismissed email marketing-related legal claims for alleged violations of California Business and Professions Code § 17529.5 – which forbids email advertisements containing false or deceptive subject lines and header information – against Sauphtware, Inc. d/b/a “Panda Mail.” The court found that Panda Mail only sent the emails and did not advertise therein. In short, the court opined that the statute covers advertisers only.

Plaintiff’s subsequently amended their complaint. On December 1, 2017, the court ruled that plaintiffs failed to cure the previously identified deficiencies.

Section 17529.5(a) provides as follows:

It is unlawful for any person or entity to advertise in a commercial e-mail advertisement either sent from California or sent to a California electronic mail address under any of the following circumstances:

(1) The e-mail advertisement contains or is accompanied by a third-party’s domain name without the permission of the third party.

(2) The e-mail advertisement contains or is accompanied by falsified, misrepresented, or forged header information. This paragraph does not apply to truthful information used by a third party who has been lawfully authorized by the advertiser to use that information.

(3) The e-mail advertisement has a subject line that a person knows would be likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message.

See Cal. Bus. & Prof. Code § 17529.5(a).

In the prior complaint, plaintiffs included no allegation that Panda Mail advertised in any email challenged by plaintiffs, but only that Panda Mail had “sent” plaintiffs emails in which a third-party’s products/services were advertised.

Plaintiffs subsequently alleged that three of the plaintiffs received from Panda Mail commercial emails advertising a third-party’s website, and that Panda Mail also “advertis[ed] its own email marketing services” in “at least 77” of the “spam” emails at issue. In support thereof, plaintiffs alleged that “[m]ost of the 77 spams expressly identify Panda [Mail] in the body,” that the “sending domain names for the 77 spams are registered to Panda [Mail],” and that “domain names registered to Panda [Mail] appear in the source code and ‘clickthrough’ links of the spams.”

Panda Mail argued the new allegations were insufficient to support a finding that it advertised in the subject emails. The court agreed.

“First, although there could be circumstances where the inclusion in an email of the sender’s name might constitute an advertisement for the sender’s email marketing services, plaintiffs fail to allege any facts to support a finding that any inclusion of “Panda Mail” in the challenged emails constituted such an advertisement, nor have plaintiffs filed, as an exhibit to the SAC or otherwise, any email sent to them by Panda Mail. Consequently, the context in which “Panda Mail” is used in the emails is unknown.”

“Second, even assuming that a sending domain name could constitute an advertisement for the sender’s email marketing services, none of the seventeen sending domain names identified in the SAC refer to “Panda Mail,” and plaintiffs have failed to allege any facts to support a finding that the domain names used by Panda Mail otherwise would be understood as an advertisement for Panda Mail’s services.”

“Third, even assuming the inclusion of a domain name in the source code or in a click-through link could constitute an advertisement for the sender’s email marketing services, plaintiffs have failed to identify any domain name used by Panda Mail for such purposes, let alone alleged any facts to support a finding that those domain names would be understood as an advertisement for Panda Mail’s services.”

The court also held that plaintiffs failed to state their fraud-related allegations – that the “Subjects” used were false or misleading – with particularity.

Plaintiffs have been afforded one further opportunity to allege sufficient facts to support a finding that each “From Line” and “Subject” included in an email in which Panda Mail advertised its services was false or misleading.

Takeaway: While arguably a win for email marketers that disseminate commercial messages advertising third-party products/services, the plaintiffs’ bar will likely not easily concede precedential value. Nor is it anticipated that the plaintiffs’ bar plans to drastically alter litigation and settlement strategies. Indemnity and defense provisions in marketing contracts are still very much in play and the plaintiffs’ bar will almost certainly leverage this fact. Preventative email marketing compliance practices remain critical.

Contact the author at rnewman@hinchnewman.com if you are interested in learning more about this decision, anticipated litigation strategies of the plaintiffs’ bar or compliant email marketing campaign practices.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777

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