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Bad News: Advertisers Liable Under California’s Anti-Commercial-Spam Law

On March 4th, 2013, in the matter of Bank v. American Home Shield Corp., the U.S. District Court for the Eastern District of New York ruled that California’s law barring commercial email advertisements that contain materially deceptive subject lines applies to parties who advertise in the emails, not just those who send them.

In addressing defendant American Home Shield Corporation’s motion to dismiss a purported class action under California’s anti-commercial-spam law, the court opined that liability under California Business & Professions Code §17529.5 is premised on advertising, not sending.  It also cited Hypertouch Inc. v. ValueClick Inc. in support of its decision and held that California follows the general common law rule that a principal is as liable for the acts he directs as he would be if he acted himself.

Also of interest is that American Home Shield argued that the complaint could not possibly meet the federal class action amount-in-controversy threshold of $5 million under the Class Action Fairness Act because the California statute caps recovery at $1 million per incident.  More specifically, AHS’ position was that the statute means per single email, irrespective of the number of recipients.  However, no California court has adopted that statutory interpretation.

Lastly, the court also rejected the argument that for an email to be subject to the California law the allegedly misleading information must be within the four corners of the message itself.  The message was misleading because the subject line read “Roof Repair Made Easy” and implied information about roof repairs.  However, the target of a hyperlink within the message actually led to a home warranty application.

Thus, the two were incongruent.  The statute requires a consideration of whether a recipient acting reasonably under the circumstances could be misled.

Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.

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Richard B. Newman

Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

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