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Online Dating Service Found To Have Violated the CAN-SPAM Act

Zoobuh, Inc. v. Savicom, Inc.

Zoobuh is at it, again.

Recently, in the matter of Zoobuh, Inc. v. Savicom, Inc. (D. Utah), a federal district court found that the plaintiff successfully pled that it was harmed by the defendant’s conduct and, therefore, possessed standing to bring a claim under the CAN-SPAM Act.  This is noteworthy because the alleged harm is unique to Internet service providers.

As alleged by the defendant, an email service provider can recover as an ISP against a company bombarding its customers’ in-boxes with pornographic emails.

The CAN-SPAM Act

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM Act”)  requires those that engage in commercial email marketing campaigns, without limitation, to avoid using deceptive header information and subject lines, identify emails as advertisements,  include a valid physical address, and clearly and conspicuously inform consumers how to opt-out of future messages from the sender.

When a company whose products are promoted (the “sender”) sends out a new commercial email – or has a third-party do so on its behalf (“initiator”) – the sender or the initiator must “scrub” the list of recipients against a suppression list to ensure that those that have opted out of receiving commercial messages do not receive them.  Those in the email marketing stream should monitor what others are doing or not doing as everyone is potential liable for violations of the CAN SPAM Act.

An experienced SPAM attorney can assist with email marketing campaign compliance protocols by ensuring that compliant From and Subject lines are utilized, as well as deliberately assessing marketing contracts and drafting liability shifting provisions.

$3M Judgment Against Virtual Cupids

According to the plaintiff, both it and its customers received thousands of commercial email advertisements for the xdating.com service on Zoobuh’s servers.  The plaintiff alleges that the defendants initiated in excess of 24,000 commercial emails that contained false sender names purporting to be actual women.  The plaintiff also alleges that neither Zoobuh, nor its customers, opted-in to receive the email advertisements.  What’s more the plaintiff alleges that its  customers were opted-in to receive emails upon attempting to unsubscribe from the defendant’s email marketing list.

Multimillion Dollar Statutory Award of Damages

The plaintiff argued that the damage caused by the emails has “manifested in financial expense and burden significant to an ISP,” including “lost employee time; lost profitability; the necessity to purchase and dedicate equipment specifically to process spam . . . harm to reputation and customer and email recipient complaints.”

The court agreed, finding that plaintiff successfully pled that it had standing under the CAN-SPAM Act and that it was damaged by the defendant’s conduct.  The court also found that the header information was materially false or misleading, in violation of CAN SPAM.

The court then found that plaintiff was entitled to judgment on the emails identifying a false sender, and that aggravated damages were justified due to automation and willfulness evidence.

The court held that the plaintiff was entitled to a statutory award of $3,003,600.00.

Calculation of Damages

As noted by the court in its memorandum decision and order granting motion for default judgment, under the CAN-SPAM Act, statutory damages are calculated by multiplying the number of violations (with each separately addressed unlawful message . . . treated as a separate violation) by up to $100, in the case of a violation of [15 U.S.C.] section 7704(a)(1). 15 U.S.C. § 7706(g)(3)(A). Although the statute establishes that there is no limitation on the amount of damages that may be awarded for violations of 15 U.S.C. § 7704(a)(1) (see id. at (g)(3)(B)), the statute offers no guidance on what amount, from $.01 to $100, the court should award per violation.

Because the statute rests discretion in the court, “[t]he court has wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima.” Facebook, Inc. v. Wallace, No. C 09-798 JF (RS), 2009 WL 3617789, at *2 (N.D. Cal. Oct. 29, 2009) (alteration in original) (quoting Columbia Pictures Television, Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1194 (9th Cir. 2001)).  But “a statutory damages award may violate the due process rights of a defendant `where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.'” Id. (quoting United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir.1992)).

While the court certainly can award the full $100 per violation, many courts have chosen to award only $50 per violation, finding that amount sufficient and not excessive to “address the deterrent and punitive purposes of a statutory damages award.” Yahoo! Inc. v. XYZ Companies, 872 F.Supp.2d 300, 308-09 (S.D.N.Y. 2011) (citing Facebook, Inc. v. Fisher et al., No. C 09-05842 JF (PSG), 2011 WL 250395 (N.D. Cal. Jan. 26, 2011) (awarding $50 per violation) and Facebook v. Wallace, 2009 WL 3617789.  The court in Yahoo! chose to limit the damages to $50 per violation to limit the size of the award.  In Facebook v. Fisher, 2011 WL 250395, at *2, the court considered the defendants’ culpability and their willful and knowing violations of the statute and then limited the damages to $50 per violation because of the resulting size of the award.

Some courts however have chosen to award even less, especially when defendants sent a lesser quantity of emails. For example, in Tagged, Inc. v. Does 1 Through 10, No. C 09-01713 WHA, 2010 WL 370331, at *11-12 (N.D. Cal. Jan. 25, 2010), the court awarded only $25 per violation of CAN-SPAM because the defendants had only sent 6,079 emails and the plaintiff had given “no estimates of actual damages.”  Meanwhile in Asis Internet Servs. v. Rausch, No. 08-03186 EDL, 2010 WL 1838752, at *7 (N.D. Cal. May 3, 2010) the court awarded only $25 per violation of 15 U.S.C. § 7704(a)(1) and $10 per violation of 15 U.S.C. § 7704(a)(2), finding the case analogous to Tagged.

“The court must balance the nature of the harmful behaviors with the size of the award.  DGI LLC willfully engaged in a scheme to send fraudulent emails to Utah citizens, causing harm to ZooBuh and ZooBuh’s customers.  DGI LLC is alleged to have sent tens of thousands of emails, and although only 20,024 are at issue here, that number is certainly more significant than the 6,079 sent in Tagged, Inc., and is only a limited sample of the total emails sent.  The court therefore finds that an award of $50 per violation is appropriate…”

Perhaps affiliate marketers are more familiar with California’s anti-SPAM legislation because it confers a private right of action for consumers and is often used by zealous plaintiffs’ attorneys when initiating coercive shakedown lawsuits.  While the CAN-SPAM Act confers no such private right of action it remains a weapon for ISPs and regulatory agencies, including Federal Trade Commission (FTC) attorneys that occasionally initiate enforcement actions against marketers that violate the FTC Act by contacting consumers via deceptive SPAM emails.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP.  You can find him on LinkedIn at FTC defense lawyer.

For informational purposes only. Not legal advice. Attorney Advertising

 

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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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