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Comment RSSEmail Marketers Win Decisive Legal Victory
Written by Ari RothmanJuly 8, 2012 # 8:13 am # Legal Challenges, Specials # 7 Comments
A trial team led by J. Douglas Baldridge and Ari N. Rothman from Venable LLP obtained a unanimous jury verdict favoring the rights of online marketers. Specifically, a jury found that anti-spam plaintiff Beyond Systems, Inc., an alleged Internet service provider owned by Paul Wagner (the brother of anti-spam plaintiff Hypertouch, Inc. owned by Joe Wagner), is “primarily or substantially” engaged in filing anti-spam lawsuits. Therefore, Beyond Systems is not a bona fide “Electronic Mail Service Provider” under California’s anti-spam statute or a bona fide “Interactive Computer Service Provider” under Maryland’s anti-spam statute. This jury finding paves the way for the trial judge to decide that service providers like Beyond Systems must be bona fide to sue under California and Maryland law, and that plaintiffs that are “primarily or substantially” engaged in filing anti-spam litigation cannot sue under the statutes.
California’s anti-spam statute allows an “electronic mail service provider” or recipient of fraudulent spam email to sue over that email. Likewise, Maryland’s anti-spam statute allows an “interactive computer service provider” or a recipient of fraudulent spam email to sue over such email. Each statute allows a service provider to obtain $1,000 for each unlawful email.
In 2008, Beyond Systems sued Kraft Foods and Connexus Corp. in federal court, and claimed that it was an Internet service provider that received alleged fraudulent emails. When it became clear that Beyond Systems was primarily and substantially engaged in filing lawsuits and provided services at most as a secondary purpose, the judge ordered a trial on the issue of whether Beyond Systems was a bona fide service provider under the California and Maryland statutes. Then, at trial, defendants presented the jury with evidence showing that Beyond Systems did everything it could to trap alleged spam; agreed to receive vast amounts of alleged spam from Joe Wagner of Hypertouch; filed dozens of lawsuits across the country over alleged spam based that Beyond Systems trapped and that Joe Wagner of Hypertouch sent to Beyond Systems; generated revenues from litigation that far exceeded revenues generated from alleged services provided to customers; and otherwise functioned to file lawsuits and not as a legitimate service provider.
When confronted with this evidence, the jury found that Beyond Systems was not a bona fide “electronic mail service provider” under California’s anti-spam or an “interactive computer service provider” under Maryland’s anti-spam statute. Instead, Beyond Systems functioned to “primarily or substantially” file anti-spam lawsuits.
Venable’s client in the case is Connexus Corp. While we are grateful that the jury found that Beyond Systems was not bona fide but instead primarily or substantially engaged in filing anti-spam lawsuits, the judge must now decide that only bona fide service providers — and not service providers that exist to sue over alleged illegal email — can sue under the California and Maryland statutes. Although this process will take some time, we can only hope that the trial judge sees through the facade that Beyond Systems put up at trial and issue a ruling that prevents anti-spam litigants from suing under the statutes by merely holding themselves out as service providers where they truly exist to file lawsuits. Regardless of how the judge rules, the outcome of this case will have ramifications across the country and must be watched, as this is a case of first impression under state anti-spam statutes.
We expect briefing to occur in the next few months and anticipate a ruling later this year.
The case caption is Beyond Systems, Inc. v. Kraft Foods et al., 8:08-cv-00409, United States District Court for the District of Maryland.
Written by Ari Rothman
Ari Rothman focuses on complex litigation and transactions with a particular emphasis on Internet marketing and advertising matters involving advertisers, advertising networks, affiliates/publishers, list owners/managers, credit card processors, Internet service providers, and hosting companies.
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LOL are you trying to pass this off as news?
Wasn’t the ISP defense used YEARS ago in a few other cases like Gordon and Asls? This is pretty common knowledge and followed very close by those in the online community.
This was also picked apart and laid out pretty cleraly by courts in New York not long ago.
feels more like a commercial than a real article. Pace usually has higher standards than this when it comes to legal stuff
yawn
agreed with Johns post but before writin this off as another loud talker its only fair to give someone a shot
to the Rothman author seeing as how this was already argued /as stated in above post/ can you explain how this “first impression” case or how the impact is any different?
if not very uncool trying to take credit
peace
It’s a case of first impression because it will decide whether the bona fide ISP standard applies to standing under state law, not just to CAN-SPAM. Recall that Gordon addressed only standing under CAN-SPAM (federal law) and the defendant conceded standing under state law. Therefore, Gordon reached the issue of the legality of the emails under state law. By contrast, we fought standing under state law and the jury found for our client. If the judge adopts the jury’s finding then a plaintiff will need to be bona fide under state law — a ruling Gordon did not make because state law standing was uncontested.
In Gordon, “Virtumondo does not contest Gordon’s standing to bring CEMA claims.” Gordon v. Virtumondo, 575 F.3d 1040, 1058 (9th Cir. 2009). “CEMA” is the Washington state email statute. Our case involved the MD CEMA, which is the Maryland anti-spam statute based on Washington’s CEMA. Our case also involved California Business & Professions Code 17529.
What our case does — assuming the judge adopts the jury verdict and our theory of the case — is require bona fide ISP standing to maintain claims under state law (California Business & Professions Code 17529 and Maryland state law). This is new territory especially since a jury made the findings.
We no doubt expressly relied on Gordon in many Court papers, are not shy about that (the documents are public and my name is all over them), and take zero credit for Gordon. What we did was take the logic of Gordon and apply it to state law so that the door is shut on state law suits brought by ISPs that are not bona fide — something that Gordon did not decide.
My firm represented BSI in the trial that is the subject of Mr. Rothman’s story.
What Mr. Rothman utterly fails to note is that (1) this was a two-phase trial, and (2) the only phase that is indisputably supported by the law was the first phase that Connexus and Kraft lost. In phase one, the jury was asked to determine whether BSI is an “interactive computer service provider” and an “electronic mail service provider” as defined by the Maryland and California statutes, respectively. Under those statutes, providers of these kinds of services are permitted to sue for false and misleading spam. Connexus and Kraft, the spammer-defendants in this case, put on all kinds of evidence in phase one to try to undercut BSI’s claim that it satisfied the statutory requirements for standing. For example, the defendants proferred a so-called expert on ISPs, who testified that BSI was “inconsistent” with a true ISP because it didn’t have its servers in cages, didn’t have fire protection, and didn’t have other bells and whistles that large ISPs allegedly have. The jury rejected all of this evidence and expressly found — in phase one — that BSI clearly met the statutory definitions for standing. The case then moved to phase two during which, as Mr. Rothman wrote, the jury was allowed to consider whether BSI’s frequent litigation under the various state anti-spam statutes somehow affects its “bona fides,” a requirement that, unlike the federal statute, is found nowhere in the far more encompassing state statutes at issue. BSI’s position was that phase two of the trial never should have occurred, because there was no legal basis for it. The judge, however, was not prepared to rule on the “bona fide” requirement prior to trial and was interested to see how a jury would decide the issue. Accordingly, Connexus and Kraft fashioned a jury instruction that essentially compelled the outcome. Under it, if the jury concluded that, between 2005 and 2011, BSI was “substantially” or “primarily” involved in anti-spam litigation, then it couldn’t be found to be a bona fide plaintiff. BSI never hid from the fact that, when these state anti-spam statutes went into effect around the country, it (BSI) used them to try to stop the spam that was clogging its servers, and it spent a great deal of time and money doing so. Thus, the jury instruction essentially was drafted such that an ISP that uses the statutes for the very purpose that they were enacted would do so at its own peril, because its very use of the statutes would undercut it bona fides as an ISP. That may have been the right outcome in Gordon (under the CAN-SPAM Act), given that the plaintiff there appears to have created an ISP solely for the purpose of litigating, but BSI — a small ISP to be sure — was operating as an ISP six years before the Maryland and California statutes were even enacted.
With the outcome pre-ordained by a defendant-friendly jury instruction (one that doesn’t even track Gordon, which never mentions the actual requirements to be a “bona fide” ISP), the odds were tilted heavily (if not exclusively) in the spammers’ favor — and unfairly so in BSI’s view.
The judge now has to decide, as we had urged him to do prior to the trial, whether there is any bona fide requirement at all under the laws that govern this case. If he rules that there is no such requirement, then the jury’s verdict in phase one will control, and we’re on to a full trial on the merits on whether and to what extent the spam from Connexus and Kraft violated the anti-spam statutes.
That’s the whole story.
Roger Yoerges and Jeff McFadden
Steptoe & Johnson, LLP
well i don’t know about how the case would proceed but in my knowledge connexus and Kraft should win.
whatever Roger Yoerges and Jeff McFadden are saying it doesn’t matter according to the state law.
according to me and what the article stated Roger Yoerges and Jeff McFadden are just blood sucking leeches who just want to earn easy money by suing companies
Suing people without end surely must mean something else to lawyers, who make hefty commissions. To us, Joe Blow and John Doe, these suing trolls are the worst of the worst, taking money out of everyone’s pockets, forcing legit companies to fork over millions over minute issues they forced upon themselves. Who do the companies have to refill their cash piggie-banks? Customers Joe Blow and John Doe, who basically, just paid off their lawyers bills (and the opposing side settlement). Patent trolls are yet another horrible thing, living in the same law niche of money suckers. Sorry, BSI lawyer, no case here.
Its’s business, just like every company out there, they are trying to maximize proftability.