Spam Case Tossed; Plaintiff Must Pay Up

A U.S. District Court has ordered a Washington state man who sued spammers under the CAN-SPAM Act and lost his case to pay the legal fees of the defendants.

In its decision released last week, the U.S. District Court for the Western District of Washington at Seattle ordered the plaintiff, James Gordon, owner of Omni Innovations LLC, to pay US$111,440 to Virtumundo Inc. in Overland Park, Kan.

In May, the court ruled against Gordon, saying that he and other recipients of spam have no standing under the federal CAN-SPAM Act because they have not been "adversely affected" within the meaning of the law. The court said the recipient of the spam must be adversely affected in the same way that an Internet service provider would be, meaning he would have problems such as network and bandwidth slowdowns, greater demands on personnel or require new equipment.

The CAN-SPAM Act, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, established federal rules for commercial e-mail and penalties for unsolicited mass spamming.

After the ruling, Virtumundo sued to recoup its legal fees. Virtumundo could not be reached for comment.

In its ruling, the court was critical of the way Gordon did business.

"The court finds that the [plaintiff's] instant lawsuit is an excellent example of the ill-motivated, unreasonable and frivolous type of lawsuit that justifies an award of attorneys' fees to defendants," according to the decision. "The Court finds that the goal of deterrence is particularly relevant here. Plaintiffs should be deterred from further litigating their numerous other CAN-SPAM lawsuits now that they are aware of their lack of CAN-SPAM standing."

However, in an automatic response from Gordon to an e-mail from Computerworld requesting comment for this story, Gordon wrote, "I am a Washington state resident. By virtue of my residency in Washington state, the commercial electronic mail messages that I received from your company violate Washington state statute and the federal CAN-SPAM statute." The response also asked e-mail marketers to stop sending e-mails to certain addresses.

"As an Internet access service, I am entitled to sue under the Washington State statute, RCW 19.190 et seq. ($1,000 per e-mail)," according to the response. "And I may also pursue the statutory damages under the CAN-SPAM statute. Failure to heed this notice also exposes you (and your principal or agents) to liability under the notification prohibition under CAN-SPAM."

In February 2006, Gordon and Omni Innovations filed a complaint against Virtumundo in the federal court alleging violation of the CAN-SPAM Act as well as several state laws. In his lawsuit, Gordon claimed that he received 13,800 unsolicited e-mails and asked for damages of more than $20 million.

In its May decision, the court also noted that Gordon had filed 10 other lawsuits against spammers in Western Washington and that he made a living from settling these lawsuits.

"I believe this ruling represents the first time that a CAN-SPAM plaintiff has been ordered to pay attorneys' fees and costs to a defendant," said Eric Goldman, assistant professor and director of the High Tech Law Institute at the Santa Clara University School of Law, in as blog. "As a result, it's a leading example that courts can and do grow tired of bogus antimarketing lawsuits, and perhaps it will serve as an expensive warning to CAN-SPAM plaintiffs to ensure the merits of their lawsuit."

"As the court describes, Gordon runs a 'spam business' -- basically, a for-profit plaintiff litigation shop to go after spammers (the court also calls it a 'litigation factory')," Goldman said. "The court correctly notes that Congress really wasn't trying to enable lots of private lawsuits from CAN-SPAM, so the risk of chilled plaintiffs is appropriate in this context."

The ruling also paves the way for CAN-SPAM defendants to ask for and receive attorneys' fees when faced with frivolous CAN-SPAM claims, Goldman said.

"But it remains to be seen how well these sanctions work at curbing litigation abuse," he said. "At minimum, I hope this award convinces Gordon that his 'spam business' may not be as profitable as he initially thought."