Gordon v. Virtumundo, Inc.
575 F.3d 1040, 48 Communications Reg. (P&F) 440, 2009 U.S. App. LEXIS 17518 (2009)
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Rule of Law:
The CAN-SPAM Act's private right of action is limited to bona fide Internet access service providers who suffer real and ISP-type harms from statutory violations, and the Act broadly preempts state laws that regulate commercial email content or labeling requirements beyond prohibiting falsity or deception.
Facts:
- James S. Gordon, Jr. is the original registrant of the domain "gordonworks.com," which his company Omni Innovations, LLC ("Omni") hosts on server space leased from GoDaddy.
- Around September 2003, Gordon created a personal email address "jim@gordonworks.com" and about six additional email accounts for friends and family through the gordonworks.com domain.
- Gordon registered these email addresses for online promotions and prize giveaways, "opting in" to mailing lists approximately 100-150 times; his "clients" later relinquished control of their gordonworks.com accounts to set up their own domains.
- Gordon continued to maintain and monitor the abandoned gordonworks.com email accounts for "research on the spam that comes through," and configured the server to send an automated "Notice of Offer to Receive Unsolicited Commercial Email (SPAM)" purporting to form a contract for $500 per additional unsolicited email.
- Virtumundo, Inc., Adknowledge, Inc., and Scott Lynn (collectively “Virtumundo”), engaged in online marketing, widely transmitted email advertisements and solicitations to potential consumers on behalf of third-party clients, sending approximately 13,800 commercial email messages to gordonworks.com accounts.
- Gordon purposefully avoided implementing spam filters or blocking unwanted spam, dedicating resources to accumulating spam for litigation, and admitted setting up domains as "spam traps" with the sole purpose of gathering email marketing messages for lawsuits, with "clients" sharing in settlement proceeds based on email contributions.
Procedural Posture:
- In 2004, James S. Gordon, Jr. began filing lawsuits against persons and companies who sent solicitations or advertisements to email accounts hosted on Omni’s leased server space.
- In February 2006, Gordon filed a lawsuit against Virtumundo, Inc., Adknowledge, Inc., and Scott Lynn (collectively “Virtumundo”) in the Western District of Washington, asserting violations of the CAN-SPAM Act, the Washington Commercial Electronic Mail Act (CEMA), the Washington Consumer Protection Act (CPA), and the Washington “Prize Statute.”
- In December 2006, the district court granted in part and denied in part Virtumundo’s motion to dismiss, dismissing Gordon’s Prize Statute claims entirely and his CEMA and CPA claims related to gathering personally identifying information.
- The district court granted Virtumundo’s motion for summary judgment on all remaining claims (CAN-SPAM Act claims and the surviving CEMA and CPA claims), concluding that Gordon and Omni lacked standing under the CAN-SPAM Act and that state law claims failed due to federal preemption and as a matter of law.
- Gordon appealed the grant of summary judgment to the Ninth Circuit Court of Appeals; Omni was dismissed from the appeal as an improper pro se corporate appellant.
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Issue:
1. Does an individual who leases server space, creates email accounts for himself and friends, and actively seeks out commercial emails for litigation purposes qualify as an "Internet access service" provider "adversely affected by" CAN-SPAM Act violations, thereby granting him standing under 15 U.S.C. § 7706(g)(1)? 2. Does the CAN-SPAM Act preempt state laws, such as Washington's CEMA, that regulate commercial email header information beyond prohibiting falsity or deception?
Opinions:
Majority - Tallman, Circuit Judge
No, an individual in Gordon’s circumstances does not qualify as an "Internet access service" provider "adversely affected by" CAN-SPAM Act violations for standing purposes, and yes, the CAN-SPAM Act preempts state laws like Washington's CEMA that regulate commercial email header information beyond prohibiting falsity or deception. The court agreed that Gordon lacked standing, establishing a two-part inquiry: (1) whether the plaintiff is an "Internet access service" (IAS) provider and (2) whether the plaintiff was "adversely affected by" statutory violations. Gordon was not an IAS provider; he merely leased server space and utilized third-party services like GoDaddy and Verizon, lacking physical control over hardware. His operation was not a bona fide email provider, as he intentionally avoided blocking spam to facilitate litigation. Furthermore, Gordon was not "adversely affected" as contemplated by the Act. The statute aims to redress real, ISP-type harms such as network slowdowns, server crashes, higher bandwidth utilization, and increased hardware/software costs. Gordon suffered no such harms; his claimed burdens were self-imposed and primarily related to litigation preparation from actively seeking out and accumulating spam as "spam traps" for financial benefit. Congress intended to protect legitimate operations, not to support a "litigation mill." The court also concluded that Gordon's Washington Commercial Electronic Mail Act (CEMA) claims regarding header information were preempted. The CAN-SPAM Act broadly preempts state regulation of commercial email, with a narrow exception for state laws prohibiting "falsity or deception" (15 U.S.C. § 7707(b)(1)). Interpreting "falsity or deception" in conjunction with "fraud" (as in § 7707(b)(2)), the court found this exception refers to traditionally tortious or wrongful conduct, not immaterial inaccuracies or non-deceptive omissions. CEMA's broad language, which could create liability for unintentional clerical errors or incomplete information, exceeds this scope. Gordon's claim that Virtumundo's "from lines" "misrepresent or obscure" the sender by requiring a WHOIS search did not rise to the level of "falsity or deception." State laws imposing heightened content or labeling requirements beyond the federal standard are preempted to ensure a uniform national standard. As Gordon's CEMA claims failed, his Washington Consumer Protection Act (CPA) claims, largely dependent on CEMA violations and lacking proof of material deceptive conduct or actual, proximately caused injury, also failed.
Concurring - Gould, Circuit Judge
No, Gordon lacks standing because he structured his activities to create a "litigation factory" for personal financial benefit, rather than operating a bona fide Internet access service and suffering genuine adverse effects. Judge Gould concurred, emphasizing that Gordon's primary objective was to exploit the CAN-SPAM Act to generate litigation and personal profit. He noted that common law traditionally provides remedies for actual injustices and harms, not for situations gratuitously created to support legal claims with the chief aim of collecting damages. He argued that these common law principles, even without explicit legislative history, suggest Congress intended to exclude such "manufactured claims." The CAN-SPAM Act’s explicit limitation of standing to bona fide IAS providers who are "adversely affected" further reinforces the conclusion that plaintiffs like Gordon, who attempt to game the system, should be denied standing. He distinguished this from "tester" standing in civil rights cases (e.g., Fair Housing Act, Americans with Disabilities Act) where Congress provided broad standing without requiring proof of injury, thereby empowering private actors for enforcement.
Analysis:
This case provides crucial guidance on the interpretation of the CAN-SPAM Act's private right of action and its preemption clause. It narrowly defines "Internet access service" provider status, requiring a bona fide operation that provides actual Internet access services, not merely a domain registrant setting up email accounts for litigation. More significantly, it establishes that "adversely affected by" requires real, ISP-type harms (e.g., technical impairments, increased costs) causally linked to unlawful spam, specifically excluding self-imposed burdens or general consumer annoyance, thereby curbing "professional plaintiffs" seeking to profit from statutory damages. The ruling also clarifies the scope of federal preemption, ensuring a uniform national standard for commercial email by preempting state laws that go beyond prohibiting material falsity or deception in message content or headers.
