CAN-SPAM: Another FTC Enforcement Action Encounters Obstacles

On the heels of Cyberheat, where a federal district court in Arizona rejected a strict liability standard for affiliate emailing (based on factual disputes around the nature of the relationship) [link] a federal court in Washington reached a similar result, rejecting cross motions for summary judgment in a labeling case.  The court’s ruling offers some light to Plaintiff but it’s at the end of a long tunnel.  In all, I suspect that the government is having a much tougher time in these cases than it expected. 

The case is US v. Impulse Media Group, Inc. (CV 05-1285L) and you can access the court’s Order here.

The government alleged that Defendant caused to be sent numerous emails which did not comply with the statute.  They did not contain the appropriate adult-content label, did not contain opt-out information, or a return address.  One of the critical issues that’s yet to be fleshed out in the CAN-SPAM context is the level of fault required on the part of someone who does not send messages but who pays a marketer to do so.  On the internet, this issue arises in the context of “affiliate” relationships, which are prevalent both in and outside the context of adult-oriented websites.  The statute defines procure as to "intentionally to pay or provide other consideration to, or induce, another person to initiate such a message on one's behalf."

The government argued for strict liability.  The government also argued that it was not required to prove knowledge of the underlying violations:  (1) first, the government points to a knowledge requirement in the injunctive relief provision which Congress later dropped and (2) the government points to the “knowing” limitation in the criminal counter part.  Since Congress ultimately considered but did not include a knowledge limitation to obtain injunctive relief the government argued this constitutes legislative evidence that such knowledge was not required.  Additionally, the government argued that inclusion of knowledge in the criminal counterpart would render a knowledge limitation on the injunctive relief provision superfluous. 

The court cites to Mummagraphics (and footnotes Cyberheat) in rejecting the strict liability argument

[The government’s] interpretation of the Act would render the word “intentionally” in the Act’s definition of “procure” meaningless.

That word – intent – is definitely an awkward one for plaintiffs.  One obvious reading of the word is that when you don’t send an email yourself you can only be held liable if you intend for a third party to send email which violates CAN-SPAM.  The court rejects this interpretation and strikes the middle ground.  According to the court, the government must prove that the defendant intended a third party to market via email.  Once this is proved, the government can use the lesser standard to show knowledge (constructive knowledge) of the underlying violation.

It's interesting to see Mummagraphics spill over into the government enforcement cases.  (That case certainly is doing its best to water down CAN-SPAM.)  It's also interesting to see the government struggle in these cases.  We have now not one but two areas where a govt-enforcement defendant will be able to push for a factual dispute and stretch out a case past summary judgment.  That can't be great for enforcement.  I wonder if the government asks too much in pushing for strict liability? 

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