Asis Internet's two plus year long lawsuit against Azoogle (and others) came to an abrupt end in late March.  (The court's order dismissing the claims and granting SJ can be accessed here.  It was unsealed in late April.)  Originally I didn't think the decision was terribly significant (although a worthy defense win for sure).  But as I read it again I do think there is one somewhat tricky issue that's addressed by this dispute and something that could be revisited on appeal. 

Background

Asis is a small internet access provider in California.  At the time it filed the lawsuit it had about 1000 internet/email customers.  Like all entities, Asis had in place some anti-spam measures (principally, a filtering service).  Sometime in late 2005, Asis received a slew of messages regarding real estate financing.  A principal of Asis became aware of the messages since they were sent to email addresses that were no longer active.  The proprietor sensed that something was amiss (based on the addresses to which the messages were sent and based on their content) and filled out the forms in some of these emails.  Much of the information included was bogus, except for a telephone number.  She also included the name "Bruce Wolf".  Shortly after filling out this form, she received numerous calls offering real estate financing offers and related information.  The principal testified that she thought she filled out the form on a website registered to one of the defendants - AzoogleAds.com (the site was lowrateadvisors.com). 

Azoogle is a firm that traffics in leads.  (I say the word "traffic," as if there's something inherently wrong with buying and selling leads . . . but as this decision indicates, that's not necessarily the judicial view.)  It shifted business models over the years, and in the past got into trouble for being affiliated with shady operators.  Ultimately, it was removed from Spamhaus's ROKSO listing, and even seemed to ask Spamhaus "for advice about spammers who were copying Azoogle images."  By the time of the lawsuit, Azoogle did business mostly with companies such as "Seamless Media," which the court describes as having a "good reputation".  Seamless Media acquired the Bruce Wolf lead, and ultimately sold it to Azoogle.  Azoogle in turn provided it to third parties. 

Testimony on Damages

Here's what the court says about the anti-spam efforts of Asis (as recounted by Asis CEO and President, Nella White):

The Court's Ruling

The court stopped to flag some interesting issues along with way (use and reliability of Wayback machine, testimony of experts regarding the number and timing of the various emails, etc.).  But ultimately, the decision turned on the Virtumundo problem.   Defendants argued, citing to Gordon v. Virtumundo, that Asis did not present sufficient (or any) evidence of damages resulting from the allegedly improper emails.  There was no evidence that the emails reached any Asis end users.  No evidence that the spam-filtering service bills of Asis went up.  No evidence that Asis was forced to hire additional employees to deal with the offending emails.  According to the court, "Asis suffered no meaningful adverse effect as a result of the Emails of any kind.  As a result, it does not have standing to assert its claims under the CAN-SPAM Act."

The court also granted summary judgment on an alternative basis.  The court found that there was insufficient evidence in the record for a jury to conclude that Azoogle "procured" the emails under CAN-SPAM.  The court looked to the two definitions of procure and noted that in the context of an action brought by an ISP, the term procure also includes "conscious avoidance."  In the typical context (w/respect to actions brought by AGs or the FTC?) procure means "intentionally to pay or provide other consideration to, or induce, another person to initiate such a message on one's behalf."  Section 7706(g)(2) modifies that definition for ISP claims, and adds "with actual knowledge, or by consciously avoiding knowing."  Ultimately, the court resolves this issue in Azoogle's favor, finding that there was no evidence from which a reasonable jury could conclude that Azoogle "made a deliberate choice not to know that Seamless Media would engage third parties to send out spam on Azoogle's behalf."  However, the court rejects Azoogle's position that in order to implicate the conscious avoidance standard, the defendant would have some reason to know of the specific individual or entity which sent the spam.  The question really is whether the defendant should be on notice and be charged with conducting due diligence on all of its partners, or whether it should conduct due diligence on partners who raise red flags. 

What to Make?

The initial reaction is that the waves of Virtumundo are being felt far and wide.  A follow up reaction is "wow I'm surprised at how often courts are ruling against spam plaintiffs . . . I thought judges equated spammers with purveyors of adult entertainment and online gambling . . . ."  But thinking about it further I have to admit that the court granted summary judgment on an interesting issue and one that could well be fleshed out on appeal.  (Asis already appealed but I'm not sure of how the timing/final judgment stuff will play out.)  Here's how it looks:  Congress set up CAN-SPAM with a flimsy definition of what constitute an IAS (ISP).  It includes throwaway language in CAN-SPAM that only "adversely affected" entities can bring suit.  People come along and file suits even though they pretty clearly lack any viable business activity (Gordon).  As a result courts give teeth to the "adverse effect" requirement, requiring harm different from harm suffered by the typical end user.  In this case we seem to have an entity that doesn't fall into the Gordon category, but it's clearly a small small ISP (and based in Humboldt county to boot).  Assuming it received some non-CAN-SPAM compliant messages, it should have a claim under CAN-SPAM.  There have been plenty of cases where larger ISPs with expensive experts go into mind numbing detail about the costs of their anti-spam efforts and speculate as to the per message cost imposed by spam.  But no one is ever able really to pin point the increased cost of one particular message.  Maybe that's why Congress included a statutory damages provision in the statute.  From a policy standpoint the decision seems to create a structure where larger/more established ISPs can sue because they will have more sophisticated anti-spam efforts in place and will be better able to answer the question of the cost imposed by any particular message (granted with a lengthy piece of speculation from an expert).  That's an odd outcome from CAN-SPAM, particularly since Congress did not impose any sort of size requirement for an ISP in order to be able to sue. 

At the end of the day it's not clear that summary judgment was appropriate, particularly on the basis of no adverse effect.  Maybe the extent of damages suffered should somehow mitigate the ultimate award but it seems to me that if you are an ISP (or a provider of IAS) and you received messages that did not comply with CAN-SPAM you should be able to sue.  That's pretty much what the text of CAN-SPAM says.

As far as who you sue, that goes to the second point from the court's order.  Here again I felt like the court took a perspective that viewed the facts most favorably to Azoogle.  Azoogle allegedly buys and sells leads, including mortgage leads.  It knew that some of its lead generators engaged in email activities.  Some would argue that this itself should impose a heightened due diligence requirement on Azoogle.  The fact that Azoogle bought and sold leads in the mortgage industry and bought and sold leads multiple times (including to Quicken, eLeadZ) could arguably have raised some red flags in the mind of the judge.  Indeed, the court notes that Asis put forth evidence that Azoogle "did little to investigate the third party vendors it engaged."  Nevertheless, the court is swayed by the fact that there's nothing in the record specifically about Seamless Media (??).  The court's conclusion that "Seamless Media had a good reputation at the time, and was obliged by its contract with Azoogle to follow the law," either sounds incredibly naive.  Or sounds like it takes a view of the facts most favorable to Azoogle. 

I'm not sure where the appeal is at procedurally, but I think the chances of Asis are decent.  Counsel for defense should be excited about this win for sure, but that excitement may be short-lived.  

NB:  I was involved as counsel for one of the defendants in the Braver case in the W.D. of Oklahoma.  This revolved around mortgage leads as well, and the client was dismissed on jurisdictional grounds.  This case ultimately settled.