Every state's anti-spam statute is in jeopardy of CAN-SPAM Act preemption under the test set out by the court in Hoang v. Reunion.com Inc., No. 06-3518 (N.D. Calif. Oct. 6, 2008). In a case involving spammy invitations to join a social networking site, the court ruled that unless the plaintiffs' allegations established all of the elements of common law fraud, it would be preempted.
That's a lot to ask. Let's see how the court got there:
CAN-SPAM preempts state statutes that “expressly regulate[ ] the use of electronic mail to send commercial messages,” except to the extent such statutes prohibit “falsity or deception in any portion of a commercial electronic mail message or information attached thereto.” See 15 U.S.C. § 7707(b)(1). Section 7701(b)(1) has been interpreted to preempt state law claims, unless such claims are for “common law fraud or deceit.” See Omega World Travel, Inc. v. Mummagraphics, Inc., 469 F. 3d 348, 353-56 (4th Cir. 2006) (affirming dismissal of claim under Oklahoma statute based on defendant’s having sent email containing “immaterial” false statement, because common law fraud claim cannot be based on “immaterial” false statement); Kleffman v. Vonage Holdings Corp., 2007 WL 1518650, *3 (C.D. Cal. 2007) (holding claim under § 17529.5(a) preempted, where claim not based on “traditional tort theory” of “fraud and deceit”).
“The necessary elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.” Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239 (1995) (internal quotation and citation omitted). Here, plaintiffs fail to allege facts to support a claim of fraud, which must be alleged with particularity. See Fed. R. Civ. P. 9(b). In that regard, plaintiffs fail to allege with the requisite specificity why the statements at issue were false and why defendant knew they were false when made. Further, plaintiffs fail to allege plaintiffs relied to their detriment on any misrepresentation and that, as a result of such reliance, they incurred damage.
Accordingly, plaintiffs’ claims are preempted and subject to dismissal. (bolded emphasis mine).
Think about that. Plaintiffs are required to show detrimental reliance and actual damages or their claim is preempted by CAN-SPAM. Proof that an individual detrimentally relied on an e-mail message's routing information or subject line would seem to be a near-impossible hurdle. What "detriment" is there to opening an e-mail that appears to be from a friend but is in fact spam? As for damages, even CAN-SPAM itself does not require proof of actual damages.
The plaintiffs in the Hoang case alleged that Reunion.com's e-mail invitations for them to sign-up were false and misleading because (1) the "From" line falsely indicated that the message originated with a friend rather than from Reunion.com, and (2) the "Subject" line falsely indicated that the friend wanted to connect with them on Reunion.com.
It will be interesting to see if the court's preemption analysis stands up to additional scrutiny. Other than the obvious fact that every state anti-spam law now on the books fails the court's preemption analysis, the court's reading of the available caselaw is a little suspect. This the first time I have seen the Fourth Circuit's Omega World decision described as holding that only claims for common law fraud are not preempted by CAN-SPAM. I couldn't find anything close to that in the Omega World opinion. Omega World, it seems to me, held that CAN-SPAM preempts state-law claims for immaterial errors in e-mail messages. (See also Ferron v. Echostar Satellite LLC, No. 2:06-cv-00453 (S.D. Ohio Sept. 24, 2008), where the court, following Omega world, held that claims that e-mail advertisements violated an Ohio law prohibiting inaccurate address information are preempted by the CAN-SPAM Act absent a showing that the inaccuracy included an intentional or misleading falsity.)
As for the Kleffman ruling, the concern is the same. Kleffman just didn't say what the court here says it did. In Kleffman, a case in which the plaintiff challenged Vonage's tactic of using multiple message origination addresses to avoid spam filters, the court called the plaintiff's theory of liability a novel one because the Vonage origination addresses were not false or misrepresented in any ordinary sense of these terms. The court said: "[Congress] left states room only to extend their traditional fraud prohibitions to the realm of commercial emails because it was confident that legitimate businesses would not unwittingly transgress such well-established prohibitions."
Do anyone see in that language a holding that state-law causes of action that fall short of requiring proof of all elements of common law fraud are preempted? I don't either.
The Hoang case is different than any prior preemption case because the plaintiffs have a much stronger claim that the messages at issue were false and misleading. Omega World involved a mere immaterial error; Kleffman involved a tactic to evade spam filters that did not employ the use of false information; and Ferron involved an "inaccurate" originating address.
The Hoang court gave the plaintiff leave to amend so perhaps the issue of CAN-SPAM preemption will be revisited, and we'll see if the court meant what it said in this opinion.
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