Conflicting Outcomes Leave Room for Uncertainty

Recent decisions from California courts interpreting California’s spam law have reached different conclusions as to whether claims under such law are preempted by the federal CAN-SPAM Act. The CAN-SPAM Act preempts state statutes that expressly regulate the use of e-mail to send commercial messages, except to the extent that the state statute prohibits “falsity or deception.”

The California statute, CAL. BUS. & PROF. CODE § 17529.5, makes unlawful commercial e-mail utilizing, among other things, (1) falsified, misrepresented, or forged header information, or (2) a misleading subject line about a material fact regarding the contents or subject matter of the message.

On May 5, the U.S. District Court for the Northern District of California, in Asis Internet Servs. v. Vistaprint Ltd., N.D. Cal. No. 08- 5261, held that an Internet service provider’s claim under California’s spam law regarding misleading e-mail subject lines was not preempted by CAN-SPAM. The court found the reasoning in an earlier decision by the Northern District of California involving the same plaintiff to be convincing.

In the earlier case, Asis Internet Servs. v. Consumerbargaingiveaways LLC, No. C 08- 04856 (N.D. Cal., April 17, 2009), the court held that “falsity or deception” as used in the CAN-SPAM savings clause was “not limited just to common law fraud and other similar torts,” as the defendant had argued. The court looked to the plain language of the CAN-SPAM Act, noting that Congress chose not to use the narrower word “fraud” and that the use of “falsity or deception” suggested a broader application.

Additionally, the court looked to the use of the word “deception” elsewhere in the CANSPAM Act and noted that this act repeatedly references the FTC Act’s definition of “deceptive” practices, which includes false advertising violations similar to those alleged by the plaintiff. Accordingly, the court stated that “[t]he CAN-SPAM Act’s repeated references to the FTC Act definition of ‘deceptive’ practices strongly suggest that Congress intended the phrase ‘falsity or deception’ in [the savings clause] to refer to, or at least encompass, that definition, not just state tort law.”

However, several other recent federal and state court California decisions have reached the opposite conclusion. In Hypertouch Inc. v. ValueClick Inc., No. LC081000 (Cal. Super Ct., May 4, 2009), the Los Angeles Superior Court held that the plaintiff Internet service provider’s claims regarding violations of California’s spam law were preempted by CAN-SPAM because the state law claims did not allege common law fraud or deceit.

This decision is in line with other California cases including Asis Internet Servs. v. Optin Global Inc., No. 05-05124 (N.D. Cal., April 29, 2008) and Hoang v. Reunion.com Inc., No. 08-3518 (N.D. Cal. Oct. 3, 2008). The only circuit court to address this issue, the Fourth Circuit, also found that similar claims under an Oklahoma law were preempted by CANSPAM, in Omega World Travel Inc. v. Mummagraphics Inc., 469 F.3d 348 (4th Cir. 2006).

The U.S. Court of Appeals for the Ninth Circuit has yet to address this issue of whether California’s spam law is preempted by CAN-SPAM. However, two cases currently docketed for appeal in the Ninth Circuit, Kleffman v. Vonage Holdings Corp., 551 F.3d 847 (9th Cir. 2008) and Gordon v. Virtumundo, Inc., No. 07-56171 (9th Cir. June 18, 2007), will allow the Ninth Circuit to make a decision on the preemption issue in the near term if it so chooses.