Beyond Systems, Inc. v. Kraft Foods, Incorporated
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 8:08-cv-00409-PJM. [999523357]. [13-2137]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2137
BEYOND SYSTEMS, INC.,
Plaintiff – Appellant,
v.
KRAFT FOODS, INCORPORATED; VICT. TH. ENGWALL & CO.; KRAFT
FOODS GLOBAL, INCORPORATED; CONNEXUS CORPORATION,
Defendants – Appellees,
and
HYDRA LLC; JOHN DOES 1-20,
Defendants,
WORLD AVENUE USA, LLC,
Intervenor,
JAMES JOSEPH WAGNER; HYPERTOUCH, INCORPORATED,
Third-Party Plaintiffs.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt.
Peter J. Messitte, Senior District
Judge. (8:08-cv-00409-PJM)
Argued:
October 29, 2014
Decided:
February 4, 2015
Before NIEMEYER, WYNN, and THACKER, Circuit Judges.
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Affirmed by published opinion. Judge Wynn wrote the opinion, in
which Judge Niemeyer and Judge Thacker joined.
ARGUED:
Richard
Kennon
Willard,
STEPTOE
&
JOHNSON
LLP,
Washington, D.C., for Appellant.
Darrell J. Graham, ROESER
BUCHEIT & GRAHAM LLC, Chicago, Illinois; Ari Nicholas Rothman,
VENABLE LLP, Washington, D.C., for Appellees. ON BRIEF: Stephen
H. Ring, LAW OFFICES OF STEPHEN H. RING, P.C., Gaithersburg,
Maryland; Michael S. Rothman, LAW OFFICE OF MICHAEL S. ROTHMAN,
Rockville, Maryland; Jill C. Maguire, Benjamin B. Watson,
STEPTOE & JOHNSON LLP, Washington, D.C., for Appellant. John K.
Roche, PERKINS COIE LLP, Washington, D.C.; John E. Bucheit,
ROESER BUCHEIT & GRAHAM LLC, Chicago, Illinois, for Appellees
Kraft Foods, Incorporated, Vict. Th. Engwall & Co., and Kraft
Foods Global, Incorporated.
J. Douglas Baldridge, Lisa Jose
Fales, VENABLE LLP, Washington, D.C., for Appellee Connexus
Corporation.
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WYNN, Circuit Judge:
In the late 1990s and early 2000s, legislatures across the
country became increasingly concerned about unwanted commercial
e-mail
colloquially
known
as
“spam.”
By
2004,
thirty-five
states had enacted some form of anti-spam legislation, though as
might
be
differently.
expected
each
addressed
the
problem
somewhat
See Roger Ford, Preemption of State Spam Laws by
the Federal CAN-SPAM Act, 72 U. Chi. L. Rev. 355, 363 (2005).
Among the common provisions in these statutes were the creation
of private rights of action for internet service providers and
large statutory damage provisions.
In this case, ostensible internet service provider Beyond
Systems, Inc. seeks statutory damages from Kraft Foods, Inc. and
Connexus Corporation under California’s and Maryland’s anti-spam
statutes based upon several hundred e-mails which it alleges
were unlawful spam.
The district court summarily ruled that
Beyond Systems consented to the harm underpinning its anti-spam
claims and is therefore barred from recovery.
We affirm the
district court’s judgment on this ground.
I.
A.
Beyond Systems is a Maryland corporation that provides at
least a modicum of e-mail and server access to a limited number
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of clients.
housed
in
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Paul Wagner owns Beyond Systems, whose servers are
his
parents’
Maryland
residence.
Paul’s
brother,
James Joseph (“Joe”) Wagner, owns Hypertouch, Inc., a nominal
internet service provider in California that routes spam e-mails
to Beyond Systems’ Maryland servers, where they are cached in
accounts designed to hold spam e-mails.
Hypertouch
and
alleged spammers.
Beyond
Systems
have
histories
of
suing
To further its litigation strategy, Beyond
Systems developed web pages with hidden e-mail addresses—that
is, e-mail addresses embedded in the code that generates the
webpages that are not visible to website visitors.
e-mail
addresses
are
discovered
by
“spam
The hidden
crawlers,”
computer
programs spammers use to look for e-mail addresses and subscribe
them to e-mail lists.
hidden
e-mail
traps.”
Because only spam crawlers can find these
accounts,
Beyond
Systems
uses
them
as
“spam
As a result, spam-trap-based litigation has accounted
for 90% of Beyond Systems’ income in recent years.
Unlike other internet service providers that routinely try
to block
e-mail accounts from spam, Beyond Systems does nothing
to filter or block spam e-mail.
Further, Beyond Systems has
increased its storage capacity to archive large volumes of spam
messages,
retaining
them
specifically
litigation.
4
to
provide
grounds
for
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B.
Similar
to
Beyond
Systems,
Hypertouch
operated
in
California with the same purpose of maximizing on spam-trapbased litigation.
2005,
Hypertouch
Pertinent to the issues in this matter, in
sued
Kraft
under
California’s
anti-spam
law
based on e-mails it received regarding Gevalia coffee, a Kraft
brand.
These e-mails allegedly had false headers, including
incorrect “From” addresses, misleading subject lines, and other
deficiencies which Hypertouch claimed violated California’s law.
Under
a
settlement
agreement
reached
in
that
litigation,
Hypertouch, on behalf of itself and its assignees, specifically
disclaimed all rights it had to any causes of action based on
the Gevalia e-mails sent to that point and agreed to cooperate
with
Kraft
in
identifying
future
e-mails
that
might
violate
California law.
In
2008,
Beyond
Systems
brought
Maryland
and
California
state-law claims against Kraft and Connexus in the United States
District Court for the District of Maryland.
Beyond Systems
alleged that it received a large volume of e-mails regarding
Kraft’s
Gevalia
Maryland’s
coffee
anti-spam
in
violation
statutes.
Many
of
of
California’s
these
e-mails
and
were
exactly the same ones that formed the basis of Hypertouch’s 2005
suit.
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After
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discovery
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concluded,
the
district
court
granted
partial summary judgment in favor of Kraft on “any claims based
on the same e-mails that were the subject of Hypertouch’s June
29, 2006 Settlement Agreement with Kraft” and “any claims based
on
e-mails
sent
directly
to
Hypertouch
after
the
Settlement
Agreement, where Hypertouch failed to notify Kraft within twenty
days of receipt.”
J.A. 655.
Additionally, the district court
granted partial summary judgment as to any e-mails barred by
California’s one-year statute of limitations.
The
district
court
then
bifurcated
the
trial
on
the
remaining e-mails into a “liability” proceeding and a “damages”
proceeding.
Supp.
2d
Beyond Sys., Inc. v. Kraft Foods, Inc., 972 F.
748,
754
(D.
Md.
2013).
During
the
liability
proceeding, the district court held a jury trial, split into two
phases, to determine whether Beyond Systems had standing to sue.
Id.
The first phase presented the jury with the question as to
whether Beyond Systems was an internet service provider (or its
state
law
equivalent).
This
phase
presented
none
of
Beyond
Systems’ litigation activities, but instead focused exclusively
on
those
services
it
where
its
servers were housed, and other business-related activities.
972
F. Supp. 2d at 754.
provided
to
its
customers,
The jury found that, according to this
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evidence, Beyond Systems was an internet service provider under
California and Maryland law.
The
second
phase
presented
evidence
of
Beyond
Systems’
litigation activities, including its relationship to Hypertouch
and
the
percentage
of
its
revenue
derived
from
anti-spam
litigation, and asked the jury if the Appellant was a “bona
fide” internet service provider.
not.
law,
The jury found that it was
Therefore, the district court determined as a matter of
inter
alia,
that
Beyond
Systems
had
invited
purported injury and thus could not recover for it.
we review this issue of law de novo.
its
own
On appeal,
Wilson v. Dollar Gen.
Corp., 717 F.3d 337, 342 (4th Cir. 2013).
II.
As an initial matter, we are bound to address the subject
matter jurisdiction issue of whether Beyond Systems had Article
III standing.
Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 88-102 (1998) (recognizing that standing to maintain a
suit implicates the court’s jurisdiction to entertain a suit and
is thus a threshold question to be resolved before the merits).
To have standing, a party must allege that it suffered a
“concrete” harm, there must be “a fairly traceable connection
between the plaintiff’s injury and the complained-of conduct of
the defendant[,]” and the harm must be redressable.
7
Id. at 103
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(internal quotation marks and citations omitted).
The Supreme
Court has also cautioned that the “absence of a valid . . .
cause
of
action”
does
not
implicate
the
court’s
“power
to
adjudicate the case,” id. at 89, and we therefore take care not
to conflate a standing inquiry with a merits inquiry.
Doing so here, we conclude that Beyond Systems had Article
III
standing.
It
claimed
a
harm—receiving
spam
e-mail—and
Maryland and California law create an interest in being free
from such harm.
See, e.g., Cantrell v. City of Long Beach, 241
F.3d 674, 684 (9th Cir. 2001) (“state law can create interests
that support standing in federal courts”); Md. Code §§ 14-3002,
14-3003; Cal. Bus. and Prof. Code § 17529.5.
Beyond Systems
contended that Defendants sent false and deceptive spam e-mails,
i.e., caused its claimed harm.
provide statutory redress.
And Maryland and California law
Id.
Accordingly, we conclude that
Beyond Systems had Article III standing.
III.
The central issue in this case is whether the common law
doctrine of volenti non fit injuria precludes Beyond Systems’
recovery under the California and Maryland anti-spam statutes.
The district court held that it does.
We agree.
California’s anti-spam statute provides, in relevant part:
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(a) It is unlawful for any person or entity to
advertise in a commercial e-mail advertisement either
sent
from
California
or
sent
to
a
California
electronic mail address under any of the following
circumstances:
. . .
(2)
The
e-mail
advertisement
contains
or
is
accompanied by falsified, misrepresented, or forged
header information.
. . .
(3) The e-mail advertisement has a subject line that a
person knows would be likely to mislead a recipient,
acting reasonably under the circumstances, about a
material fact regarding the contents or subject matter
of the message.
(b)(1)(A) In addition to any other remedies provided
by any other provision of law, the following may bring
an action against a person or entity that violates any
provision of this section:
. . .
(ii) An electronic mail service provider
Cal. Bus. and Prof. Code § 17529.5.
Similarly, Maryland’s anti-spam act provides, in relevant
part:
(b) A person may not initiate the transmission,
conspire
with
another
person
to
initiate
the
transmission,
or
assist
in
the
transmission
of
commercial electronic mail that:
(1) Is from a computer in the State or is sent to an
electronic mail address that the sender knows or
should have known is held by a resident of the State;
and
(2)(i) Uses a third party's Internet domain name or
electronic mail address without the permission of the
third party;
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(ii) Contains false or misleading information about
the origin or the transmission path of the commercial
electronic mail; or
(iii) Contains false or misleading information in the
subject line that has the capacity, tendency, or
effect of deceiving the recipient.
Md.
Code
§
“interactive
14-3002.
computer
under the statute.
These
Additionally,
service
provider[s]”
to
law
allows
pursue
damages
Md. Code § 14-3003.
state
statutes
the
Assault
Controlling
Maryland
exist
of
against
the
Non-Solicited
backdrop
of
Pornography
the
and
Marketing Act (“CAN-SPAM Act”), which Congress enacted to create
a national uniform standard regarding spam control.
7701(a)(11).
CAN-SPAM
made
it
illegal
to
15 U.S.C. §
“initiate
the
transmission . . . of a commercial electronic message . . . that
contains . . . header information 1 that is materially false or
materially
misleading.”
15
U.S.C.
§
7704.
Congress
specifically provided that the statute would preempt state laws,
except
for
provision.
those
that
fit
within
15 U.S.C. § 7707(b)(1).
a
carve-out
or
“savings”
That provision saved those
state laws that “prohibit falsity or deception in any portion of
1
Header information includes an e-mail address, a domain
name, an internet protocol address (IP address), or a “from”
line, among other information. 15 U.S.C. § 7702(8).
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commercial
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electronic
thereto . . . . ”
mail
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message
or
information
attached
Id.
This Court has held that “Congress was operating in the
vein
of
tort
exceptions”.
when
it
drafted
the
pre-emption
clause’s
Omega World Travel, Inc. v. Mummagraphics, Inc.,
469 F.3d 348 (4th Cir. 2006).
Thus, in this Circuit, it is
clear that a state’s anti-spam statute is not preempted so long
as it deals with falsity or deception in the vein of tort.
Id.
While the highest court in Maryland has not spoken directly
on the issue in this matter, we find the direct pronouncement of
Maryland’s
second
highest
court
to
be
informative
state of Maryland’s law on this subject.
Special
Appeals
of
Maryland
made
as
to
the
In 2006, the Court of
clear
that
violations
of
Maryland’s anti-spam statute, “like violations of the Consumer
Protection
[because]
Act,
both
are
‘in
statutes
the
nature
regulate[]
of
false
a
and
tort.’
Indeed,
deceptive
trade
practices . . . the same principles that guide us when faced
with questions of individual liability for torts apply here.”
MaryCLE LLC v. First Choice Internet, Inc., 890 A.2d 818, 846
(Md. App. 2006) (citation omitted).
Similarly, the second highest court in California provides
us with guidance on the state of California law on this issue.
In 2011, the California Court of Appeal concluded “that the CAN–
SPAM
Act’s
savings
clause
applies
11
to
any
state
law
that
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prohibits material falsity or material deception in a commercial
e-mail . . . . ”
Hypertouch, Inc. v. ValueClick, Inc., 192 Cal.
App. 4th 805, 833 (Cal. Ct. App. 2011).
The California court
thereby limited the application of California’s anti-spam law to
deceptive e-mails.
Id.
Thus, neither the California nor the
Maryland anti-spam statutes, both of which are in the vein of a
tort, is preempted.
Generally, tort-related statutes like these anti-spam laws
are not exempt from common law principles.
This makes sense,
“because statutes creating torts rarely bother to set forth all
the
ancillary
doctrines-governing
such
issues
as
causation,
immunity, or, here, derivative liability-that are necessary to
compose a complete regime of tort liability.”
Shager v. Upjohn
Co.,
See
913
F.2d
398,
404
(7th
Cir.
1990).
also,
e.g.,
Busching v. Sup. Ct., 12 Cal.3d 44, 52 (1974) (“[I]t is not to
be presumed that the legislature in the enactment of statutes
intends to overthrow long-established principles of law unless
such
intention
is
made
clearly
to
appear
either
by
express
declaration or by necessary implication.”); Hardy v. State, 482
A.2d 474, 478 (Md. 1984) (“Maryland courts adhere to the policy
that statutes are not to be construed to alter the common-law by
implication.”).
Because the California and Maryland anti-spam
statutes are in the vein of a tort, and nothing in their text
suggests otherwise, common law tort principles that are part of
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those states’ common law also apply to the causes of action
these statutes create.
It is a general maxim of tort law that “no wrong is done to
one who consents.”
(1979).
Restatement (Second) of Torts 892A cmt. a
As such, “[o]ne who effectively consents to conduct of
another intended to invade his interests cannot recover in an
action of tort for the conduct or for harm resulting from it.”
Id. § 892A.
This principle has been known as “volenti non fit
injuria,” or “to a willing person it is not a wrong.”
Black’s
Law Dictionary 1805 (10th ed. 2014).
Maryland and California abide by volenti non fit injuria.
As the Maryland Court of Special Appeals has recognized, “[a]ll
intended
wrongs
have
in
common
the
element
inflicted without the consent of the victim.
that
they
are
Those who, with
full knowledge, assent to the invasion of their interests may
not complain.”
Janelsins v. Button, 648 A.2d 1039, 1042 (Md.
Ct.
1994)
Spec.
App.
(internal
quotation
marks
and
citation
omitted); see also, e.g., Brazerol v. Hudson, 277 A.2d 585 (Md.
1971) (landowners who consented to entry of dump truck on their
land
to
transport
materials
to
adjoining
property
could
not
recover for trespass and alleged crack in their basement wall).
California has gone so far as to codify the maxim:
consents to an act is not wronged by it.”
“He who
Cal. Civ. Code §
3515; see also Pinney & Topliff v. Chrysler Corp., 176 F. Supp.
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801,
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810
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(S.D.
Cal.
1959)
Pg: 14 of 15
(referring
to
Section
3515
as
“a
codification of the maxim volenti non fit injuria”).
We take pause to note that this doctrine is separate and
distinct from that of “assumption of risk,” with assumption of
risk
serving
defendant’s
doctrine
as
a
defense
negligent
applies
or
when
when
the
reckless
the
tort
is
conduct,
plaintiff
defendant’s intentional conduct.
based
while
has
the
consented
on
the
volenti
to
the
See Restatement (Second) of
Torts Chapter 17A, scope note; id. § 892A cmt. a.
In a similar
vein, while the Maryland Court of Special Appeals observed in
Janelsins that “the two doctrines substantively amount to flip
sides of a single conceptual principle,” it joined California in
holding that “the doctrine of assumption of risk does not bar
recovery for intentional torts.”
We
agree
with
“overwhelming”
the
that
district
Beyond
claims it suffered.
648 A.2d at 1044-45.
court
Systems
that
consented
the
to
evidence
the
harm
was
it
Beyond Sys., Inc., 972 F. Supp. 2d at 770.
Beyond Systems created fake e-mail addresses, solely for the
purpose
of
gathering
spam.
It
embedded
these
addresses
in
websites so that they were undiscoverable except to computer
programs
that
serve
accounts to spam.
no
other
function
than
to
find
e-mail
Beyond Systems increased its e-mail storage
capacity to retain a huge volume of spam, by which it hoped to
increase its eventual recovery under anti-spam statutes.
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And it
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participated
in
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routing
spam
e-mail
between
California and Maryland to increase its exposure to spam and
thereby allow it to sue under both states’ laws.
Accordingly,
we agree with the district court that Beyond Systems’ consent
to—and indeed its solicitation of—the harm at issue in this case
prohibits Beyond Systems from recovering under the Maryland and
California anti-spam statutes. 2
IV.
For the reasons above, we find that Beyond Systems cannot
recover for the e-mails sent from Kraft or Connexus to Beyond
Systems’
servers.
And
because
we
resolve
this
matter
as
detailed above, we need not and therefore do not address the
parties’ other arguments.
We thus affirm the district court’s
judgment.
AFFIRMED
2
We do not, by this opinion, suggest that a plaintiff which
is a legitimate internet service provider whose business has
been impacted by deceptive spam but who, in preparation for a
lawsuit, gathers and retains deceptive e-mails and even sets
“spam traps” to help it identify those responsible will be
prevented from bringing suit by the “volenti non fit injuria”
principle,
but
that
plaintiffs
like
Beyond
System,
who
“gratuitously created circumstances that would support a legal
claim and acted with the chief aim of collecting a damage award”
cannot.
Gordon v. Virtumundo, 575 F.3d 1040, 1068 (9th Cir.
2009) (Gould, J., concurring).
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