Asis Internet Services et al v. Active Response Group, Inc.

Filing 94

ORDER Signed by Judge Thelton E. Henderson on 2/9/2010 Granting Motion to Dismiss. (tehlc4, COURT STAFF) (Filed on 2/9/2010)

1 2 3 4 5 6 7 8 9 10 v.

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

ASIS INTERNET SERVICES, et al., Plaintiffs, No. C07-06211 TEH ORDER GRANTING MOTION TO DISMISS

United States District Court

11
For the Northern District of California

ACTIVE RESPONSE GROUP, INC., et al., Defendants.

12 13 14

This matter came before the Court for case management conference on February 8,

15 2010. Thomas R. Burke appeared in person on behalf of Defendant Active Response Group, 16 Inc. ("ARG"). Telephonic appearances were made by Jason K. Singleton for Plaintiffs Asis 17 Internet Services ("Asis") and Joel Householter, dba Foggy.net (collectively "Plaintiffs"); 18 Richard B. Newman for Defendant Integraclick, Inc. ("Integraclick"); and Jared Gordon for 19 Defendants Hydra LLC and Hydra Media Group, Inc. ("Hydra"). Integraclick made an oral 20 motion to dismiss Plaintiffs' federal CAN-SPAM Act claim for lack of standing, in light of 21 the Ninth Circuit's recent decisions in Asis Internet Services v. Azoogle.com, Inc. 22 ("Azoogle"), No. 08-15979, 2009 U.S. App. LEXIS 26232 (9th Cir. Dec. 2, 2009), and 23 Gordon v. Virtumundo, Inc. ("Virtumundo"), 575 F.3d 1040 (9th Cir. 2009). The Court, 24 having taken the motion under submission, now GRANTS it. 25 Plaintiffs are Internet access providers who allege that Defendants sent unsolicited and

26 misleading spam emails to Plaintiffs' customers, in violation of the Controlling the Assault of 27 Non-Solicited Pornography and Marketing ("CAN-SPAM") Act of 2003, 15 U.S.C. § 7701 28 et seq., and section 17529.5 of the California Business and Professions Code. This Court

1 denied ARG's motion to dismiss on July 30, 2008, finding that Plaintiffs' allegations were 2 sufficient to establish standing under the CAN-SPAM Act, which confers a limited private 3 right of action on "provider[s] of Internet access service adversely affected by" certain 4 violations of the Act. 15 U.S.C. § 7706(g)(1). Acknowledging that the standing requirement 5 was "being interpreted for the first time in district courts," which were split "on what 6 plaintiff must show to prove it was `adversely affected,'" the Court allowed ARG to file an 7 interlocutory appeal of its order denying the motion to dismiss. 9/16/08 Order, at 5. This 8 action was then stayed pending resolution of the appeal or, if the appeal was not accepted for 9 hearing, the Ninth Circuit's decision in Azoogle, which presented an identical standing issue.1 10 The Ninth Circuit declined to hear the interlocutory appeal on November 4, 2008.

United States District Court

11
For the Northern District of California

On August 6, 2009, the Ninth Circuit issued its first guidance on the statutory standing

12 requirements of the CAN-SPAM Act. In Virtumundo, the court segregated the standing 13 inquiry into two components: "(1) whether the plaintiff is an `Internet access service' 14 provider," and "(2) whether the plaintiff was `adversely affected by' statutory violations." 15 575 F.3d at 1049. To satisfy the second component, the plaintiff must have suffered a harm 16 that is "both real and of the type experienced by" internet service providers, which would 17 ordinarily require "evidence of some combination of operational or technical impairments 18 and related financial costs attributable to unwanted commercial e-mail." Id. at 1053-54. 19 That harm must also be "attributable to the type of practices circumscribed by the Act," a 20 standard that could be satisfied, "at the very least," by a showing that the emails at issue 21 "contribute to a larger, collective spam problem that caused ISP-type harms." Id. at 1054. 22 The Ninth Circuit issued its decision in Azoogle on December 2, 2009, affirming

23 summary judgment for defendants based on the lack of standing under the CAN-SPAM Act. 24 2009 U.S. App. LEXIS 26232, at *2-3. Applying the standard articulated in Virtumundo, the 25 court found that the second requirement was "not satisfied," because the "mere cost of 26 carrying SPAM emails over Plaintiff's facilities does not constitute a harm as required by the 27 Pursuant to a stipulation with ARG, Plaintiffs added Integraclick and Hydra as 28 defendants in a second amended complaint filed on September 30, 2008. 2
1

1 statute." Id. at *2. The plaintiff in Azoogle was, notably, Asis Internet Services, one of two 2 plaintiffs in the current matter. The record of harm put forth by Asis included expenses of 3 "$3,000.00/month on spam filtering and employee time devoted to dealing with spam 4 issues," and the devotion of "a third of ASIS employee time" to "dealing with spam 5 complaints." Asis Internet Servs. v. Optin Global, Inc., 2008 U.S. Dist. LEXIS 34959, at *12 6 (N.D. Cal. Mar. 27, 2008). Plaintiffs allege nearly identical harm in the matter before this 7 Court. See Second Amended Complaint, ¶ 31 (estimating that "a third of [Asis] employees' 8 time is spent on customer spam complaints and technical issues," and that "the prevention of 9 SPAM costs about $3000 per month"). 10 Plaintiffs stated at the case management conference that their evidence does not differ

United States District Court

11 from that offered in Azoogle, and acknowledged that dismissal is "inevitable" as long as the
For the Northern District of California

12 rule of law from Azoogle governs. Although the Azoogle decision is unpublished and 13 therefore not binding, it is an application of the governing Virtumundo standard to facts 14 identical to those before this Court, and therefore carries great weight. Based on the Ninth 15 Circuit's clear guidance in Virtumundo and Azoogle, the conclusion that Plaintiffs lack 16 standing to bring a claim under the CAN-SPAM Act is inescapable. This Court therefore 17 GRANTS Integraclick's motion to dismiss Plaintiffs' first cause of action against all 18 Defendants. Plaintiffs' claim under the CAN-SPAM Act is DISMISSED WITH 19 PREJUDICE. 20 This leaves only a state law cause of action, under Cal. Bus. & Prof. Code § 17529.5.

21 A district court "may decline to exercise supplemental jurisdiction over" state law claims if 22 "the district court has dismissed all claims over which it has original jurisdiction." 28 U.S.C. 23 § 1367(c)(3). Although Plaintiffs requested that the Court remand the state claim to state 24 court, this action was originally filed in this Court, and therefore cannot be remanded. 25 // 26 // 27 // 28 3

1 As this Court declines to exercise supplemental jurisdiction over the state law cause of 2 action, that claim is DISMISSED WITHOUT PREJUDICE to its being re-filed in state court. 3 4 IT IS SO ORDERED. 5 6 Dated: 2/9/10 7 8 9 10 THELTON E. HENDERSON, JUDGE UNITED STATES DISTRICT COURT

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4