Zoobuh v. Savicom et al
Filing
81
MEMORANDUM DECISION AND ORDER granting 76 Motion for Default Judgment: Default Judgment shall be entered in favor of ZooBuh and against DGI LLC in the amount of $3,003,600.00 on ZooBuh's claim under 15 U.S.C. Section 7704(a)(1). Signed by Judge Jill N. Parrish on 4/3/19. (dla)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
ZOOBUH, INC., a Utah corporation,
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING MOTION FOR
DEFAULT JUDGMENT
v.
SAVICOM, INC., dba MINDSHARE
DESIGN, a California Entity
[TERMINATED]; DG INTERNATIONAL, a
foreign entity; DG INTERNATIONAL
LIMITED, LLC, a Delaware entity; Sylvia
van Baekel, an individual,
Case No. 2-17-cv-01098
District Judge Jill N. Parrish
Defendants.
This matter is before the court on the Motion for Default Judgment (ECF No. 76) against
defendant DG International Limited, LLC (“DGI LLC”) filed by Plaintiff ZooBuh, Inc.
(“ZooBuh”) pursuant to Fed. R. Civ. P. 55(b)(2). ZooBuh seeks statutory damages and treble
damages against DGI LLC for its alleged violations of the Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003 (CAN-SPAM Act), 15 U.S.C. § 7701 et seq, in the
amount of $3,003,600.00. The court grants ZooBuh’s motion.
BACKGROUND
ZooBuh is a Utah corporation with its principal place of business in Utah County, Utah.
ZooBuh provides email services to its customers, and it owns all of the servers, routers, and
switches on its network. Every ZooBuh email account is registered, hosted, and serviced through
ZooBuh’s hardware.
DGI LLC is a Delaware limited liability company with its principal place of business in
New Castle, Delaware. DGI LLC is an email marketing company. It entered into a contract with
Defendant DG International Limited (“DGI Limited”), a foreign entity, to send emails to persons
on DG International’s customer lists. The customer list at issue in this case contained email
addresses for persons who had supposedly registered for the dating website xdating.com. DGI LLC
used the platform of Savicom, Inc., dba Mindshare Design (“Mindshare”) 1 to send email
advertisements to the email addresses associated with the xdating.com customer list. 2
Zoobuh alleges that it and its customers have received thousands of email advertisements
for xdating.com. All of these emails arrived on Zoobuh’s email servers, which are located in Utah.
The emails contain links to a registration page for xdating.com. Many of the emails contain
misleading information: they purport to identify people registered on xdating.com, but in reality
the people identified in the emails do not exist and are not users of xdating.com. Rather, the emails
are sent from “virtual cupids”: fake users created by DGI LLC and/or DG International who
communicate with users in the same way actual users would. As xdating.com’s terms and
conditions explain:
THIS SITE USES FANTASY PROFILES CALLED “ONLINE
FLIRT®” In order to enhance your amusement experience, to
stimulate you and others to use our Services more extensively, and
to generally sprinkle some sparkle and excitement into the Services
of XDATING.COM, we may post fictitious profiles, generate or
respond to communications by means of automated programs or
scripts that simulate or attempt to stimulate your
intercommunication with another real human being (though none
really exists and any dialog is generated by programming) . . . .
Many of the emails at issue are tailored to the recipient’s location, in this case, Utah. Some
of the emails state, “Hey there [username], these are few [sic] members we’ve selected for you
near Salt Lake City.” The emails identify supposed members of xdating.com living in Salt Lake
1
ZooBuh and Mindshare stipulated to the dismissal of Mindshare on August 15, 2018.
2
This information is undisputed. See Declaration of Sylvia Van Baekel (Baekel Dec.) at ¶¶ 8-10.
2
City, Ogden, Sandy, West Jordan, Cedar Valley, West Valley City, Provo, Midvale, Spanish Form,
Orem, and Murray—all cities in Utah. But the members identified whose usernames range from
“bigbootylicious” to “sassyhottie37,” appear to be virtual cupids only. Many images are reused
with different usernames and ages.
According to ZooBuh, neither it nor its customers elected to receive email advertisements
for xdating.com. Rather, ZooBuh believes that its customers are being opted-in to receive emails
from xdating.com when, in actuality, the customers are attempting to unsubscribe from
xdating.com’s email list. Specifically, ZooBuh has an auto-unsubscribe feature that does not
distinguish between unsubscribe links and marketing links. As such, the auto-unsubscribe “follows
all links.” This, according to ZooBuh, has inadvertently resulted in ZooBuh customers being added
to the xdating.com customer list.
ZooBuh alleges that all of the emails at issue violate at least one or more provisions of
CAN-SPAM. ZooBuh alleges that it has suffered harms to its business, including financial harm,
lost time, and server crashes. ZooBuh regularly receives customer complaints concerning spam
email, and some customers have stopped using ZooBuh because of the spam emails.
DGI LLC was served on November 1, 2017. See ECF No. 11. Although DGI LLC initially
appeared in this case, when its motion to dismiss was denied, its attorneys withdrew from the case.
The court gave DGI LLC until July 23, 2018 to appear and file its answer. DGI LLC failed to file
an Answer and the time to respond expired. On August 15, 2018, the clerk of court entered a
default certificate as to DGI LLC.
ZooBuh now seeks the entry of default judgment against DGI LLC for 24,024 violations
of 15 U.S.C. § 7704(a)(1).
3
ANALYSIS
ZooBuh moves the court pursuant to Fed. R. Civ. P. 55(b)(2) to enter a default judgment
against DGI LLC for its violations 15 U.S.C. § 7704(a)(1). ZooBuh has obtained a default
certificate as required by DUCivR 55-1(a). The court has subject matter jurisdiction over the case
under 15 U.S.C. § 1331 (federal question doctrine) and 15 U.S.C. § 7706(g)(1) (authorizing
original jurisdiction), and personal jurisdiction over DGI LLC. 3 The court now addresses whether
ZooBuh has standing to bring a claim for relief under 15 U.S.C. § 7704(a)(1) and then addresses
whether ZooBuh has successfully established that it is entitled to the relief it seeks against DGI
LLC. 4
A. CLAIM FOR RELIEF UNDER 15 U.S.C. § 7704(a)(1)
1. Standing
To bring private action to enforce the CAN-SPAM Act, ZooBuh must have statutory
standing. See Gordon v. Virtumundo, Inc., 575 F.3d 1040, 1049 (9th Cir. 2009). 5 Under 15 U.S.C.
§ 7706(g)(1), “[a] provider of Internet access service adversely affected by a violation of section
7704(a)(1) . . . of this title, may bring a civil action in any district court of the United States with
jurisdiction over the defendant.” The question of standing involves two questions: “(1) whether
the plaintiff is an ‘Internet access service’ provider . . . and (2) whether the plaintiff was ‘adversely
affected by’ statutory violations.” Gordon, 575 F.3d at 1049; see also XMission, L.C. v. Trimble,
3
The court has already held that it may exercise personal jurisdiction over DGI LLC in the court’s
Memorandum Decision and Order granting in part and denying in part Sauvicom and DGI LLC’s
Motion to Dismiss (“Order on Motion to Dismiss”), ECF No. 50.
4
The court entered Default Judgment against DG International in the amount of $3,003,600.00
on March 8, 2019.
5
The court relies on Gordon for its persuasive value as the Tenth Circuit has yet to address standing
under the CAN-SPAM Act.
4
No. 2:17-CV-00013, 2018 WL 5045236, at *2 (D. Utah Aug. 24, 2018), report and
recommendation adopted, No. 2:17-CV-13, 2018 WL 5044237 (D. Utah Oct. 17, 2018).
The CAN-SPAM Act defines “Internet access service” as “a service that enables users to
access content, information, electronic mail, or other services offered over the Internet, and may
also include access to proprietary content, information, and other services as part of a package of
services offered to consumers. Such term does not include telecommunications services.” See 15
U.S.C. § 7702(11) (cross-referencing 47 U.S.C. § 231(e)(4)). ZooBuh alleges that it is a “service
provider of email, blog, and chat services.” ZooBuh also “owns all the servers, routers, and
switches on its network through which it hosts and provides its Internet access services.” Am.
Compl. ¶ 13. The court finds that ZooBuh is an Internet access service provider within the meaning
of 15 U.S.C. § 7706(g)(1).
Although “[t]he CAN–SPAM Act itself does not delineate the types of harm suggested by
the ‘adversely affected by’ language,” other courts have “concluded that the harm ‘must be both
real and of the type uniquely experienced by [internet access service providers] for standing to
exist.” Gordon, 575 F.3d at 1053 (emphasis in the original) (quoting Gordon v. Virtumundo, Inc.,
No. 06-0204-JCC, 2007 WL 1459395, at *7 (W.D. Wash. May 15, 2007), aff'd, 575 F.3d 1040).
In Gordon, the Ninth Circuit held that being “forced to wade through thousands of e-mails” that
“clogged” the plaintiff’s servers did not constitute actual adverse effects without evidence that
there were costs associated with the annoyance. Gordon, 575 F.3d at 1055. In its complaint,
ZooBuh alleges that the harm caused by the emails has “manifested in financial expense and
burden significant to an [Internet service provider]” including “lost employee time; lost
profitability; the necessity to purchase and dedicate equipment specifically to process spam . . .;
harm to reputation; and customer and email recipient complaints.” Amend. Compl. ¶ 60. As
5
ZooBuh has successfully pled that it was harmed by DGI LLC’s behavior in a way that is unique
to Internet service providers, the court finds that ZooBuh has standing to bring a claim under the
CAN-SPAM Act.
2. DGI LLC Violated 15 U.S.C. § 7704(a)(1)
Under 15 U.S.C. §7704(a)(1):
It is unlawful for any person to initiate the transmission, to a
protected computer, of a commercial electronic mail message, or a
transactional or relationship message, that contains, or is
accompanied by, header information that is materially false or
materially misleading.
First the court must address whether DGI LLC “initiat[ed] the transmission, to a protected
computer, of a commercial electronic mail message.” Id. Then the court must determine whether
those emails messages “contain[], or [are] accompanied by, header information that is materially
false or materially misleading.” Id. The final issue is damages.
a. DGI LLC Initiated Emails
The CAN-SPAM Act states that “the term ‘initiate,’ when used with respect to a
commercial electronic mail message, means to originate or transmit such message or to procure
the origination or transmission of such message, but shall not include actions that constitute routine
conveyance of such message.” 15 U.S.C. §7702(9). Additionally, “more than one person may be
considered to have initiated a message.” Id. In this case, DGI LLC has admitted to sending emails
on DG International’s behalf. Thus, DGI LLC has “initiated” emails within the definition of the
statute.
b. Materially False Header Information
“The CAN–SPAM Act ‘does not ban spam outright, but rather provides a code of conduct
to regulate commercial e-mail messaging practices.’” Facebook, Inc. v. Power Ventures, Inc., 844
F.3d 1058, 1064 (9th Cir. 2016) (quoting Gordon, 575 F.3d at 1047–48). To violate 15 U.S.C.
6
§ 7704(a)(1) the emails must contain header information that is “materially false” or “materially
misleading.” 15 U.S.C. § 7704(a)(1).
i. Header Information
To constitute a violation of 15 U.S.C. §7704(a)(1), the false information must be contained
in the header information. “Header information” includes “the source, destination, and routing
information attached to an electronic mail message [(“email”)], including the originating domain
name and originating electronic mail address, and any other information that appears in the line
identifying, or purporting to identify, a person initiating the message.”15 U.S.C. § 7702(8). The
“line identifying a person initiating the message” is the “From” line on an email. It can contain
both the email address and other names that may identify the sender. The “electronic email
address” itself is split into two parts: the username or mailbox (the “local part”) and the originating
“domain
name.”
15
U.S.C.
§
7702(4)–(5).
For
example,
in
the
email
“John_Smith@notarealemail.com,” the local part is “John_Smith” and the originating domain
name is “notarealemail.com.”
ii. Materially False or Misleading
In defining materially false or misleading, 15 U.S.C. § 7704(a)(1) provides in relevant
part 6 that:
(B) a “from” line (the line identifying or purporting to identify a
person initiating the message) that accurately identifies any person
who initiated the message shall not be considered materially false or
materially misleading; and
(C) header information shall be considered materially misleading if
it fails to identify accurately a protected computer used to initiate
the message because the person initiating the message knowingly
uses another protected computer to relay or retransmit the message
for purposes of disguising its origin.
6
The court has already found that ZooBuh failed to state a claim for relief under 15 U.S.C.
§ 7704(a)(1)(A).
7
And 15 U.S.C. § 7704(a)(6) provides that:
the term “materially,” when used with respect to false or misleading
header information, includes the alteration or concealment of header
information in a manner that would impair the ability of an Internet
access service processing the message on behalf of a recipient, a
person alleging a violation of this section, or a law enforcement
agency to identify, locate, or respond to a person who initiated the
electronic mail message or to investigate the alleged violation, or the
ability of a recipient of the message to respond to a person who
initiated the electronic message.
3. ZooBuh’s Claim for Relief
ZooBuh alleges that DGI LLC initiated at least 24,024 emails promoting DGI LLC and/or
DG International all of which contained false sender names purporting to be actual women. For
example, Zoobuh provides an email that in the sender line contains the name “Cassidy Fox,” and
the email address “XDmembers@reply.m100.net.” ECF No. 33-1 at 94. But Cassidy Fox is not a
real person. Because the email identifies a false sender, the header information is materially false
or misleading in accordance with 15 U.S.C. § 7704(a)(1)(B). 7 ZooBuh is entitled to judgment on
the 24,024 emails identifying a false sender.
4. Damages
Zoobuh claims statutory damages 8 of $50 for each of the 24,024 alleged violations of
15 U.S.C. § 7704(a)(1) as well as treble damages under 15 U.S.C. § 7706(g)(3)(C) for a total sum
of $3,003,600.00. But, the court must exercise its discretion in deciding the base amount per
violation and whether to award treble damages.
7
An email is NOT materially false if it “accurately identifies any person who initiated the
message,” conversely, falsely identifying a person who sent the message is false and misleading.
8
The Statute authorizes “actual monetary loss” or Statutory damages. 15 U.S.C. § 7706(g)(1)(B).
ZooBuh has elected statutory damages.
8
a. Statutory Damages
Under the CAN-SPAM Act, Statutory Damages are calculated by “multiplying the number
of violations (with each separately addressed unlawful message . . . treated as a separate violation)
by up to $100, in the case of a violation of [15 U.S.C.] section 7704(a)(1).” 15 U.S.C.
§ 7706(g)(3)(A). Although the statute establishes that there is no limitation on the amount of
damages that may be awarded for violations of 15 U.S.C. § 7704(a)(1) (see id. at (g)(3)(B)), the
statute offers no guidance on what amount, from $.01 to $100, the court should award per violation.
Because the statute rests discretion in the court, “[t]he court has wide discretion in
determining the amount of statutory damages to be awarded, constrained only by the specified
maxima and minima.” Facebook, Inc. v. Wallace, No. C 09-798 JF (RS), 2009 WL 3617789, at
*2 (N.D. Cal. Oct. 29, 2009) (alteration in original) (quoting Columbia Pictures Television, Inc. v.
Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1194 (9th Cir. 2001)). But “a statutory
damages award may violate the due process rights of a defendant ‘where the penalty prescribed is
so severe and oppressive as to be wholly disproportioned to the offense and obviously
unreasonable.’” Id. (quoting United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir.1992)).
While the court certainly can award the full $100 per violation, many courts have chosen
to award only $50 per violation, finding that amount sufficient and not excessive to “address the
deterrent and punitive purposes of a statutory damages award.” Yahoo! Inc. v. XYZ Companies,
872 F. Supp. 2d 300, 308–09 (S.D.N.Y. 2011) (citing Facebook, Inc. v. Fisher et al., No. C 09–
05842 JF (PSG), 2011 WL 250395 (N.D. Cal. Jan. 26, 2011) (awarding $50 per violation) and
Facebook v. Wallace, 2009 WL 3617789 (same)). The court in Yahoo! chose to limit the damages
to $50 per violation to limit the size of the award. In Facebook v. Fisher, 2011 WL 250395, at *2,
the court considered the defendants’ culpability and their willful and knowing violations of the
statute and then limited the damages to $50 per violation because of the resulting size of the award..
9
Some courts however have chosen to award even less, especially when defendants sent a
lesser quantity of emails. For example, in Tagged, Inc. v. Does 1 Through 10, No. C 09-01713
WHA, 2010 WL 370331, at *11–12 (N.D. Cal. Jan. 25, 2010), the court awarded only $25 per
violation of CAN-SPAM because the defendants had only sent 6,079 emails and the plaintiff had
given “no estimates of actual damages.” Meanwhile in Asis Internet Servs. v. Rausch, No. 0803186 EDL, 2010 WL 1838752, at *7 (N.D. Cal. May 3, 2010) the court awarded only $25 per
violation of 15 U.S.C. § 7704(a)(1) and $10 per violation of 15 U.S.C. § 7704(a)(2), finding the
case analogous to Tagged.
Here, the court must balance the nature of the harmful behaviors with the size of the award.
DGI LLC willfully engaged in a scheme to send fraudulent emails to Utah citizens, causing harm
to ZooBuh and ZooBuh’s customers. DGI LLC is alleged to have sent tens of thousands of emails,
and although only 20,024 are at issue here, that number is certainly more significant than the 6,079
sent in Tagged, Inc, and is only a limited sample of the total emails sent. The court therefore finds
that an award of $50 per violation is appropriate and sets the base award amount at $1,001,200.00.
b. Aggravated Damages
Under 15 U.S.C. § 7706(g)(3)(C):
The court may increase a damage award to an amount equal to not
more than three times the amount otherwise available under this
paragraph if— (i) the court determines that the defendant committed
the violation willfully and knowingly; or (ii) the defendant’s
unlawful activity included one or more of the aggravating violations
set forth in section 7704(b) of this title.
Aggravated violations include: “(1) address harvesting and dictionary attacks”; “(2) automated
creation of multiple electronic email accounts”; and “(3) relay or retransmission through
unauthorized access.” 15 U.S.C. § 7704(b)(1)–(3). ZooBuh alleges that DGI LLC acted willfully
and intentionally in concert with DG International. As part of the scheme, DG International and/or
10
DGI LLC used “automated programs or scripts” in drafting the emails and used address harvesting
techniques to unwillingly subscribe ZooBuh customers to the list. The court finds that aggravated
damages should be awarded in light of evidence of automated process and willfulness. See
XMission, L.C. v. Trimble, 2018 WL 5045236, at *8. Thus ZooBuh is entitled to a statutory award
of $3,003,600.00.
ORDER
The court hereby GRANTS ZooBuh’s motion for default judgment against Defendant DGI
LLC. Default Judgment shall be entered in favor of ZooBuh and against DGI LLC in the amount
of $3,003,600.00 on ZooBuh’s claim under 15 U.S.C. § 7704(a)(1).
Signed April 3, 2019
BY THE COURT
______________________________
Jill N. Parrish
United States District Court Judge
11
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