Omni Innovations LLC v. Ascentive LLC et al

Filing 65

MOTION to Dismiss and to Stay by Defendant Ascentive LLC. Noting Date 3/16/2007.(Townsend, Roger)

Omni Innovations LLC v. Ascentive LLC et al

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 M O T IO N TO DISMISS AND STAY - i (0 6 -C V -0 1 2 8 4 TSZ) v. A S C E N T IV E , LLC, a Delaware limited lia b ility company; ADAM SCHRAN, in d iv id u a lly and as part of his marital c o m m u n ity; JOHN DOES, I-X, D e f e n d a n ts .

T h e Honorable Thomas S. Zilly

U N IT E D STATES DISTRICT COURT W E S T E R N DISTRICT OF WASHINGTON A T SEATTLE O M N I INNOVATIONS, LLC, a W a s h in g to n limited liability company; E m ily Abbey, an individual, P l a i n t if f s , N o . 06-CV-01284 TSZ D E F E N D A N T S ' MOTION TO D I S M I S S AND TO STAY THIS L IT IG A T IO N NOTE FOR MOTION CALENDAR: M a rc h 16, 2007

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1 2 I. 3 II. 4 A. 5 B. 6 7 8 9 10 1. 11 12 13 14 15 IV . 16 17 18 19 V. 20 21 22 23 24 25 26 27 28 C. 2. III.

T A B L E OF CONTENTS IN T R O D U C T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A b b e y Does Not Allege She Is an Internet Access Service . . . . . . . . . . . . 1 Id e n tic a l Theories have been Alleged by Plaintiff Omni in Related L a w s u its in this District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A B B E Y 'S CLAIMS SHOULD ALL BE DISMISSED . . . . . . . . . . . . . . . . . . . 3 A. B. C R 12(b)(6) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A b b e y's Claimed Damages Are All Based on Her Legal Status as an In te rn e t Access Service, with No Supporting Factual Allegation . . . . . . . . 3 C A N -S P A M Only Provides Relief to Internet Access Service P ro v id e rs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A b b ey's Claimed Damages Under CEMA and WCPA Are B a se d on Her (Nonexistent) Status as an Internet Service P ro v id e r. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

P la in t if f s ' CEMA Claims Are Preempted by CAN-SPAM as a M a tte r of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

T H IS LAWSUIT SHOULD BE STAYED PENDING RESOLUTION OF D E F E N D A N T S ' SUMMARY JUDGMENT MOTION IN OMNI . . . . . . . . . 6 A. B. S ta n d a rd s for Granting a Stay of Proceedings . . . . . . . . . . . . . . . . . . . . . . . 6 A Stay Is Appropriate Because This Court Is Adjudicating Omni In n o v a tio n s 's Identical Claims in Omni . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C O N C L U S IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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I.

IN T R O D U C T IO N D ef en d an ts Ascentive, LLC ("Ascentive") and Adam Schran ("Schran") (together,

" D e f en d a n ts " ) hereby move to dismiss pursuant to Fed. R. Civ. P 12(b)(6). Plaintiff E m ily Abbey's ("Abbey") has not alleged sufficient facts to establish standing under the C A N -S P A M Act of 2003, 15 U.S.C. § 7701 et seq. ("CAN-SPAM"). Moreover, all three o f her causes of action are based on her status as an Internet access service, yet Plaintiffs' F irs t Amended Complaint ("FAC", Dkt. #2) fails to allege Abbey provides an Internet a c ce ss service. Consequently, all Abbey's claims must be dismissed. Furthermore, P la in tif f s' Washington state law claims based upon immaterial violations of email header p ro to c o l should be dismissed as a matter of law because they are preempted by CANSPA M . A d d itio n a lly, Defendants move to stay this case pending resolution of the lawsuit b ro u g h t by Plaintiff Omni alleging precisely the same claims before Judge Coughenour. Case No. CV06-0204JCC, W.D.Wash. ("Omni"). Omni is scheduled for trial on April 1 6 , 2007. The complaints and causes of action alleged by Plaintiff Omni Innovations, L L C 's ("Omni Innovations") are virtually identical in each case. If the court rules that O m n i Innovations does not have standing under CAN-SPAM and the Washington C o m m e rc ia l Electronic Mail Act (RCW 19.190) ("CEMA"), that ruling will have a d is p o s itiv e issue preclusion/collateral estoppel effect on this case. Omni Innovations s e e k s only statutory damages and is, therefore, not suffering irreparable harm from the em ails in question. In contrast, without a stay of proceedings in this case, the Court's re so u rc e s are likely to be wasted and the parties will incur unnecessary legal fees and c o s ts .

II.

FACTS A. A b b e y Does Not Allege She Is an Internet Access Service.

B o th Plaintiffs seek damages allegedly resulting from the receipt of unsolicited c o m m e rc ia l email (aka "spam"). (FAC ¶¶ 11, 15.) For all their causes of action, M O T IO N TO DISMISS AND STAY - 1 (0 6 -C V -0 1 2 8 4 TSZ)
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P la in tif f s allege Defendants caused damage "to Plaintiff as the provider of the Internet a c ce ss service" or "to Plaintiff as the interactive computer service"(emphasis added). (Id. ¶ ¶ 17, 19, 20.) However, the FAC only alleges Omni Innovations is an "Internet access s e rv ic e " or "interactive computer service" ­ it does not allege Abbey provides such s e rv ic e s . (Id. ¶ 8.) B. I d e n t ic a l Theories have been Alleged by Plaintiff Omni in Related L a w su its in this District.

In this case, Plaintiffs seek damages based upon the following theories of email 8 h e a d e r protocol: 9 10 11 12 13 14 15 (F A C at ¶ 13-14.) 16 O m n i Innovations brought essentially identical claims in Omni. (See Omni, Case 17 N o . CV06-0204JCC, First Amended Complaint (Dkt. # 15).) In that case, the defendants 18 m o v e d for summary judgment alleging, inter alia, that Omni Innovations (i) does not 19 h a v e standing because it is not, and never was, an Internet access service adversely 20 a f f e c ted by the subject emails; and (ii) that Omni Innovations's theories regarding email 21 h e a d e r protocol cannot give rise to a violation under CAN-SPAM or CEMA. (See Omni, 22 D ef en d an ts ' Motion for Summary Judgment (Dkt. # 98).) 23 Omni Innovations's novel theories of email header protocol asserted in Omni are 24 u n s u p p o rte d by case law, FTC rule or regulation, or express statutory language. (See 25 O m n i, Defendants' Motion for Summary Judgment (Dkt. # 98) at 16-28.) Omni 26 In n o v a tio n s alleges violations of CAN-SPAM and CEMA from emails sent by the 27 d e f en d a n ts which allegedly have an improper IP address and host name protocol, transfer 28 M O T IO N TO DISMISS AND STAY - 2 (0 6 -C V -0 1 2 8 4 TSZ)
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13. Each of the E-mails misrepresents or obscures information in identifying th e point of origin or the transmission path thereof, and contains header in f o rm a tio n that is materially false or materially misleading. The m is re p re s e n ta tio n s include without limitation: IP address and host name in f o rm a tio n do not match, or are missing or false, in the "from" and "by" tok en s in the Received header field; and dates and times of transmission are d e le te d or obscured. 1 4 . On information and belief, Plaintiff alleges that some of the E-mails used th e Internet domain name of a third party or third parties without permission o f that third party or those third parties.

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to k e n information and other immaterial email header information. (Id.) The basis of O m n i Innovations's claims are technical in nature and involve the intricacies and innerw o rkin g s of email transmission over the Internet. (Id.)

III.

A B B E Y 'S CLAIMS SHOULD ALL BE DISMISSED A s a matter of law, Abbey's damages are all predicated on her status as an Internet

a c ce ss service. As a matter of fact, however, the FAC does not allege she provides such a s e rv ic e . Accordingly, all of her claims should be dismissed. A. C R 12(b)(6) Standards.

A complaint should be dismissed for failure to state a claim upon which relief may b e granted under FED. R. CIV. P. 12(b)(6) if it "appears beyond doubt that the plaintiff can p ro v e no set of facts in support of his claim which would entitle him to relief." Conley v. G ib s o n , 355 U.S. 41, 45-46 (1957). When the legal sufficiency of a complaint's a lle g a tio n s are tested with a motion under Rule 12(b)(6), "[r]eview is limited to the c o m p lain t." Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993). All f a ctu a l allegations set forth in the complaint are taken as true and construed in the light m o st favorable to the plaintiff. Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th C ir. 1996). However, "[w]hile a court must accept all material allegations in the c o m p la in t as true and construe them in the light most favorable to the nonmoving party, c o n c lu s o ry allegations of law or unwarranted inferences of fact urged by the nonmoving p a rty are insufficient to defeat a motion to dismiss." Segal Co. v. Amazon, 280 F. Supp. 2 d 1229, 1232 (W. D. Wash. 2003). B. A b b e y 's Claimed Damages Are All Based on Her Legal Status as an I n te r n e t Access Service, with No Supporting Factual Allegation.

E v e n viewed in the light most favorable to Abbey, the FAC provides no factual 25 s u p p o rt for the causes of action she alleges. She is not an Internet access service, so her 26 C A N -S P A M claim fails. Her other two claims are preempted by CAN-SPAM. In 27 a d d itio n , the FAC provides no factual basis for the damages Abbey seeks. Consequently, 28 M O T IO N TO DISMISS AND STAY - 3 (0 6 -C V -0 1 2 8 4 TSZ)
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a ll her causes of action must be dismissed. 1. C A N -S P A M Only Provides Relief to Internet Access Service P r o v id e r s .

In enacting the CAN-SPAM act,15 U.S.C.§ 7701 et seq., Congress expressly 4 re c o g n iz e d that commercial email offers "unique opportunities for the development and 5 g ro w th of frictionless commerce." 15 U.S.C. § 7701(a)(1). Congress enacted a system 6 to : 7 1 ) create a nationwide standard for commercial email; 8 9 10 11 15 U.S.C. § 7701(b). The Act does not create any private cause of action for individual 12 re c ip ien ts of unsolicited commercial email, even if those emails violate the requirements 13 o f the Act. Rather, the Act is enforceable only by the Federal Trade Commission and 14 o th e r specified federal agencies, by state Attorneys General; and by "provider(s) of 15 Intern et access service"who are "adversely affected by a violation of section 7704 (a)(1), 16 (b ), or (d) of [the Act], or a pattern or practice that violates paragraph (2), (3), (4), or (5) 17 o f section 7704 (a)." 15 U.S.C. § 7706(g)(1) (emphasis added). 18 CAN-SPAM defers to section 231(e)(4) of title 47 for the definition of "Internet 19 a c ce ss service": 20 21 22 23 T h e FAC does not allege Abbey provides any such service. Accordingly, Abbey's CAN24 S P A M claim should be dismissed pursuant to FED. R. CIV. P. 12(b)(6) for failure to allege 25 f a c ts sufficient to establish standing. 26 2. 27 28 A b b e y 's Claimed Damages Under CEMA and WCPA Are Based on H e r (Nonexistent) Status as an Internet Service Provider. T h e term "Internet access service" means a service that enables users to access c o n te n t, information, electronic mail, or other services offered over the In te rn e t, and may also include access to proprietary content, information, and o ther services as part of a package of services offered to consumers. Such term d o e s not include telecommunications services. 2) prohibit senders of commercial electronic mail from misleading recipients a s to the source or content of such mail; and 3) ensure that recipients of commercial electronic mail have the right to d e c lin e additional email from a particular source.

A b b e y's other causes of action allege Defendants violated CEMA and the M O T IO N TO DISMISS AND STAY - 4 (0 6 -C V -0 1 2 8 4 TSZ)
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W a sh in g to n Consumer Protection Act ("WCPA"), RCW 19.86.010 et seq. However, w ith respect to both claims, the only damage she alleges is "damage to Plaintiff as the in te ra c tiv e computer service." (FAC ¶¶ 19-20.) Abbey does not claim to be an in ter a c tiv e computer service, so the FAC does not provide any factual basis for her to c la im damages. Without damages, her claims are meritless and must be dismissed. See, e .g ., In re Cray Inc. Derivative Litig., 431 F. Supp. 2d 1114, 1134 (W.D.Wash. 2006) ( g ra n t in g a motion to dismiss claims which "fail to identify recoverable damages for loss o f goodwill or business reputation") (Zilly, J.). C. P la in t iffs ' CEMA Claims Are Preempted by CAN-SPAM as a Matter o f Law.

T o the extent that Plaintiffs allege causes of action under Washington Law for 11 im m a te ria l falsehoods or deception ­ whether in the email header information or 12 o th e rw is e ­ those claims are preempted by CAN-SPAM and must be dismissed. 13 CEMA prohibits transmitting a commercial email message that "misrepresents or 14 o b s c u re s any information in identifying the point of origin" of the message. RCW 15 1 9 .1 9 0 .0 2 0 . Plaintiffs contend that each of Defendants' allegedly misleading headers 16 "m isrep rese n ts or obscures" information in identifying the point of origin. (FAC ¶ 13.) 17 However, to the extent Plaintiffs rely on CEMA to recover for emails with headers that 18 c o n ta in an immaterial misrepresentation or obfuscation (or other non-tortious fraud or 19 m is re p re s e n ta tio n ), those claims are preempted by CAN-SPAM. 20 Congress intended CAN-SPAM to create a single national standard for commercial 21 e m a il, and to that end it preempts state laws, subject to a narrow exception: 22 23 24 25 1 5 U.S.C. 7707(b)(1). In Omega World Travel, Inc. v. Mummagraphics, Inc., 469 F. 3d 26 3 4 8 (4th Cir. 2006), the Fourth Circuit considered the CAN-SPAM preemption clause in 27 re la tio n to an Oklahoma law that prohibits, among other things, sending a commercial 28 M O T IO N TO DISMISS AND STAY - 5 (0 6 -C V -0 1 2 8 4 TSZ)
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T h is chapter supersedes any statute, regulation, or rule of a State or political s u b d iv is io n of a State that expressly regulates the use of electronic mail to send c o m m e rc ia l messages, except to the extent that any such statute, regulation, or ru le prohibits falsity or deception in any portion of a commercial electronic m a il message or information attached thereto.

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e m a il that "misrepresents any information in identifying the point of origin or the tra n s m is s io n path of the electronic mail message." This is virtually identical to the CEMA p rov isio n upon which Plaintiffs base their suit. (FAC ¶ 20.) See RCW 19.190.030 (p ro h ib itin g sending a commercial email that "misrepresents or obscures any information in identifying the point of origin or the transmission path of a commercial electronic mail m e ss a g e "). In Omega, the district court held that the Oklahoma statute created a cause of ac tio n for immaterial errors and sought to govern email header protocol and was therefore p re e m p te d . The Fourth Circuit affirmed, reasoning "[r]ather than banning all commercial e -m a ils or imposing strict liability for insignificant inaccuracies, Congress targeted only e -m a ils containing something more than an isolated error." Omega, supra, 469 F.3d at 348. T h e Fourth Circuit thus held that permitting claims under state law for immaterial e rro rs would subvert Congress' intent to create a national standard: In sum, Congress' enactment governing commercial e-mails reflects a calculus th a t a national strict liability standard for errors would impede "unique o p p o rtu n itie s for the development and growth of frictionless commerce," while m o re narrowly tailored causes of action could effectively respond to the o b sta c les to "convenience and efficiency" that unsolicited messages present. I d . Like the Oklahoma statute, CEMA is preempted to the extent it purports to impose lia b ility for immaterial errors and to set a national standard to govern proper email header p roto co l. Plaintiffs claims under CEMA rely on such allegations and, therefore, are p re e m p te d .

IV .

T H IS LAWSUIT SHOULD BE STAYED PENDING RESOLUTION OF D E F E N D A N T S ' SUMMARY JUDGMENT MOTION IN OMNI A. S t a n d a r d s for Granting a Stay of Proceedings.

In the interests of judicial economy, the Court may exercise its inherent power to s ta y proceedings until the resolution of a related case that would resolve a dispositive is s u e . See Leyva v. Certified Grocers of California, 593 F.2d 857, 863-64 (9th Cir. 1979) ( " A trial court may, with propriety, find it is efficient for its own docket and the fairest M O T IO N TO DISMISS AND STAY - 6 (0 6 -C V -0 1 2 8 4 TSZ)
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c o u rs e for the parties to enter a stay of an action before it, pending resolution of in d e p e n d e n t proceedings which bear upon the case."); see also Silvaco Data Systems, Inc. v . Technology Modeling Associates, Inc., 896 F. Supp. 973, 975 (N.D. Cal. 1995) ("in the in te re st of wise judicial administration, a federal court may stay its proceedings where a p a ra lle l state action is pending") (internal citation omitted). "Collateral estoppel" or "offensive nonmutual issue preclusion" generally prevents a party from relitigating an issue that the party has litigated and lost. See Catholic Social S e rv s ., Inc. v. I.N.S., 232 F.3d 1139, 1152 (9th Cir. 2000). The application of "offensive n o n m u tu a l issue preclusion" is appropriate only if: 1. th e re was a full and fair opportunity to litigate the identical issue in the prior a c tio n , see Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1399 (9th Cir. 1992); R e so lu tio n Trust Corp. v. Keating, 186 F.3d 1110, 1114 (9th Cir. 1999); Appling v . State Farm Mut. Auto Ins. Co., 340 F.3d 769, 775 (9th Cir. 2003); 2. 3. th e issue was actually litigated in the prior action, see Appling, 340 F.3d at 775; th e issue was decided in a final judgment, see Resolution Trust Corp., 186 F.3d at 1 1 1 4 ; and 4. th e party against whom issue preclusion is asserted was a party or in privity with a p a rty to the prior action, see id. See also Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir. 2006); R o b i v. Five Platters, Inc., 838 F.2d 318, 322 (9th Cir. 1988). B. A Stay Is Appropriate Because This Court Is Adjudicating Omni In n o v a tio n s's Identical Claims in Omni.

If there is a judgment that Omni Innovations does not have standing as an Internet 23 ac ce ss service in Omni, then issue preclusion will be dispositive as to Omni Innovations's 24 f e d era l CAN-SPAM claims in the instant lawsuit. Alternatively, if the Court rejects Omni 25 In n o v a tio n s ' theories regarding email protocol and whether immaterial violations can 26 e n title a plaintiff to recover statutory damages, then those findings will apply to Omni 27 In n o v a tio n s 's theories in the instant matter. 28 M O T IO N TO DISMISS AND STAY - 7 (0 6 -C V -0 1 2 8 4 TSZ)
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F irs t, Omni Innovations is the plaintiff in Omni and has had a full and fair o p p o rtu n ity to litigate the identical issue in the related action. Omni Innovations has had a n opportunity to make a record in Omni and, if applicable, may advance any facts or te s tim o n y at trial that supports its claim to be an Internet access service. Second, the matters of (i) whether Omni Innovations has standing as an Internet a c ce ss service that is adversely affected; and (ii) whether Omni Innovations's novel theo ries give rise to a claim for statutory damages under CAN-SPAM or CEMA are b e f o re the Court in the Omni case. Third, the matter is fully briefed and before the court in Omni on summary ju d g m e n t. Trial is scheduled for April 17, 2007. Plaintiffs merely request a stay pending re s o lu tio n of that case and a final judgment. Finally, since Omni Innovations is a plaintiff in Omni, the fourth prong of issue p re c lu s io n has been satisfied. In the interest of judicial economy and avoiding the potential waste of hundreds of h o u rs of attorney time and unnecessary pretrial motion practice before the Court, this C o u rt should stay this lawsuit. In the event that the Court does not grant a stay, then the p a r tie s will have no alternative but to commence discovery. Defendants will request s u b s ta n tia lly the same documents and issue the same requests for admission as p ro p o u n d e d by the defendants' counsel in the Omni lawsuit. Plaintiffs will likely provide th e same answers and the same documents. In turn, the parties will take depositions and d e v e lo p much of the same record as in the related action. These efforts will take many m o n th s and consume many thousands of dollars. However, all of that time and money c o u ld be for naught if there is a judgment either that (i) Omni Innovations is not an In te rn e t access service adversely affected by emails or (ii) Omni Innovations's novel th e o rie s concerning email protocol lack merit. Such rulings would eliminate Omni In n o v a tio n s 's CAN-SPAM and CEMA claims in the instant lawsuit pursuant to the d o c trin e of offensive nonmutual issue preclusion. T h is case is in its nascent stages and the parties have not yet devoted resources to M O T IO N TO DISMISS AND STAY - 8 (0 6 -C V -0 1 2 8 4 TSZ)
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c o n d u c t discovery and pretrial motion practice. Balancing the lack of actual damages to P la in tif f s against the unnecessary expenditure of resources, this Court should grant a stay u n til such time as it makes a final adjudication of whether Omni Innovations has standing a n d whether its email header protocol theories will prevail.

V.

C O N C L U SIO N P u r s u a n t to Fed. R. Civ. P. 12(b)(6), Abbey's claims must all be dismissed because

h e r damages are based on a legal theory which has no factual support in the FAC. Claims b a s e d upon immaterial violations of email header protocol are also preempted by CANS P A M as a matter of law. F u r th e rm o re , the Court should stay this litigation pending resolution of collateral iss u e s in Omni. This Court will resolve many of the same issues in that case as in this c a se ­ including the threshold issue of whether Omni Innovations has standing ­ and it w o u ld be a waste of judicial resources and the resources of the parties to litigate this case w h e n the Court is already deciding the same issues in another matter. DATED this 21st day of February, 2007. N E W M A N & NEWMAN, A T T O R N E Y S AT LAW, LLP B y: /s/ D e re k A. Newman, No. 26967 R o g e r M. Townsend, No. 25525

A tto rn e ys for Defendants Ascentive, LLC and A d a m Schran

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