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CAN-SPAM Defendant Awarded $111k in Fees/Costs: Gordon v. Virtumundo

Gordon v. Virtumundo, 06-0204-JCC (W.D. Wash. Aug. 1, 2007)

I believe this ruling represents the first time that a CAN-SPAM plaintiff has been ordered to pay attorneys’ fees and costs to a defendant. As a result, it’s a leading example that courts can and do grow tired of bogus anti-marketing lawsuits, and perhaps it will serve as an expensive warning to CAN-SPAM plaintiffs to ensure the merits of their lawsuit.

Gordon is an uber anti-spam plaintiff, leading countless CAN-SPAM lawsuits. (Ethan blogged a little on Gordon’s litigation here). As the court describes, Gordon runs a “spam business”—basically, a for-profit plaintiff litigation shop to go after spammers (the court also calls it a “litigation factory”). The court doesn’t seem very impressed with this business model. Having already dismissed the lawsuit’s substance, the court repeatedly rips on Gordon for bringing a junk lawsuit, saying that “The Court finds that Plaintiffs’ instant lawsuit is an excellent example of the ill-motivated, unreasonable, and frivolous type of lawsuit that justifies an award of attorneys’ fees to Defendants” and “the Court finds that the goal of deterrence is particularly relevant here. Plaintiffs should be deterred from further litigating their numerous other CAN-SPAM lawsuits now that they are aware their lack of CAN-SPAM standing.”

Along the way, the court interprets the appropriate standard for awarding fees under the CAN-SPAM fee shifting provision. Informed by Gordon’s litigation abuses, the court decides that the fee-shifting provision should use the more defendant-favorable “even-handed” standard when evaluating a defendant’s fee requests (like it is in the copyright context) instead of the “dual standard” where the plaintiff gets a favorable review on both its fee requests and defendant’s fee requests (the latter standard thus encourages plaintiffs to bring lawsuits without the fear of a loser-pays ruling). The court correctly notes that Congress really wasn’t trying to enable lots of private lawsuits from CAN-SPAM, so the risk of chilled plaintiffs is appropriate in this context. As the court says, “Promotion of prolific private CAN-SPAM litigation is not what Congress intended.” Thus, this ruling paves the way for CAN-SPAM defendants to request and get attorneys’ fees when faced with bogus CAN-SPAM claims.

More generally, I remain frustrated that so much regulatory attention is focused on curbing marketers’ abuse while comparatively little attention is given to curbing marketing plaintiffs’ abuse. But make no mistake—every new anti-marketing law with a private right of action will stir up more action than some chum thrown into shark-infested waters. As I think I’ve mentioned before, I have a Westlaw alert set up on TCPA cases, usually triggering several alerts each week, and the amount of wasted judicial resources is stunning—there is a steady and mind-numbing stream of rulings over whether TCPA lawsuits are covered by advertising injury insurance; whether (in light of the business relationship exception) TCPA plaintiffs have enough in common to form a class; whether the TCPA preempts state law; and lawsuits where plaintiffs try to get standing to sue under TCPA provisions that are clearly specified as enforced only by the FTC or FCC. In other words, most of the rulings relate to largely procedural squabbling before the parties even get to the substance of the marketer’s allegedly impermissible behavior. What a colossal waste of society’s resources.

Fortunately, rulings like this one (and others I’ve blogged about based on anti-SLAPP and Rule 11 sanctions) suggest that plaintiffs can and do go too far and that courts won’t ignore this either. But it remains to be seen how well these sanctions work at curbing litigation abuse. At minimum, I hope this award convinces Gordon that his “spam business” may not be as profitable as he initially thought.

By Eric Goldman, Professor, Santa Clara University School of Law

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Simon Waters  –  Aug 8, 2007 12:11 AM

I think you are so far out of line with opinion on the net, that you’ll be surprised.

All he need do is offer to represent ISPs, their are plenty without the experience, or desire to pursue these battles independently, who have huge expenses due to the abuses of the CAN-SPAM act, and various other crimes perpetrated by Internet marketing companies.

The mistake is not allowing end users to sue under CAN-SPAM, since they ultimately incur the highest costs. The legislation was ill thought out.

Suresh Ramasubramanian  –  Aug 8, 2007 6:45 AM

Y’know, the gordon v/s virtumundo case seems more like

1. Professional plaintiff
2. Didnt do his homework in the case

Whether that case was on spam, or on one of the more usual happy hunting grounds for ambulance chasers - tort law and personal injury .. whoever goes into a case trying to make money out of it should budget for losing money and having to pay fines or costs.

That doesn’t really have anything else that will bear on the merits of the case, or on whether he actually had a case and could have prepared it far better than he did.

So, spinning this as a victory against anti marketing lawsuits is not going to get very far.

What About Your Employer? Crosby Spencer  –  May 13, 2009 11:34 PM

I’m extremely discouraged by the tens of thousands of links to law firms and “how to sue” articles from “protection advocates” that I find when entering TCPA into a search engine. So many litigants, so few (if any) business advocates.

I’m sure that the endless supply of advocates and litigants are only present to ensure that the socially egregious behavior of businesses advertising their wares is halted post-haste, and that it has nothing to do with the fact that the federal government allows attorneys to collect the largest penalty-to-damages awards on the books. Or, that a single complainant can sponsor a class action suite whereby an attorney can then mine the defendant’s own business records to create a class of potential litigants. No public outcry necessary, just seize the property of the business owner and solicit his customer base for their share of the plunder.

I’m also sure that the federal government only levies heavy penalties for emailing, faxing, and calling prospective customers because these are the lewdest of acts, and the fact that the FCC and USPS receives hundreds of billions of dollars from regulatory and postage fees charged to TV, radio and mailed advertisements has no correlation at all.

Congratulations! Brick by brick, litigation by litigation, you are tearing down the foundations of small businesses and forcing owners to increase their costs to you, the consumer. So, while you enjoy the pittance share you receive now only to have it eclipsed by the higher cost of products and services later, at least you’ll know that your “advocate” attorneys thank you for their beach-side properties and you can rest assured that the federal government will efficiently utilize their share just as they always have.

Of course, only about 80% of the people who read this work for small business employers so I’m sure that this is all much ado about nothing.

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