CAN-SPAM Preempts California Spam Law

A Los Angeles judge, ruling on a case of first impression, has found that the federal CAN-SPAM Act preempts a California law designed to curb false and misleading commercial e-mails.

The May 4 ruling, which throws out a case claiming $45 million in damages, is the first to address the preemption issue in California's state courts and could stymie future suits filed under the statute. Hypertouch Inc. v. ValueClick, et al, No. LC081000 (Cal. Sup. Ct., County of L.A.).

“This opinion has closed the door on lawsuits asserting contrived violations of the California statute where the plaintiff can't show actual intent to deceive or that any deception occurred,” says Ashlie Beringer, a partner in the Palo Alto, CA, office of Los Angeles-based Gibson, Dunn & Crutcher, who represents the defendant, ValueClick Inc.

The case was filed in Los Angeles Superior Court against ValueClick Inc., which manages online and e-mail advertising for clients including Wells Fargo & Co. and The Walt Disney Co. The plaintiff, Hypertouch Inc., an Internet service provider in Menlo Park, CA, alleged that its end users received 45,000 misleading e-mails from ValueClick in violation of a California's Business & Professions Code section that provides $1,000 in damages per e-mail ' the most aggressive statute of its kind in the nation.

The 2004 CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing) Act imposes penalties against companies that send e-mails with false and misleading information on subject lines and headers. The CAN-SPAM Act pre-empts all state laws except those that prohibit false and deceptive information in the e-mails.

Federal judges have split whether that pre-emption includes California's statute. Two federal district court decisions ' one in 2007 and one in 2008 ' found that the California statue was pre-empted by the CAN-SPAM Act. A third ruling, issued in April, found that the CAN-SPAM Act did not preempt the California statute.

“This judge held correctly that they must include a showing of the elements of fraud or deception in order to avoid the effect of CAN-SPAM,” Beringer says.

Lawrence Riff, a partner in the Los Angeles office of Washington's Steptoe & Johnson, who represents Hypertouch, insists that the California statute falls under the CAN-SPAM Act's exception.

“Whereas the statute by its terms simply prohibits falsity or deception, the defendants say to survive the preemption what a spam plaintiff needs to plead and prove is all of the elements of common law fraud,” he says. Congress, Riff says, did not intend to require that.

A Los Angeles judge, ruling on a case of first impression, has found that the federal CAN-SPAM Act preempts a California law designed to curb false and misleading commercial e-mails.

The May 4 ruling, which throws out a case claiming $45 million in damages, is the first to address the preemption issue in California's state courts and could stymie future suits filed under the statute. Hypertouch Inc. v. ValueClick, et al, No. LC081000 (Cal. Sup. Ct., County of L.A.).

“This opinion has closed the door on lawsuits asserting contrived violations of the California statute where the plaintiff can't show actual intent to deceive or that any deception occurred,” says Ashlie Beringer, a partner in the Palo Alto, CA, office of Los Angeles-based Gibson, Dunn & Crutcher, who represents the defendant, ValueClick Inc.

The case was filed in Los Angeles Superior Court against ValueClick Inc., which manages online and e-mail advertising for clients including Wells Fargo & Co. and The Walt Disney Co. The plaintiff, Hypertouch Inc., an Internet service provider in Menlo Park, CA, alleged that its end users received 45,000 misleading e-mails from ValueClick in violation of a California's Business & Professions Code section that provides $1,000 in damages per e-mail ' the most aggressive statute of its kind in the nation.

The 2004 CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing) Act imposes penalties against companies that send e-mails with false and misleading information on subject lines and headers. The CAN-SPAM Act pre-empts all state laws except those that prohibit false and deceptive information in the e-mails.

Federal judges have split whether that pre-emption includes California's statute. Two federal district court decisions ' one in 2007 and one in 2008 ' found that the California statue was pre-empted by the CAN-SPAM Act. A third ruling, issued in April, found that the CAN-SPAM Act did not preempt the California statute.

“This judge held correctly that they must include a showing of the elements of fraud or deception in order to avoid the effect of CAN-SPAM,” Beringer says.

Lawrence Riff, a partner in the Los Angeles office of Washington's Steptoe & Johnson, who represents Hypertouch, insists that the California statute falls under the CAN-SPAM Act's exception.

“Whereas the statute by its terms simply prohibits falsity or deception, the defendants say to survive the preemption what a spam plaintiff needs to plead and prove is all of the elements of common law fraud,” he says. Congress, Riff says, did not intend to require that.