Gordon v. Virtumundo, Inc.

• Decision Date: 06 August 2009
• Docket Number: No. 07-35487.,07-35487.
• Citation: 575 F.3d 1040
• Parties: James S. GORDON, Jr., an individual doing business as gordonworks.com, Plaintiff-Appellant, v. VIRTUMUNDO, INC., a Delaware corporation; Adknowledge, Inc., a Delaware corporation; and Scott Lynn, an individual, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

575 F.3d 1040

James S. GORDON, Jr., an individual doing business as gordonworks.com, Plaintiff-Appellant, v. VIRTUMUNDO, INC., a Delaware corporation; Adknowledge, Inc., a Delaware corporation; and Scott Lynn, an individual, Defendants-Appellees.

No. 07-35487.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 9, 2008.

Filed August 6, 2009.

Timothy J. Walton, Walton & Rose, LLP, Palo Alto, CA, for plaintiff-appellant James S. Gordon, Jr.

Derek Newman (argued), Randall Moeller, Newman & Newman, Attorneys at Law, LLP, Seattle, WA, and Michael R. Geroe, General Counsel, Adknowledge, Inc., Santa Monica, CA, for defendants-appellees, Virtumundo, Inc., Adknowledge, Inc., and Scott Lynn.

Shannon E. Smith, Deputy Attorney General, Robert M. McKenna, Attorney General of Washington, Seattle, WA, for Amicus Curiae State of Washington.

Jason K. Singleton, Richard E. Grabowski, Singleton Law Group, Eureka, CA, for Amicus Curiae ASIS Internet Services, Joel Householter, and Ritchie Phillips.

Appeal from the United States District Court for the Western District of Washington, John C. Coughenour, District Judge, Presiding. D.C. No. CV-06-00204-JCC.

Before RONALD M. GOULD, RICHARD C. TALLMAN, and CONSUELO M. CALLAHAN, Circuit Judges.

Opinion by Judge TALLMAN; Concurrence by Judge GOULD.

TALLMAN, Circuit Judge:

This case addresses unsolicited commercial e-mail, more commonly referred to as "spam."¹ While ignored by most and reviled by some, spam is largely considered a nuisance and a source of frustration to e-mail users who, at times, must wade through inboxes clogged with messages peddling assorted, and often unwanted, products and services. The rising tide of spam poses an even greater problem to businesses, institutions, and other entities through network slowdowns, server crashes, and increased costs. At the same time, commercial enterprise has staked its claim within the online world. The Internet is a unique medium that offers legitimate businesses a low-cost means to promote themselves and their wares and in turn fosters competition in the marketplace. Both consumers and Congress have come to view e-mail, when fairly employed, as an established and worthwhile device in the toolbox of accepted marketing practices.

After individual states initially wrestled with properly balancing the benefits and burdens of commercial e-mail, Congress enacted legislation in an effort to curb the negative consequences of spam and spamming practices without stifling legitimate commerce. Through this opinion we review the federal statutory scheme of the Controlling the Assault of Non-Solicited Pornography and Marketing ("CAN-SPAM") Act of 2003, 15 U.S.C. § 7701 et seq., and assume the formidable task of determining the statutory standing requirements and the scope of federal preemption intended by Congress.

In the case before us, James S. Gordon, Jr. and his company, Omni Innovations, LLC ("Omni"),² sued Virtumundo, Inc., Adknowledge, Inc., and Scott Lynn, the sole shareholder of both companies, seeking injunctive relief and significant damages based on the receipt of thousands of commercial e-mails. Defendants are in the online marketing business and widely transmit e-mail advertisements and solicitations to potential consumers on behalf of third-party clients. In the parlance of our time, they are "spammers."

Based on a dense record developed through substantial discovery, the district court granted summary judgment in favor of Virtumundo, Adknowledge, and Lynn (collectively, "Virtumundo") on all of Gordon's claims. We have jurisdiction over Gordon's appeal pursuant to 28 U.S.C. § 1291. Having carefully and independently evaluated the issues in light of the evidence, we agree that summary judgment was proper and therefore affirm.

I

Gordon is the original registrant of the Internet domain "gordonworks.com," which he hosts on server space that Omni leases from GoDaddy, a domain registrar and web hosting company that also sells e-business related software and services, see http://www.godaddy.com. The GoDaddy service allows users to virtually access the server through an ordinary Internet connection—in Gordon's case, a broadband connection from Verizon. Through a virtual desktop called a "Plesk," Gordon is able to manage his domain. He can post content on the Internet, create new e-mail accounts, and set user names and log-on passwords. There are, of course, substantial restrictions regarding Gordon's usage of the leased server space.

It was through this vehicle that Gordon created a personal e-mail address: "jim@ gordonworks.com." Around September 2003, Gordon created additional e-mail accounts through the gordonworks.com domain for about six friends and family members, which he monitored for "data collection" and "research purposes." Gordon registered jim@gordonworks.com and the gordonworks.com e-mail addresses of his "clients" in response to various online promotions and for numerous prize giveaways. Gordon estimates that, in doing so, he subscribed, or "opted in," to e-mail mailing lists somewhere between 100 and 150 times.³

Soon thereafter, these accounts began receiving e-mails from businesses marketing their goods and services. Some of these messages were transmitted by online marketers, such as Virtumundo, on behalf of their clients. At his instruction, Gordon's "clients" relinquished control of their e-mail accounts. They then set up their own domains through GoDaddy, which they housed on the server space leased by Omni. This enabled these individuals to create their own e-mail addresses "@" personalized domain names—e.g., "anthonycentral.com," "jaykaysplace.com," and "chiefmusician.net"—rather than gordonworks.com.

Gordon continued to maintain and monitor the abandoned gordonworks.com e-mail accounts. He described his ongoing efforts as "do[ing] research on the spam that comes through." At some later point, Gordon configured the e-mail server to provide an automated response to all commercial e-mail sent to gordonworks.com accounts. The response was titled "NOTICE OF OFFER TO RECEIVE UNSOLICITED COMMERCIAL EMAIL (SPAM)" and purported to consummate a "binding contract" by which the sender agreed to either cease and desist or pay Gordon $500 for each additional unsolicited e-mail subsequently delivered to the account. While he claims that online marketers, including Virtumundo, ignored his requests that all gordonworks.com e-mail addresses be removed from their mailing lists, Gordon does not provide evidence, apart from a general "belief," that he followed the "opt-out" procedure stated in the individual e-mail messages. Not surprisingly, the e-mail accounts continued to receive spam, which over time accumulated in the unused inboxes. At the time of his deposition in January 2007, these gordonworks.com e-mail accounts remained active. However, the only persons who actually used a gordonworks.com account were Gordon and his wife.

In 2004, Gordon began filing lawsuits in state and federal court against persons and companies who sent solicitations or advertisements to e-mail accounts hosted on Omni's leased server space. In February 2006, Gordon filed this lawsuit against Virtumundo in the Western District of Washington. He asserted various causes of action for violations of the CAN-SPAM Act, 15 U.S.C. § 7701 et seq., the Washington Commercial Electronic Mail Act ("CEMA"), Wash. Rev.Code § 19.190.010 et seq., the Washington Consumer Protection Act ("CPA"), Wash. Rev.Code § 19.86.010 et seq., and the Washington "Prize Statute," Wash. Rev.Code § 19.170.010 et seq. As relevant to this appeal, Gordon contends that Virtumundo sent, according to his most recent estimate, approximately 13,800 materially misleading or otherwise unlawful commercial e-mail messages to e-mail accounts hosted through gordonworks.com. Gordon sought injunctive relief, several millions of dollars in statutory and treble damages, and his attorney's fees and costs.⁴

In December 2006, the Honorable John C. Coughenour granted in part and denied in part Virtumundo's motion to dismiss for pleading deficiencies. The order dismissed Gordon's Prize Statute claims, in their entirety, and his CEMA and CPA claims to the extent they related to the gathering of "personally identifying information." Wash. Rev.Code § 19.190.080. The court gave leave to amend the complaint to cure pleading deficiencies, but Gordon never did so.

Virtumundo then moved for summary judgment on all remaining claims, which consisted of Gordon's CAN-SPAM Act claims and the surviving CEMA and CPA claims. By Order dated May 15, 2007, the district court granted the defense motion, see Gordon v. Virtumundo, Inc., No. 06-0204, 2007 WL 1459395 (W.D.Wash. May 15, 2007). Judge Coughenour concluded that both Gordon and Omni lacked standing to pursue a private action under the CAN-SPAM Act and that the state law claims failed as a matter of law based in part on federal preemption grounds.

Gordon alone now appeals this grant of summary judgment.⁵

II

We review a district court's grant of summary judgment de novo, and may affirm on any basis supported by the record. Burrell v. McIlroy, 464 F.3d 853, 855 (9th Cir.2006). Our review is governed by the same standard used by the trial court under Federal Rule of Civil Procedure 56. Adcock v. Chrysler Corp., 166 F.3d 1290, 1292 (9th Cir.1999). "Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Devereaux v. Abbey, 263 F.3d 1070, 1074 (9th Cir.2001) (en banc).

A determination of standing is a question of law that we review de novo, see Nat'l Res. Def. Council v. EPA, 542 F.3d 1235, 1244 (9th Cir.2008), as is a finding of federal preemption, see Indus. Truck Ass'n, Inc. v. Henry, 125 F.3d 1305, 1309 (9th Cir.1997).

III

A

We first turn to Gordon's...