Beyond Systems, Inc. v. Keynetics, Inc., No. CIV. PJM 04-686.

• Decision Date: 14 February 2006
• Docket Number: No. CIV. PJM 04-686.
• Parties: BEYOND SYSTEMS, INC. Plaintiff v. KEYNETICS, INC., et al. Defendants
• Court: U.S. District Court — District of Maryland

422 F.Supp.2d 523

BEYOND SYSTEMS, INC. Plaintiff v. KEYNETICS, INC., et al. Defendants

No. CIV. PJM 04-686.

United States District Court, D. Maryland.

February 14, 2006.

Stephen Howard Ring, Esquire, Germantown, MD, for Plaintiffs.

Richard William Goeken, Esquire, Washington, DC, Alfred Arthur Day, Esquire, Rita V. Latsinova, Esquire, Seattle, WA, Eric Samuel Namrow, Esquire, Mary Jane Saunders, Esquire, Jennifer D Jesinoski, Esquire, Washington, DC, Sidney S. Friedman, Esquire, Baltimore, MD, Rosemary Elizabeth Allulis, Esquire, Towson, MD, for Defendants.

OPINION

MESSITTE, District Judge.

I.

Beyond Systems, Inc. ("BSI") sues Keynetics, Inc., t/a ClickBank (collectively "Keynetics"), Rackspace Ltd. and Macro Holding, Inc. (collectively "Rackspace"), and Jeffrey Mulligan t/a HighTechMarketing.com and CBmall.com (collectively "Mulligan").¹ BSI alleges that Defendants individually and as co-conspirators violated the Maryland Commercial Electronic Mail Act, § 14-3001 et seq., of the Commercial Law Article of the Maryland Code (MCEMA). Defendants have moved to dismiss the action on a number of grounds. The Court GRANTS the Motion of Defendants Rackspace and Macro Holding. The Court DENIES WITHOUT PREJUDICE the Motions of Keynetics and Mulligan and will permit BSI to conduct discovery of jurisdictional facts as to them as hereinafter described.

II.

In 2003, in enacting legislation to control unsolicited commercial e-mails, commonly known as "UCE" or "spam," Congress had occasion to make certain findings relative to the problems such e-mails pose. According to § 7701(a) of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM):

(1) Electronic mail has become an extremely important and popular means of communication, relied on by millions of Americans on a daily basis for personal and commercial purposes. Its low cost and global reach make it extremely convenient and efficient, and offer unique opportunities for the development and growth of frictionless commerce.

(2) The convenience and efficiency of electronic mail are threatened by the extremely rapid growth in the volume of unsolicited commercial electronic mail. Unsolicited commercial electronic mail is currently estimated to account for over half of all electronic mail traffic, up from an estimated 7 percent in 2001, and the volume continues to rise. Most of these messages are fraudulent or deceptive in one or more respects.

(3) The receipt of unsolicited commercial electronic mail may result in costs to recipients who cannot refuse to accept such mail and who incur costs for the storage of such mail, or for the time spent accessing, reviewing, and discarding such mail, or for both.

(4) The receipt of a large number of unwanted messages also decreases the convenience of electronic mail and creates a risk that wanted electronic mail messages, both commercial and noncommercial, will be lost, overlooked, or discarded amidst the larger volume of unwanted messages, thus reducing the reliability and usefulness of electronic mail to the recipient.

(5) Some commercial electronic mail contains material that many recipients may consider vulgar or pornographic in nature.

(6) The growth in unsolicited commercial electronic mail imposes significant monetary costs on providers of Internet access services, businesses, and educational and nonprofit institutions that carry and receive such mail, as there is a finite volume of mail that such providers, businesses, and institutions can handle without further investment in infrastructure.

(7) Many senders of unsolicited commercial electronic mail purposefully disguise the source of such mail.

(8) Many senders of unsolicited commercial electronic mail purposefully include misleading information in the messages' subject lines in order to induce the recipients to view the messages.

(9) While some senders of commercial electronic mail messages provide simple and reliable ways for recipients to reject (or "opt out" of) receipt of commercial electronic mail from such senders in the future, other senders provide no such "opt-out" mechanism, or refuse to honor the requests of recipients not to receive electronic mail from such senders in the future, or both.

(10) Many senders of bulk unsolicited commercial electronic mail use computer programs to gather large numbers of electronic mail addresses on an automated basis from Internet websites or online services where users must post their addresses in order to make full use of the website or service.

(11) Many States have enacted legislation intended to regulate or reduce unsolicited commercial electronic mail, but these statutes impose different standards and requirements. As a result, they do not appear to have been successful in addressing the problems associated with unsolicited commercial electronic mail, in part because, since an electronic mail address does not specify a geographic location, it can be extremely difficult for law-abiding businesses to know with which of these disparate statutes they are required to comply.

(12) The problems associated with the rapid growth and abuse of unsolicited commercial electronic mail cannot be solved by Federal legislation alone. The development and adoption of technological approaches and the pursuit of cooperative efforts with other countries will be necessary as well.

15 U.S.C. § 7701(a).

As Congress noted, prior to the enactment of the federal legislation a number of states, Maryland among them, had attempted to contend with the problem of spam.² Thus, in 2002 Maryland enacted MCEMA, Annotated Code of Maryland, Commercial Law Article § 14-3001 et seq., which authorizes recipients of commercial e-mail (essentially advertisements for real property, goods or services) to sue senders who know or should know that the recipient's e-mail address is in Maryland and who use the domain name or e-mail address of a third person without permission or who send a message which contains false or misleading information about the origin or transmission path of the e-mail or in the subject line. Md.Code Ann., Corn. Law § 14-3002(b) (LexisNexis Supp 2004). For each such e-mail, the recipient may recover the greater of $500 or actual damages, the same measure of damages available to a third party without whose permission its domain name or e-mail address was used. An interactive computer services provider (ISP) which receives such email may recover $1,000 per e-mail or actual damages, whichever is greater. § 14-3003.

After CAN-SPAN, Maryland also enacted a criminal anti-spam law, the Spam Deterrence Act, which provides, inter alia, that a sender of essentially the same sort of false transmission information in e-mail messages made illegal by MCEMA may, depending on the number of messages sent within defined periods of time and on whether the sender has been previously convicted of similar spam offenses, be subject to fines as high as $25,000 and imprisonment up to 10 years. Md.Code Ann., Crim. Law § 3-805.1 (LexisNexis Supp. 2004).

To a limited extent, federal anti-spam legislation existed prior to CAN-SPAM, since the Communications Decency Act of 1996(CDA), 47 U.S.C. § 230, addressed certain issues relative to commercial email, particularly pornography and defamation. As will be discussed below, the CDA provides that ISP's are immune against any cause of action that would make them liable for information originating with third party users of the service.

Under CAN-SPAM, all state or local government regulation of the use of e-mail to send commercial messages is expressly preempted, except for any "statute, regulation, or rule [which] prohibits falsity or deception in any portion of a commercial electronic mail messages or information attached thereto." 15 U.S.C. § 7707(b)(1).

But CAN-SPAM itself prohibits, among other things, the transmission of false or misleading information or deceptive subject headings and requires senders of email to have valid return e-mail addresses. 15 U.S.C. § 7704(a).³ Accordingly, the viability of state anti-spam legislation somewhat clouded even after CAN-SPAM.⁴

In the present case, the Court considers the extent to which an action under MCEMA against non-resident defendants remains effective in view of the federal legislation, as well as constitutional and other considerations.

III.

BSI, a corporation formed under the laws of the State of Maryland, has its principal offices in Montgomery County, Maryland. Keynetics, Inc., trading as ClickBank,⁵ is a corporation formed under the laws of the State of Delaware, which maintains its principal offices in Boise, Idaho. Rackspace, Ltd., a corporation formed under the laws of the State of Texas, maintains its principal offices in San Antonio, Texas, and has additional data centers in Grapevine, Texas, and Herndon, Virginia. Macro Holding, Inc., a corporation formed under the laws of the State of Delaware, has its principal offices in Texas.⁶ Although the Amended Complaint does not specifically plead Mulligan's citizenship, he has affirmed in the affidavit attached to his Motion to Dismiss that he is a resident of the State of New Hampshire and that both website businesses ascribed to him in the Amended Complaint (viz., CBmall.com and High-TechMarketing.com) operate in the State of New Hampshire.

BSI describes itself as an ISP which provides, computer services and Internet access to multiple users.

Keynetics, trading under the name of ClickBank, operates a website offering over 10,000 digital products of various vendors, such as e-books and software programs. It claims a network of over 100,000 online marketers, known as "affiliates," who drive Internet traffic to Click-Bank's website. A primary means by which the affiliates drive traffic to Click-Bank is said to be bulk mail. When shoppers respond to the e-mails sent by affiliates, they are routed to ClickBank, which "makes the sale, pays the vendor, and pays the...