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[By Venkat Balasubramani with comments from Eric Goldman]

Unspam Technologies, Inc. v. Chernuk, 2013 WL 1849080 (4th Cir. May 4, 2013)

We’ve mentioned “Project Honeypot,” the efforts of a company (founded by Matthew Prince) to track down and prosecute spammers. This lawsuit was ambitious in its scope and suitably quixotic. Like SOPA, it sought to attack pharmacy spam by going after the money.

Unspam (operator of Project Honeypot) and John Doe sued two individuals for pharmacy spam. They also named a slew of international banks who allegedly provided transaction processing services to pharmacy spammers. The banks submitted affidavits demonstrating that they had no activity or customers in the United States, and therefore they should not be subject to personal jurisdiction in the U.S. The district court agreed, granting the banks’ motion to dismiss on jurisdictional grounds. Unspam appealed to the Fourth Circuit.

Unspam fared no better on appeal. In a published opinion, the Fourth Circuit affirms the district court’s dismissal of the banks on jurisdictional grounds:

Not one of the banks directed its business to Virginia or aimed its commercial efforts at customers in Virginia. Indeed, there is no evidence that any drug transactions involving the plaintiffs were connected by intermediaries to these banks. Moreover, even if we were to assume that Doe’s purchase was presented by some Internet “pharmacist” to one of the foreign banks for processing through the international Visa network, that transaction still would be too remote an act to justify jurisdiction in Virginia. The transaction would have occurred in the foreign country where the pharmacist presented the Visa charge to the bank, and thereafter, the bank would simply have collected the charge through the Visa network. The foreign bank’s relevant activity would thus be localized to the foreign country where it did business, and its only conduct “aimed” from that location would be the transmittal of the transaction into the Visa network. The fact that the transaction ultimately rippled through other countries for the collection of monies would not indicate that the bank purposefully availed itself of the laws of the countries where subsequent transactions occurred..

Plaintiffs also argued that they need not establish jurisdictional facts over the banks because the banks were part of a conspiracy and were subject to jurisdiction based on the acts of co-conspirators. Plaintiffs argued, relying on “blog research and internet searches” that “Canadian Pharmacy” was a trade name for two of the defendants and that Chronopay [described as “the PayPal of Russia”] provided transaction processing services to defendants, with the defendant banks acting as links in the chain. The court says this is mere speculation, and there is no evidence or allegation regarding the transaction(s) involving the doe plaintiff.

Finally, plaintiffs tried to rely on Rule 4(k), which provides personal jurisdiction based on federal claims where the defendant may not be subject to jurisdiction in a particular state, but has minimum contacts with the U.S. as a whole. The court says that defendants do not have sufficient contacts with the United States as a whole for plaintiffs to invoke Rule 4(k) as a basis of jurisdiction.
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As mentioned in my post on the district court ruling (Is SOPA’s “Follow the Money” Meme Infecting Anti-Spam Litigation? – Project Honey Pot v. Does), on the merits, plaintiffs’ claims were a serious stretch. It’s not surprising that the plaintiffs got zero sympathy from the Fourth Circuit on the jurisdictional issues.
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Eric’s Comments. The Fourth Circuit reached the logical result in this case. However, I view this lawsuit as a cautionary tale of how close we are to breaking the Internet.

The overzealous war against Internet pharmaceuticals has already taken a half-billion dollar toll on Google and another $40M toll on UPS (yes, the shipping company). In both cases, these intermediaries “agreed” (with the DOJ’s axe ready to swing if they didn’t acquiesce) to become the DOJ’s deputies and police their customers more aggressively. The result is that we now have key cogs in the wheel making legal determinations about the legitimacy of their customers’ activities, with zero due process or other oversight of any errors they make make against customers.

This problem only exacerbates as we continually expand the list of potential deputies who should be combating illicit activity online. There is no natural boundary for that witchhunt, and lots of defendants got tossed into the litigation mix and have to spend lots of money defending their conduct (even if legitimate). Worse, any vendor who might be deputized becomes adversarial to their customer base, with the inevitable waste of resources and chilled environment for innovation. For those of you who think that a narrow “follow the money” liability trail as an alternative to more draconian intermediary deputization, I encourage you to review this lawsuit and think carefully if this is the world you want. For more on this, see my six month retrospective of SOPA.
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Previous post:

Is SOPA’s “Follow the Money” Meme Infecting Anti-Spam Litigation? – Project Honey Pot v. Does

Related posts:

Trademark Owner Can’t Hold GoDaddy Liable for Domain Name Forwarding — Berhad v. GoDaddy
Court Allows Microsoft’s Claims for Contributory Cybersquatting and Dilution to Move Forward — Microsoft v. Shah
Ninth Circuit Upholds Web Host’s Liability for Counterfeiting Retailers–Louis Vuitton v. Akanoc
The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
I Don’t Heart SOPA or PROTECT-IP: A Linkwrap
SOPA/PROTECT-IP/OPEN Linkwrap #2
Eighth Circuit: No Derivative Liability Under Iowa Spam Statute — Kramer v. Bartok

[image credit: Shutterstock - Matthew Cole - "Illustration of a Honey Bee on a White Background"]

Yandex has taken exception to a recent study that reported it has more malware in its search results than other major search engines like Google and Bing. The company shared its concerns with Search Engine Land via email, saying that it also sent the same response to AV-TEST, the German IT security…



Please visit Search Engine Land for the full article.

It may be illegal to send text spam, but that hasn't stopped companies from bombarding consumers with hundreds of millions of text messages. Cracking down on the practice, the Federal Trade Commission said it has filed eight lawsuits against companies that have collectively sent more than 180 million unsolicited text messages.

In the complaints, the FTC charged 29 defendants with sending texts that promised free gift cards and steered consumers towards deceptive websites.

Spam texts have cost consumers "millions of dollars," because some cell phone plans require consumers to pay per text message or the messages force consumers beyond their monthly allotment, Steve Baker, the FTC's midwest director said during a press conference in Chicago.

In such spammy text messages, consumers are lured to websites with the promise of free gifts or prizes worth as much as $1,000 from big retailers such as Best Buy, Walmart, and Target. But when unknowing consumers click on such links, they are often then asked to provide all kinds of personal information like email addresses, or urged to apply for a credit card or subscribe to a service, per the FTC. In some cases, consumers are asked to send money to receive these gifts.

Yet even after jumping through all the digital hoops, consumers are left with nothing but more spam. "No one has gotten a gift that we know of," Baker said.

The FTC has received 50,000 complaints for spam texts in general and 20,000 complaints against specific scams named in the lawsuits.

Major big box retailers are also distressed by a practice that tarnishes their brand and have made attempts to warn consumers.

The cell phone companies have also tried to help consumers block the texts, but the offending companies change numbers frequently and use automated systems that can send 70 to 80 texts per minute, making it difficult to block, reports the FTC.

"It's really a slick operation," Baker said.

Of the eight suits filed, seven were filed against the alleged senders of the unsolicited text messages and one was filed against the operators of the deceptive websites to which consumers were directed. The companies named in the suits are Superior Affiliate Management; Rentbro, Inc.; Jason Q. Cruz; Rishab Verma; AdvertMarketing; Henry Kelly; Seaside Building Marketing; and SubscriberBASE Holdings, Inc. The FTC is asking the courts for an immediate injunction and damages that would be used to return money to the victims.

Interflora, the major UK flower delivery service, is showing up again in Google’s search results — just 11 days after it was penalized. According to some tweets and posts on Google+, Chris Gilchrist was first to spot Interflora’s resurrection today. As you can see in the…



Please visit Search Engine Land for the full article.

In Google’s new How Search Works, Google is showing real live examples of spam that was recently removed from their search index. Most of these examples are of pure spam, as Search Engine Land founding editor Danny Sullivan explained in his write up, Google Charts “Manual Actions” Against…



Please visit Search Engine Land for the full article.

How often does Google take “manual action” against websites for spam, where a human being reviews a site and decides it deserves some type of penalty? For the first time, Google’s released a chart showing this, going back nearly 10 years. The chart is part of Google’s new…



Please visit Search Engine Land for the full article.

Every wondered how Google Search works, finds pages from across the web and decides how to list them in response to a search? If so, Google’s got a new resource designed to answer questions. Called “How Search Works,” the new area announced today is an interactive infographic that…



Please visit Search Engine Land for the full article.

Google has released a new Webmaster Help video. This time, Matt Cutts shares some statistics about the messages it sends webmasters. The video is a response to this user-submitted question:

You’ve been sending us various kinds of messages via WMT to improve transparency. It’s a good move. How many types of messages do you send now? And how do you decide what message you send?

“At this point we do send hundreds of thousands of messages each month,” says Cutts. “That might sound like a lot, but for example, one search engine named blekko estimated that a million spam pages are created every hour. The web is very large, so we shouldn’t be surprised that some percentage of it is spam, and as a result, we do spend a lot of time finding that spam, and since we automatically send messages and notifications when we find it, there are a lot – hundreds of thousands of notifications we send out each month.”

Cutts notes that there’s a lot of different categories of spam covered in Google’s webmaster guidelines, but that they all lead to about ten different kinds of messages that Google sends. Hidden text, keyword stuffing, etc. would all go into one kind of message.

He then goes on to share some stats from “earlier this year,” as he says, indicating that they’re from January and February. It’s not entirely clear when this video was made. Since it’s still early in February, we’re not sure if the video was recorded before the New Year or not. Cutts does tend to film a bunch of these videos at a time. Either way, it probably makes little difference if they’re putting the video out now.

“Out of the hundreds of thousands of messages that we sent over that time period, roughly 90% of those were for what we call ‘black hat’,” says Cutts. “That’s pure egregious spam (clear cut), so anybody sufficiently tech savvy would probably be able to recognize that it’s spam. It’s the stuff that you think of as traditional junk that you just don’t want to show up in your results because it is very clearly spam.”

“About four percent of the messages were because the content had little or no added value, and so it’s not ranking as highly in our search results,” he continues. “About three percent of the messages that we sent were related to hacking, so hacking is a big attack as far as black hats, and even though it’s illegal, there’s a lot of people that do that, trying to promote their pharmacy pills or whatever…that sort of thing. Something like two percent of the messages that we sent out were related to link buying, and about one percent were related to link selling. So overall, between two and three precent related to links and link spam overall – about buying and selling links.”

He leaves it at that.

Earlier this week, Google put out a video of Cutts explaining how to figure out which links to remove if you got an unnatural link warning.

[Post by Venkat Balasubramani]

Birchmeier v. Econ. Strategy Group, 12 C 4069 (N.D. Ill. Dec. 28, 2012): This was a putative class action filed against Economic Strategy Group and Caribbean Cruise Line. Plaintiff alleges that defendants made calls to their cell phones under the auspices of conducting political polls, but in reality wanted to sell cruises. The court denies defendants’ motion to dismiss on Rule 8 grounds, saying that plaintiff does not need to specify which defendants engaged in what activity. More importantly, the court rejects the argument that only the person who placed the call is liable under the TCPA. Finally, the court rejects as a “non starter” defendants’ argument that the fact that the call allegedly involved a political survey fits it within the FCC exemption for political surveys. In any event, the court says that the FCC exemption covers calls made with artificial or pre-recorded voices but does not involve calls made with autodialers.

Gragg v. Orange Cab Co., C12-0576RS (W.D. Wash. Jan. 17, 2013): This was another putative class action where plaintiff alleged that defendants sent a text message offering a free taxi booking app. The text attached to the complaint read as follows:

Taxi #850 dispatched @ 05:20. Smart phone? Book our cabs with Taxi Magic – #1 FREE taxi booking app http://cabs.io/29e1b7d

In order to trigger liability, the call must be placed with equipment that “has the capacity to store or produce numbers using a random or sequential number generator.” The court says that the message appears personal in question and does not appear to be sent “by means of an ATDS.” The court dismisses the claim but grants leave to amend. The court says that plaintiff can allege supporting facts that the message was not a personalized message but was a mass marketing text.

The court also looks at whether the message violates Washington’s email statute. While another judge in the same district had recently held (Hickey v. Voxernet) that a message that offers a free download was not “commercial” for purposes of the Washington statute, since the date of this decision, the Ninth Circuit issued its opinion in Chesbro v. BestBuy. Chesbro took an expansive view of what is a “commercial” message for the TCPA (and the Washington statute dealing with autodialers). The court follows suit and finds that the message in question was commercial for purposes of Washington’s email law. While the app was free, “the only purpose of the offer was to promote or encourage the use of defendants’ taxi services.”

Lee v. Stonebridge Life Insurance Co., C 11-0043 RS (N.D. Cal. Feb. 13, 2013) [pdf]: This was another putative class action—the court finds grants the motion for class certification. Plaintiff received the following text that she alleges violated the TCPA and was a lead generation mechanism for Trifecta, the marketing company defendant:

Thanks 4 visiting our website please call 877-711-5429 to claim your $100 walmart gift card voucher! Reply stop 2 unsub.

As alleged by plaintiffs, Stonebridge and Trifecta had a marketing arrangement. Trifecta’s job under this arrangement was to generate leads for Stonebridge, but it contracted the job of actually sending out text messages to third parties. Consumers who received the messages and responded were connected to a Trifecta call center and pitched products from either Stonebridge or third parties. If they expressed interest in a Stonebridge product, their number was then passed on to Stonebridge.

The court says that the dispute is amenable to class-wide resolution. The fact that Stonebridge didn’t actually send the messages is not a defense that requires an individualized determination (in the process,the court says this is unlikely to be a viable defense for either). The court passes on a related argument that the messages may not have been sent “on behalf” of Stonebridge exclusively.

[See also: "Federal Court Certifies 60,000-Member Class in “Wireless Spam” TCPA Litigation against Insurance Company, for Actions of Its Marketing Vendors."]
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None of these cases alone are blockbusters, but it’s interesting to see the text spam litigation juggernaut continue on. Three points from the cases:

- making a call with an autodialer is a low standard (the Orange Cab case, notwithstanding, Satterfield set an incredibly low bar for pleading standards);

- outsourcing text marketing is a recipe for disaster (the fact that the particular defendant did not send the messages in question is not likely to be a viable defense);

- fitting within an exception is not easy, and courts have taken a broad view of what is commercial.

Overall, it probably bears repeating that text-based marketing is a high risk endeavor.

Related posts:

Courts Allows Text Spam Class Action Against Voxer, a Cell Phone Walkie-Talkie App — Hickey v. Voxernet
9th Circuit Zings Best Buy Over Robocalls – Chesbro v. Best Buy
Confirmatory Opt-out Text Message Not Actionable Under the TCPA — Ryabyshchuck v. Citibank
Group Text Services Grapple with TCPA Class Actions
Ninth Circuit Revives TCPA Claim–Satterfield v. Simon & Schuster
Cellphone Spam Violates TCPA–Joffe v. Acacia Mortgage
Text Spam Lawsuit Against Citibank Moves Forward Despite Vague Allegations of Consent — Ryabyshchuk v. Citibank
Court Rejects Constitutional Challenge to TCPA Based on Vagueness in “Prior Express Consent” Exception — Kramer v. Autobytel, Inc.
Another Court Finds that TCPA Applies to Text Messages — Lozano v. Twentieth Century Fox Film Corp.
Court Finds that SMS Spam Messages are Subject to the TCPA and Rejects First Amendment Defense — Abbas v. Selling Source, LLC
Confirmatory Opt-Out Text Message Doesn’t Violate TCPA – Ibey v. Taco Bell
Franchisor Isn’t Liable Under the TCPA for Franchisees’ Text Message Campaign – Thomas v. Taco Bell
Court: Customer Consents to Receive Texts by Providing Phone Number to Pharmacy – Pinkard v. Wal-Mart Stores, Inc.

[image credit: Shutterstock/Anton Novik "Glossy Winged Mail Envelope"]

I just received this email from a friend’.

Unlike my ‘friend’, I’ve protected the names and email addresses included in this email.

The mistake they made is a mistake that I made almost 15 years ago and never made again.

After sending out a bunch of unsolicited emails through my hosts server, they shut me down until I signed a bunch of papers saying that I wouldn’t do so again.

Who knew?

I was using software supplied by a ‘reputable’ marketer to collect the email addresses of everyone who had contacted me through my site.

I thought it was OK.

NOT.

It’s called SPAM.

In other words, they are email marketing without generating a list of subscribers without an autoresponder.

What I find remarkable is that some newbie marketers are still trying it (marketing to their personal lists through their hosts), despite ALL the spam that is out there… AND all the education available.

I must assume that THEY get unwanted emails, yet think nothing of sending unwanted emails.

REALLY BAD move.

Nowadays, hosting services aren’t so lenient as mine was 15 years ago. They’ll just kill your hosting and email accounts.

So… if you want to send an email to a bunch of your ‘friends’ – build a list using an autoresponder.

My personal choice is Aweber – I’ve been using them ever since I made that mistake more than a decade ago and have never looked back – not through 100′s of thousands of subscribers… AND I’ve never jeopardized my business again either.

Comments, questions or suggestions? Please leave a comment below!

Cheers,