After a bench trial on the issue, the district court awarded e360 a mere $27,002, a far cry from the millions of dollars that e360 sought. Both parties have appealed. We conclude that the district court properly struck most of e360’s damages evidence, either as an appropriate discovery sanction or for proper procedural reasons, and we reject e360’s challenges to the judgment. We also agree with Spamhaus that the evidence failed to support the modest award of $27,000 in actual damages because e360 based its damage calculations on lost revenues rather than lost profits. We vacate and remand with instructions to enter judgment for e360 in the nominal amount of three dollars.  Judge Hamilton, opinion

Spamhaus posted the final judgement. The full opinion is also available.

HT: Mickey Chandler who posted a case summary and a bit more of the background on what is going on than I managed.

1. The Court Should Vacate The $27,000 Award Because The Court Previously Ruled That Plaintiffs Were Barred From Relying On The Putative Lost Revenue Data Upon Which It Was Based.
2. The Court Should Vacate The $27,000 Award Because It Is Improperly Based On Lost Revenue, Not Lost Profit.
3. The Court Should Vacate The $27,000 Award Because There Is No Evidence That The Putative Lost Revenue Belonged Exclusively To Plaintiff e360.

As Spamhaus says in their opening paragraph, they know motions to reconsider are “rarely fruitful or helpful” but go on to say:

in this particular case, as Your Honor knows, Plaintiffs’ damages calculations and requests were a quickly moving target. Indeed, although evidence regarding e360 Insight LLC’s monthly revenue from its relationship with SmartBargains, Vendare Media and OptinBig (the “Putative Lost Revenue”) was offered at trial, Plaintiffs did not ask that an award of damages be based on the methodology the Court used – one month of those putative revenues. As a consequence, Spamhaus did not get an opportunity to point out the specific reasons why the problems we raised generally with Plaintiffs’ various damages methodologies barred an award based on the Putative Lost Revenue. Given that history, while mindful of the disfavor in which motions to reconsider are held, we wanted to directly present the infirmities in the $27,000 award to Your Honor before raising them in the Court of Appeals in the hopes of ultimately conserving judicial resources.¹

¹ Spamhaus respectfully believes that the $27,000 award is erroneous for additional reasons that we have elected not to present in this motion because they have already been adequately presented to Your Honor. By making this motion, Spamhaus does not waive, and expressly reserves, any and all other grounds for appeal of the Court’s judgment.

Just from that, it’s clear Spamhaus is prepared to take this to the Court of Appeals (again) if the judge doesn’t reconsider. In my lay reading of the law, and the memo in support of motion to alter judgement I don’t think Spamhaus is out of line in asking for the judge to reconsider. I expect that if the judge doesn’t reconsider, then we’ll see an even more aggressive filing taking it up to the Court of Appeals.

I think that John Levine said it best, though, in his recent post about the issue

I’m sure that Judge Korcoras is very, very, sorry he ever heard of Spamhaus or E360

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First is e360 v. Spamhaus. This is the case that actually prompted me to start this blog and my first blog post analyzed the 7th circuit court ruling sending the case back the lower court to determine actual damages. The lower court ruled this week, lowering the judgment to $27,002 against Spamhaus. The judge ruled that there was actual tortuous interference on the part of Spamhaus. In my naive reading of the law, this strikes me as not only an incorrect ruling, but one that ignores previous court decisions affirming that blocklists are protected under Section 230. Venkat seems to agree with me.

Spamhaus had a viable Section 230 argument here, but this argument got lost in the procedural quagmire. Section 230(c)(2) protects filtering judgments and insulates “action taken to enable or make available to information content providers or others the technical means to restrict access to material [that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable].” (See Professor Goldman’s post discussing Pallorium v. Jared, a California state appeals court case where the court held that a publisher of list of IP addresses for open relays could not be held liable. See also Zango v. Kaspersky.)

I do hope that Spamhaus appeals this ruling.

Second is Microsoft Corporation v. Mizhen et al. This is going to be an interesting case, I think. Microsoft is suing Mizhen, among others, alleging that he gamed Microsoft’s filters by opening up millions of Hotmail accounts and hitting “this is not spam” for his own mail.

The complaint details how Mizhen and his affiliates allegedly manipulated the statistics that Microsoft’s anti-spam system relies on by creating millions of new email accounts and then moving up to 200,000 of their own messages a day from “junk” files into inboxes.

This is actually the second time Microsoft has sued Mizhen. The first case was settled and Mizhen had to pay Microsoft $2,000,000 and promise not to spam MS users any longer, but I suspect that Mizhen may not get off so easy this time.

Over the last 18 months, the suit has moved through the courts. There have been significant delays in the case, and e360 seems to have been dragging their feet based on some of the motions filed by Comcast asking the judge to compel e360 to follow through on discovery.

Today, only weeks before the trial date, a settlement agreement was filed. The settlement agreement prohibits the defendants and any group associated with them from transmitting email to any domain owned by Comcast without affirmative consent (as defined by CAN SPAM). All mail sent by the defendants must comply with the Comcast Terms of Use or AUP. The defendants must not attempt to circumvent Comcast’s spam filters, must comply with CAN SPAM and must not help anyone else violate any of the provisions of the agreement.

The agreement also prohibits mail from defendants that:

• contains any false headers, including fraudulent or false corporate information
• contains any false or misleading subject lines
• lacks clear and conspicuous notice of the ability to opt-out
• identifies the sender only as a domain name
• lacks a valid physical postal address and the actual name of the sender
• uses or redirects users to any IP address that does not contain accurate identification.

The last 3 points are the biggies. They require that e360 stand up and stand behind any email they send. No more hiding behind false fronts, drop boxes, domains by proxy or any of the other ways that spammers hide their connection with the spam.

Comcast has crafted an agreement that stops e360, or any of Dave Linhardt’s businesses, from spamming their users. And they have expressly prohibited many of the standard techniques spammers use to hide their connection with the spam.

A settlement agreement isn’t precedent, which is a bit of a shame. A legal precedent that says that hiding behind domains by proxy, hiding behind random and rotating domain names and hiding a sender’s corporate identity from email recipients is a violation of any of the statues that Comcast sued under would be a good thing. Sure, spammers will continue to do all those things, but they will be further marginalized from legitimate by their violation of case law.

Previous blog entries about e360 v. Comcast:

• e360 in court again
• Legal filings this week
• e360 v. Comcast part 1, part 2, part 3, part 4
• Judge rules in e360 v. Comcast

This may actually be an interesting case. On the surface it is a contractual dispute. Choicepoint sold e360 40,000,000 data records containing contact information including email addresses, snail mail addresses and phone numbers. Some of the records were marked “I” meaning they could be used for email. Some of the records were marked “O” meaning they could not be used for email.

Despite these terms being reasonably well defined in the contract, e360 sent email to addresses in records marked “O.” Some of those addresses resulted in e360 being sued by recipients. During the course of the suit, e360 contacted Choicepoint and asked for indemnification. Choicepoint refused for a number of reasons, including the fact that Choicepoint told e360 the addresses were not for mailing. In response, e360 filed suit.

The interesting and relevant part of this case is the CAN SPAM violation that e360 alleges.

9. In her September 10, 2008, letter, Ms. Meredith Sidewater on behalf of ChoicePoint declined to indemnify e360 for the expenses and damages incurred by e360 in the three (3) disputes. See Letter attached hereto as Exhibit B. She claimed four (4) of the six (6) emails at issue in the disputes were “Optin Status of O,” which she contended means that the records were approved only for direct mail and not email.

10. If Ms. Sidewater’s assertion is true, this assertion constitutes an admission of violation of the CAN-SPAM Act of 2003, which provides that if a recipient requests not to receive commercial email, then it is unlawful for the sender to release, sell, or transfer such person’s email address to a third party. Thus, ChoicePoint admits that it breached ¶ 12(a)(ii) of the Agreement. But for this breach, e360 would not have sent any emails to the complainants and would not have been sued.

CAN SPAM does indeed state that once someone has opted out from email that the address cannot be sold, transferred, leased for any purpose. If e360 prevails in this case it will have far reaching implications for a lot of senders and data brokers. I’ll be watching this one closely.

e360 petitioned the court earlier this week to compel Spamhaus to expand on their answers to e360′s interrogatories. Today the court denied the motion. Text of the motion at Mickey’s place.

There has been a noticeable increase in registrar phishing over the last week. This may be related to ICANN de-accrediting ESTHosts, a registrar well known in the anti-spam community for registering domains used in phising and spam. UPDATE from ICANN.