Antitrust Law Daily Wrap Up, ADVERTISING—4th Cir.: Internet provider solicits harm in anti-spam suit, banned from recovery, (Feb 5, 2015)

By Greg Hammond, J.D.

A small Maryland Internet service provider, Beyond Systems, Inc., was barred from seeking recovery under the California and Maryland anti-spam statutes because it consented to the alleged harm, the U.S. Court of Appeals in Richmond, Virginia, has ruled. Judgment in favor of defendants Kraft Foods, Inc. and Connexus Corporation was affirmed (Beyond Systems, Inc. v. Kraft Foods, Inc., February 4, 2015, Wynn, J.).

Beyond Systems is owned by Paul Wagner. Wagner’s brother, James Joseph Wagner, owns Hypertouch, Inc.—a nominal internet service provider in California that routes spam e-mails to Beyond System’s in Maryland. Both companies have a history of suing alleged spammers. Beyond Systems used “spam traps,” by hiding email addresses in web pages that are only discoverable by “spam crawlers.” In recent years, spam-trap-based litigation accounted for 90 percent of Beyond Systems’ income.

After Hypertouch reached a settlement with Kraft, under California’s anti-spam law, based on emails it received regarding Gevalia coffee, Beyond Systems sued Kraft and Connexus for many of the same emails that formed the basis of Hypertouch’s suit. A jury concluded that Beyond Systems was not a bona fide internet service provider, and the district court determined that as a matter of law, Beyond Systems invited its own purported injury and could therefore not recover. Beyond Systems appealed.

Consent to injury. The central issue, according to the appellate court, is whether the common law doctrine of volenti non fit injuria precludes Beyond Systems’ recovery under the California and Maryland anti-spam statutes. It first determined that violations of Maryland and California anti-spam statutes are “in the nature of a tort,” and like tort-related statutes, the anti-spam laws are therefore not exempt from common law principles. Under the principle of volenti non fir injuria, or “to a willing person it is not a wrong,” a plaintiff that effectively consents to conduct of another intended to invade his interests cannot recover in an action of tort for the conduct or for harm resulting from it.

The appellate court agreed with the lower court, that the evidence was “overwhelming” that Beyond Systems consented to the harm it claimed it suffered. Specifically, Beyond Systems created fake email addresses that were undiscoverable except to spam-crawlers; increased its email storage capacity to keep huge volumes of spam; and participated in routing spam emails between California and Maryland to increase its exposure to spam. The company’s consent to and solicitation of the harm at issue therefore prohibited Beyond Systems from recovering under both Maryland and California anti-spam statutes.

The case number is 13-2137.

Attorneys: Richard Kennon Willard (Steptoe & Johnson LLP) for Beyond Systems, Inc. Darrell J. Graham (Roeser Bucheit & Graham LLC) for Kraft Foods, Inc. and Connexus Corp.

Companies: Beyond Systems, Inc.; Kraft Foods, Inc.; Connexus Corp.; Hypertouch, Inc.

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