Silverstein v. Keynetics Inc.

Citations: 192 F. Supp. 3d 1045; 2016 U.S. Dist. LEXIS 83298; 2016 WL 3479083Docket: Case No. 16-CV-00684-DMR

Court: District Court, N.D. California; June 27, 2016; Federal District Court

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Defendants 418 Media LLC, 418 Media, Lewis Howes, Keynetics, Inc., Keynetics, and Click Sales, Inc. filed motions to dismiss Plaintiff William Silverstein’s amended complaint under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2). A hearing was conducted on April 28, 2016, following supplemental briefing from both parties. The court granted the motions to dismiss, concluding that Plaintiff’s claims were preempted by federal law.

Silverstein's amended complaint alleges violations of California’s laws against unsolicited commercial email, claiming to be part of a LinkedIn group where he received spam emails from fictitious senders using LinkedIn's domain without authorization. The emails contained links to various websites and misrepresented the true senders in their headers. He received at least 86 spam emails between July and November 2015, which falsely identified the senders and were linked to Defendants.

Silverstein's sole claim is based on California Business and Professions Code section 17529.5, seeking $1,000 in damages per unlawful email, along with attorney fees. Defendants contended that his claims were preempted by the federal CAN-SPAM Act, that the complaint lacked necessary specificity, and that specific facts regarding Howes’s liability were not adequately pled.

Defendants Keynetics and Click Sales support the motion to dismiss filed by 418 Media and Howes, citing federal preemption as a primary ground. They also move to dismiss the Plaintiffs' amended complaint under Rule 12(b)(6) for failure to state a claim against Keynetics and under Rule 12(b)(2) for lack of personal jurisdiction. 

The legal standard for a Rule 12(b)(6) motion requires the court to assess the legal sufficiency of the claims, accepting all factual allegations in the complaint as true. Claims must show facial plausibility, allowing for reasonable inferences of liability, beyond mere labels or conclusions.

The discussion highlights California Business and Professions Code section 17529.5, which prohibits certain practices in unsolicited commercial emails. Plaintiffs allege violations of this section, asserting that emails were sent from LinkedIn's domain without authorization and included misleading sender information. Defendants argue that these claims are preempted by the federal CAN-SPAM Act, which supersedes state laws specifically regulating commercial email, except in cases of falsity or deception. The Ninth Circuit interprets this preemption broadly, with limited exceptions, reinforcing the dominance of federal law over state regulations related to commercial emails.

Defendants present two preemption arguments regarding Plaintiffs' claims. They contend that claims asserting that the names in the 'from' field misrepresent actual email advertisers are preempted, as such claims do not pertain to false or deceptive information but rather involve a 'content or labeling requirement.' Additionally, they argue that any challenges related to the alleged violation of LinkedIn's user agreement are also preempted, asserting that breach of a user agreement does not constitute a deceptive practice.

The Ninth Circuit's ruling in Gordon clarifies that the CAN-SPAM Act's exception for laws prohibiting 'falsity' and 'deception' relates to traditional tortious conduct, requiring that any false or deceptive information must be material. The court emphasized that allowing states to impose liability for minor inaccuracies would contradict the federal Act’s preemption provisions. To successfully challenge a state law claim regarding false or deceptive header information without facing CAN-SPAM Act preemption, a plaintiff must demonstrate material misrepresentations.

In the Gordon case, the plaintiff alleged that Virtumundo sent emails with misleading header information, but he acknowledged he was not actually deceived. The court determined that the plaintiff's claim centered on inadequate identification of the sender rather than true deception, as there was nothing inherently misleading about the domain names used. The court concluded that technical allegations regarding header information lacked a basis in traditional tort theories and thus were preempted. The plaintiff's argument that any attempt to obscure the sender's identity constituted actionable deception was rejected, with the court indicating that the only acceptable information in the 'from' field would be the actual sender's name or that of the entity hiring the sender.

The court rejected the plaintiff's theory regarding deceptive email headers, stating that the CAN-SPAM Act does not require specific content or labeling in commercial emails and that any state law imposing such requirements is preempted. Notably, claims based on deceptive header information, like those in Kleffman v. Vonage Holdings Corp., were dismissed on similar grounds. The plaintiff alleged that the email headers were misleading because they used fictitious sender names and the linkedin.com domain, which he claimed misappropriated LinkedIn's goodwill. However, the court found that these allegations mirrored those rejected in the Ninth Circuit case, Gordon, where the plaintiff similarly argued that headers did not clearly identify the sender. The court noted that the plaintiff did not assert that the headers contained fraudulent information or that he was misled about the emails' commercial nature, acknowledging he could identify the true sender. The court concluded that the headers were not significantly different from those in Gordon, which had already been deemed not deceptive under the CAN-SPAM Act. The plaintiff failed to address or distinguish the Gordon precedent in his opposition, leading to the court's ruling against him.

Before the hearing, the court required the parties to submit supplemental briefs regarding the relevance of the case Gordon to the current matter. The Plaintiff attempted to differentiate Gordon, arguing it dealt with preemption of Washington state law rather than section 17529.5, but the court found this distinction unconvincing. The Plaintiff also claimed that Gordon did not cover the specific issue of alleged deception through unauthorized LinkedIn emails. However, the court noted that factual differences do not warrant a different outcome.

The Plaintiff primarily relied on Balsam v. Trancos, Inc. for support, but the court highlighted that Balsam is not applicable. In Balsam, the defendant knowingly concealed their identity using untraceable domain names, which constituted deception regarding the sender's identity. In contrast, the Plaintiff admitted that the emails were sent from a recognizable domain (linkedin.com) and did not allege that he was unable to determine the senders’ identities, as the emails contained links to Defendants’ web pages. 

During oral arguments, the Plaintiff suggested the emails were deceptive because he had to open them to identify the senders, a point the California Court of Appeal has previously rejected. The court clarified that a sender's identity does not misrepresent simply due to the absence of the official name in the header, provided it can be identified from the email body.

The court referenced Rosolowski v. Guthy-Renker LLC, which affirmed that identification of the sender from the body of the email negates claims of misrepresentation under section 17529.5. Given that the Plaintiff acknowledged the identities of the senders were clear from the email content, his claim does not meet actionable criteria. Ultimately, the court concluded that the alleged deficiencies in the email headers were non-deceptive and therefore preempted by the CAN-SPAM Act, aligning with the findings in Gordon.

The court dismisses the Plaintiff's complaint as preempted under federal law, specifically citing concerns regarding the Plaintiff's ability to assert claims that would avoid federal preemption. Despite doubts about the viability of the claims, the court grants the Plaintiff leave to amend the complaint within 14 days. The upcoming case management conference is rescheduled from June 29, 2016, to August 31, 2016, with a joint statement due by August 24, 2016. The court emphasizes that when assessing a motion to dismiss, all factual allegations in the complaint must be accepted as true. The court also references the California statute's lack of a definition for "header information," but notes that the California Supreme Court has adopted the CAN-SPAM Act's definition. The court discusses relevant case law, particularly the Gordon case, which dealt with deceptive header information in emails and the concept of email spoofing. It concludes that the Plaintiff's claims, which center on misleading header information, are likely to be preempted since the Ninth Circuit has determined such content regulation is subject to federal law.

Plaintiff argues that previous district court cases concerning section 17529.5 require allegations of common law fraud elements, such as reliance and damages, to meet the CAN-SPAM Act's preemption exception. However, the cited cases (Wagner v. Spire Vision, Asis Internet Servs. v. Vistaprint, Hoang v. Reunion.com, and Asis Internet Servs. v. Subscriberbase) are deemed irrelevant as they do not address the specific issue of whether the allegations of falsity or deception are sufficient to avoid preemption under Gordon. The court clarifies that Defendants did not claim preemption due to lack of reliance and damages, and notes that 418 Media and Howes improperly introduced this argument in their supplemental brief, which the court will not consider. Additionally, the court emphasizes that introducing new facts or legal arguments in a reply brief is improper. Finally, while Plaintiff heavily relies on Balsam, the court points out that Balsam did not consider the Ninth Circuit's ruling that the CAN-SPAM Act preempts any state law mandating the identification of the actual sender in commercial email headers, as established in Gordon.