Federal District Court Opinions
GORDON v. VIRTUMUNDO, INC., (W.D.Wash. 12-8-2006) JAMES S. GORDON, Jr., a married individual, d/b/a `GORDONWORKS.COM’; OMNI INNOVATIONS, LLC., a Washington limited liability company, Plaintiffs, v. VIRTUMUNDO, INC., a Delaware Corporation, d/b/a ADNOWLEDGEMAIL.COM; ADKNOWLEDGE, INC., a Delaware Corporation, d/b/a ADKNOWLEDGEMAIL.COM; SCOTT LYNN, an individual; and JOHN DOES, 1-X, Defendants. CASE NO. 06-0204-JCC. United States District Court, W.D. Washington, At Seattle. December 8, 2006
ORDER
JOHN COUGHENOUR, District Judge
This matter comes before the Court on Defendants’ Motion
to Dismiss (Dkt. No. 30) for failure to state a valid claim
under Federal Rule of Civil Procedure 12(b)(6) and failure
to properly plead under Federal Rules of Civil Procedure
8(a) and 9(b), Plaintiffs’ Response (Dkt. No. 32), and
Defendants’ Reply (Dkt. No. 34). This Court has reviewed
the materials submitted by the parties, as well as the
complete record, and determined that oral argument is not
necessary. For the following reasons, Defendants’ motion is
hereby DENIED IN PART, and GRANTED IN PART, and Plaintiffs
are granted Page 2 leave to amend their Complaint to cure
identified deficiencies.
I. BACKGROUND
Plaintiffs James S. Gordon (“Gordon”) and Omni Innovations,
LLC (“Omni”) have brought this action for alleged
violations of the Federal CAN-SPAM Act of 2003, 15 U.S.C.
§§ 7701- 7711; the Washington
Commercial Electronic Mail Act (“CEMA”), WASH. REV. CODE
§ 19.190.010-.110; the Washington
“Prize Statute,” WASH. REV. CODE §§
19.170.010-.900; and the Washington Consumer
Protection Act (“CPA”), WASH. REV. CODE §§
19.86.01-.920. Gordon is a Washington resident
and registrant of the internet domain gordonworks.com
(“Gordonworks”). Gordonworks is an interactive computer
service that, among other functions, provides e-mail
accounts to individuals. (Am. Compl. (Dkt. No. 15) —
3.4.) The internet domain server on which the Gordonworks
domain resides is owned by Omni.[fn1]
Defendants Virtumundo, Inc. (“Virtumundo”) and
Adknowledge, Inc. (“Adknowledge”) are non-Washington
resident businesses that provide online marketing services
to third-party clients. Virtumundo is a Delaware
corporation with its principal place of business in Kansas.
Adknowledge is also a Delaware corporation with its
principal place of business in Missouri. Virtumundo and
Adknowledge market products for their clients by
transmitting e-mails to interested consumers. Their
services are permission-based, meaning that consumers must
voluntarily provide their contact information to the
companies and must also specify the subject matter of the
advertisements that they are interested in receiving.
Defendant Scott Lynn (“Lynn”) is a Missouri citizen and
serves as Chief Executive Officer of Adknowledge. He is
also the sole shareholder of both companies.[fn2]
Plaintiff Gordon alleges that between August 21, 2003 and
February 15, 2006, he received misleading, unsolicited
e-mail advertisements from Defendants that were transmitted
through Omni’s Page 3 domain server to his e-mail address
“jim@gordonworks.com,” as well as to other individuals
using Gordonworks for domain hosting. Gordon alleges that
he has sent numerous direct e-mail requests to various
Virtumundo e-mail addresses to cease transmission of all
e-mails, but that the e-mails nevertheless persisted, even
after the filing of the present action. (Am. Compl.)
II. LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), this
action cannot be dismissed for failure to state a claim
unless it appears beyond doubt that Plaintiffs can prove no
set of facts in support of their claims that would entitle
them to relief. Conley v. Gibson, 355 U.S. 41, 45-46
(1957). All factual allegations set forth in the Complaint
are taken as true and construed in the light most favorable
to the Plaintiffs. Epstein v. Wash. Energy Co., 83 F.3d
1136, 1140 (9th Cir. 1993).
As a general rule, courts may not consider materials beyond
the pleadings in a ruling on a 12(b)(6) motion. Lee v. City
of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). Courts
may, however, consider documents referenced extensively in
the complaint, documents that form the basis of the claim,
and matters of judicial notice when determining if a
plaintiff has stated a claim upon which relief may be
granted. United States v. Ritchie, 342 F.3d 903, 908
§ 09 (9th Cir. 2003).
III. ANALYSIS
Plaintiffs allege that they were injured by e-mails sent
by Defendants. These e-mails, they contend, violated four
separate statutes: (1) the federal CAN-SPAM Act, (2) the
Washington CEMA, (3) the Washington Prize Statute, and (4)
the Washington CPA. Defendants argue that Plaintiffs have
failed to plead their CAN-SPAM and CEMA claims with
particularity under Federal Rule of Civil Procedure 9(b),
and, alternatively, that Plaintiffs have not met the
liberal pleading requirements of Federal Rule of Civil
Procedure 8(a) on those claims. Defendants also assert that
Plaintiffs have failed to allege both causation and damages
in their claims under the Prize Statute. Finally,
Defendants argue that Plaintiffs have not alleged a nexus
between their damages and Defendants’ alleged violations of
the CPA. Page 4
A. CAN-SPAM and CEMA claims
Defendants contend that Plaintiffs’ CAN-SPAM and CEMA
allegations sound in fraud and therefore must be pled with
particularity under Federal Rule of Civil Procedure 9(b).
Alternatively, Defendants contend that Plaintiffs’ CAN-SPAM
and CEMA claims are so vague that they cannot meaningfully
respond. Defendants request that this Court require
Plaintiffs to articulate how each specific e-mail allegedly
sent by Defendants violates CAN-SPAM and CEMA. (Defs.’ Mot.
4-7.)
1. Failure to plead with particularity
Rule 9(b) requires that: “In all averments of fraud or
mistake, the circumstances constituting fraud or mistake
shall be stated with particularity.” FED. R. CIV. P. 9(b).
The Ninth Circuit Court of Appeals has yet to address
whether the heightened pleading requirements of Rule 9(b)
apply to claims under CAN-SPAM or CEMA. However, even if
Plaintiffs do not specifically plead fraud, the Ninth
Circuit does require that cases “grounded in fraud” must be
pled with particularity regardless of whether the
underlying substantive law is federal or state. Vess v.
Ciba-Geigy Corp., 317 F.3d 1097, 1103 § 04 (9th Cir.
2003). Where a complaint contains allegations of both
fraudulent and non-fraudulent conduct, only the specific
“averments” of fraud must be pled with particularity. Id.
at 1105. Fraud consists of (1) a false representation, (2)
in reference to a material fact, (3) made with knowledge of
its falsity, (4) with the intent to deceive, and (5) with
action taken in reliance on the misrepresentation. Hart v.
McLucas, 535 F.2d 516, 519 (9th Cir. 1976) (citing Pence v.
United States, 316 U.S. 332, 338 (1942)).
In their claims under the CAN-SPAM Act, Plaintiffs allege
that Defendants initiated the transmission of commercial
e-mail messages to e-mail addresses served by Plaintiffs’
domain name and servers which (1) contained materially
misleading subject lines, (2) did not include an
unsubscribe option, (3) did not disclose that they were
advertisements, and (4) did not provide a postal address.
Plaintiffs also contend that Defendants illegally
“harvested” their e-mail addresses. Finally, Plaintiffs
contend that Defendants continued to send them e-mails
after Plaintiffs had asked not to receive further messages.
(Am. Compl. ¶¶ 4.1.4 – .8.) Each of
these claims identifies an act prohibited by CAN-SPAM. See
Page 5 15 U.S.C. § 7704. Only one of these claims
incorporates any of the elements of fraud. A “materially
misleading” e-mail subject line could be considered a false
representation of a material fact. Plaintiffs, however, do
not allege that Defendants knew the subject lines were
misleading, that they intended the e-mails to be deceptive,
or that Plaintiffs took any action in reliance on
Defendants’ alleged misrepresentations. (See Am. Compl.
¶ 4.1.4.) Therefore, under Vess, none of Plaintiffs’
CAN-SPAM claims constitute averments of fraud and
Plaintiffs are not required to plead them with
particularity.
The result is slightly different under CEMA, however.
Plaintiffs claim that e-mails sent by Defendants violated
CEMA because the e-mails misrepresented or obscured their
point of origin and/or the e-mails contained false or
misleading subject lines. (Id. ¶¶ 4.2.1- .2.)
Like Plaintiffs’ CAN-SPAM claims, these
allegations do not necessarily allege an intent to defraud,
and therefore they are not subject to the requirements of
Rule 9(b). Plaintiffs, however, also charge that
Defendants’ e-mails violated a provision of CEMA, WASH.
REV. CODE § 19.190.080, that prohibits “any action
to induce a person to provide personally identifying
information . . . by representing oneself . . . to be
another person.” (Am. Compl. ¶ 4.2.3.) This claim
does include an element of intent, as well as knowledge,
and a material misrepresentation. This claim thus
potentially avers fraud within the meaning of Vess,
alleging all of the requirements of common law fraud except
detrimental reliance.
In another e-mail spam case brought by Gordon in the
Eastern District of Washington, the court ruled that CEMA
was not a fraud-based cause of action, and therefore, that
the particularity requirements of Rule 9(b) did not apply.
Gordon v. Impulse Marketing Group, 375 F. Supp. 2d 1040
(E.D. Wash. 2005). Defendants ask this Court to ignore
Gordon and instead follow the Northern District of
California’s ruling in Asis Internet Servs. v. Optin
Global, No. C 05-5124 CW, 2006 WL 1820902 (N.D. Cal. June
30, 2006). (Defs.’ Mot. 5-6.) In that case, the plaintiff
claimed, inter alia, that it was injured by “fraudulent
e-mail attacks,” and that defendants used “stolen or
hijacked e-mail identities” to send “deceptive” e-mails
containing “falsified, misrepresented, or forged header
information” as well as subject lines “likely to mislead a
recipient” about material facts related to its contents.
The Asis court held that Page 6 although the plaintiff’s
allegations did not meet all of the elements of common law
fraud, the plaintiff still had to plead with particularity
all claims that specifically alleged that the content of
defendants’ e-mails were fraudulent. Asis Internet Servs.,
2006 WL 1820902 at *4.
Although Plaintiffs do not specifically allege “fraud” in
any of their CEMA claims, by arguing that Defendants
violated Washington Revised Code section 19.190.080,
Plaintiffs imply that Defendants intentionally designed
their e-mails to deceive Plaintiffs into providing personal
information. Under Asis, this amounts to an allegation that
the contents of Defendants’ e-mails were fraudulent. Vess
therefore requires that Plaintiffs plead this averment of
fraud with particularity. Specifically, Plaintiffs must
identify which e-mails violate section 19.190.080 and how
they run afoul of the provision. Plaintiffs’ claim under
section 19.190.080 is therefore dismissed pursuant to Rule
9(b), and Plaintiffs are granted leave to amend to cure the
identified deficiencies.
2. Failure to state a claim
Defendants contend, in the alternative, that Plaintiffs’
CAN-SPAM and CEMA claims fail to meet the liberal pleading
requirements of Federal Rule of Civil Procedure 8(a).
Specifically, Defendants argue that Plaintiffs’ Complaint
does not afford them a fair opportunity to understand the
allegations against them. (Defs.’ Mot. 10.) Rule 8(a)
requires “a short and plain statement of the claims that
will give the defendant fair notice of what the plaintiff’s
claim is and the grounds upon which it rests.” Conley, 355
U.S. at 47. Although Plaintiffs’ Complaint generally tracks
the statutory language of CAN-SPAM and CEMA, these statutes
are specific to commercial e-mails and Plaintiffs have
specified the provisions on which their claims are based.
In addition, Plaintiffs have provided Defendants with
copies of the e-mails along with explanations of their
allegedly illegal contents.[fn3] (See Pls.’ Am. Initial
Disclosures (Dkt. No. 28).) Defendants therefore have had
fair notice of the basic events and circumstances giving
rise to Plaintiffs’ claims. Page 7
B. Prize Statute claims
Defendants argue that Plaintiffs fail to state a cause of
action under the Prize Statute because they do not allege
that they were damaged by Defendants’ promotional offers.
Defendants contend that Plaintiffs have no standing to
bring a claim under the Prize Statute unless they actually
pursued an offered prize and were damaged by Defendants’
failure to comply with the statute’s disclosure
requirements. (Defs.’ Mot. 12.) Plaintiffs concede that
they “inadvertently omitted the recital of damages” in
their cause of action under the Prize Statute and request
leave to file an amended complaint. They deny, however, that
a claimant must pursue an offered prize before he can claim
that he has been damaged under the statute. (Pls.’ Resp.
19.)
Plaintiffs’ numerous claims under the Prize Statute relate
to disclosure requirements for promotional offers (WASH.
REV. CODE § 19.170.030), as well as requirements for
the award of prizes (WASH. REV. CODE § 19.170.040).
Under Washington Revised Code section 19.170.030,
Plaintiffs contend that Defendants’ e-mails contained
promotions for prizes which failed to identify the name and
address of the promoter and the sponsor of the promotion.
(Am. Compl. ¶ 4.3.2(a)[1].[fn4].) They also claim
that the e-mails failed to state the verifiable retail
value and odds of winning each prize in the manner required
by the statute. (Id. ¶¶ 4.3.2(b)[1] – (c)[1].)
Each of these claims is valid under the statute
and provides adequate notice to Defendants of their nature.
See WASH. REV. CODE § 19.170.030(1), (2), (4).
Plaintiffs’ claims (d)[1] and (e)[1] under section
19.170.030, however, each describe disclosure requirements
for specific types of promotional offers. Plaintiffs fail
to allege that Defendants’ e-mails contained promotions of
the type to which these disclosure requirements
apply.[fn5] Page 8 (See Am. Compl. ¶¶
4.3.2(d)[1] – (e)[1].) Plaintiffs must show how the
relevant provisions of the Prize Statute apply to
Defendants’ e-mails in order for these two claims to be
valid. See WASH. REV. CODE § 19.170.030(5) –
(6). Plaintiffs’ claims (d)[1] and (e)[1] in paragraph
4.3.2 are therefore dismissed pursuant to Rule 12(b)(6) and
Plaintiffs are granted leave to amend to cure the
identified deficiencies.
Plaintiffs make six claims under Washington Revised Code
section 19.170.040. In claim (e)[2], Plaintiffs charge that
Defendants’ e-mails failed to contain a clear and
conspicuous statement of a gift recipient’s rights
regarding a rain check on their prize in the manner
required by the Prize Statute. (Am. Compl. ¶
4.3.2(e)[2].) This claim accurately states the statutory
requirement and provides Defendants with adequate notice of
the charge. See WASH. REV. CODE § 19.170.040(7).
Plaintiffs’ five other claims under this section of the
statute all concern requirements for prizes that are not
immediately available or not received as advertised.
Because Plaintiffs do not allege that they attempted to
collect any of the prizes purportedly offered by
Defendants, they cannot claim that Defendants’ e-mails
violated any of these rain check provisions of the Prize
Statute. (See Am. Compl. ¶¶ 4.3.2(a)[2],
(b)[2], (c)[2], (d)[2], (f)[2].) Plaintiffs’ claims
4.3.2(a)[2], (b)[2], (c)[2], (d)[2], and (f)[2] are
therefore dismissed pursuant to Rule 12(b)(6) and
Plaintiffs are granted leave to amend to cure the
identified deficiencies.
Finally, because Plaintiffs fail to allege damages in all
of their Prize Statute claims, all of these claims are
dismissed. Plaintiffs are granted leave to cure this
deficiency as well. Where the Court has dismissed a claim
for multiple reasons, all deficiencies must be corrected
for the claim to be valid as amended.
C. CPA claims
Plaintiffs allege that their CEMA and Prize Statute claims
also constitute violations of the Washington CPA. (Am.
Compl. ¶¶ 4.2.4 – .5.) In their Motion
to Dismiss, Defendants argue that Plaintiffs’ CEMA-based
CPA claims are invalid because they do not allege that
Plaintiffs suffered Page 9 damages cognizable under the
CPA.[fn6] There are five elements to a CPA claim: (1) an
unfair or deceptive act or practice, (2) in trade or
commerce, (3) that impacts the public interest, (4) which
causes injury to the party in his business or property, and
(5) the injury must be causally linked to the unfair or
deceptive act. Hangman Ridge Training Stables, Inc. v.
Safeco Title Ins. Co., 719 P.2d 531, 535 -37 (Wash.
1986). Regarding claims under the CPA, CEMA states that:
The legislature finds that the practices covered by this
chapter are matters vitally affecting the public interest
for the purpose of applying the consumer protection act,
chapter 19.86 RCW. A violation of this chapter is not
reasonable in relation to the development and preservation
of business, and is an unfair or deceptive act in trade or
commerce and an unfair method of competition for the
purpose of applying the consumer protection act, chapter
19.86.
WASH. REV. CODE § 19.190.100. The plain text of CEMA
thus clearly shows that the Washington legislature intended
that a violation of CEMA would satisfy the first three
Hangman Ridge elements.[fn7] Therefore, having already made
out a claim under CEMA, Plaintiffs need only allege the
last two Hangman Ridge elements to complete their CPA
claims.
Plaintiffs have alleged causation and damages to the
extent necessary to defeat Defendants’ 12(b)(6) motion on
Plaintiffs’ CPA claims. Plaintiffs’ Complaint states simply
that they “have been damaged as a result of Defendants’
[CEMA] violations . . . in an amount to be proved at
trial.” (Am. Compl. ¶ 4.2.5.) In their Response to
Defendants’ Motion to Dismiss, however, Plaintiffs clarify
that Defendants’ allegedly large volume of illegal e-mails
cost them time away from work, bandwidth, and “other costs
associated with ISP time.” (Pls.’ Resp. 17.) This statement
is adequate for this Court to Page 10 infer an allegation
of injury to business or property under the fourth Hangman
Ridge element and causation under the fifth element.
Plaintiffs therefore have stated valid CPA claims as to all
of their properly pled CEMA claims.[fn8]
IV. CONCLUSION
For the foregoing reasons, this Court hereby ORDERS that:
(1) Defendants’ motion to dismiss Plaintiffs’ CAN-SPAM Act
claims is DENIED;
(2) Defendants’ motion to dismiss Plaintiffs’ CEMA claims
is GRANTED with respect to Plaintiffs’ claim under
Washington Revised Code section 19.190.080 and DENIED in
all other respects;
(3) Defendants’ motion to dismiss Plaintiffs’ Prize
Statute claims is GRANTED with respect to Plaintiffs’
general failure to allege damages on all Prize Statute
claims; and additionally, for the reasons set forth supra
section III.B, GRANTED with respect to Plaintiffs’
deficient claims 4.3.2(d)[1] and (e)[1] under Washington
Revised Code section 19.170.030, and Plaintiffs’ deficient
claims 4.3.2(a)[2], (b)[2], (c)[2], (d)[2], and (f)[2]
under Washington Revised Code section 19.170.040;
(4) Defendants’ motion to dismiss Plaintiffs’ CPA claims
is GRANTED to the extent that Plaintiffs’ claims under
Washington Revised Code section 19.190.080 and the Prize
Statute are defective and is DENIED in all other respects.
Plaintiffs are GRANTED leave to amend their Complaint as to
all invalid dismissed claims.
SO ORDERED.
[fn1] Unless otherwise indicated, references to “Plaintiffs”
include both Gordon and Omni.
[fn2] Unless otherwise indicated, references to “Defendants”
include Adknowledge, Virtumundo, and Lynn.
[fn3] This Court can consider these e-mails in deciding
Defendants’ motion because they form the basis of
Plaintiffs’ Complaint. Ritchie, 342 F.3d at 908.
[fn4] Plaintiffs’ Complaint paragraph “4.3.2” is actually
two different sets of identically labeled claims. In order
to avoid confusion, the Court has added the numbers [1] and
[2] to distinguish the two different sets of “4.3.2”
claims.
[fn5] Claim (d)[1] in paragraph 4.3.2 of the Complaint
corresponds to section 19.170.030(5), which concerns
promotions involving sales presentations. Claim (e)[1]
corresponds to section 19.170.030(6), which applies to
promotions where the offeree must give some consideration
before a prize is awarded.
[fn6] Defendants do not challenge the validity of
Plaintiffs’ claim that violations of the Prize Statute are
per se violations of the CPA. (See Am. Compl. ¶
4.3.1; Defs.’ Mot. 9-10.)
[fn7] Defendants selectively quote only the second clause of
the second sentence in the above section and claim that a
violation of CEMA satisfies only the first of the Hangman
Ridge elements. (Defs.’ Mot. 9.)
[fn8] All of Plaintiffs’ Prize Statute-based CPA claims are
invalid to the extent that their underlying Prize Statute
claims are defective. Page 1