Opinion
No. C07-06211 TEH.
February 9, 2010
ORDER GRANTING MOTION TO DISMISS
This matter came before the Court for case management conference on February 8, 2010. Thomas R. Burke appeared in person on behalf of Defendant Active Response Group, Inc. ("ARG"). Telephonic appearances were made by Jason K. Singleton for Plaintiffs Asis Internet Services ("Asis") and Joel Householter, dba Foggy.net (collectively "Plaintiffs"); Richard B. Newman for Defendant Integraclick, Inc. ("Integraclick"); and Jared Gordon for Defendants Hydra LLC and Hydra Media Group, Inc. ("Hydra"). Integraclick made an oral motion to dismiss Plaintiffs' federal CAN-SPAM Act claim for lack of standing, in light of the Ninth Circuit's recent decisions in Asis Internet Services v. Azoogle.com, Inc. (" Azoogle"), No. 08-15979, 2009 U.S. App. LEXIS 26232 (9th Cir. Dec. 2, 2009), and Gordon v. Virtumundo, Inc. (" Virtumundo"), 575 F.3d 1040 (9th Cir. 2009). The Court, having taken the motion under submission, now GRANTS it.
Plaintiffs are Internet access providers who allege that Defendants sent unsolicited and misleading spam emails to Plaintiffs' customers, in violation of the Controlling the Assault of Non-Solicited Pornography and Marketing ("CAN-SPAM") Act of 2003, 15 U.S.C. § 7701 et seq., and section 17529.5 of the California Business and Professions Code. This Court denied ARG's motion to dismiss on July 30, 2008, finding that Plaintiffs' allegations were sufficient to establish standing under the CAN-SPAM Act, which confers a limited private right of action on "provider[s] of Internet access service adversely affected by" certain violations of the Act. 15 U.S.C. § 7706(g)(1). Acknowledging that the standing requirement was "being interpreted for the first time in district courts," which were split "on what plaintiff must show to prove it was `adversely affected,'" the Court allowed ARG to file an interlocutory appeal of its order denying the motion to dismiss. 9/16/08 Order, at 5. This action was then stayed pending resolution of the appeal or, if the appeal was not accepted for hearing, the Ninth Circuit's decision in Azoogle, which presented an identical standing issue. The Ninth Circuit declined to hear the interlocutory appeal on November 4, 2008.
Pursuant to a stipulation with ARG, Plaintiffs added Integraclick and Hydra as defendants in a second amended complaint filed on September 30, 2008.
On August 6, 2009, the Ninth Circuit issued its first guidance on the statutory standing requirements of the CAN-SPAM Act. In Virtumundo, the court segregated the standing inquiry into two components: "(1) whether the plaintiff is an `Internet access service' provider," and "(2) whether the plaintiff was `adversely affected by' statutory violations." 575 F.3d at 1049. To satisfy the second component, the plaintiff must have suffered a harm that is "both real and of the type experienced by" internet service providers, which would ordinarily require "evidence of some combination of operational or technical impairments and related financial costs attributable to unwanted commercial e-mail." Id. at 1053-54. That harm must also be "attributable to the type of practices circumscribed by the Act," a standard that could be satisfied, "at the very least," by a showing that the emails at issue "contribute to a larger, collective spam problem that caused ISP-type harms." Id. at 1054.
The Ninth Circuit issued its decision in Azoogle on December 2, 2009, affirming summary judgment for defendants based on the lack of standing under the CAN-SPAM Act. 2009 U.S. App. LEXIS 26232, at *2-3. Applying the standard articulated in Virtumundo, the court found that the second requirement was "not satisfied," because the "mere cost of carrying SPAM emails over Plaintiff's facilities does not constitute a harm as required by the statute." Id. at *2. The plaintiff in Azoogle was, notably, Asis Internet Services, one of two plaintiffs in the current matter. The record of harm put forth by Asis included expenses of "$3,000.00/month on spam filtering and employee time devoted to dealing with spam issues," and the devotion of "a third of ASIS employee time" to "dealing with spam complaints." Asis Internet Servs. v. Optin Global, Inc., 2008 U.S. Dist. LEXIS 34959, at *12 (N.D. Cal. Mar. 27, 2008). Plaintiffs allege nearly identical harm in the matter before this Court. See Second Amended Complaint, ¶ 31 (estimating that "a third of [Asis] employees' time is spent on customer spam complaints and technical issues," and that "the prevention of SPAM costs about $3000 per month").
Plaintiffs stated at the case management conference that their evidence does not differ from that offered in Azoogle, and acknowledged that dismissal is "inevitable" as long as the rule of law from Azoogle governs. Although the Azoogle decision is unpublished and therefore not binding, it is an application of the governing Virtumundo standard to facts identical to those before this Court, and therefore carries great weight. Based on the Ninth Circuit's clear guidance in Virtumundo and Azoogle, the conclusion that Plaintiffs lack standing to bring a claim under the CAN-SPAM Act is inescapable. This Court therefore GRANTS Integraclick's motion to dismiss Plaintiffs' first cause of action against all Defendants. Plaintiffs' claim under the CAN-SPAM Act is DISMISSED WITH PREJUDICE.
This leaves only a state law cause of action, under Cal. Bus. Prof. Code § 17529.5. A district court "may decline to exercise supplemental jurisdiction over" state law claims if "the district court has dismissed all claims over which it has original jurisdiction." 28 U.S.C. § 1367(c)(3). Although Plaintiffs requested that the Court remand the state claim to state court, this action was originally filed in this Court, and therefore cannot be remanded. As this Court declines to exercise supplemental jurisdiction over the state law cause of action, that claim is DISMISSED WITHOUT PREJUDICE to its being re-filed in state court.