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by Mike Masnick


Filed Under:
california, liability, spam



California Appeals Court Says Company Can Be Held Liable For Spam It Didn't Write Or Know About

from the that-doesn't-make-any-sense dept

In a ruling that Eric Goldman correctly refers to as "divorced from reality," a California Appeals court has ruled that two advertising firms can be held liable for actions done by their affiliates (and sub-affiliates). In this case, these sub-affiliates sent out spam, advertising things on behalf of the defendants in the case. There were a few legal questions raised by the case, including yet another attempt to see if CAN SPAM really pre-empts state anti-spam laws, which are interesting, but which we won't discuss right now. Instead, I wanted to focus on that one key issue of putting the blame on a company for what a third party does.

This is a key point that we've been raising a lot around here lately, as more and more people look to blame third parties, often because it's (a) easier and (b) those third parties have more money. While I recognize that we all get annoyed by spam, a ruling of this nature is completely misdirected. It means that if you want to get a company in trouble, just send spam advertising their stuff to California residents. Now those firms are liable for your statements even if it had no idea that you were doing this. Goldman warns that this ruling will "generate lots more of wasteful profit-seeking litigation."

Both Venkat and Eric in the link above question how this ruling could survive a Section 230 analysis -- which should present a perfectly valid safe harbor for the two firms in question. It's not clear if either firm even raised a Section 230 defense, but even without that, I'm troubled by the fact that the court didn't seem to comprehend that it was blaming a company for actions of someone they have no control over. The court -- incorrectly -- claims that this could lead to "take a more active role in supervising" actions of affiliates, but as Eric points out, the strict liability standard put forth by the court means that no matter how active a role they take, if one spam message slips through, they're still liable. That doesn't lead to a more active role in supervising, it leads companies to dump such programs altogether:
Because of strict liability, even advertisers who undertake substantial efforts to police their affiliate network ARE STILL LIABLE FOR ANY PROBLEMS CREATED BY AFFILIATES. Maybe the court got confused about what it meant to impose STRICT LIABILITY. In reality, many advertisers won't rely on affiliates at all if they are strictly liable for what they do. I bet this court would view that as a perfectly fine outcome, but the it's disingenuous to say that strict liability will ratchet up the policing effort. A negligence standard might have done that; strict liability squashes the endeavor altogether.
This is definitely a worrisome trend, as we've seen a growing number of courts get tripped up on ideas surrounding third party liability, not recognizing the consequences of those rulings.

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  1. icon
    Bill Silverstein (profile), 21 Jan 2011 @ 11:24am

    Extreme Hyperbole

    First of all, this is on DECEPTIVE headers and subject lines, so there is already a wrong and a violation of the I-CAN-SPAM Act.

    Second, under 17529.5, there is a provision for reduction of damages, if there are preventative measures in place.

    Third, the reality is that most companies that hire spammers will have a policy prohibiting it, but do nothing to enforce that policy. In a case that I am litigating, the Defendants David Szpak and Emmanuel Gurtler decided not to check any of their affiliates, accept defaults judgments on prior lawsuits (totaling over $300k USD). Even after the judgments were satisfied by seizing monies from accounts, they never bothered sending an e-mail or making a phone call to the plaintiffs in those cases to ask which affiliate.

    Fourth, in my current litigation, one of the identified affiliates is Yambo Financials (listed on ROSKO since 2004 and associated with Child porn and fake canadian drugs), which turned out to have 17 different affiliate IDs that shared banking/epassport accounts. In fact, Gurtler claimed that once they learned of this, they terminated this "affiliate" but that was a lie, and they didn't terminate all 17 different aliases for this "affiliate."

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