John Rosenthal
John Rosenthal is a senior associate at Harrington, Ocko & Monk, LLP His law practice includes disputes relating to intellectual property, business, cyber/internet law, and employment. Before joining the firm, he clerked for the Hon. Richard Enslen, US District Court. Prior to attending Notre Dame Law School, Mr. Rosenthal served as a Captain in the Marines.
On October 29, 2014, the Second Appellate District issued a decision on the appeal of plaintiffs in the action, Greg Rosolowski v. Guthy-Renker LLC.1 In its decision, the appellate court affirmed the ruling of the Superior Court, Los Angeles County, which dismissed in its entirety the amended class action complaint of plaintiffs regarding allegations of deceptive commercial email ads. In doing so, the Second Appellate District did not specifically follow the decision of the First Appellate District in Hypertouch2 as to how courts should view whether a commercial email ad is materially deceptive. The Second Appellate District also distinguished the facts alleged in the Rosolowski amended complaint from the facts of the previously decided Balsam3 action as to whether information in the body of a commercial email ad precludes claims of deceptive "header" information. The appellate court's decision in Rosolowski could have significant ramifications for senders, advertisers, and publishers of commercial email advertisements, and could impact the ability of plaintiffs to apply California Business and Professions Code section 17529.5 ("CBPC section 17529.5") to commercial email messages for the purpose of asserting multimillion dollar claims for liquidated damages under the statute.
The advent of the Internet created a new medium through which companies could communicate directly with consumers and advertise their products and services to a huge audience.4 The ubiquitous nature of the Internet in our everyday lives (and the advertising opportunities it presents) is evidenced through the massive increase in the number of computers and computer users connected to this digital technology. In 1985, about 2,000 computers were connected to the Internet, which increased to 100 million American adults using email every day by 2010.5 In fact, the number of users or accounts that participate in Internet-based platforms like Facebook, Twitter, and LinkedIn may be larger than the populations of almost every major country on the planet with over 100 million Facebook accounts and/or users, alone.6
Companies, while originally slow to recognize the Internet as an effective marketing medium, soon began to take advantage of the low cost and efficient nature of the Internet as an advertising tool.7 Through email ads, a small company can send marketing materials to thousands of consumers around the country and the world.
Not long after companies recognized the efficiencies involved in advertising through the Internet, consumers began to complain about what has become known generally as "spam."8 There is no formal definition of "spam" when applied to commercial email advertising.9 While some consumer groups define "spam" as any email advertisement that has not been consented to in advance by a recipient, groups and associations in the business community define "spam" in a much more limited manner: email communications which involve fraud, deception, or viruses.10 Regardless of which definition is applied, various reports and analyses of commercial email traffic over the Internet indicate that "spam" may comprise as much as 60% of all email messages sent.11
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States began to pass laws relating to commercial email messages, with Nevada being the first state to pass such a law in 1997.12 Just six years later, 36 states had passed regulations or laws regarding commercial email advertising and messages.13 These state laws had limited commonality, and much dissimilarity. Some states had laws that required commercial email ads to include a valid physical postal address, while others obligated the sender to include a means of "opting out" of receiving future commercial email messages from the particular advertiser or sender.14 The significant variation among state laws regulating commercial email ads left businesses in doubt as to which state's laws to comply with.
In September of 2003, California enacted what many businesses considered to be the most drastic law intended to regulate commercial email marketing and advertisements.15 California's approach to email ad regulation required that a recipient actually "opt in" to receiving commercial email ads from an advertiser before that advertiser was allowed to send the individual a commercial email message.16 Moreover, the California law seems to indicate that "consent" by a recipient to receive email ads has to be "direct consent" with a particular advertiser, and that such "direct consent" cannot be transferred between companies or entities.
The California law also contains what many believed to be stifling penalties for what is defined as "unsolicited" commercial email advertisements that are found to be deceptive. Provisions in the law allow for liquidated damages of up to $1,000 per email, or $1 million per incident, plus attorneys' fees, to a prevailing plaintiff.17 California's email regulation also gives individuals standing to sue senders, advertisers, and initiators of commercial email messages.18
In response to the onerous "patchwork" of conflicting state laws regarding Internet advertising, and California's draconian law in particular, Congress enacted the Controlling Assault on Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM").19 CAN-SPAM is specifically designed to provide a "national" standard regarding the regulation of commercial email advertising, and to preclude states from imposing what Congress deemed to be undue burdens upon businesses as to use of the Internet.20 One of the primary means through which CAN-SPAM imposes a "national" standard on commercial email advertising is the broad "preemption" clause present in the Act.21 Pursuant to CAN-SPAM's preemption clause, the "Act supersedes any statute, regulation, or rule of a state or political subdivision of a state that expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such state, regulation or rule, prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto."22
The clash between CAN-SPAM's broad preemption clause and state law regulation of commercial email ads did not take long to reach the courts.23 In the years after CAN-SPAM was enacted, federal and state courts have wrestled with...
