Source: https://spamlaws.com/cases/ferguson.html
Timestamp: 2019-04-24 20:51:04+00:00

Document:
Home › Ferguson v. Friendfinders, Inc.
Ferguson v. Friendfinders, Inc., 94 Cal. App. 4th 1255, 115 Cal. Rptr. 2d 258 (Cal. App. 1st Dist. Jan. 2, 2002), review denied (Apr. 10, 2002).
MARK FERGUSON, Plaintiff and Appellant, v. FRIENDFINDERS, INC., et al., Defendants and Respondents.
John L. Fallat, Steven D. Schroeder, Law Offices of John L. Fallat, and Timothy J. Walton, for Appellant.
Ira P. Rothken, and Robert Kovsky, Rothken Law Firm, for Respondents.
Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Herschel T. Elkins, Senior Assistant Attorney General, and Seth E. Mermin, Deputy Attorney General, for Office of the Attorney General as Amicus Curiae.
Carol A. Kunze, for The Internet Alliance as Amicus Curiae.
Mark Ferguson (Ferguson) sued respondents for violating California law by sending him unsolicited e-mail advertisements that were allegedly deceptive and misleading. The superior court sustained a demurrer without leave to amend with respect to each of Ferguson's causes of action. In reaching its decision, the lower court found that section 17538.4 of the Business and Professions Code1 violates the dormant Commerce Clause of the United States Constitution.
In the published portion of this decision, we hold that section 17538.4 does not violate the dormant Commerce Clause. In the unpublished portion of this opinion, we conclude that the trial court erred by sustaining a demurrer without leave to amend as to each of Ferguson's causes of action except for the cause of action in which he purported to state a negligence claim.
Section 17538.4 regulates conduct by persons or entities doing business in California who transmit unsolicited advertising materials. Section 17538.4, which originally applied only to faxed documents, was amended in 1998 to extend to electronic-mail (e-mail).
Section 17538.4 states that the section, or any part of it, shall become inoperative when "federal law is enacted that prohibits or otherwise regulates the transmission of unsolicited advertising by electronic mail." (§ 17538.4, subd. (i).) Although Congress has considered several bills addressing this subject, federal law does not currently regulate the transmission of unsolicited advertising by electronic mail.
Ferguson, a California resident, filed a complaint on October 20, 1999, which he amended on January 31, 2000.2 On behalf of himself and all other persons similarly situated, Ferguson sued Friendfinders, Inc. and Conru Interactive, Inc., two California businesses located in Palo Alto, Andrew B. Conru, a California resident, and 50 doe defendants (jointly, respondents).
Ferguson alleged that respondents sent him and others unsolicited e-mail advertisements that did not comply with the requirement set forth in section 17538.4. Specifically, Ferguson alleged that "the subject lines of the email messages failed to begin with the characters 'ADV:'; the first line in the text of the e-mail messages failed to contain information about how recipients could have their email addresses removed from future advertising campaigns; the email messages failed to provide a valid return email address to which Plaintiffs could respond; and the headers of the email messages were altered to mask the identity of the sender."
Ferguson attempted to allege four distinct causes of action for which he sought general and special damages, injunctive relief, and attorneys' fees. In his first cause of action for negligence, Ferguson alleged that respondents' violations of section 17538.4 and other California statutes constituted negligence per se. In his second cause of action, Ferguson alleged respondents were liable for trespass for taking possession and control of plaintiffs' "computer processors, hard drives, Random Access Memory and Internet email accounts" without plaintiffs' consent by sending the unsolicited commercial e-mail advertising.
In his third cause of action, Ferguson alleged respondents' transmission of the unsolicited e-mail advertisements constituted an unfair business practice under California law because respondents' e-mails (1) were designed to deceive and mislead plaintiffs as to the origin of the transmission, (2) were actually misleading and deceptive, and (3) violated section 17538.4. Citing these same reasons, Ferguson alleged a fourth cause of action for unlawful advertising practices.
Respondents filed their demurrer to the complaint on March 3. They argued that Ferguson failed to state a cause of action for negligence, that sending unsolicited email cannot constitute a trespass as a matter of law, and that Ferguson's third and fourth causes of action for unfair business practices and unlawful advertising practices were flawed in several respects. Among other things, respondents alleged that the relief sought with respect to Ferguson's third and fourth causes of action "would constitute an unconstitutional interference with interstate commerce." In this regard, respondents argued that the Internet cannot be regulated by individual states because it is a national infrastructure without territorial boundaries.
A hearing on respondents' demurrer was held on March 30. At that hearing, the trial court indicated that Ferguson had failed to state a cause of action for negligence because respondents' conduct was intentional, and that Ferguson could not prove that plaintiffs were actually damaged by the alleged trespass. The discussion as to the third and fourth causes of action was limited to the question whether section 17538.4 violates the dormant Commerce Clause of the federal Constitution. After taking the matter under submission, obtaining additional briefing on this discrete issue, and holding a second hearing on May 18, the court issued an order on June 7. That order sustained respondents' demurrer without leave to amend on the following ground: "California Business and Professions Code section 17538.4 unconstitutionally subjects interstate use of the Internet to inconsistent regulations, therefore violating the dormant Commerce Clause of the United States Constitution."3 Judgment was entered on July 17 and this timely appeal followed.
Ferguson disputes the lower court's conclusion that section 17538.4 is unconstitutional, as does the Attorney General who has filed an amicus curie brief in this court. Ferguson also argues his entire complaint is viable without section 17538.4. We begin our analysis by addressing the constitutional issue presented and will then consider the adequacy of Ferguson's pleading.
In the present case, respondents concede that section 17538.4 does not discriminate against out-of-state actors. The statute applies equally to in-state and out-of-state actors who (a) do business in California and (b) transmit unsolicited commercial e-mail (UCE) to a California resident, (c) via equipment located in California.
However, respondents contend that section 17538.4 directly regulates interstate commerce. Citing Healy, supra, 491 U.S. 324, they argue that, when section 17538.4 is viewed in the context of Internet reality, the statute regulates beyond California's borders and that its extraterritorial reach violates the dormant Commerce Clause.
Section 17538.4 does not violates the principles discussed in Healy because it does not directly regulate commerce occurring wholly outside the State. It expressly applies only when UCE is sent to a California resident by means of an electronic-mail service provider who has equipment in the State. Respondents contend, however, that the practical effect of section 17538.4 is to control commerce occurring wholly outside California because the geographic limitations set forth in section 17538.4 are ineffectual and, therefore, senders of UCE who do business in California must always comply with section 17538.4 regardless of the actual residence of the UCE recipient. Respondents offer several theories to support their claim that section 17538.4 has an impermissible extraterritorial reach.
First, respondents argue that the geographic limitations on the scope of section 17538.4 are ineffectual because of the very nature of the Internet. UCE is transmitted via the Internet which functions in cyberspace, a place respondents characterize as being "wholly insensitive to geographic distinctions." (Quoting American Libraries Association v. Pataki (S.D.N.Y. 1997) 969 F.Supp. 160, 170 (Pataki).) Thus, respondents maintain, an e-mail address simply does not logically correspond to a geographic residence.
The problem with this argument is that section 17538.4 does not regulate the Internet or Internet use per se. It regulates individuals and entities who (1) do business in California, (2) utilize equipment located in California and (3) send UCE to California residents. The equipment used by electronic-mail service providers does have a geographic location. And e-mail recipients are people or businesses who function in the real world and have a geographic residence.
In any event, the Pataki court's conclusions about the extraterritorial effects of the New York law in that case do not apply to section 17538.4. The statute at issue in Pataki applied to all Internet activity and the court's comments about the absence of geographic sensitivity were made it that context. (Pataki, supra, 969 F.Supp. at p. 171.) As we have already explained, section 17538.4 does not regulate the Internet. It regulates e-mail users who send UCE to California residents via equipment located in California. These limitations distinguish section 17538.4 from the New York statute at issue in Pataki and avoid the problems which most concerned the Pataki court.
Respondents argue that, even if e-mail recipients do have geographic residences, it is simply not possible for senders of UCE to determine the residency of any particular e-mail recipient. Thus, respondents argue that the only way to avoid violating section 17538.4 is to comply with it in every instance. This argument has two fatal flaws. First, respondents ignore the second geographic limitation imposed by section 17538.4: it applies only when equipment located in the State is used. By limiting the scope of section 17538.4 to UCEs that are transmitted via equipment located in the State, our Legislature ensured that the statute would not reach conduct occurring "wholly" outside the State.
Second, the record does not support respondents' claim that it is impossible to determine the geographic residence of a UCE recipient. Both the Attorney General and Ferguson dispute this contention. They suggest that lists of e-mail addresses sorted by geographic residence exist already or can be created and utilized by senders of UCE. Respondents have offered no evidence supporting a contrary conclusion. Instead, they argue that "[t]ypically unsolicited email advertising is sent in 'bulk,' that is to lists of recipients processed by automation" and that "[t]here is no practical way to ascertain which addresses are California residents." That respondents consider section 17538.4's requirements inconvenient and even impractical does not mean that statute violates the Commerce Clause. Further, if respondents choose to comply with section 17538.4 all the time (so they can avoid having to determine whether they are corresponding with California residents via equipment located in California), that is their business decision. Such a business decision simply does not establish that section 17538.4 controls conduct occurring wholly outside California.
Respondents' argument that section 17538.4 conflicts with Pennsylvania law fails at its base because they have not established that the geographic limitations imposed by section 17538.4 are ineffectual. In other words, although respondents have found a minor distinction between California and Pennsylvania law, they have not shown that a UCE sender would ever face a situation in which he or she was required to comply with both laws at the same time.4 The Commerce Clause protects against inconsistent regulations in order to prevent "the projection of one state regulatory regime into the jurisdiction of another." (Healy, supra, 491 U.S. at pp. 336-337.) Respondents have not established that section 17538.4 has such an effect.
We conclude that section 17538.4 does not discriminate against or directly regulate or control interstate commerce. Therefore, section 17538.4 does not violate the Commerce Clause if it serves a legitimate local public interest and if the burden it imposes on interstate commerce is not excessive when viewed in light of its local benefits.
As noted, section 17538.4 regulates the amount of UCE sent to residents of the State by establishing and enforcing a mechanism for residents to have their names removed from UCE mailing lists. It also regulates the content of UCE sent to State residents by imposing truthfulness and disclosure requirements on UCE senders.
We find that California has a substantial legitimate interest in protecting its citizens from the harmful effects of deceptive UCE and that section 17538.4 furthers that important interest. By requiring disclosure of the advertising and/or adult nature of an unsolicited e-mail in the subject line, section 17538.4 establishes a quick and simple way of identifying UCE without having to read it first. By requiring establishment and disclosure of a legitimate procedure for responding to a UCE, section 17538.4 holds UCE senders accountable for their actions. And, by requiring that senders of UCE honor requests that future mailings not be sent to recipients who do not want them, section 17538.4 protects California residents from all of the potential harms associated with unwanted UCE.
We must next consider whether the burden that section 17538.4 imposes on interstate commerce outweighs the benefits of that statute.
To the extent that section 17538.4 requires truthfulness in advertising, it does not burden interstate commerce at all "but actually 'facilitates it by eliminating fraud and deception.' [Citation.]" (Heckel, supra, 24 P.3d at p. 411.) Further, as the Heckel court found, "'truthfulness requirements . . . make spamming unattractive to many fraudulent spammers, thereby reducing the volume of spam.'" (Ibid., quoting The Internet and the Dormant Commerce Clause, supra, at p. 819.) Nor do the statute's affirmative disclosure requirements impose any appreciable burden on senders of UCE. As the Attorney General has observed, the cost of placing particular letters in the subject line of the e-mail and including a valid return address in the message itself "is appreciably zero in terms of time and expense." Finally, respondents do not identify any burden on interstate commerce arising from the requirement that an express request to be eliminated from a UCE sender's mailing list must be honored. Any conceivable burden clearly does not outweigh the local benefits of section 17538.4.
We next consider whether the complaint allegations support the four causes of action that Ferguson attempted to allege.
Ferguson's third cause of action for unfair business practices (§ 17200) and his fourth causes of action for unfair advertising practices (§ 17500) are both based on facts alleging a violation of section 17538.4. For purposes of our review, we assume those allegations to be true. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1381; Smith v. County of Kern, supra, 20 Cal.App.4th at p. 1830.) The sole ground for sustaining respondents' demurrer to these two causes of action was that section 17538.4 violates the dormant Commerce Clause. Furthermore, respondents' defense of the trial court's ruling is that Ferguson cannot rely on section 17538.4. Since section 17538.4 is valid, the trial court's order sustaining demurrers to the third and fourth causes of action must be reversed.
In an attempt to state a cause of action for trespass, Ferguson alleged that respondents "took possession of Plaintiffs' computer possessors, hard drives, Random Access Memory and Internet email accounts by sending [UCE] to each of the Plaintiffs." He also alleged that plaintiffs were dispossessed of control of their computers and email accounts for the duration of the time required to download respondents' UCE and that plaintiffs were unable to send or receive any e-mail during that time.
But Ferguson did not allege facts that would establish that respondents caused a tangible physical intrusion upon plaintiffs' property or that respondents' conduct caused actual physical damage to plaintiffs' property. Thus, in its present form, the complaint does not allege a cause of action for trespass to chattel.
However, Ferguson contends that he could allege sufficient facts to support this claim if given the opportunity to amend his complaint. Ferguson maintains that receiving an e-mail has a physical effect on computer hardware and that downloading e-mail and then deleting it by a process called "fragmentation" causes actual physical damage to a computer system. Respondents dispute the factual underpinnings of this argument. They also argue that cases recognizing a trespass to chattel theory relating to unwanted UCE are factually distinguishable because of the quantity of UCE involved.
The parties' factual disputes are simply not relevant at this stage in the litigation. Nor are they sound grounds for sustaining the trial court's demurrer ruling. To the contrary, in light of Ferguson's articulated theory of actual physical damage, the trial court should have granted him the opportunity to amend this cause of action to attempt to state a claim for trespass to chattel.
In his complaint, Ferguson alleged that respondents owed plaintiffs a duty of care to not send unlawful UCE. However, Ferguson did not allege any facts that would give rise to such a duty. On appeal, Ferguson maintains he alleged facts to satisfy this element by invoking the presumption of negligence that can arise when a statute is violated.
"[T]he Evidence Code section 669 presumption of negligence applies only after determining that the defendant owes the plaintiff an independent duty of care . . . ." (California Service Station Etc. Assn v. American Home Assurance Co. (1998) 62 Cal.App.4th 1166, 1177-1180.) That presumption may not be used to create negligence liability in a case in which it would not otherwise exist. (California Service Station Etc. Assn. v. American Home Assurance Co., supra, 62 Cal.App.4th at p. 1180; Rosales v. City of Los Angeles (2000) 82 Cal.App.4th 419, 429.) In other words, section 669 gives rise to a presumption that a duty has been breached; it does not establish that duty in this first instance.
Section 17538.4 does not itself impose a duty of care on respondents. Thus, an alleged violation of that statute does not give rise to a presumption of negligence. Ferguson has not articulated any other theory which would establish that respondents owed plaintiffs a duty of care to not send plaintiffs the allegedly unlawful UCE. Therefore, the trial court did not err by sustaining respondents' demurrer without leave to amend with respect to Ferguson's negligence cause of action.
The lower court's ruling sustaining the demurrer without leave to amend as to Ferguson's first cause of action for negligence is affirmed. In all other respects, the judgment is reversed and this case is remanded to the trial court for further proceedings consistent with this opinion. Costs on appeal are awarded to Ferguson.
Kline, P.J., and Lambden, J., concurred.
*. Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication with the exception of part III, C.
1. Unless otherwise indicated, all further statutory references are to the Business and Professions Code.
2. All further dates are in 2000 unless otherwise indicated.
Notwithstanding the broad language employed in both the lower court's order and judgment, its constitutional ruling implicates only the provisions of section 17538.4 which regulate e-mail advertising. The constitutionality of the provisions of section 17538.4 which regulate the faxing of unsolicited commercial materials was not questioned below and is not at issue in this appeal.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.