Court Opinion

ID: 2776538
Source: CourtListenerOpinion
Date Created: 2015-02-04 20:01:04.162786+00
Date Added: 2024-06-11T10:52:23.941573
License: Public Domain

PUBLISHED

                 UNITED STATES COURT OF APPEALS
                     FOR THE FOURTH CIRCUIT

                          No. 13-2137

BEYOND SYSTEMS, INC.,

                 Plaintiff – Appellant,

           v.

KRAFT FOODS, INCORPORATED; VICT. TH. ENGWALL & CO.; KRAFT
FOODS GLOBAL, INCORPORATED; CONNEXUS CORPORATION,

                 Defendants – Appellees,

           and

HYDRA LLC; JOHN DOES 1-20,

                 Defendants,

WORLD AVENUE USA, LLC,

                 Intervenor,

JAMES JOSEPH WAGNER; HYPERTOUCH, INCORPORATED,

                 Third-Party Plaintiffs.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt.     Peter J. Messitte, Senior District
Judge. (8:08-cv-00409-PJM)

Argued:   October 29, 2014                Decided:   February 4, 2015

Before NIEMEYER, WYNN, and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Wynn wrote the opinion, in
which Judge Niemeyer and Judge Thacker joined.

ARGUED:   Richard  Kennon  Willard,   STEPTOE  &   JOHNSON LLP,
Washington, D.C., for Appellant.     Darrell J. Graham, ROESER
BUCHEIT & GRAHAM LLC, Chicago, Illinois; Ari Nicholas Rothman,
VENABLE LLP, Washington, D.C., for Appellees. ON BRIEF: Stephen
H. Ring, LAW OFFICES OF STEPHEN H. RING, P.C., Gaithersburg,
Maryland; Michael S. Rothman, LAW OFFICE OF MICHAEL S. ROTHMAN,
Rockville, Maryland; Jill C. Maguire, Benjamin B. Watson,
STEPTOE & JOHNSON LLP, Washington, D.C., for Appellant. John K.
Roche, PERKINS COIE LLP, Washington, D.C.; John E. Bucheit,
ROESER BUCHEIT & GRAHAM LLC, Chicago, Illinois, for Appellees
Kraft Foods, Incorporated, Vict. Th. Engwall & Co., and Kraft
Foods Global, Incorporated.    J. Douglas Baldridge, Lisa Jose
Fales, VENABLE LLP, Washington, D.C., for Appellee Connexus
Corporation.

                               2
WYNN, Circuit Judge:

     In the late 1990s and early 2000s, legislatures across the

country became increasingly concerned about unwanted commercial

e-mail   colloquially     known   as   “spam.”    By   2004,   thirty-five

states had enacted some form of anti-spam legislation, though as

might    be    expected    each    addressed     the   problem   somewhat

differently.     See Roger Ford, Preemption of State Spam Laws by

the Federal CAN-SPAM Act, 72 U. Chi. L. Rev. 355, 363 (2005).

Among the common provisions in these statutes were the creation

of private rights of action for internet service providers and

large statutory damage provisions.

     In this case, ostensible internet service provider Beyond

Systems, Inc. seeks statutory damages from Kraft Foods, Inc. and

Connexus Corporation under California’s and Maryland’s anti-spam

statutes based upon several hundred e-mails which it alleges

were unlawful spam.        The district court summarily ruled that

Beyond Systems consented to the harm underpinning its anti-spam

claims and is therefore barred from recovery.             We affirm the

district court’s judgment on this ground.

                                       I.

                                       A.

     Beyond Systems is a Maryland corporation that provides at

least a modicum of e-mail and server access to a limited number

                                       3
of clients.       Paul Wagner owns Beyond Systems, whose servers are

housed    in    his   parents’     Maryland   residence.          Paul’s   brother,

James Joseph (“Joe”) Wagner, owns Hypertouch, Inc., a nominal

internet service provider in California that routes spam e-mails

to Beyond Systems’ Maryland servers, where they are cached in

accounts designed to hold spam e-mails.

     Hypertouch       and     Beyond   Systems     have     histories      of   suing

alleged spammers.           To further its litigation strategy, Beyond

Systems developed web pages with hidden e-mail addresses—that

is, e-mail addresses embedded in the code that generates the

webpages that are not visible to website visitors.                       The hidden

e-mail    addresses     are    discovered     by   “spam    crawlers,”      computer

programs spammers use to look for e-mail addresses and subscribe

them to e-mail lists.          Because only spam crawlers can find these

hidden    e-mail      accounts,    Beyond     Systems      uses   them     as   “spam

traps.”     As a result, spam-trap-based litigation has accounted

for 90% of Beyond Systems’ income in recent years.

     Unlike other internet service providers that routinely try

to block       e-mail accounts from spam, Beyond Systems does nothing

to filter or block spam e-mail.                Further, Beyond Systems has

increased its storage capacity to archive large volumes of spam

messages,      retaining    them    specifically     to    provide    grounds     for

litigation.

                                         4
                                              B.

       Similar          to    Beyond     Systems,         Hypertouch             operated     in

California with the same purpose of maximizing on spam-trap-

based litigation.             Pertinent to the issues in this matter, in

2005,    Hypertouch          sued    Kraft    under    California’s            anti-spam     law

based on e-mails it received regarding Gevalia coffee, a Kraft

brand.          These e-mails allegedly had false headers, including

incorrect “From” addresses, misleading subject lines, and other

deficiencies which Hypertouch claimed violated California’s law.

Under       a    settlement         agreement       reached        in     that       litigation,

Hypertouch, on behalf of itself and its assignees, specifically

disclaimed all rights it had to any causes of action based on

the Gevalia e-mails sent to that point and agreed to cooperate

with    Kraft      in    identifying      future      e-mails           that   might     violate

California law.

       In       2008,   Beyond      Systems     brought     Maryland           and    California

state-law claims against Kraft and Connexus in the United States

District Court for the District of Maryland.                                   Beyond Systems

alleged that it received a large volume of e-mails regarding

Kraft’s         Gevalia      coffee     in    violation        of         California’s       and

Maryland’s         anti-spam        statutes.        Many     of    these        e-mails    were

exactly the same ones that formed the basis of Hypertouch’s 2005

suit.

                                                5
        After     discovery         concluded,       the    district    court      granted

partial summary judgment in favor of Kraft on “any claims based

on the same e-mails that were the subject of Hypertouch’s June

29, 2006 Settlement Agreement with Kraft” and “any claims based

on    e-mails     sent     directly     to     Hypertouch      after   the    Settlement

Agreement, where Hypertouch failed to notify Kraft within twenty

days of receipt.”           J.A. 655.          Additionally, the district court

granted partial summary judgment as to any e-mails barred by

California’s one-year statute of limitations.

        The     district    court       then       bifurcated    the    trial      on   the

remaining e-mails into a “liability” proceeding and a “damages”

proceeding.         Beyond Sys., Inc. v. Kraft Foods, Inc., 972 F.

Supp.     2d     748,    754    (D.     Md.     2013).        During    the     liability

proceeding, the district court held a jury trial, split into two

phases, to determine whether Beyond Systems had standing to sue.

Id.

        The first phase presented the jury with the question as to

whether Beyond Systems was an internet service provider (or its

state    law     equivalent).          This    phase       presented   none   of    Beyond

Systems’ litigation activities, but instead focused exclusively

on    those     services       it    provided      to   its    customers,     where     its

servers were housed, and other business-related activities.                             972

F. Supp. 2d at 754.                 The jury found that, according to this

                                               6
evidence, Beyond Systems was an internet service provider under

California and Maryland law.

       The   second    phase    presented      evidence   of    Beyond    Systems’

litigation activities, including its relationship to Hypertouch

and    the   percentage    of    its   revenue      derived     from     anti-spam

litigation, and asked the jury if the Appellant was a “bona

fide” internet service provider.                The jury found that it was

not.    Therefore, the district court determined as a matter of

law,    inter   alia,    that    Beyond       Systems   had    invited    its   own

purported injury and thus could not recover for it.                    On appeal,

we review this issue of law de novo.                    Wilson v. Dollar Gen.

Corp., 717 F.3d 337, 342 (4th Cir. 2013).

                                       II.

       As an initial matter, we are bound to address the subject

matter jurisdiction issue of whether Beyond Systems had Article

III standing.         Steel Co. v. Citizens for a Better Env’t, 523

U.S. 83, 88-102 (1998) (recognizing that standing to maintain a

suit implicates the court’s jurisdiction to entertain a suit and

is thus a threshold question to be resolved before the merits).

       To have standing, a party must allege that it suffered a

“concrete” harm, there must be “a fairly traceable connection

between the plaintiff’s injury and the complained-of conduct of

the defendant[,]” and the harm must be redressable.                    Id. at 103

                                          7
(internal quotation marks and citations omitted).                     The Supreme

Court has also cautioned that the “absence of a valid . . .

cause   of   action”    does   not    implicate       the   court’s    “power   to

adjudicate the case,” id. at 89, and we therefore take care not

to conflate a standing inquiry with a merits inquiry.

      Doing so here, we conclude that Beyond Systems had Article

III   standing.    It    claimed      a       harm—receiving   spam    e-mail—and

Maryland and California law create an interest in being free

from such harm.    See, e.g., Cantrell v. City of Long Beach, 241

F.3d 674, 684 (9th Cir. 2001) (“state law can create interests

that support standing in federal courts”); Md. Code §§ 14-3002,

14-3003; Cal. Bus. and Prof. Code § 17529.5.                    Beyond Systems

contended that Defendants sent false and deceptive spam e-mails,

i.e., caused its claimed harm.                And Maryland and California law

provide statutory redress.           Id.       Accordingly, we conclude that

Beyond Systems had Article III standing.

                                      III.

      The central issue in this case is whether the common law

doctrine of volenti non fit injuria precludes Beyond Systems’

recovery under the California and Maryland anti-spam statutes.

The district court held that it does.              We agree.

      California’s anti-spam statute provides, in relevant part:

                                          8
     (a) It is unlawful for any person or entity to
     advertise in a commercial e-mail advertisement either
     sent   from  California   or  sent  to   a   California
     electronic mail address under any of the following
     circumstances:
     . . .
     (2)   The   e-mail   advertisement  contains    or   is
     accompanied by falsified, misrepresented, or forged
     header information.
     . . .
     (3) The e-mail advertisement has a subject line that a
     person knows would be likely to mislead a recipient,
     acting reasonably under the circumstances, about a
     material fact regarding the contents or subject matter
     of the message.

     (b)(1)(A) In addition to any other remedies provided
     by any other provision of law, the following may bring
     an action against a person or entity that violates any
     provision of this section:
     . . .
     (ii) An electronic mail service provider

Cal. Bus. and Prof. Code § 17529.5.

     Similarly, Maryland’s anti-spam act provides, in relevant

part:

     (b) A person may not initiate the transmission,
     conspire   with    another  person    to    initiate  the
     transmission,   or   assist  in   the    transmission  of
     commercial electronic mail that:

     (1) Is from a computer in the State or is sent to an
     electronic mail address that the sender knows or
     should have known is held by a resident of the State;
     and

     (2)(i) Uses a third party's Internet domain name or
     electronic mail address without the permission of the
     third party;

                                9
      (ii) Contains false or misleading information about
      the origin or the transmission path of the commercial
      electronic mail; or

      (iii) Contains false or misleading information in the
      subject line that has the capacity, tendency, or
      effect of deceiving the recipient.

Md.   Code      §     14-3002.          Additionally,         Maryland     law    allows

“interactive         computer    service        provider[s]”     to    pursue    damages

under the statute.           Md. Code § 14-3003.

      These     state       statutes    exist      against    the     backdrop    of   the

Controlling         the     Assault     of      Non-Solicited         Pornography      and

Marketing Act (“CAN-SPAM Act”), which Congress enacted to create

a national uniform standard regarding spam control.                        15 U.S.C. §

7701(a)(11).              CAN-SPAM     made     it   illegal     to     “initiate      the

transmission . . . of a commercial electronic message . . . that

contains . . . header information 1 that is materially false or

materially      misleading.”               15      U.S.C.    §   7704.           Congress

specifically provided that the statute would preempt state laws,

except    for       those    that    fit   within     a     carve-out    or   “savings”

provision.      15 U.S.C. § 7707(b)(1).               That provision saved those

state laws that “prohibit falsity or deception in any portion of

      1
       Header information includes an e-mail address, a domain
name, an internet protocol address (IP address), or a “from”
line, among other information. 15 U.S.C. § 7702(8).

                                              10
a   commercial    electronic          mail    message        or   information          attached

thereto . . . . ”         Id.

       This Court has held that “Congress was operating in the

vein    of     tort     when     it      drafted        the       pre-emption          clause’s

exceptions”.         Omega World Travel, Inc. v. Mummagraphics, Inc.,

469 F.3d 348 (4th Cir. 2006).                      Thus, in this Circuit, it is

clear that a state’s anti-spam statute is not preempted so long

as it deals with falsity or deception in the vein of tort.                               Id.

       While the highest court in Maryland has not spoken directly

on the issue in this matter, we find the direct pronouncement of

Maryland’s      second    highest      court       to   be    informative         as    to    the

state of Maryland’s law on this subject.                          In 2006, the Court of

Special      Appeals     of    Maryland       made      clear      that     violations         of

Maryland’s anti-spam statute, “like violations of the Consumer

Protection      Act,     are    ‘in    the     nature        of    a     tort.’        Indeed,

[because]     both     statutes       regulate[]        false      and    deceptive       trade

practices . . . the same principles that guide us when faced

with questions of individual liability for torts apply here.”

MaryCLE LLC v. First Choice Internet, Inc., 890 A.2d 818, 846

(Md. App. 2006) (citation omitted).

       Similarly, the second highest court in California provides

us with guidance on the state of California law on this issue.

In 2011, the California Court of Appeal concluded “that the CAN–

SPAM    Act’s    savings        clause       applies     to       any    state     law       that

                                              11
prohibits material falsity or material deception in a commercial

e-mail . . . . ”         Hypertouch, Inc. v. ValueClick, Inc., 192 Cal.

App. 4th 805, 833 (Cal. Ct. App. 2011).                    The California court

thereby limited the application of California’s anti-spam law to

deceptive e-mails.         Id.    Thus, neither the California nor the

Maryland anti-spam statutes, both of which are in the vein of a

tort, is preempted.

       Generally, tort-related statutes like these anti-spam laws

are not exempt from common law principles.                    This makes sense,

“because statutes creating torts rarely bother to set forth all

the    ancillary    doctrines-governing            such   issues   as    causation,

immunity, or, here, derivative liability-that are necessary to

compose a complete regime of tort liability.”                  Shager v. Upjohn

Co.,   913   F.2d   398,    404   (7th    Cir.      1990).     See      also,   e.g.,

Busching v. Sup. Ct., 12 Cal.3d 44, 52 (1974) (“[I]t is not to

be presumed that the legislature in the enactment of statutes

intends to overthrow long-established principles of law unless

such   intention    is    made    clearly     to    appear   either      by   express

declaration or by necessary implication.”); Hardy v. State, 482

A.2d 474, 478 (Md. 1984) (“Maryland courts adhere to the policy

that statutes are not to be construed to alter the common-law by

implication.”).      Because the California and Maryland anti-spam

statutes are in the vein of a tort, and nothing in their text

suggests otherwise, common law tort principles that are part of

                                         12
those states’ common law also apply to the causes of action

these statutes create.

       It is a general maxim of tort law that “no wrong is done to

one who consents.”          Restatement (Second) of Torts 892A cmt. a

(1979).     As such, “[o]ne who effectively consents to conduct of

another intended to invade his interests cannot recover in an

action of tort for the conduct or for harm resulting from it.”

Id. § 892A.        This principle has been known as “volenti non fit

injuria,” or “to a willing person it is not a wrong.”                     Black’s

Law Dictionary 1805 (10th ed. 2014).

       Maryland and California abide by volenti non fit injuria.

As the Maryland Court of Special Appeals has recognized, “[a]ll

intended       wrongs   have    in   common    the   element   that     they    are

inflicted without the consent of the victim.                   Those who, with

full knowledge, assent to the invasion of their interests may

not complain.”          Janelsins v. Button, 648 A.2d 1039, 1042 (Md.

Ct.    Spec.    App.    1994)   (internal     quotation   marks   and    citation

omitted); see also, e.g., Brazerol v. Hudson, 277 A.2d 585 (Md.

1971) (landowners who consented to entry of dump truck on their

land   to   transport     materials     to    adjoining   property      could   not

recover for trespass and alleged crack in their basement wall).

California has gone so far as to codify the maxim:                        “He who

consents to an act is not wronged by it.”                   Cal. Civ. Code §

3515; see also Pinney & Topliff v. Chrysler Corp., 176 F. Supp.

                                        13
801,   810    (S.D.       Cal.    1959)      (referring       to    Section       3515    as    “a

codification of the maxim volenti non fit injuria”).

       We take pause to note that this doctrine is separate and

distinct from that of “assumption of risk,” with assumption of

risk   serving       as    a     defense      when     the    tort    is        based    on    the

defendant’s       negligent        or    reckless      conduct,       while       the    volenti

doctrine      applies       when       the    plaintiff       has     consented          to    the

defendant’s intentional conduct.                       See Restatement (Second) of

Torts Chapter 17A, scope note; id. § 892A cmt. a.                                In a similar

vein, while the Maryland Court of Special Appeals observed in

Janelsins that “the two doctrines substantively amount to flip

sides of a single conceptual principle,” it joined California in

holding that “the doctrine of assumption of risk does not bar

recovery for intentional torts.”                     648 A.2d at 1044-45.

       We   agree    with      the      district      court   that        the    evidence      was

“overwhelming”        that       Beyond      Systems     consented         to    the    harm    it

claims it suffered.              Beyond Sys., Inc., 972 F. Supp. 2d at 770.

Beyond Systems created fake e-mail addresses, solely for the

purpose      of   gathering        spam.        It    embedded       these       addresses      in

websites so that they were undiscoverable except to computer

programs      that    serve       no    other    function          than    to    find     e-mail

accounts to spam.              Beyond Systems increased its e-mail storage

capacity to retain a huge volume of spam, by which it hoped to

increase its eventual recovery under anti-spam statutes.                                  And it

                                               14
intentionally    participated    in     routing   spam   e-mail      between

California and Maryland to increase its exposure to spam and

thereby allow it to sue under both states’ laws.                Accordingly,

we agree with the district court that Beyond Systems’ consent

to—and indeed its solicitation of—the harm at issue in this case

prohibits Beyond Systems from recovering under the Maryland and

California anti-spam statutes. 2

                                   IV.

     For the reasons above, we find that Beyond Systems cannot

recover for the e-mails sent from Kraft or Connexus to Beyond

Systems’    servers.   And   because     we   resolve    this    matter   as

detailed above, we need not and therefore do not address the

parties’ other arguments.       We thus affirm the district court’s

judgment.

                                                                    AFFIRMED

     2
       We do not, by this opinion, suggest that a plaintiff which
is a legitimate internet service provider whose business has
been impacted by deceptive spam but who, in preparation for a
lawsuit, gathers and retains deceptive e-mails and even sets
“spam traps” to help it identify those responsible will be
prevented from bringing suit by the “volenti non fit injuria”
principle,   but  that   plaintiffs  like   Beyond  System,   who
“gratuitously created circumstances that would support a legal
claim and acted with the chief aim of collecting a damage award”
cannot.   Gordon v. Virtumundo, 575 F.3d 1040, 1068 (9th Cir.
2009) (Gould, J., concurring).

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