 Articles Found in This Issue
 
FTC Wins Temporary Restraining Order with Asset Freeze Halting Unauthorized Debits by Prepaid Stored-Value Card Seller
THE
FTC COMPLAINT:
The FTC alleged that defendants,
EdebitPay, LLC, and others, violated Section 5 of the FTC
Act by: - the unauthorized debiting of consumer bank accounts;
- failing to disclose, or adequately disclose, that consumers'
personal information will be used to debit a fee from their
bank accounts and that the fee will be debited once they
apply for a prepaid card; and
- misrepresenting that consumers
are obligated to pay the fee when they did not consent to
do so.
FACTS:
The FTC claimed that defendants: - market at
least 22 prepaid cards (each card has its own website which
consumers are invited to visit to obtain their card(s) of
choice);
- requested personally identifiable information
from consumers applying for a card, e.g., bank account information;
- made deceptive claims on their websites such as "No Annual
Fees" and "No Security Deposit" without properly disclosing
that they would use the consumers' information to debit
the $159.95 fee; and
- debited the $159.95 fee from consumers'
bank accounts.
COURT
ORDER:
- The Court granted a temporary
restraining order: (1) prohibiting the defendants from debiting
consumers' accounts without authorization; (2) freezing
defendants' assets; and (3) appointing a receiver.
- The
FTC is now seeking a permanent injunction barring defendants
from future violations and a monetary judgment requiring
them to relinquish any money received from improper past
practices.
| "...the
Court found the critical issue to be 'whether SexSearch.com
acted as an information content provider with respect
to the information that plaintiff claims is false.'" |
| "...affords
the website immunity from liability for a member's misrepresentation
about his/her age" |
Adult
Online Dating Service Entitled to § 230 Immunity
FACTS:
- Defendant SexSearch.com is an online dating service.
- SexSearch.com members are permitted to create member profiles, which are made up, in part, of responses to a list of specific SexSearch.com prepared questions available on the website.
- Members may also upload photographs and video content to their profile.
- Plaintiff, a gold member of SexSearch.com, located Jane Roe's profile, which indicated her age as 18 and included a photograph of her at her then-current age.
- After chatting online, the two eventually met at Jane Roe's home and engaged in consensual sexual relations.
- It turned out that Jane Roe was not 18, but rather a minor of 14 years of age.
- Plaintiff was arrested on three (3) separate counts of engaging in unlawful sexual conduct with a minor.
COMPLAINT:
- Plaintiff alleges that upon becoming a member of SexSearch.com,
he reviewed the warranties and agreed to the membership
Terms and Conditions and profile guidelines.
- He contends that SexSearch.com warranted that "all persons
within this site are 18+.
- Plaintiff also alleges that the Terms and Conditions
indicate that defendant promises to review, verify and
approve all profiles on its website and remove materials
depicting minors.
- Based on these allegations, plaintiff brought 14 causes
of action against defendant which the Court summarizes
as either:
- defendant failed to discover that Jane Roe lied about
her age, or
- the contract terms were unconscionable.
COURT REVIEW:
- Is defendant entitled to immunity under § 230 of the
Communications Decency Act?
Defendant is immune from liability from state law claims
if:
- SexSearch.com is a "provider or user of an interactive
computer service;"
- the claim is based on "information provided by another
information content provider;" and
- the claim would treat SexSearch.com "as publisher
or speaker" of that information.
COURT FINDINGS: - The Court found SexSearch.com immune from liability for the causes of action hinging on its failure to remove Jane Roe's profile, or its failure to prevent John Doe from communicating with her.
- SexSearch.com is an interactive computer service because the website "functions as an intermediary by providing a forum for the exchange of information between third party users."
- Regarding whether SexSearch.com is an information content provider (and therefore not entitled to immunity), the Court found the critical issue to be "whether SexSearch.com acted as an information content provider with respect to the information that plaintiff claims is false."
- The Court held that SexSearch.com is not an Internet content provider because although it may have reserved the right to modify the content of member profiles in general, plaintiff did not allege that SexSearch.com specifically modified Jane Roe's profile.
- The Court noted that SexSearch.com is effectively a "publisher" in the context of its "decisions relating to monitoring, screening, and deletion of content from its network…"
Merits of Individual Claims:
Breach of Contract Claim Fails
- Plaintiff alleges that defendants breached the contract by "permitting minors to become paid members" and by "deliver[ing] a minor to plaintiff for the purpose of sexual relations."
- The Terms and Conditions specifically state that SexSearch.com does not "assume any responsibility for verifying the accuracy of the information provided by users of the service."
Fraud Claim Fails
- Plaintiff alleges that SexSearch.com fraudulently represented that "all persons on its site are '18+' years of age," and that it "verifies all members' profiles prior to posting" and that he "reasonably relied" on that representation.
- The Court found that plaintiff cannot claim that he was misled or reasonably relied on that representation when the Terms and Conditions clearly state that the website did not guarantee (and took no responsibility for verifying) members' ages.
- Further, the Terms and Conditions also state that "no information, whether oral or written, obtained by you from SexSearch.com or through or from SexSearch.com shall create any warranty not expressly stated in the TAC."
- The Court also pointed out that plaintiff had the opportunity to confirm Jane Roe's age when he met with her in person.
SUMMARY: Under these facts, the court found that an online dating website is not liable when a member lies about his/her age. More specifically, the Court broadly interprets § 230 and affords the website immunity from liability for a member's misrepresentation about his/her age.
Circuit Vacates Injunction Against Spamhaus as Overbroad
Sends Case Back to District Court
FACTS: - e360 Insight is an Internet marketing company.
- Spamhaus, an "Internet watchdog group," is a not-for-profit U.K. entity that maintains the "Register of Known Spam Operations" (ROKSO), a "3 strikes list" for Internet users that it believes are responsible for creating and distributing unsolicited commercial email.
- Through ROKSO, Spamhaus publishes a list of persons or businesses that have been blocked by a minimum of three (3) Internet service providers (ISPs) for violating their respective terms of use.
- e360 Insight brought an action against Spamhaus for placing e360 Insight on the ROKSO list without cause, alleging various tort claims. e360 Insight maintains that, at the time it was placed on the ROKSO list, it had never been blocked by an ISP.
- Spamhaus first appeared in the case and then withdrew, believing that U.S. courts had no jurisdiction over a UK-based company.
- The District Court entered a default judgment against Spamhaus in the amount of $11.7 million dollars and ordered it to remove e360 Insight from ROKSO.
- Spamhaus moved to vacate the judgment which the District Court denied.
- Spamhaus appealed.
DECISION:
- The Seventh Circuit upheld the default judgment but struck down both the damage award and the injunction, and sent the case back to the District Court.
- The Court further discussed the standard for obtaining a permanent injunction and noted that plaintiff did not meet the burden.
- The Court pointed out that a default judgment establishes liability, but does not determine whether any particular remedy is appropriate. A more substantial inquiry is necessary prior to the entry of equitable relief.
| ""...permitting parties with no harm
to invoke CAN-SPAM to collect millions of dollars surely
is not what Congress intended when it crafted this 'limited'
private right of action."" |
| "...
plaintiffs are testing their luck by seeking statutory
damages through a strategy of spam collection and serial
litigation..." |
Email Marketer Awarded Fees and Costs under CAN-SPAM
FACTS:
- James Gordon is the registrant of the URL, gordonworks.com.
- His business, Omni Innovations, is involved in software development and is an "anti-spam business," which entails notifying alleged spammers that they are violating the law and filing lawsuits if they do not stop sending email to the gordonworks domain.
- Virtumundo and Adknowledge market products for their clients by transmitting email to interested consumers.
- Plaintiffs brought an action against Virtumundo, Inc. et al, under the CAN-SPAM Act and various Washington State laws, claiming that the "from" lines of various email messages that Virtumundo had sent violated the law because they did not contain the name of the company or an employee.
- The Court granted summary judgment in favor of defendants and dismissed plaintiffs' CAN-SPAM claims for lack of standing.
- Defendants moved for attorneys' fees and costs.
COURT FINDINGS:
- The CAN-SPAM Act authorizes costs and attorneys' fees
"against any party."
- CAN-SPAM provides a limited private right of action
for a provider of Internet access service adversely affected
by violators.
- Plaintiffs had no statutory standing; the most significant
harms listed by Congress in enacting the statute were
ISP- or IAS-specific, going well beyond the consumer-specific
burden of sorting through an inbox full of spam.
- The Court explained: "permitting parties with no harm
to invoke CAN-SPAM to collect millions of dollars surely
is not what Congress intended when it crafted this 'limited'
private right of action."
- In determining whether to award fees, the Court applied
the Fogerty standard - which includes review of factors
such as frivolousness, motivation, objective unreasonableness
and considerations of compensation and deterrence.
- The Court awarded fees to defendants because:
- plaintiffs are testing their luck by seeking statutory
damages through a strategy of spam collection and serial
litigation (plaintiffs are parties to 10 additional
cases similar to this one);
- plaintiffs are not the type of entities that Congress
intended to possess the limited private right of action
it conferred on adversely affected bona fide Internet
access service providers; and
- plaintiffs' instant lawsuit is an excellent example
of the ill-motivated, unreasonable, and frivolous types
of lawsuits that justify an award of attorneys' fees
to defendants under Fogerty.
Posting Modified Terms on Website is Unenforceable with respect to Existing Customer that Lacks Notice
FACTS:
- Douglas contracted with America Online for long distance telephone service.
- Talk America (TA) subsequently acquired this business from AOL and continued to provide telephone service to AOL's then existing customers.
- TA added four provisions to the service contract: additional service charges, a class action waiver, an arbitration clause and a New York State choice of law clause.
- TA posted the revised contract on its website.
- Unaware of these changes, Douglas continued using TA's services for four (4) years.
- After learning of the additional charges, Douglas filed a class action lawsuit charging TA with violations of the Federal Communications Act, breach of contract and violations of various California consumer protections statutes.
- TA moved to compel arbitration under the revised contract.
DISTRICT COURT:
- The Court granted the motion to compel arbitration.
- Douglas petitioned for a writ of mandamus.
ISSUE ON APPEAL:
- Whether a service provider may change the terms of its service contract by merely posting a revised contract on its website?
COURT OF APPEALS:
- The Court of Appeals vacated the District Court's order compelling arbitration.
- The Court held that Douglas was not bound by the terms of the revised contract because he was not properly notified of the changes.
- The Court pointed out that: "Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."
- Further, the Court noted: "Nor would a party know when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes."
SIGNIFICANCE - Issue of First Impression:
- The Court pointed out that: "The district court's order enforcing new contractual terms when a customer is only given notice of the terms by having the contract posted on the internet 'raises new and important problems' and addresses 'issues of law of first impression.'"
- "This is the first time any federal court of appeals has considered whether to enforce a modified contract with a customer where the customer claims that the only notice of the changed terms consisted of posting the revised contract on the provider's website."
- The Court did not elaborate on what "proper notice" would be.
FTC Halts Diet Product Email Marketing
SUMMARY OF ORDER: - A District Court Judge ordered defendants to stop sending unwanted and illegal email messages promoting hoodia weight-loss products and human growth hormone anti-aging products that the FTC alleges do not work as advertised.
- The Court granted the FTC's motion for a Temporary Restraining Order (TRO) and asset freeze.
FTC COMPLAINT ALLEGES:
- defendants sent email messages to consumers which then
drove traffic to the defendants' websites (which sold two
(2) types of products under a variety of names);
- defendants claim that these products, respectively, are
supposed to cause significant weight loss and dramatically
reverse the aging process;
- these claims are false and unsubstantiated;
- the FTC database received over 85,000 email messages sent
on behalf of the operation; and
- the operation violated the CAN-SPAM Act by initiating
commercial emails that:
- contained materially false and misleading header information;
- contained deceptive subject headings;
- failed to provide clear and conspicuous opt-out links;
and
- failed to include a physical postal address.
Pro-Se Complaint against Google Dismissed
FACTS:
- Gordon Roy Parker, a copyright owner, brought a pro-se
complaint (represented himself) against Google, an Internet
search engine.
- Google provides users with the ability to access, search
and post messages to the USENET -- a global system of online
bulletin boards.
- Parker alleged that third parties (and Google) infringed
upon his copyright by copying and posting items to the USENET
without his permission.
- Parker also alleged that Google, through its search engine,
provided users with links to websites that portrayed him
in a negative light.
THE COURT: The Third Circuit Court of Appeals affirmed the District Court's dismissal of Parker's complaint against Google. The Court held:
- Google is not liable for direct copyright infringement because Parker failed to allege that Google engaged in any volitional conduct by archiving USENET posts.
- Google is also not liable for contributory copyright infringement because Parker failed to allege that Google had the requisite knowledge of a third-party's infringing activity. The letters addressed to Google forming the basis of the allegations did not reference any specific copyrighted work.
- Google is not liable for vicarious copyright infringement because Parker failed to allege that Google had a direct financial interest in the purported infringing activity.
- Google is immune from liability for defamation, invasion of privacy and negligence under 47 USC § 230, as Parker failed to assert that Google is the information content provider of the statements at issue.
- Parker's trademark claim that Google's republication of his site amounted to a false designation of origin and represented unfair competition was dismissed for failure to allege a likelihood of confusion with respect to the origin of his works.
- Parker's trade disparagement claim was also dismissed for failure to allege that the statements about him were made in the context of commercial advertising or promotion.
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