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California District Court Grants Microsoft's and Yahoo's Motion to Dismiss Claims Related to Spam Blocking, Finds Defendants Did Not Block E-Mails in Bad Faith

Wednesday, September 14, 2011
Holomaxx Technologies Corp. v. Yahoo!, Inc., No. 10-CV-04926, 2011 BL 217990 (N.D. Cal. Aug. 23, 2011) In a pair of related cases, the U.S. District Court for the Northern District of California granted defendants Yahoo!, Inc.'s and Microsoft Corp.'s motions to dismiss claims of unauthorized interception of the plaintiff's communications. The court found that both Yahoo and Microsoft were immune from liability under the Communications Decency Act ("CDA"), 47 U.S.C. § 230(c)(2)(A), the Wiretap Act, 18 U.S.C. § 2511(2)(a)(i), and the Stored Communications Act ("SCA"), 18 U.S.C. § 2701(c)(1).

Microsoft and Yahoo! Block Spam E-Mail

Plaintiff Holomaxx Technologies Corp. operates an e-commerce business that provides e-mail marketing services for clients. Holomaxx sends marketing e-mails on behalf of its clients, and is paid based on the volume of e-mails it sends. However, Holomaxx requires that its clients comply with the Controlling Assault of Non-Solicited Pornography and Marketing ("CAN-SPAM") Act and allegedly limits the volume of e-mails to avoid harassing customers. Yahoo! runs the SpamGuard program on its system and Microsoft runs Smartscreen. SpamGuard and Smartscreen both identify and block spam e-mail. Upon learning that Yahoo! and Microsoft blocked spam e-mails using these services, Holomaxx filed suit alleging that Yahoo! and Microsoft intercepted the e-mails without authorization. The court dismissed Holomaxx's original complaint, determining that Holomaxx failed to allege that Yahoo!'s filtering system was faulty or that Yahoo! had failed to act in accordance with an objective industry standard. Furthermore, the court concluded that Holomaxx failed to explain how either Microsoft or Yahoo! had intercepted the e-mails or how either had used and disclosed Holomaxx's communications, including what facility or communications were accessed, by which persons, or how the access was unauthorized. For a discussion of the earlier cases, see District Court Finds Yahoo! and Microsoft Immune Under Section 230 of the Communications Decency Act in Suit Alleging Filtering and Blocking of Bulk E-Mail, Bloomberg Law Reports – Technology Law, Vol. 3, No. 7 (Apr. 3, 2011). Holomaxx responded by filing a First Amended Complaint alleging that defendants violated the CAN-SPAM Act and were liable for computer fraud, intentional interference with contract, intentional interference with prospective business advantage, and wiretapping/eavesdropping. Defendants both moved to dismiss.

CDA Immunity

Defendants contended that they were entitled to CDA immunity. The CDA immunizes from liability interactive computer service providers that, in good faith, restrict access to harassing material. See 47 U.S.C. § 230(c)(2). Holomaxx countered that defendants were not immune under the CDA because Holomaxx's e-mails did not qualify as unwanted or harassing, and the volume of messages it sent was too small to qualify as harassing. Holomaxx argued that in Zango v. Kaspersky Lab, Inc., the Ninth Circuit indicated that "a blocking software provider might abuse that immunity to block content for anticompetitive purposes or merely at its malicious whim, under the cover of considering such material 'otherwise objectionable.'" Zango, 568 F.3d 1169, 1178 (9th Cir. 2009). Holomaxx contended that defendants acted in bad faith by intentionally intercepting Holomaxx's e-mails after previously delivering some of Holomaxx's e-mails. The court, however, explained that Section 230(c)(2) "allows a [Provider] to establish standards of decency without risking liability for doing so." Goddard v. Google, Inc., No. 08-CV-02738, 2008 BL 279383 at *6 (N.D. Cal. Dec. 17, 2008). It noted that good faith immunity takes into consideration a Provider's subjective intent. The court additionally determined that Holomaxx failed to identify an industry standard that defendants violated, and that defendants' decision to intercept the e-mails after previously allowing the delivery of some e-mails was not indicative of bad faith.

Wiretap Act Immunity

The Wiretap Act grants immunity to an operator of an electronic communication service that is "engaged in any activity which is a necessary incident to the rendition of his service or to the protection of the rights or property of the provider of that service." 18 U.S.C. § 2511(2)(a)(i). The court agreed with defendants that their own servers could not be interception devices under the Act, and that they could not intercept stored e-mails because those e-mails had already been transmitted. Thus, the court found that Holomaxx failed to sufficiently allege that defendants intercepted any electronic communications.

Stored Communications Act Immunity

The SCA immunizes "conduct authorized . . . by the person or entity providing a wire or electronic service." 18 U.S.C. § 2701(c)(1)). Holomaxx alleged that Yahoo! and Microsoft exceeded their legal authority by searching the e-mails for non-legitimate reasons, violating the privacy of their users. However, Holomaxx did not provide any authority for its position, and defendants countered that they had broad discretion to access communications in electronic storage. The court ultimately determined that Holomaxx failed to adequately allege which facilities or communications were accessed, by which persons, and how any such access exceeded authorization. Accordingly, the court granted defendants' motion to dismiss. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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