An important California Appeals Court ruling in Hypertouch vs. ValueClick shined a light on the issue of preemption as it relates to the CAN-SPAM Act.
Preemption is a constitutionally-based judicial principle that gives federal laws supremacy over conflicting state laws governing similar areas. In essence, federal laws trump state laws.
Hypertouch vs. ValueClick: Case Background
In 2008, a California Internet service provider (ISP), Hypertouch, filed a $45-million dollar lawsuit against an online marketing company, ValueClick.
Hypertouch asserted that ValueClick was partially in violation of the Californian Business and Professions Code; specifically section 17529.5, which stipulates that companies cannot send deceptive, unsolicited, spam emails. Superior Court Judge Richard Adler dismissed the case In 2009.
At the time, Judge Adler said the 2003 federal CAN-SPAM Act preempted California’s business regulations. He also cited lack of evidence and reasoned that unless someone follows through on a spam offer — (i.e., the plaintiff actually sends all his personal information and money to a “Nigerian prince”) — then fraud cannot be proven.
This month, though, the California Appeals Court overturned Adler’s ruling.
Reasons For Appeals Reversal
The Californian Appeals Court judgment is a huge win for both anti-spam and states’ rights advocates. However, many pundits think it will be overturned, once again.
This time around, the Appeals Court ruled in favor of Hypertouch because CAN-SPAM’s preemption provision doesn’t apply in cases where state law goes further than federal law. In this instance, California law is stricter than the federal law with regards to falsified emails.
In addition, the appeals court cited a US Senate report which expressly stated:
“Statutes that prohibit fraud and deception in e-mail do not raise the same concern, because they target behavior that a legitimate business trying to comply with relevant laws would not be engaging in anyway.”
In other words, state law should not be subject to preemption if it prohibits otherwise unlawful acts.
How Will Other Courts React to This Ruling?
Preemption is a hot-button legislative issue because it tests the limits of states’ rights. In Hypertouch vs. ValueClick, it’s almost certain that the California Supreme Court, and perhaps the United States Courts of Appeals, will want to weigh in.
Hypertouch, Inc. v. ValueClick, Inc., et al., Los Angeles County Super. Ct. No. LC081000 (2011).