An important California Appeals Court ruling in Hypertouch vs. ValueClick shined a light on the issue of preemption as it relates to the Federal Government’s anti-SPAM legislation, the CAN-SPAM Act.
Preemption is a constitutionally-based judicial principle that gives Federal laws supremacy over conflicting US State laws governing the same areas of legislation. In essence, Federal laws trump State laws. Attorneys arguing against preemption try to prove that the question of law at hand does not fall under the purview of the applicable Federal law.
Hypertouch vs. ValueClick: Case Background
In 2008, California-based an Internet service provider (ISP), Hypertouch, filed a $45-million dollar lawsuit against 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 e-mails. In 2009, the case was thrown out by California Superior Court Judge Richard Adler.
At the time, Judge Adler reasoned that the 2003 Federal CAN-SPAM Act preempted California’s business regulations. Another cause for Adler’s dismissal was lack of evidence proving e-mail fraud. Adler took the position that unless one follows through on a spam e-mail offer or directive — i.e., the plaintiff actually sends all his personal information and money to the African prince and waits for him to fork over the millions — then fraud cannot be sufficiently proven.
This month, though, the California Appeals Court overturned Adler’s ruling.
Reasons behind the California Appeals Court Decision
The Californian Appeals Court judgment is a huge win for both anti-spam and States’ rights advocates, but many are speculating that it will be overturned once again.
This time around, the Appeals Court ruled in favor of Hypertouch because CAN-SPAM’s preemption provision does not apply in cases where a State’s law goes further than Federal law. In this instance, California law is stricter than the Federal law with regards to falsified e-mails (i.e., Nigerian King-type scams).
In addition, the appeals court went on to cite 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. 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 with opinions.
Hypertouch, Inc. v. ValueClick, Inc., et al., Los Angeles County Super. Ct. No. LC081000 (2011).