A federal appeals court last week erased an $11.7 million judgment against Spamhaus in its legal brawl with marketer e360 Insight.
However, this doesn’t mean the anti-spam blacklister is off the hook. Spamhaus’s temporary decision not to defend itself earlier in the case has come back to haunt it in a big way.
The U.S. Court of Appeals for the Seventh Circuit last week vacated a district court’s decision last fall to award $11.7 million in damages to e360. It also vacated an injunction requiring Spamhaus to stop causing e-mail from e360 and its clients to be blocked and requiring Spamhaus to post a retraction on its home page.
The original decision was rendered by default when Spamhaus representatives inexplicably elected not to show up in court and mount a defense after successfully arguing to have the case moved from state to federal court.
The Seventh Circuit last week ruled that the lower court’s ruling was overbroad because it awarded the damages and injunction based solely on claims from e360 CEO Dave Linhardt. The three-judge panel ruled that the lower court didn’t do a thorough enough investigation on Linhardt’s claims.
However, the Seventh Circuit also ruled that Spamhaus knew it would lose the case by default if it pulled its defense and, as a result, the default judgment of liability against Spamhaus should stand.
“Based on its conduct before the court, we have no doubt that Spamhaus understood the defenses available to it, consistently asserted those defenses in the early stages of those proceedings and then affirmatively elected to abandon those defenses before the district court,” said the ruling. “We see no reason to allow Spamhaus to escape the consequences of that decision in the later stages of this proceeding.”
E360’s Linhardt called the Seventh Circuit’s decision a total victory for his side.
“The ruling allows us to hold Spamhaus accountable in the U.S. and anywhere in the world,” he said in an e-mail exchange with this newsletter. “We welcome the opportunity to go through discovery to revise the damages and injunctive relief. We have been granted discovery from three different courts in the case.”
The case now goes back to the district court where Spamhaus can no longer argue it isn’t liable for damages. The only question is what those damages will be.
“When the dust settles, I am confident we will have shown damages greater than the original judgment amount,” said Linhardt.
However, many experts—albeit those whose sympathies lie with Spamhaus—are calling the ruling a partial victory for the anti-spam group.
Internet expert and anti-spam advocate John Levine posted a message on his technology blog saying that while e360 won on procedure, Spamhaus won on substance.
“By my reading this is as close to a complete victory as Spamhaus could have hoped for,” wrote Levine. “There was no chance the appeals court would throw out the default, since that would have been an invitation to every losing defendant in the midwest to tell their lawyers to withdraw so they could start the case over again. Beyond that, E360 now has no damages and no injunction, and a steep hill to climb to get either of them back.”
He added: “To get damages, E360 will have to document their lost income, which I expect would mean they'd have to get affidavits from third parties saying (under penalty of perjury) that they were about to sign a million dollar contract for E360 to do their mail blasting until those Spamhaus meanies interfered. That seems unlikely, considering how reluctant E360 has been in the past year even to disclose who their actual customers are, in complaints that Spamhaus is blocking them in violation of the now-voided injunction.”
Spamhaus maintains lists of what it deems are sources of spam that an unknown but significant number of Internet service providers use to help the determine if incoming e-mail is spam.
Linhardt sued Spamhaus last year, claiming the group wrongfully listed his servers, resulting in as much as 65% of his e-mail being blocked by Internet service providers who subscribe to Spamhaus’ service.
Spamhaus’ chief executive, Steve Linford, has refused to abide by the decision against him, claiming the Illinois court has no jurisdiction over his UK-based group. After the default judgment, however, he retained a Chicago-based lawyer in an attempt to get it overturned.
It is unclear whether Linford will abide by any decision rendered by a U.S. court. He declined comment for this article on advice from his lawyer.
