Designer Skin LLC v. S & L Vitamins, Inc., et al.
Mark Ferguson v. Friendfinders, Inc.
No. A092653 (Cal. Crt. App., First Appellate Dist., January 2, 2002)
Reversing the court below, the Court of Appeals for the State of California, First Appellate District, holds that Section 17538.4 of the California Business and Professions Code, which regulates the sending of unsolicited commercial e-mail ("UCE") to California residents, does not run afoul of the Commerce Clause of the United States Constitution. The court accordingly reinstated so much of plaintiff's complaint which asserts unfair business and unlawful advertising practice claims arising out of defendants' transmission of UCE in violation of Section 17538.4. The Court also granted plaintiff leave to replead his claim that defendants' transmission of UCE constitutes an impermissible trespass to chattels -- namely plaintiff's computer -- finding his existing complaint deficient as a result of its failure to allege the injury necessary to sustain such a claim.
California Business and Professions Code §17538.4 regulates the sending of UCE by those doing business in California to California residents provided the "unsolicited e-mailed documents are delivered to a California resident via an electronic mail service provider's service or equipment located in this state." An individual or entity who sends such e-mail must:
(1) establish a toll-free telephone number or valid sender operated return e-mail address that recipients may use to notify the sender not to e-mail further unsolicited documents; (2) include as the first text in the e-mailed document a statement informing the recipient of the toll-free number or return address that may be used to notify the sender not to e-mail any further unsolicited material; (3) not send any further unsolicited advertising material to anyone who has requested that such material not be sent; and (4) include in the subject line of each e-mail message "ADV:" as the first four characters or "ADV:ADLT" if the advertisement pertains to adult material.
Charging that defendants sent e-mail that did not comply with these regulations, plaintiff commenced a class-action law suit. In his complaint, plaintiff claimed that defendants' transmission of e-mail in violation of Section 17538.4 constituted an unfair business practice and an unlawful advertising practice in violation of applicable California statutes, as well as trespass to chattels and negligence. The lower court dismissed plaintiff's complaint, in large part because it found that Section 17538.4 ran afoul of the Commerce Clause of the United States Constitution.
The Appellate Division disagreed, and reversed this determination. According to the Court, under the Commerce Clause, States are not permitted to pass laws which "discriminate against interstate commerce" or "directly regulate  commerce occurring wholly outside the boundaries of the state" unless they "can demonstrate under vigorous scrutiny that [the state] has no other means to advance a legitimate local interest." Provided the regulation neither discriminates against or directly regulates conduct occurring outside the state, States are permitted to enact legislation which has an impact on interstate commerce. "[W]here the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, [the statute] will be upheld unless the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits."
Applying these standards, the Appellate Division held that Section 17538.4 does not violate the Commerce Clause. The court held that the statute neither discriminates against, nor directly regulates conduct occurring wholly outside of California. All e-mail sent to California residents has to meet the statute's strictures, regardless of whether they originate inside or outside California. As such, the statute does not discriminate against interstate commerce. And because the statute only regulates e-mail sent to California residents by means of an electronic mail service provider using (in part) equipment located in California, the statute does not directly regulate conduct occurring wholly outside of California.
In reaching this conclusion, the court rejected America Libraries Association v. Pataki, 969 F. Supp. 160 (S.D.N.Y. 1997) ("[W]e join the other California courts that have rejecte[d] Pataki's holding that any state regulation of Internet use violates the dormant commerce clause.") The court also rejected defendants' argument that, due to the difficulty in determining the geographical residence of an e-mail recipient, the practical effect of the statute was to require anyone doing business in California to comply with Section 17538.4 whenever they sent e-mails, be it inside or outside of California. Said the Court:
That respondents consider section 17538.4's requirements inconvenient and even impractical does not mean that statute violates the Commerce Clause.
The court held that because Section 17538.4 furthered important state interests, while posing only a limited burden on interstate commerce, it was a valid exercise of California's legislative authority that did not violate the Commerce Clause.
The court held that Section 17538.4 protects California residents both from deceptive UCE, as well as the economic burdens UCE imposes on them. UCE, noted the court, "often contains offensive subject matter, is a favored method for pursuing questionable if not fraudulent business schemes and has been successfully used to spread harmful computer viruses." The court further noted that transmission of unwanted UCE causes ISPs, and hence their customers, to incur significant business related costs to accommodate bulk e-mail. Individuals also suffer the time loss attendant with reviewing and/or deleting UCE.
The court held that the statute's regulatory scheme appropriately addressed these concerns, inter alia, by requiring UCE to be plainly identified in the subject of the e-mail, and by requiring the sender of the UCE to both accurately identify himself and honor requests to terminate future transmission of UCE. Conversely, held the court, such regulations do not pose a significant burden on interstate commerce. As such, stated the court:
We conclude that the burdens imposed on interstate commerce by section 17538.4 are minimal and do not outweigh the statute's benefits. Therefore, respondents have failed to carry their burden of proving that section 17538.4 violates the dormant Commerce Clause.
The court accordingly reinstated plaintiff's claims that defendants' conduct violated California's unfair business practice and unlawful advertising statutes.
The court also granted plaintiff leave to replead his trespass to chattels claim. As stated by the court:
Trespass to chattel ... lies where an intentional interference with the possession of personal property has proximately caused injury. However, the interference must have a tangible effect; recovery for trespass to chattel must be "predicated upon the deposit of particulate matter upon the plaintiffs' property or on actual physical damage thereto... All intangible intrusions, such as noise, odor, or light alone, are dealt with as nuisance cases, not trespass."
Plaintiff had not, as yet, alleged the injury needed to sustain a claim. Said the court:
In an attempt to state a cause of action for trespass, Ferguson alleged that respondents "took possession of Plaintiffs' computer processors hard drive, Random Access Memory and Internet e-mail accounts by sending [UCE] to each of the Plaintiffs." He also alleged that plaintiffs were dispossessed of control of their computers and e-mail accounts for the duration of the time required to download respondents' UCE and that plaintiffs' were unable to send or receive any e-mail during that time. But Ferguson did not allege facts that would establish that respondents caused a tangible physical intrusion upon plaintiffs' property or that respondents' conduct caused actual physical damage to plaintiffs' property. Thus, in its present form, the complaint does not allege a cause of action for trespass to chattel.
Lastly, the court affirmed the dismissal of plaintiff's negligence claim.
The full text of the court's decision can be found on a web site maintained by the Judicial Council of California.