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STROOCK & STROOCK & LAVAN LLPSTEPHEN J. NEWMAN (State Bar No. 181570)MARIAN K. SELVAGGIO (State Bar No. 224072)NATHAN CLARK (State Bar No. 256472)2029 Century Park East, Suite 1800Los Angeles, California 90067-3086Telephone: 310-556-5800Facsimile: 310-556-5959

Attorneys for DefendantsSUBSCRIBERBASE, INC.,SUBSCRIBERBASE HOLDINGS, INC.,CONSUMER RESEARCH CORPORATION, INC.,FREE SLIDE INC., and INVOLVE MEDIA, INC.

SUPERIOR COURT OF THE STATE OF CALIFORNIA

DANIEL L. BALSAM, an Individual, ))

Plaintiff, ))

v. ))

SUESCRIBERBASE, INC., a South Carolina )corporation; SUBSCRIBERBASE HOLDINGS,)INC., a South Carolina corporation; )CONSUMER RESEARCH CORPORATION, )INC., a South Carolina corporation; FREE )SLIDE, INC., a South Carolina corporation; )INVOLVE MEDIA, INC., a South Carolina )corporation; E-TRACK MEDIA CORP., a )Florida corporation; REMEDY MEDIA, LLC, a)Delaware limited liability corporation; 5- )INFOTECH, INC., a Florida corporation; )ARBCDA.COM, a business entity of unknown )organization; DQ MEDIA, a business entity of )unknown organization; SMALL CAP )INVESTOR, a business entity of unknown )organization; and DOES 1-100. )

)Defendants. )

)

Case No. IO6CV-066258

Case Management Judge: The HonorableMary J0 Levinger

DEFENDANT SUBSCRIBERBASE INC.’SMEMORANDUM OF POINTS ANDAUTHORITIES IN SUPPORT OFMOTION FOR SUMMARY JUDGMENTOR IN THE ALTERNATIVE SUMMARYADJUDICATION

Action Filed: June 27, 2006Trial Date: November 10, 2008

Date: October 2, 2008Time: 9:00 a.m.Dept. 5

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FOR THE COUNTY OF SANTA CLARA (UNLIMITED JURISDICTION)

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES TN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

LA 51069998v2

1 TABLE OF CONTENTS

2 Page

I. INTRODUCTION 13

II. STATEMENT OF FACTS 44

A. Procedural History 4

B. TheParties 66

III. ARGUMENT 77

8A. Standard On Summary Judgment 7

B. Plaintiffs Claims Are Barred By The Statute Of Limitations As To 99% Of9 The EMAILS 8

10 C. Plaintiffs Claims Are Expressly Limited By The Federal CAN-SPAM Act 9

11 1. No Substantial Evidence Supports Any Traditional Tort Theory 10

12 2. Plaintiff Fails To Allege Or Provide Evidence Of A MaterialMisrepresentation 12

13D. Plaintiff Fails To Show Falsity or Deception In The EMAILS As Required

14 BySection 17529.5 13

15 E. Plaintiffs Claims Are Barred By The Doctrine Ofç Judicata 17

16 F. Plaintiffs Claims Are Barred By The Doctrine Of Unclean Hands 19

17 Iv. CONCLUSION 20

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDiCATION

LA 51069998v2

1 TABLE OF AUTHORITIES

2 Page(s)CASES

3Aguilar v. Atlantic Richfield Co.,

4 25 Cal. 4th 826 (2001) 7, 8

5 Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers Cas. & Sur. Co. ofAmerica,

6 133 Cal. App. 4th 1319 (2005) 18

7 Balsam v. Sourceout, et a!.,

8San Francisco Superior Court case no. B05-441627 4, 5, 17, 18, 20

Banga v. American Express Cards,9 2007 WL474182(E.D. Cal.2007) 17

10 Blain v. The Doctor’s Company,222Cal.App.3d1048(1990) 19

Branson v. Sun-Diamond Growers,12 24 Cal.App.4th 327 (1994) 18

13 Buckland v. Threshold Enters., Ltd.,

14155 Cal. App. 4th 798 (2007) 19

Burton v. Sosinsky,15 203 Cal. App. 3d 562 (1988) 19

16 Cattie v. Wal-Mart Stores, Inc.,504 F. Supp. 2d 939 (S.D. Cal. 2007) 19

< 17

Engalla v. Permanente Medical Group, Inc.,18 15 Cal.4th 951 (1997) 11

0 19 Federation of Hillside & Canyon Assns. v. Los Angeles,126Cal. App. 4th1180(2004) 18

>20Fibreboard Paper Products Corp. v. East Bay Union of Machinists,Z21

227 Cal. App. 2d675 (1964) 19

22 Gordon v. Virtumundo, Inc.,2007 WL1459395 12

23

Grimes v. Rave Motion Pictures Birmingham, L.L.C. et al.,24 Ala. Case No. 2:07 -cv-0 1397 12

25 Hall v. Time Inc.,

26158 Cal. App. 4th 847 (2008) 19

Intri-Plex Technologies, Inc. v. Crest Group, Inc.,27 499 F.3d 1048 (9th Cir. 2007) 18

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

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Kleffman v. Vonage Holdings, Con.,2007 WL 1518650 (C.D. Cal. 2007) 10

Laster v. T-Moblile, USA, Inc.,407 F. Supp. 2d 1181 (S.D. Cal. 2005) 19

Lekse v. Municipal Court,138 Cal. App. 3d 188 (1982) 18

Lynn v. Duckel,46 Cal. 2d 845 (1956) 19

Manderville v. PCG & S Group, Inc.,146 Cal.App.4th 1486 (2007) 11

Mummagraphics, Inc.,469 F.3d at 348 (2006) 12

Omega World Travel, Inc. v. Mummagraphics,469 F.3d 348 (4th Cir. 2006) 10

People v. Sims,32 Cal.3d 468 (1982) 18

Peregrine Funding, inc. v. Sheppard Mullin Richter & Hampton LLP,133 Cal. App. 4th 658 (Cal. Ct. App. 2005) 20

Phillips v. Netblue, Inc.,2006 WL 3647116 (N.D.Cal. Dec. 122006) 8,9

Service by Medallion, Inc. v. Clorox Co.,44 Cal.App.4th 1807, 52 Cal.Rptr.2d 650 (1996) 11

Slater v. Blackwood,15 Cal.3d 791 (1975) 18

Southwest Sunsites, Inc. v. F.T.C.,785 F.2d 1431 (9th Cir. 1986) 17

STATUTES

15 U.S.C. § 7701(11) 9

15 U.S.C. § 7701(a) 9

15 U.S.C. §7701(b)(l) 9, 10

15 U.S.C. 7704(a)(2) 17

Cal. Bus. & Prof. Code §17529.5(b)(1) 8

Cal. Bus. & Prof. Code §17529.5(b)(2) 9

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DEFENDANT SB INC.’ S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

LA 51069998v2

I MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION

3 This case is about email advertising and the federal limits on state law efforts to restrict the

4 use of the Internet for legitimate commercial purposes. Plaintiff Daniel Balsam (“Plaintiff’) brings

5 this action under the California anti-spam statute, California Business & Professions Code Section

6 17529.5 (“Section 17529.5”) alleging that defendants SB, inc., SB Holdings, Inc., Consumer

7 Research Corporation, Inc., Free Slide Inc., and Involve Media, Inc. (collectively, “SB”) sent email

8 advertisements that contained falsified, misrepresented or forged header information and had

9 deceptive subject lines.1 For this he seeks nearly $4 million in statutory penalties although he

10 concedes he suffered no actual damages. Plaintiff, a recent law school graduate has brought similar

i claims against other advertisers repeatedly in the California courts, and has modified his computer

12 systems to collect emails for no purpose but to sue on them. His scheme already has netted himI—.

13 somewhere between $100,000 and $1 million in settlements.

14 On December 6, 2006, this Court entered its Order re: Demurrer to First Amended

i Complaint (“2006 Order”) and stated that Plaintiff could only prove a violation occurred if he

16 establishes facts to show that the commercial emails at issue in this action (hereinafter “the

17 EMAILS”) contained header information that was “inaccurate or untruthful.” Although he has

18 sued for receipt of almost 4,000 EMAILS, according to his interrogatory responses all Plaintiffs

19 claims as to each EMAIL falls into one of five liability theories:

20 • The EMAILS were sent from multiple email addresses and multiple domain names;

21 • The EMAILS were sent from multiple IP addresses;

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23Plaintiff also sued six other defendants: E-Track Media, Corp., Remedy Media, LLC, S-Infotech,

24 Inc., ARBCDA.com, DQ Media and Small Cap Investors. None of these defendants have beenserved, none have been dismissed and Plaintiff at his deposition refused to explain their relation to

25 the claims in this matter.2 Plaintiff claims to have received 3,954 emails in violation of the law. Of those emails, 3,890

26 were sent by SB. The emails advertised websites both owned by SB and owned by third parties.The remaining 64 emails were sent by third party affiliates of SB to advertise websites owned by

27 SB.

28DEFENDANT SB TNC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 • The EMAILS used false “HELO”3or routing information to avoid filtering software;4

2 • The “from” lines of the EMAILS did not accurately identify the sender of the EMAILS;

3 and/or

4 • The EMAILS have deceptive or misleading “subject” lines in that the “subject” lines do

5 not accurately describe the goods or services offered, particularly when “free” promotional

6 items are described.”

7 As shown below, these theories all lack merit, Plaintiff can demonstrate no genuine issue of

8 triable fact, and his claims fail as a matter of law.

9 As an initial matter, Plaintiff’s claims as to all EMAILS but seventeen are barred by the

10 statute of limitations. California Code of Civil Procedure Section 340(a) prescribes that private

11 claims for statutory penalty must be brought within one-year. Here, Plaintiff concedes that he

12 seeks no actual damages, but rather seeks only to impose a penalty on SB for its alleged violation.

- 13 Accordingly, the one-year statute applies, and Plaintiffs claims are barred as to all EMAILS

14 received on or before June 26, 2005.

15 Plaintiff’s claims also fail because they are preempted by federal law. Due to the difficulty

16 in identifying the physical location of an email recipient, Congress passed legislation to establish

17 nationwide standards upon which advertisers can rely without fear of mistakenly running afoul of

18 contradictory requirements in each of the fifty states. The Controlling the Assault of Non-

19 Solicited Pornography and Marketing Act of 2003, 15 U.S.C. Sections 7701-77 13 (“CAN

20 SPAM”), supersedes any state statute that regulates email advertising except to the extent the

21 statute prohibits falsity or deception in the advertising message -- the exact scope of this exception

22 is the subject of a developing line of cases.

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25 HELO is a part of the email routing information exchanged between the sending computer and thereceiving computer during a Simple Mail Transfer Protocol (“SMTP”) session. For a more detailed

26 discussion of SMTP and HELO information see Declaration of Dr. Fred Cohen, Section III (7).

“Anti-spam” or “filtering software” is software that is operated by the Internet service provider27 and designed to block advertisements from reaching users’ electronic mailboxes.

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, TN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 Federal law thus mandates that Plaintiff prove material falsity or deception. In the absence

2 of such proof federal law bars his claims. Section 17529.5 seeks to regulate false and deceptive

3 commercial emails.5 Cases interpreting the state anti-spam statutes, including California’s, have

4 found that state claims only survive CAN-SPAM preemption if they are based on traditional

5 theories of fraud. Putting aside the preemption issue, the EMAILS also do not violate Section

6 17529.5 for the reasons set forth below.

7 As to Plaintiff’s first theory of recovery, Plaintiff cannot dispute that the use of multiple

8 domain names complies with the California anti-spam statute because in its 2006 Order, this Court

9 specifically held that the use of multiple domain names in the “from” line of different emails is not

10 a violation of the California anti-spam statute. Moreover, Plaintiff has been unsuccessfully

z 11 lobbying for two years -- including in-person visits to legislators in Sacramento -- to revise Section

12 17529.5 to create liability for using multiple domain names. It is undisputed that SB did not send

- 13 any EMAILS from domain names that it did not own.(J C-

14 As to Plaintiff’s second theory of recovery, it cannot be disputed that the use of multiple IP

15 addresses to send email is not deceptive. Indeed, the California judiciary and Plaintiff’s own ISPs(1 v

16 (Yahoo and Hotmail) use multiple IP addresses for email administration. SB’s expert, Dr. Fred0 -

17 Cohen, opines that using multiple IP addresses is a reasonable and prudent practice, is widely

18 accepted in the industry and is not deceptive. The evidence is undisputed that all of the IP

19 addresses used in the 3,954 emails at issue in this litigation that were sent by SB were properly

20 assigned to SB.

21 As to Plaintiff’s third theory of recovery, it cannot be disputed that the email routing

22 information is not deceptive because it is not intended to be human readable, but rather to perform

23 technical functions when email is transmitted across independently-operating computer systems.

24

__________________________

Under Section 17529.5 at a minimum Plaintiff must show the claim is not preempted by CAN-25 SPAM and that the email advertisement is; (1) unsolicited, (2) the email advertisement contains or

is accompanied by a third-party’s domain name without the permission of the third party or, (3) the26 email advertisement contains or is accompanied by falsified, misrepresented or forged header

information or, (4) the email advertisement has a subject line that a person knows would be likely27 to mislead a recipient about a material fact regarding the content or subject matter of the message.

28 -3-DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 SB’s email routing information was properly formatted for this purpose. Moreover, SB did not

2 create the routing information that Plaintiff complains of here, so it cannot be held liable for any

3 alleged error in the information. To the contrary, Plaintiffs own email services (Yahoo and

4 Hotmail) created that information. More significantly, Plaintiff specifically configured his email

5 program to display the email routing infoniiation, even though routing information would not

6 normally be displayed to the receipt of this information.

7 As to Plaintiffs fourth theory of recovery, it is undisputed that the “from” lines do not

8 violate the statute. The presumed basis for Plaintiffs claims is that these lines did not specifically

9 say “SB,” but instead contained advertising copy that described the nature of the email. However,

10 the body of each EMAIL truthfully, clearly and conspicuously identifies SB as the source of the

11 promotional offer and includes both SB’s physical address and email contact information should

12 the consumer wish to directly contact SB regarding the offer, or request that he no longer receive

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13 advertisements. There is no attempt to disguise or otherwise misrepresent SB as the sponsor of the,U

14 or sender of the EMAIL, and Plaintiff admits he had no trouble identifying SB as the party

4 15 responsible for the message.

16 As to Plaintiffs fiflh theory of recovery, it is undisputed that Plaintiff was not deceived by

17 the EMAIL “subject” lines because Plaintiff admits he did not pursue any of the promotional offers

18 advertised in the “subject” lines. In fact, Plaintiff only looked at a “couple” of the EMAILS, and

19 admits that the EMAILS looked at were; “not a significant number compared to the 3,900” at issue

20 in this case. Thus, Plaintiff has no evidence to support his claim that the “subject” lines were

21 untruthful or inaccurate, nor does such evidence exist.

22 There are serious legal, logical and evidentiary defects in Plaintiffs claims. No genuine

23 issue of material fact exists. SB is entitled to judgment as a matter of law.

24 II. STATEMENT OF FACTS

25 A. Procedural History

26 On May 26, 2005, Balsam v. Sourceout, et al., San Francisco Superior Court case no. B05-

27 441627 (“Sourceout litigation”), Plaintiff sued SB and five other defendants under Section

28DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 17529.5. [Fact No. 1]. On May 15, 2006, Plaintiff accepted a Code of Civil Procedure Section 998

2 offer of compromise in the amount of $5,000 and judgment was entered thereon. [Fact No. 2]. The

3 judgment has been satisfied. [Fact No. 3].

4 On June 26, 2006, Plaintiff filed the instant lawsuit against SB. [Fact No. 4]. Balsam

5 claims that because he received 3,954 emails, he is entitled to $3,954,000 in statutory damages of

6 $1,000 per EMAIL. j Plaintiff alleges he received the present EMAILS action between January

7 1, 2004 and November 6, 2006. [Fact No. 5]. Of the 3,954 emails Plaintiff claims he received

8 during that time period, 3,937 were received before June 26, 2005, the date the one-year statute of

9 limitations expired, leaving only seventeen emails that were received and sued on before the statute

10 of limitations expired. [Fact No. 6]. Furthermore, of the 3,954 emails at issue in this action,

11 Plaintiff received 3,936 before the Sourceout litigation was filed. [Fact No. 7]. In other words, all

12 but eighteen of the emails at issue here were known to Balsam before the Sourceout case was filed.

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13 [Fact No. 8]. Of those eighteen emails, sixteen were received before Balsam accepted SB’s offer ofU

_ 14 compromise and had judgment entered upon it. [Fact No. 9]. In all fairness, this litigation should

15 be restricted to the two post-Sourceout emails.

16 Plaintiff filed a first amended complaint on September 8,2006. [Fact No. 10]. On

17 December 6, 2006, this Court entered an order (“2006 Order”) sustaining Defendants’ Demurrer to

18 the First Amended Complaint. [Fact No. 11]. In the 2006 Order, the Court held that Plaintiff had

19 failed to allege sufficiently that the EMAILS contained “falsified, misrepresented, or forged”

20 header information. !4 Applying a “plain and commonsense” meaning to those terms, the Court

21 found that Plaintiff had to plead (and ultimately prove) that the header information was “inaccurate

22 or untruthful.” ih The Court further specifically held that the use of multiple domain names

23 specifically was not a violation of Section 17529.5. Id.

24 Plaintiff filed the second amended complaint on December 22, 2006, adding new

25 allegations of false and misleading content. [Fact No. 12]. SB elected to answer the Section

26 17529.5 claim but to demur again to the second cause of action, asserting violations of the

27 Consumers Legal Remedies Act (“CLRA”). [Fact No. 13]. On March 27, 2007, the Court

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

I sustained SB’s demurrer to the CLRA claim without leave to amend. [Fact No. 14]. Thus, the

2 Section 17529.5 claim is all that remains in this litigation. [Fact No. 15].

3 B. The Parties

4 This action is brought by a recent law school graduate whose self-professed motive for

5 going to law school is to use the legal system to end email advertising that he considers to be

6 “spam.” [Fact No. 16]. Plaintiff publishes a website called danhatesspam.com to press his mission

7 to “clean up the internet.” [Fact No. 17]. Plaintiff has filed at least 65 lawsuits under Section

8 17529.5 or its predecessor statute. [Fact No. 18]. Almost all of the cases filed by Plaintiff involve

9 the two email addresses at issue in this case, although Plaintiff admits he owns and uses other email

10 addresses. [Fact No. 19]. Plaintiff refused to answer questions at his deposition about his

z settlements of the other cases, but he has estimated that he received settlements between $100,000

12 and $1,000,000. [Fact No. 20]. Plaintiff also refused to answer deposition questions about

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- 13 settlement with the unserved (but not yet dismissed) co-defendants herein. [Fact No. 21].

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14 SB is a direct marketing firm that operates promotions, based customer acquisition on the

f 15 Internet. [Fact No. 22]. SB refuses to accept as clients those that promote pornography,

16 companies that make unsubstantiated medical or health claims, or that promote gambling. [Fact

17 No. 23]. SB uses multiple technologies to encourage visits to its promotional websites, including

18 banner ads, strategic placement on search engine results and commercial email. [Fact No. 24].

19 However, SB earns no revenue merely by encouraging a website visit. Rather, SB’s compensation

20 from its advertisers is based 100% on performance, in that SB only gets paid when an actual

21 customer is generated for an advertiser. [Fact No. 25]. SB does not get paid based on mere clicks

22 or impressions. [Fact No. 26]. Thus, there is no business motivation for SB to send unsolicited

23 emails, as such emails do not generate consumer transactions and consequently do not provide any

24 revenue for SB. [Fact No. 27].

25 Conditional free offers, which require the consumer to satisfy certain terms and conditions

26 before receiving the free gift, are common in direct response advertising and customer loyalty

27 programs both in the online and “brick and mortar” retail world. [Fact No. 28].

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DEFENDANT SB TNC.’S MEMORANDUM OF POTNTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

LA 51069998v2

1 SB clearly and conspicuously discloses the terms and conditions that consumers are

2 required to meet in order to receive gift items through its promotional programs and websites.

3 [Fact No. 29]. Furthermore, consumers are prohibited from submitting any personally identifiable

4 information during the registration process without first actively confirming that they have read and

5 agreed to both the website’s privacy policy and the terms and conditions for offer participation.

6 [Fact No. 30]. If a consumer attempts to register without affirming their agreement to these terms,

7 their registration is refused and they receive an error message informing the consumer that their

8 agreement is required in order to proceed. [Fact No. 31].

9 SB completely fulfills its obligations to every consumer who meets the terms and

10 conditions of its promotional websites. [Fact No. 32]. The total value of promotional gifts sent to

11 consumers by SB is in excess of two million dollars. [Fact No. 33]. Consumers pay nothing (not

12 even shipping and handling) for these gifts. [Fact No. 34]. Any monetary obligations incurred by

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13 consumers participating in one of SB’s promotions are a direct result of a voluntary transaction(3

14 between the consumer and one of SB’s clients, for which the consumer receives separatec4

jf 15 consideration from the clients in the form of products andlor services. [Fact No. 35].

16 A consumer who receives an email from SB can easily notify SB he/she does not want toC

17 receive further email solicitations. [Fact No. 36]. SB provides web-based unsubscribe mechanisms

18 as required by federal law in all of the emails it sends. [Fact No. 37]. Additionally, each EMAIL

19 sets forth an address to which physical mail may be sent, if the consumer does not wish to

20 communicate his/her preference online. [Fact No. 38].

21 III. ARGUMENT

22 A. Standard On Summary Judgment

23 Code of Civil Procedure Section 437c requires summary judgment or adjudication if all of

24 the evidence submitted shows that there is no triable issue as to any material fact and the moving

25 party is entitled to a favorable adjudication as a matter of law, “that is, there is no issue requiring a

26 trial as to any fact that is necessary under the pleadings, and ultimately, the law.” Aguilar v.

27 Atlantic Richfield Co., 25 Cal. 4th 826, 843 (2001). Where the movant has demonstrated an

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DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

I absence of proof a party opposing summary judgment must produce significant, probative

2 evidence sufficient to sustain a jury verdict on every issue as to which it bears the burden of proof.

3 See Aguilar, 25 Cal. 4th at 852. Should Plaintiff fail to carry his burden of adducing competent

4 evidence on every element of his claim, judgment should be entered against Plaintiff.

5 B. Plaintiff’s Claims Are Barred By The Statute Of Limitations As To 99% OfThe EMAILS

6California Code of Civil Procedure Section 340(a) prescribes that actions brought by

7individuals for statutory penalty must be brought within one year, except when the statute imposing

8the penalty expressly prescribes a different limitation. Here, Plaintiff concedes that he seeks no

9actual damages, but rather seeks only to impose a penalty on SB for its alleged violation. [Fact No.

1039]. Accordingly, the one-year statute applies, and Plaintiff’s claims are barred as to all EMAILS

zexcept the seventeen EMAILS received on or after June 26, 2005.

‘? 12Section 17529.5(b)(1)(B) states that any person eligible to bring suit may recover actual

g 13u damages or a penalty of up to $1000 (reduced to a maximum of $100 if the defendant establishedg 14

and implemented, with due care, practices and procedures reasonably designed to effectively15

prevent violations). Cal. Bus. & Prof. Code §17529.5(b)(1)(B). The statutory penalties available16

under 17529.5 have been specifically found to be penal in nature.17

In Phillips v. Netblue, Inc., the distinction between 17529.5’s compensatory statutory18

damages and penalty statutory damages was recognized. Phillips v. Netblue, Inc., No. C-05-440119

SC, 2006 WL 3647116 at *5 (N.D. Cal. Dec. 12, 2006). The court held that the difference between20

recovery that is compensatory and recovery that is penal is whether there exists a relationship21

between the amount of money awarded and the actual damages suffered by the plaintiff as a result22

of the wrongful act. A statutory award is a penalty if it imposes damages in an arbitrary sum,23

regardless of the actual damage suffered. Id.24

in Phillips, the court found that because 17529.5 allows the plaintiff to recover “either or25

both” actual damages and a fixed amount, “[the section] makes clear that the two kinds of damages26

are different and thus logically serve different purposes: compensatory in the case of [actual27

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DEFENDANT SB NC’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

I damages] and penal in the case of the latter.” Phillips v. Netblue, lic., No. C-05-4401 SC, 2006

2 WL 3647116 at *5 The Phillips court further held that the penal purpose is emphasized by the

3 sections of the statute, which provide for a reduction of the penalty upon a finding of mitigating

4 factors. See Cal. Bus. & Prof. Code §17529.5(b)(2).

5 Plaintiff admits he has suffered no actual damages and that he only seeks the statutory

6 penalty here. [Fact No. 40]. Consequently, Plaintiff’s claims are governed by the one-year statute

7 of limitations for penalties. Indeed, Plaintiff himself is aware that the statute currently provides for

8 a one-year statute of limitations because, and discovery has revealed his personal lobbying efforts

9 to amend Section 17529.5 to add specific language extending the statute of limitations to three

10 years. [Fact No. 41]. To date, this amendment has not been approved or passed by either

z legislative chamber but Plaintiff’s proposal was passed in committee to make clear that the one

12 year statute applies as to all pending litigation such as this case. [Fact No. 42]. Thus, the 3,937

- 13 EMAILS received before June 26, 2005 are barred by the one-year statute of limitations and at

14 most only seventeen EMAILS remain at issue here. SB is entitled to summary adjudication that

15 Plaintiff may pursue no claim based upon any EMAIL received before June 26, 2005.

‘ l6 C. Plaintiff’s Claims Are Expressly Limited By The Federal CAN-SPAM Act

17 Congress enacted CAN-SPAM to address the growth in commercial electronic mail. 15

H

18 U.S.C. § 7701(a) (2005). Congress recognized that email advertising has socially redeeming

19 qualities, and that merchants have important rights to advertise via the channels of interstate

20 commerce, such as in email, and to take measures designed to increase the likelihood that

21 advertisements for lawful products will be read. See 15 U.S.C. §7701(b)(1).

22 Congress found that the anti-spam legislation enacted in many states imposed

23 contradictory standards and requirements. 15 U.S.C. § 7701(11) states:

24 The Congress finds as follows:

25 (11) Many States have enacted legislation intended to regulate or

26 reduce unsolicited commercial electronic mail, but these statutes

impose different standards and requirements. As a result, they do not

27 appear to have been successful in addressing the problems associated

28DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

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1 with unsolicited commercial electronic mail, in part because, since an

electronic mail address does not specify a geographic location, it can2 be extremely difficult for law-abiding businesses to know with which

3of these disparate statutes they are required to comply.

As a result, Congress determined that there was a substantial federal interest in regulating

5commercial electronic mail on a uniform nationwide basis. 15 U.S.C. § 770 1(b)(1) (2005).

6Section 7701(b)(l) of the CAN-SPAM Act addresses preemption of state laws. It provides:

7 This chapter supersedes any statute, regulation, or rule of a State orpolitical subdivision of a State that expressly reculates the use of

8 electronic mail to send commercial messages, except to the extentthat any statute, regulation, or rule prohibits falsity or deception in

9 any portion of a commercial electronic mail message or information

10attached thereto.

15U.S.C.7701(b)(l)(2005).

In crafting CAN-SPAM’s savings clause, Congress struck a careful balance between< ? 12

protecting consumers and its reluctance to force law-abiding businesses to conform to a patchwork-°‘ 13C) of state laws. See S.Rep. No. 108-102, at 21-22.g 14

15Congress’ legislative findings indicate that Congress did not want legitimate businesses to

have to guess at the meaning of various state laws when their advertising campaigns ventured into

C)

cyberspace. Kleffman v. Vonage Holdings, Corp., 2007 WL 1518650, *3 (C.D. Cal. 2007).

18Thus, states were left room only to extend traditional fraud prohibitions to the realm of commercial

19email because legitimate businesses would not “unwittingly transgress such well-established

20prohibitions.” Kleffman, 2007 WL 1518650 at *3; Omega World Travel, Inc. v. Mummagraphics,

21469 F.3d 348, 354 (4th Cir. 2006) (holding that the pairing of the words “falsity and deception” in

22the savings clause of CAN-SPAM suggests that “Congress was operating in the vein of tort when

23it drafted the pre-emption clause’s exceptions, and intended falsity to refer to other torts involving

24misrepresentations, rather than to sweep up errors that do not sound in tort”).

251. No Substantial Evidence Supports Any Traditional Tort Theory

26Plaintiff argues that he is entitled to statutory penalties under Section 17529.5, which states:

27

28-10-

DEFENDANT SB fl’JC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

I (a) It is unlawful for any person or entity to advertise in a commercialemail advertisement either sent from California or sent to a California

2 electronic mail address under any of the following circumstances:

3 ..

. (2) The email advertisement contains or is accompanied byfalsified, misrepresented, or forged header information. . . .(3) The e

4 mail advertisement has a subject line that a person knows would belikely to mislead a recipient, acting reasonably under the

5 circumstances, about a material fact regarding the contents or subject

6matter of the message.

Business & Professions Code Section 17529.5(a)(2).

8 Although Congress did not define the terms “falsity” or “deception” in CAN-SPAM’s

9 savings clause, it is settled law that those terms must be construed to include traditional tort

10 concepts like materiality and justifiable reliance. See Kleffman, 2007 WL 158650 at *3 Plaintiff,

11 however, improperly seeks to use Section 17529.5 in a way that significantly deviates from the

12 traditional legal principles applicable to fraud claims. Plaintiff does not allege a traditional tortNSD

-

13 theory at all, or even that he was ever misled by any of the EMAILS he received. Plaintiffs claimsc)

- 14 are therefore preempted.

15 Under California law, to establish a claim for fraud based on a misrepresentation, the

16 plaintiff must prove: (1) the defendant represented to the plaintiff that an important fact was true;

17 (2) that representation was false; (3) the defendant knew that the representation was false when the

18 defendant made it, or the defendant made the representation recklessly and without regard for its

19 truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff

20 reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiffs reliance

21 on the defendant’s representation was a substantial factor in causing that harm to the plaintiff.

22 Manderville v. PCG & S Group, Inc., 146 Cal.App.4th 1486, 1498 (2007).6 No substantial

23 evidence exists in regard to these elements.

24 6 See also Sources and Authority to Judicial Council of Cal. Civ. Jury Instns. (Fall 2006). CACI

25 No. 1900, pp. 921-922, citing Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951, 974(1997) (“Engalla”) (“The elements of fraud that will give rise to a tort action for deceit are: “(a)

26 misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity(or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d)justifiable reliance; and (e) resulting

27 damage”); Service by Medallion, Inc. v. Clorox Co., 44 Cal.App.4th 1807, 1816,52 Cal.Rptr.2d650 (1996) (complaint for deceit must allege the following elements: “(1) a knowingly false

28 -11-

DEFENDANT SB INC.’S MEMOPANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 Plaintiff was not misled by any of the EMAILS. [Fact No. 43]. He did not pursue gy of

2 the offers in the EMAILS and took no action in reliance upon any of them. [Fact No. 44]. Plaintiff

3 admits he only clicked on a couple of the links in the EMAILS, “[n]ot a significant number

4 compared to the 3,900” at issue in this action. [Fact No. 45] Plaintiff admits he suffered no

5 damages as a result of receiving the EMAILS. Even so, he wants the Court to award him

6 $3,954,000 in penalties. [Fact No. 46]. Plaintiff’s claim that he is simply seeking penalties does

7 not absolve him of the requirement to show some sort of pecuniary harm. Gordon v. Virtumundo,

8 Inc., 2007 WL 1459395 at *8 (holding that in order for the “exorbitant amounts of statutory

9 damage” to be available to private plaintiffs, substantial actual harm must exist). Plaintiff attempts

10 to circumvent the requirements of reliance and consequential harm, but such use of Section

11 17529.5 violates CAN-SPAM and is preempted.

12 2. Plaintiff Fails To Allege Or Provide Evidence Of A MaterialMisrepresentation

-c 13Additionally, the savings clause of CAN-SPAM prohibits state law liability unless the

14misrepresentation in the commercial email is material. Mummagraphics, Inc., 469 F.3d 348, 354

15(4th Cir. 2006) (holding that CAN-SPAM was not meant to “sweep up” and penalize immaterial

16errors); Gordon, 2007 WL 1459395 at *11 (because only “materially false or materially

17H misleading” header information was actionable under CAN-SPAM, Congress could not have

18intended, to allow states to undermine that choice by imposing “strict liability for insignificant

19inaccuracies...”) (internal citations omitted).

20In Mummagraphics, the court held that Oklahoma’s anti-spam statute was preempted

21insofar as it applied to immaterial misrepresentations. Id. At 353. It found that while CAN-SPAM

22allows civil causes of action relating to certain inaccuracies in header information, the inaccuracies

23had to go beyond simple mistake or non-material errors. Id. at 355.

24

25 representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable relianceby the plaintiff; and (4) resulting damages”).

26 Such an inherently disproportionate award of statutory damages absent actual harm is an improper“taking” of property without due process. Grimes v. Rave Motion Pictures Birmingham, L.L.C. et

27 No. 2:07 —cv-0 1397 WMA (N.D. Ala. May 28, 2008).

28 -12-

DEFENDANT SB INC.’S MEMOPANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 Section 17529.5 does not define a “material” misrepresentation in a header. Under CAN-

2 SPAM, however, a header contains a material misrepresentation where:

3 [T]he alteration or concealment of header information, ... would

4impair the ability of an Internet access service processing the

message on behalf of a recipient, a person alleging a violation of this

section, or a law enforcement agency to identify, locate, or respond to

a person who initiated the electronic mail message or to investigate

6 the alleged violation, or the ability of a recipient of the message to

respond to a person who initiated the electronic message.

8Mummagraphics, 469 F.3d at 357.

The undisputed evidence shows that SB did not do any of those things. Plaintiff cannot

10 show any of the header information contained a material misrepresentation because SB’s identity

and physical address was disclosed. [Fact No. 47]. Plaintiff testifies that he had no problem

12 identifying SB as the source of the EMAILS. [Fact No. 48]. The EMAILS were “chock full of

- 13 methods to ‘identify, locate, or respond to” SB or to investigate an alleged violation. Each

U

14 EMAIL listed SB’s physical mailing address. [Fact No. 49]. SB also publishes its telephone

15 number on its website, www.SB.com. [Fact No. 50]. In fact, Plaintiff contacted SB prior to filing

16 this litigation seeking settlement money. [Fact No. 51]. It is undisputed that the EMAILS were

17 full of accurate identifiers of SB. [Fact No. 52]. Consequently, any inaccuracies in the headers

18 alleged by Plaintiff are not material because he was not misled as to the source of the EMAILS and

19 any minor error did not impede his ability to find SB. Plaintiff cannot prevail on a 17529.5 action

20 without showing material misrepresentation of the header information and, therefore, this theory

21 fails as a matter of law.

22 D. Plaintiff Fails To Show Falsity or Deception In The EMAILS As Required BySection 17529.5

23Even if Plaintiffs claims survive preemption, which they should not, Plaintiff fails to meet

24his evidentiary requirement outlined by this Court that the EMAILS are “inaccurate or untruthful.”

25The undisputed evidence shows that they are not and each of Plaintiff’s theories of recovery fail as

26a matter of law:

27

28-13-

DEFENDANT SB INC.’ S MEMORANDUM OF POINTS AND AUTHORITIES TN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, TN THE ALTERNATIVE, SUMMARY ADJUDICATION

LA 51069998v2

I • The Use Of Multiple Domain Names.

2 The analysis of the use of domain names is a technical matter. Plaintiff has admitted he has

3 no technical expertise. [Fact No. 53]. Notwithstanding his admission, Plaintiff claims that the use

4 of multiple domain names is deceptive. On December 6, 2006, this Court entered an order

5 sustaining Defendants’ Demurrer to the First Amended Complaint. [Fact No. 11]. In that Order

6 the court specifically held that the use of multiple domain names is not a violation of Section

7 17529.5. Id.

8 Other courts also have held that the California anti-spam legislation does not prohibit the

9 use of multiple domain names. Kleffman, 2007 WL 1518650 at *3(“S. .and the complaint of

10 [plaintiff] as to [defendant’s] multiple domain names simply have no analogue outside the virtual

11 world.. ..Thus, these claims fall squarely into the realm of regulation that Congress intended to

12 preempt.”). Plaintiff recognizes that the statute does not prohibit multiple domain names in that he

- 13 is actively lobbying to amend the statute so that he may find it easier to sue email advertisers in theC) -

14 future. [Fact No. 54].

15 Many businesses use multiple domain names for many different purposes, just as businesses

16 may use multiple physical mailing addresses for lawful purposes. As Dr. Cohen explains, many

17 companies lawfully buy up large numbers of domain names as properties to allow customized

18 branding for the different services they provide. [Fact No. 55]. Even Plaintiff admits he uses

19 multiple emails with different domain names for different purposes. [Fact No. 56]. SB does not

20 deny it used multiple domain names. [Fact No. 57]. SB did not attempt to veil its identity in its use

21 of multiple domain names, as it did not use domain names that it did not own. [Fact No. 58]. SB’s

22 servers did not alter or falsely identify those domain names in the transmission of the EMAILS.

23 [Fact No. 59]. To the extent that SB used multiple domain names, all such uses were authorized by

24 the governance mechanisms of the Internet. [Fact No. 60].

25 • The Use Of Multiple IP Addresses.

26 Dr. Cohen also concludes that SB did not forge any IP address, violate any Internet

27 governance rule or alter or modify any IP address. [Fact No. 61]. Multiple IP addresses are used

28 -14-

DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 by the vast majority of large Internet Service Providers and other businesses to assure availability

2 of services, and the use of multiple IP addresses is advised in the computer security arena. [Fact

3 No. 62]. Most large enterprises use multiple IP addresses as part of their normal procedures to

4 ensure reliable and continuous Internet communication capability. [Fact No. 63]. In Dr. Cohen’s

5 opinion, using multiple IP is a reasonable and prudent practice, and is not deceptive. [Fact No. 64].

6 In fact, California courts use multiple IP addresses to send email as does Plaintiff’s own ISP,

7 Yahoo. [Fact No. 65]. It is undisputed that all of the P addresses used in the 3,954 emails at issue

8 in this litigation that were sent by SB were properly assigned to SB. [Fact No. 66].

9 • Email Routing Information.

10 Here, Plaintiff claims that the email routing information is forged, but as shown in Dr.

z Cohen’s comprehensive report, however, Plaintiff’s claim is technologically unsound. [Fact No.

12 67]. No claim under Section 17529.5 can proceed based upon Plaintiff’s email routing information

- 13 allegations. Plaintiff lacks the technological expertise to make such a claim, and no substantial

14 evidence supports it.a U

15 Dr. Cohen has concluded that SB has not altered the headers in the EMAILS. [Fact No.Q

16 68]. In fact, the HELO header information, included in the email routing information, that Plaintiff

17 claims is false or forged is accurate information created by the sending computer. [Fact No. 69].

18 The HELO information identified by Plaintiff as being deceptive also was inserted into the

19 EMAILS by the receiving computer, Plaintiff’s ISP, not by SB. [Fact No. 70]. Additionally, this

20 email routing information, contained in the HELO line, is not normally seen by email recipients

21 and is not intended to be meaningful to human users. [Fact No. 71]. Dr. Cohen concludes that

22 Plaintiff had to specially configure his computer to receive the routing information, further

23 undermining the claim that SB engaged in deception. [Fact No. 72].

24 The “received” routing information is truthful and accurate according to the Internet

25 governance rules. [Fact No. 73]. Plaintiff asserts that the routing information violates Internet

26 governance rules, but the rules cited by Plaintiff do not govern commercial email. There also is no

27

28 -15-

DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

I basis for Plaintiffs assumption that the governance rules are mandatory or have any legal standing.

2 [Fact No. 74]. Plaintiffs theory lacks all evidentiary support.

3 • The EMAILS Did Not Accurately Identify The Sender Of The EMAIL In The “from”

4 Line.

5 So long as a party can “identify, locate, or respond to” the sender or can “investigate [an]

6 alleged violation,” the emails are not actionable because there has been no material

7 misrepresentation. Mummagraphics, 469 F.3d at 357 (finding that “if the alleged inaccuracies in a

8 message containing so many valid identifiers could be described as ‘materially false or materially

9 misleading’. . .Congress’ materiality requirement would be rendered all but meaningless.”). The

10 EMAILS did not obscure their source. [Fact No. 75]. Anyone could have read them and known

11 how to contact SB in response. In fact, Plaintiff did just that, first to demand a settlement and then

12 to initiate this lawsuit.

- 13 As explained by Dr. Cohen, SB never caused its computers to use any address or name thatU

g ‘ 14 didn’t correspond to the name or address with which the sending computer system was configured.

15 [Fact No. 76]. The names in the “from” lines were not forgeries orfraudulent, nor did they violate

16 any applicable standard or common practice. [Fact No. 77]. There is no requirement under0

17 Internet governance rules elsewhere that the “from” fields be associated with any individual and

18 the governance rules explicitly demonstrate legitimate uses in which the from lines are not so

19 associated. [Fact No. 78].

20 Plaintiff had no difficulty following links in the EMAILS and using reverse-lookup to

21 identify SB. [Fact No. 79]. SB did not use any address it did not own. [Fact No. 80]. Each

22 EMAIL clearly and conspicuously identifies SB as the source of the promotional offer and includes

23 SB’s physical address should the consumer wish to contact SB directly regarding the offer. [Fact

24 No. 81]. Additionally, SB publishes its telephone number on its website www.SB.com. [Fact No.

25 50]. There is no attempt to disguise or otherwise misrepresent SB as the sponsor of the promotion

26 or the sender of the email. [Fact No. 82]. Thus, the EMAILS are not materially “false or

27 deceptive” and Plaintiffs claim fails as a matter of law.

28 -16-

DEFENDANT SB INC.’S MEMOPANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 • The EMAILS Have Deceptive Or Misleading “subject” Lines In That The “subject” Lines

2 Do Not Accurately Describe The Goods And Services Offered, Particularly When The Goods

3 Or Services Are Advertised As “free.”

4 In order to prevail, Plaintiff must show that he was deceived by the promotional offers in

5 the EMAIL “subject” lines. To determine whether a “subject” line is deceptive, CAN-SPAM looks

6 to the Federal Trade Commission (“FTC”) consumer protection standards against deceptive

7 advertisements. 15 U.S.C. 7704(a)(2). The FTC standards for deception require proof of three

8 elements: (1) Probable, not possible deception; (2) potential deception of a consumer acting

9 reasonably in the circumstances, not just any consumer; and (3) deception that is likely to cause

10 injury to a reasonably relying consumer. Banga v. American Express Cards, 2007 WL 474182, *3,

z 11 fn.4 (E.D. Cal. 2007), citing Southwest Sunsites, Inc. v. F.T.C., 785 F.2d 1431, 1436 (9th Cir.

12 1986).

-

13 Plaintiff has not met, and cannot meet, his burden. Plaintiff did not pursue any of the offers

_ 14 in the EMAILS to see if they did, in fact, award the incentive offered in the “subject” line. [Fact

15 No. 83] .Likewise, Plaintiff did not attempt to purchase any of the goods or services offered in the

‘ 16 EMAILS and advertised in the “subject” line. [Fact No. 84]. Plaintiff admits he only investigated0 -

17 a couple of the EMAILS, not a “significant number compared to 3,900” at issue in this case. [Fact

18 No. 45]. To the contrary, he testified that he would never purchase anything in response to an

19 email advertisement. [Fact No. 85]. Plaintiff has no basis to allege that the “subject” lines are

20 untrue and no basis to assert that the subject lines will deceive reasonable consumers because

21 Plaintiff was not deceived. Moreover, as shown in SB’s evidence the EMAILS are not deceptive

22 because SB makes good on its promotional offer and has delivered $3 million in free goods to

23 consumers who fulfilled the terms of the offer.

24 E. Plaintiff’s Claims Are Barred By The Doctrine Of Res Judicata

25 Plaintiff’s claim is substantially barred by the doctrine of res judicata, California’s public

26 policy against claim splitting. The judgment in the earlier Sourceout litigation precludes Plaintiff

27 from suing on any EMAIL received prior to the date ofjudgment (or alternatively, the date of the

28 -17-DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 filing of the Sourceout complaint). This litigation reflects an improper effort to split his cause of

2 action and to obtain a double recovery. Accordingly, SB is entitled to summary adjudication as to

3 all EMAILS received prior to May 15, 2006 or, alternatively, prior to May 26, 2005. Under

4 California law, rc judicata precludes parties or their privies from relitigating a cause of action that

5 has been resolved by judgment. Intri-Plex Technologies, Inc. v. Crest Group, Inc., 499 F.3d 1048

6 (9th Cir. 2007). Res judicata promotes judicial economy because it precludes piecemeal litigation

7 by splitting a single cause of action or relitigating the same cause of action on a different legal

8 theory or for different relief. Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers

9 Cas. & Sur. Co. of America, 133 Cal. App. 4th 1319, (2005). Consequently, a plaintiff cannot sue

10 on only part of what is basically a single claim. Leksev. Municipal Court, 138 Cal. App. 3d 188,

z 11 194 (1982). Suit on any part bars later suit on the balance after judgment is entered. Id.; People v.

12 Sims, 32 Cal.3d 468, 477, fn. 6 (1982).

-

13 “California has consistently applied the ‘primary rights’ theory, under which the invasion of()

14 one primary right gives rise to a single cause of action.” Slater v. Blackwood, 15 Cal.3d 791, 795

15 (1975). Two actions constitute a single cause of action if they both affect the same primary right.

‘ 16 Branson v. Sun-Diamond Growers, 24 Cal.App.4th 327, 341 (1994). Consequently, “[i]f the facts0

17 alleged show one primary right of the plaintiff, and one wrong done by the defendant which

18 involves that right, the plaintiff has stated but a single cause of action.” Branson, 24 Cal.App.4th at

19 341 quoting Pomeroy, Code Remedies, Joinder of Causes of Action, § 349, p.533; see also

20 Federation of Hillside & Canyon Assns. v. Los Angeles, 126 Cal. App. 4th 1180, 1202 (2004).

21 Of the 3,954 emails identified in this present litigation, Plaintiff received 3,936 before the

22 Sourceout litigation was filed. [Fact No. 7]. In other words, all but jgjiteen of the EMAILS at

23 issue here were known to Plaintiff before the Sourceout case was filed. [Fact No. 8]. Moreover, of

24 those eighteen, sixteen were received before Plaintiff accepted SB’s offer of compromise and had

25 judgment entered upon it. [Fact No. 9]. Judicial economy is not served by allowing Plaintiff’s to

26 stockpile claims and file piecemeal litigation on the same claims under the same legal theories.

27 Summary adjudication should be granted as to all but two post-judgment EMAILS.

28 -18-DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES TN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, TN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 F. Plaintiff’s Claims Are Barred By The Doctrine Of Unclean Hands

2 Plaintiff is not an innocent victim. Enraptured by the prospect of millions of dollars in

3 penalty damages, Plaintiff initiated a massive California anti-spam litigation scheme to collect and

4 stockpile email advertisements for the sole purpose of extorting settlements from the senders.

5 The rule is settled in California that whenever a Plaintiff who, as actor, seeks to set judicial

6 machinery in motion and obtain some remedy but has acted in bad faith or other equitable principle

7 in his prior conduct, the court can refuse to afford the plaintiff any remedy. Lynn v. Duckel, 46

8 Cal. 2d 845, 850 (1956). The rule is codified, at least in part, in Civil Code Section 3517, “no one

9 can take advantage of his own wrong.” The unclean hands doctrine provides a defense for cases in

io both law and equity. Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal.

ii App. 2d 675,727 (1964); see also Blain v. The Doctor’s Company, 222 Cal. App. 3d 1048, 1060

12 (Cal. Ct. App. 1990) (holding the doctrine of unclean hands is also applicable in tort where “theN

13 misconduct relates directly to the controversy immediately involved [j and is of a character that itU

14 renders the plaintiff’s interests undeserving of[] protection.”)(internal citations omitted); Burton v.vU

15 Sosinsky, 203 Cal. App. 3d 562, 574 (1988).

16 Moreover, if a plaintiff is seeking recovery based on a theory of fraud, the plaintiff may notU

17 “set up” the litigation by actively seeking the harmon which the action is based. Well-settled law

18 has found that such an enterpnse negates an essential element of a fraud claim, namely actual

19 reliance. See Buckland v. Threshold Enters., Ltd., 155 Cal. App. 4th 798, 808-09 (Cal. Ct. App.

20 2007) (holding that because an individual suspected marketing to be misleading and bought

21 products solely in order to pursue litigation, that person could not establish actual reliance for

22 purposes of a fraud claim); Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939, 946-47 (S.D. Cal.

23 2007) (explaining that plaintiff could not prevail on claims based on allegations of false advertising

24 because plaintiff suspiciously filed several lawsuits shortly after purchasing goods); Laster v. T

25 Moblile, USA, Inc., 407 F. Supp. 2d 1181, 1194 (S.D. Cal. 2005) (stating that, because plaintiffs

26 did not allege that they relied upon or entered into transactions as a result of advertisements, no

27 causation could be demonstrated, nor recovery obtained); Hall v. Time Inc., 158 Cal. App. 4th 847,

28 -19-DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 855 (2008) (holding that plaintiff could not recover because he had not established causation).

2 Importantly, in California, a defense of unclean hands will not necessarily always rest on questions

3 of fact, and therefore may be appropriate before trial, such as in a motion for summary judgment or

4 a motion to strike. See Peregrine Funding, inc. v. Sheppard Mullin Richter & Hampton LLP, 133

5 Cal. App. 4th 658, 681 (Cal. Ct. App. 2005) (holding that where “a plaintiff’s own pleadings

6 contain admissions that establish a basis of an unclean hands defense, the defense may be applied

7 without a further evidentiary hearing”). Plaintiffs actions invite a finding of unclean hands and

8 this action should be dismissed as a matter of law in its entirety.

9 As discussed above, Plaintiff filed the Sourceout action and three months after accepting

10 payment on a 998 offer of compromise, filed the instant action asserting violations of the same

11 statute for 3,936 emails received before the Sourceout litigation was filed. [Fact No. 7]. PlaintiffC . . . .

? 12 configured his email service to maximize the number of emails he received and collected thoseN.c

13 emails in anticipation of filing multiple lawsuits or collecting settlement money from SB and otherLi

14 advertisers across the country. [Fact No. 86]. Plaintiff’s litigation operation is solely organized for

15 the purpose of extracting financial settlements, and he has already received settlements — in spite of

16 no actual harm — of between $100,000 and $1,000,000. To permit Plaintiff to profit from sucho

17 activity would create the worst kind of incentives and inequities.

18 IV. CONCLUSION

19 For the reasons stated herein, the Court should grant SB’s motion for summary judgment or,

20 in the alternative, summary adjudication.

21Dated: July 18, 2008

22 STROOCK & STROOCK & LAVAN LLPSTEPHEN J. NEWMAN

23 MARIAN K. SELVAGGIONATHAN L

By:___________

26 Attorneys for DefendantSubscriberBASE, INC., et al.

27

28 -20-DEFENDANT SB INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FORSUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATIONLA 51069998v2

1 PROOF OF SERVICE

2 STATE OF CALIFORNIA )) ss

3 COUNTY OF )

4 I am employed in the County of Los Angeles, State of California, over the age of eighteenyears, and not a party to the within action. My business address is: 2029 Century Park East, LosAngeles, CA 90067-3086.

On July 18, 2008, I served the foregoing document(s) described as DEFENDANT‘‘ SUBSCRIBERBASE INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN

SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR IN THE ALTERNATIVESUMMARY ADJUDICATION on the interested parties in this action as follows:

8 Timothy J. Walton John S. Worden, Esq.Walton & Roess LLP Alex P. Catalona, Esq.

9 407 South California Avenue, Suite 8 SCHIFF HARD1N LLPPalo Alto, California 94306 One Market, Spear Street Tower, 32nd Floor

10 Telephone: 650.556.8500 SanFrancisco, CA 94105Facsimile: 650.618.8687 Telephone: 415.901.8700

11 Facsimile: 415.901.8701

12 (VIA PERSONAL SERVICE By causing the document(s), in a sealed envelope, to be

13 delivered to the person(s) at the address(es) set forth above.

14(VIA U.S. MAIL) In accordance with the regular mailing collection and processingpractices of this office, with which I am readily familiar, by means of which mail is

15deposited with the United States Postal Service at Los Angeles, California that sameday in the ordinary course of business, I deposited such sealed envelope, with postage

16thereon fully prepaid, for collection and mailing on this same date following ordinarybusiness practices, addressed as set forth above.

17 (VIA E-MAIL) Based on a court order or an agreement of the parties to accept

18service by e-mail, I caused the documents to be sent to the persons at the e-mailaddresses listed in the attached Service List.

19 (VIA FACSIMILE) By causing such document to be delivered to the office of the

20- addressee via facsimile.

21 (VIA OVERNIGHT DELIVERY) By causing the document(s), in a sealed envelope,to be delivered to the office of the addressee(s) at the address(es) set forth above by

22 overnight delivery via Federal Express, or by a similar overnight delivery service.

23 I declare that I am employed in the office of a member of the bar of this court, at whosedirection the service was made.

24I declare under penalty of perjury under the h

25 true and correct.

26 Executed on July 18, 2008, at Los Angeles,

27Cecilia Dusi

28

the State of California that the above is

LA 51009356v1