SPAM Sent by Publishers Does Not Create Jurisdiction Over Digital Marketing Company

On December 18, 2014 in the matter of ZooBuh, Inc. v. Williams et al., the U.S. District Court for the District of Utah ruled that electronic mail messages sent via a company’s servers by a third party, without the latter’s knowledge, did not create minimum contacts to establish general or specific jurisdiction.

ZooBuh Inc. is a Utah company that provides email, blog and chat services to its customers.  The company purports to be a bona fide Internet Access Service as defined by the CAN-SPAM Act.  It owns all servers, routers, and switches on its network and every ZooBuh email account is registered, hosted, and serviced through ZooBuh’s hardware.

Defendant Bell Holdings, LLC d/b/a Thrive Marketing Group is a digital marketing company located in Tennessee that contracts with third party publishers to provide multi-media marketing and advertising services for clients.  As part of its business, Thrive sells and rents email lists for the purpose of email marketing.  Thrive sells these email lists based on various recipient categories, such as age, occupation, or geographic location.

ZooBuh alleged that Thrive, either directly or indirectly through its third party publishers, knowingly sent thousands, if not millions, of emails over the Internet to ZooBuh customers – some, residents of Utah – through the use of ZooBuh’s Utah-based email network, in violation of the CAN-SPAM Act.  Zoobuh alleged that the foregoing was done in an effort to generate sales leads and create email lists that it later sells.

Thrive filed a motion to dismiss for lack of jurisdiction, contending that it did not purposefully conduct any business in Utah, that it merely provided advertising content to third party publishers, that it did not approve or control any part of the email delivery process – including where the commercial emails were being sent – and that it did not work with advertisers who reside in or do business in Utah.  In short, Thrive asserted that third party publishers possessed full control over the origination, approval, content and delivery of the advertising content.

To establish sufficient contacts in support of jurisdiction, a defendant must have substantial and continuous contact with the forum state, or a defendant must have purposely directed its conduct at the forum state.  Here, neither was established.

It is well established that business dealings with a person or entity in the forum state does not always equate to “continuous and systematic” contacts.  In fact, a defendant will not necessarily be subject to jurisdiction merely because its advertisements are found in the forum state as a result of a nationwide and regional advertising campaign.  Rather, other factors must be considered, such as what percentage of nationals sales are derived from the forum state.

Both parties recognized that the use of third party publishers is a common industry practice.  Thus, based upon the evidence presented, the court held that no contacts between Thrive and Utah existed because the alleged spamming did not arise out of contacts that Thrive itself created.

The court held that Thrive did not take any direct action to send the commercial emails to customers in the forum state.   Particularly noteworthy here is the court’s conclusion that there was no evidence to support a finding of an agency relationship, at least insofar as the jurisdictional analysis, between and amongst Thrive and its third party publishers.

In other words, the court expressly refused to impute the actions of the publishers to Thrive.  “At best, Plaintiff has shown contacts with the third party publishers and Utah, but has not provided evidence of any minimum contacts between Defendant and the forum state.”

This decision is of particular importance to digital marketing agencies.  Contact an experienced SPAM defense lawyer if you are faced with a SPAM litigation or compliance matter.

Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.

Richard B. Newman
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

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