FACEBOOK, INC. v. POWER VENTURES, INC. Case No. 08-CV-5780-LHK.
FACEBOOK, INC., Plaintiff, v. POWER VENTURES, INC., a Cayman Island corporation, and STEVE VACHANI, an individual, Defendants.
United States District Court, N.D. California, San Jose Division.
September 25, 2013.
ORDER DENYING LEAVE TO FILE MOTION FOR RECONSIDERATION, FINDING DEFENDANT STEVEN VACHANI LIABLE AS A MATTER OF LAW, AND GRANTING DAMAGES AND PERMANENT INJUNCTIVE RELIEF
LUCY H. KOH, District Judge.
Defendant Power Ventures, Inc. ("Power Ventures") and Defendant Steve Vachani ("Vachani") (collectively, "Defendants") request leave to file a motion for reconsideration of the February 16, 2012 summary judgment order issued by Judge James Ware. Plaintiff, Facebook, Inc. moves for statutory and compensatory damages, permanent injunctive relief, and a grant of summary judgment holding that Vachani is personally liable for violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM Act"), 15 U.S.C § 7701; the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030; and California Penal Code § 502. Pursuant to Civil Local Rule 7-1(b), the Court finds a hearing unnecessary for resolution of these matters and accordingly VACATES the hearing and case management conference set for September 26, 2013. Having considered Defendants' papers and the record in this case, Defendants' request for leave to file a motion for reconsideration is DENIED. Plaintiff's motion for statutory and compensatory damages, motion for permanent injunctive relief, and motion for summary judgment on the issue of Vachani's personal liability are GRANTED. The Court proceeds to discuss each issue in turn.
A. Factual Background
Facebook owns and operates the eponymous social networking website located at facebook.com. First Amended Complaint ("FAC") ¶ 2. Power Ventures is a corporation incorporated in the Cayman Islands and doing business in California. Answer ¶ 10. It operates the website www.power.com, which offers to integrate users' various social media accounts into a single experience. FAC ¶ 5; Answer ¶ 5. Vachani is the Chief Executive Officer of power.com. Answer ¶ 11.
Facebook brought this action against Defendants in December 2008, alleging violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM Act"), 15 U.S.C § 7701; the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030; California Penal Code § 502; and the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 1201; copyright infringement under 17 U.S.C. § 101; trademark infringement under 15 U.S.C. §§ 1114 and 1125(a) and California law; and violations of California Business and Professions Code Section 17200. ECF Nos. 1, 9. Facebook complains that Defendants employ Facebook's proprietary data without its permission by inducing Facebook users to provide their login information and then using that information to "scrape" Facebook's proprietary material. FAC ¶¶ 49, 50, 52. Defendants then display Facebook's material on power.com. FAC ¶ 52. Facebook asserts that it never gave Defendants permission to use its material in this way. FAC ¶ 54.
Facebook also accuses Defendants of sending unsolicited and deceptive email messages to Facebook users. FAC ¶¶ 65-69. To launch their site, Defendants promised power.com users a chance to win $100 if they invited and signed up the most new users to Defendants' site. FAC ¶ 65. Defendants provided to their users a list of the users' Facebook friends from which the users could choose people to whom to send the invitation. FAC ¶ 66. Power.com sent unsolicited commercial emails to those friends that included on the "from" line a "@facebookmail.com" address. FAC ¶¶ 66, 68. The content of the message included a line that the message was from "The Facebook Team." FAC ¶ 69, 70. Facebook contends that it never gave permission to send these messages and that the emails were deceptive because they "do not properly identify the initiators of the messages, nor do they provide clear or conspicuous notice that the messages are advertisements for" power.com. FAC ¶ 71.
On February 18, 2011, Judge Ware granted the parties' stipulation to dismiss Facebook's DMCA claim, copyright and trademark infringement claims, and claims for violations of California Business and Professions Code Section 17200. ECF No. 97. On May 9, 2011, Defendants moved for summary judgment on Facebook's CFAA, Section 502, and CAN-SPAM Act claims. ECF No. 98. On November 17, 2011, Facebook moved for summary judgment on Facebook's § 502 and CFAA claims. ECF No. 214 ("§ 502/CFAA Motion"). On November 18, 2011, Facebook moved for summary judgment on Facebook's CAN-SPAM Act claim. ECF No. 215 ("CAN-SPAM Motion"). On February 16, 2012, Judge Ware issued an order denying Defendants' motion for summary judgment and granting summary judgment in Facebook's favor as to Facebook's § 502, CFAA, and CAN-SPAM Act claims. ECF No. 275 ("February 16 order").
In the February 16 order, Judge Ware requested additional briefing regarding Vachani's individual liability and the amount of damages Facebook should receive in light of the February 16 order. Id. at 19. On March 30, 2012, Facebook filed its supplemental brief regarding damages and the liability of Vachani. ECF No. 299 ("Facebook Damages/Liability Brief"). The same day, Defendants lodged with the court a brief regarding damages and the liability of Vachani. ECF No. 288 ("Defendants' Damages/Liability Brief"). On August 15, 2012, Vachani also submitted a supplemental brief regarding damages and his personal liability. ECF No. 317 ("Vachani Damages/Liability Brief").
On June 4, 2012, the attorneys representing Vachani and Power Ventures moved to withdraw as counsel. ECF Nos. 302, 303. On July 2, 2012, Judge Ware granted the motions to withdraw. ECF No. 306. In the order granting the withdrawal requests, Judge Ware required Vachani and Power Ventures to file Notices of Identification of Substitute Counsel no later than July 17, 2012. Id. Judge Ware noted that although Vachani could proceed pro se, Power Ventures had to be represented by a member of the bar pursuant to Civil L.R. 3-9(b). Id. Judge Ware cautioned Defendants that a failure to file timely Notices of Identification of Substitute Counsel may result in default of the case. Id.
On July 19, 2012, after neither Vachani nor Power Ventures had filed a Notice of Identification of Substitute Counsel, Judge Ware ordered both parties to appear on August 6, 2012 to respond to an Order to Show Cause regarding Defendants' failure to obtain counsel. ECF No. 308. On August 6, 2012, the parties appeared for the hearing, and on August 8, 2012, Judge Ware issued an order regarding Defendants' failure to obtain counsel ("August 8 order"). ECF No. 313. Because Power Ventures had failed to identify replacement counsel, Judge Ware found good cause to strike Power Ventures' answer to Facebook's complaint and enter default against Power Ventures. Id. Judge Ware permitted Vachani a short extension to find new counsel, which was conditioned on Vachani's immediate filing of a Notice of Self-Representation. Id. The Clerk entered default against Power Ventures on August 9, 2012. ECF No. 314.
On August 15, 2012, new counsel filed a Notice of Appearance on behalf of Power Ventures. ECF No. 316. That same day, Power Ventures moved for leave to file a motion for reconsideration of Judge Ware's August 8 order requiring entry of default against Power Ventures. ECF No. 318. Judge Ware gave Power Ventures leave to file the motion for reconsideration on August 21, 2012. ECF No. 320. On August 23, 2012, Power Ventures filed its motion for reconsideration. ECF No. 321. On August 27, 2012, Facebook filed its response and simultaneously requested entry of default judgment against Power Ventures. ECF No. 322.
On August 27, 2012, Defendants provided notice that both Power Ventures and Vachani had filed for bankruptcy. ECF Nos. 323, 324. Noting that pursuant to 11 U.S.C. § 362(a)(1), a voluntary petition for bankruptcy operates as an automatic stay of any judicial actions involving the petitioners, Judge Ware stayed the proceedings and administratively closed the case on August 29, 2012. ECF No. 325. In the same order, Judge Ware denied as premature Power Ventures' motion for reconsideration of the August 8 order requiring entry of default. Id.
On March 20, 2013, Facebook notified the Court that the Bankruptcy Court had dismissed Power Ventures' bankruptcy case and had granted Facebook's request for relief from the automatic stay in Vachani's bankruptcy case. ECF No. 327. Facebook sought to reopen the case. Id. Facebook also sought reassignment to a new judge because on August 31, 2012, while the automatic stay was in effect, Judge Ware resigned from the bench. Id. On April 8, 2013, the undersigned judge, as the Duty Judge at the time Facebook filed its motion, granted Facebook's request. ECF No. 328. The undersigned judge ordered that the stay be lifted, the case be reopened, and the case be reassigned. Id. The case then was reassigned to the undersigned judge. ECF No. 329.
On April 25, 2013, Vachani moved for clarification of the February 16 order regarding whether Vachani's liability had been determined in the February 16 order. ECF No. 332. On April 29, 2013, Facebook filed a case management statement in which Facebook again requested that default judgment be entered against Power Ventures. ECF No. 333. On the same day, Defendants filed a consolidated case management statement in which Power Ventures again sought to set aside default. ECF No. 334. Defendants also stated their intent to request leave to file a motion for reconsideration of the February 16 order. Id. In Facebook's and Defendants' respective case management statements, the parties acknowledged that Vachani's liability and the issues of damages and injunctive relief still need to be addressed. ECF No. 333, 334.
On May 2, 2013, following a case management conference, the Court issued a case management order. ECF No. 340. In that order, the Court clarified that the February 16 order did not decide Vachani's liability. Id. The Court granted Power Ventures' request to set aside default and denied Facebook's request for entry of default judgment against Power Ventures. Id. The Court also set a briefing schedule for the damages and injunctive relief issues. Id. The Court set a hearing date of September 26, 2013 to consider Vachani's liability, as well as the remedies issues. Id.
On August 1, 2013, Power Ventures filed its request for leave to file a motion to reconsider the February 16 order. ECF No. 353. On August 1, 2013, Facebook filed its supplemental memorandum in support of its request for injunctive relief. ECF No. 354 ("Facebook Injunction Brief"). On August 15, 2013, Defendants filed a response to Facebook's request for injunctive relief. ECF No. 357 ("Defendants' Inj. Opp.") On August 22, 2013, Facebook filed its reply. ECF No. 358 ("Facebook Injunction Reply").
II. LEGAL STANDARDS
A. Motion for Reconsideration
Pursuant to Civil Local Rule 7-9, "[b]efore the entry of a judgment adjudicating all of the claims and the rights and liabilities of all the parties in a case, any party may make a motion before a Judge requesting that the Judge grant the party leave to file a motion for reconsideration of any interlocutory order made by that Judge on any ground set forth in Civil L.R. 7-9(b). No party may notice a motion for reconsideration without first obtaining leave of Court to file the motion." Civil Local Rule 7-9(b) provides three grounds for reconsideration of an interlocutory order:
Rule 7-9(c) further requires that "[n]o motion for leave to file a motion for reconsideration may repeat any oral or written argument made by the applying party in support of or in opposition to the interlocutory order which the party now seeks to have reconsidered." In general, motions for reconsideration should not be frequently made or freely granted. See generally Twentieth Century-Fox Film Corp. v. Dunnahoo,
B. Summary Judgment Regarding Liability of Vachani
Summary judgment is appropriate if, viewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmoving party, there are no genuine disputed issues of material fact, and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a); Celotex v. Catrett,
The moving party has the burden of demonstrating the absence of a genuine issue of fact for trial. Celotex, 477 U.S. at 323. It "must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Companies, Inc.,
C. Permanent Injunctive Relief
A party seeking a permanent injunction must make a four-part showing: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. See eBay Inc. v. MercExchange, L.L.C.,
III. ANALYSIS OF DEFENDANTS' MOTION FOR RECONSIDERATION
Defendants proffer three grounds in support of their request for reconsideration, notably none of which arise out of a material difference in fact or law either at the time the February 16 order was issued or in the intervening period. Defendants instead assert that the February 16 order represents a "manifest failure" to consider "material facts or dispositive legal arguments which were presented" and that the order includes "conclusions of law counter to precedent controlling authorities." Mot. Recons. at 2. In support of their position, Defendants argue that (1) the February 16 order incorrectly applied the law by finding that the email messages were materially misleading; (2) the order incorrectly considered the issue of data ownership under the CFAA and § 502 claims; and (3) the order incorrectly classified Facebook's damages in determining that Facebook had standing to litigate its claims. Mot. Recons. at 3.
A. Materially Misleading Emails
Defendants argue that the February 16 order incorrectly applied the law by finding that the email messages Defendants caused to be sent to Facebook users were materially misleading. Defendants assert that the header information was not materially misleading because within the body of the email, Defendants were identified and because no one complained about being misled. Mot. Recons. at 3-4.
To establish liability under the CAN-SPAM Act, Facebook had to establish that Defendants' emails were materially misleading. 15 U.S.C. § 7704(a)(1). The Act provides that "[i]t is unlawful for any person to initiate the transmission, to a protected computer of a commercial electronic mail message . . . that contains, or is accompanied by, header information that is materially false or materially misleading." Id. The Act defines "materially" "when used with respect to false or misleading header information" to include:
15 U.S.C. § 7704(a)(6).
Defendants' arguments fail to meet the standard for reconsideration for three reasons. First, Defendants presented essentially the same arguments to Judge Ware in their opposition to Facebook's CAN-SPAM Motion. ECF No. 239. In Defendants' opposition to the CAN-SPAM Motion, Defendants asserted that the header information was not materially misleading because Facebook in fact had generated the emails and because no one complained about being misled. ECF No. 239 at 11-12. The significant overlap in the arguments alone warrants denial of Defendants' request. Moreover, to the extent Defendants failed to present these arguments in Defendants' opposition to Facebook's CAN-SPAM Motion, Defendants have provided no reason why they could not have done so at that time.
Second, Judge Ware considered Defendants' arguments in his order. In the February 16 order, Judge Ware addressed whether the "from" line in the emails rendered the emails materially misleading as required under the CAN-SPAM Act. ECF No. 275 at 13. Judge Ware also addressed Defendants' argument that the body of the email corrected any misrepresentation in the header information. Id. Judge Ware therefore did not manifestly fail to consider Defendants' legal theories or material facts.
Third, Judge Ware's consideration of Defendants' argument was not clear error. The February 16 order correctly states that a false or misleading statement is considered material if "the alteration or concealment of header information" would impair the ability of an Internet Service Provider ("ISP") or the recipient of the email to "identify, locate, or respond to a person who initiated the electronic mail message." 15 U.S.C. § 7704(a)(6). The parties did not dispute that the "from" line of the emails Defendants caused to be sent listed the address "@facebookmail.com." ECF No. 375 at 13. Judge Ware found that the "@facebookmail.com" failed to provide the recipient with an ability to identify, locate, or respond to Defendants. ECF No. 275 at 13. As a result, Judge Ware concluded that the headers were materially misleading as defined by the statute. Id. Judge Ware did not, as Defendants argue, hold that misleading header information is a per se violation of the CAN-SPAM Act.
Defendants have failed to meet their burden for leave to request reconsideration of the February 16 order on this issue.
B. Violations Under the CFAA and § 502
Defendants next argue that reconsideration of the February 16 order is warranted because Judge Ware failed to address whether the information Defendants took from Facebook had value. Mot. Default J. at 4-5. Defendants assert that a determination of value was necessary because violations under the CFAA and § 502 require a showing that the taken information had value. Id. The Court first addresses Defendants' CFAA argument.
The CFAA prohibits several types of activities involving fraud and unauthorized access to protected computers. 18 U.S.C. § 1030(a)(1)-(7). The CFAA provides a civil cause of action for a violation of any of its provisions. Specifically, the CFAA provides that "[a]ny person who suffers damage or loss by reason of a violation of this section [i.e. Section 1030] may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief." 18 U.S.C. § 1030(g).
Notably, the CFAA defines "loss" and "damage" separately from the actions prohibited under the CFAA. See 18 U.S.C. § 1030(a)(1)-(7) (describing prohibited activities); § 1030(e)(8) (defining "damage"); § 1030(e)(11) (defining "loss"). The Court addresses in this section only the violations of the CFAA that serve as the basis of Facebook's CFAA cause of action and addresses the "damage or loss" requirement in Section C below.
In Facebook's § 502/CFAA Motion, Facebook alleged that Defendants had violated both 18 U.S.C. § 1030(a)(2)(C) and 18 U.S.C. § 1030(a)(4). Either violation could serve as the basis for Facebook's CFAA cause of action. Section 1030(a)(2)(C) prohibits a person from "intentionally access[ing] a computer without authorization or exceed[ing] authorized access, and thereby obtain[ing] . . . information from any protected computer." Section 1030(a)(4) meanwhile prohibits a person from:
Notably, while Section 1030(a)(4) prohibits unauthorized access to a protected computer that results in obtaining "anything of value," Section 1030(a)(2)(C) prohibits unauthorized access that results in obtaining only "information." Thus, Section 1030(a)(2)(C) does not require a showing that the taken information had value.
In the February 16 order, Judge Ware determined that Defendants had violated Section 1030(a)(2)(C). ECF No. 275 at 17-18. In his analysis, Judge Ware found that an admission by Defendants that Defendants had taken, copied, or used data from Facebook's site established that Defendants had "obtain[ed] information" from Facebook, as required to establish a violation under Section 1030(a)(2)(C). ECF No. 275 at 18. Because Judge Ware found a violation of the CFAA under Section 1030(a)(2)(C), Judge Ware did not need to address Facebook's alternative argument that Defendants had also violated Section 1030(a)(4), which would require a showing that the taken information had value. Accordingly, as Defendants correctly point out, Judge Ware in the February 16 order did not explicitly analyze whether the taken information had value. Thus, Defendants' argument is meritless. Defendants have not shown that Judge Ware manifestly failed to consider a dispositive legal argument or that Judge Ware clearly erred.
Defendants' arguments regarding § 502(c) likewise are unavailing. Section 502(c) prohibits, among other things, a person from "knowingly access[ing] and without permission tak[ing], cop[ying] or ma[king] use of any data from a computer, computer system or computer network." Cal. Penal Code § 502(c)(2). Section 502(e)(1) confers standing for a civil cause of action on an "owner or lessee of the . . . data who suffers damage or loss by reason of a violation of any of the provisions of subdivision (c)." In Section C below, the Court addresses the "damage or loss" requirement.
Judge Ware determined that Defendants' admission established that Defendants had violated § 502(c), and Judge Ware further determined that Facebook had suffered a loss as a result of that violation. ECF No. 275 at 14-15; ECF No. 89 at 8. As with Section 1030(a)(2)(C) of the CFAA, the plain language of § 502(c) does not require that any data that was taken be valuable. Defendants offered no case law in their opposition to Facebook's § 502/CFAA Motion and do not offer any case law in this motion suggesting that § 502(c) requires that the data that was taken be valuable. See ECF No. 242 at 4-5; Mot. Default. J. at 5. Thus, Defendants have not shown that Judge Ware's finding that Defendants were liable under § 502(c) reflects a manifest failure to consider a dispositive legal theory or clear error.
Defendants also include a new argument in the motion for leave to seek reconsideration that because Defendants did not destroy any information or data Defendants are not liable under the CFAA or § 502.
Defendants finally argue that Judge Ware erred in finding that Facebook had established sufficient harm to have standing under the CAN-SPAM Act, § 502, and the CFAA. Mot. Recons. at 5-6. Defendants have not made the requisite showing to justify reconsidering the February 16 order.
1. CAN-SPAM Act
To recover under the CAN-SPAM Act, Facebook had to establish that it was "adversely affected by a violation of . . . or a pattern or practice that violates" the Act. 15 U.S.C. § 7706(g)(1). In Gordon v. Virtumundo, Inc., the Ninth Circuit held that to be "adversely affected" under the CAN-SPAM Act, an ISP must experience harm that is "both real and the type experienced by ISPs."
In this motion, Defendants argue that Facebook's harm evidence fails to meet the standard under Gordon. Defendants' argument, however, is recycled from the argument Defendants made before Judge Ware in opposition to Facebook's CAN-SPAM Motion. In their opposition to the CAN-SPAM Motion, Defendants argued that under Gordon Facebook's claimed injuries do not give rise to standing under the statute. ECF No. 239 at 14-15. Defendants repeat that argument in this motion. Accordingly, Defendants have not established that leave for reconsideration is warranted.
The Court further finds that Judge Ware considered Defendants' argument in the February 16 order. In his order, Judge Ware addressed Gordon and concluded that Facebook's evidence of costs incurred as a result of investigating Defendants' unauthorized access and the legal fees incurred in trying to stop Defendants' unauthorized access sufficed to confer standing on Facebook under the CAN-SPAM Act. ECF No. 275 at 8-9. The analysis of Gordon and Facebook's evidence in the February 16 order precludes any claim by Defendants that Judge Ware manifestly failed to address either material facts or legal arguments. See id.
There is no clear error or manifest injustice in Judge Ware's analysis. The February 16 order describes how Facebook's evidence of injury from having to address Defendants' unauthorized access amounts to the type of specialized harm against which the CAN-SPAM Act protects. ECF No. 275 at 7-8. Gordon advises that "the threshold of standing should not pose a high bar for the legitimate service operations contemplated by Congress" in instituting the CAN-SPAM Act, and so for "well-recognized ISPs or plainly legitimate [ISPs] . . . adequate harm might be presumed." 575 F.3d at 1055. In light of that advice, the Court finds no clear error or manifest injustice in Judge Ware's holding.
2. CFAA and § 502
In this motion, Defendants argue that the costs Facebook incurred from investigating Defendants' actions and having Facebook's attorneys respond to Defendants' activities are insufficient to show harm under the CFAA and § 502.
The CFAA defines "loss" as:
18 U.S.C. § 1030(e)(11).
§ 502(e)(1) in turn provides that:
§ 502 does not further define "loss."
Defendants' argument in support of its request for leave to move for reconsideration is unavailing. First, Defendants raised this argument in the opposition to Facebook's § 502/CFAA Motion. ECF No. 242 at 11. To the extent Defendants repeat arguments from their opposition to the § 502/CFAA Motion, Defendants have not established grounds for seeking reconsideration. Defendants add new case law in this motion, but Defendants offer no reasons why they did not or could not present these decisions in Defendants' opposition to Facebook's § 502/CFAA Motion.
Second, Judge Ware addressed Defendants' arguments regarding harm under the CFAA and § 502. Judge Ware specifically determined that the costs Facebook incurred to block Defendants from the site, to investigate Defendants' activities, and to have its attorneys attempt to stop Defendants from continuing the activities were sufficient to establish loss under the CFAA and § 502. ECF No. 275 at 18; ECF No. 89 at 8. Defendants therefore cannot assert that the order reflects a manifest failure to consider either material facts or dispositive legal arguments.
Third, the Court finds no manifest injustice or clear error in the February 16 order regarding Facebook's "loss" under the CFAA or § 502. Given that the CFAA explicitly identifies the "cost of responding to an offense" and "conducting a damage assessment" as types of losses for which the CFAA confers standing, the Court finds no clear error in Judge Ware's determination that Facebook's costs meet the definition of "loss" provided by the CFAA. See Multiven, Inc. v. Cisco Sys., Inc.,
The Court further finds no manifest injustice or clear error in the February 16 order based on Defendants' late-added case law. See AtPac, Inc. v. Aptitude Solutions, Inc.,
Defendants have not established that leave to request reconsideration of the February 16 order is warranted.
IV. STEVEN VACHANI'S PERSONAL LIABILITY FOR VIOLATIONS OF THE CAN-SPAM ACT, CFAA, AND CALIFORNIA PENAL CODE § 502
The next issue before the Court is whether there is a genuine issue of material fact as to whether Defendant Steve Vachani, who was CEO of Power Ventures during the time period in question, is personally liable for statutory violations of the CAN-SPAM Act, CFAA, and California Penal Code § 502. For the reasons explained below, the Court concludes Vachani is personally liable as a matter of law and is thus jointly and severally liable with Power Ventures for violations of these statutory provisions.
Before analyzing Vachani's personal liability, the Court first summarizes this Court's previous findings regarding the precise conduct by Power Ventures that led to Judge Ware's finding of Power Venture's liability under the CAN-SPAM Act, CFAA, and California Penal Code § 502. See ECF No. 275. The Court first held that Power Ventures, by creating the Launch Promotion and the software that caused Facebook's servers to send out the misleading emails with "@facebookmail.com" addresses to Facebook users, violated the provision of the CAN-SPAM Act which makes it unlawful "for any person to initiate the transmission, to a protected computer, of a commercial electronic mail message, or a transactional or relationship message, that contains, or is accompanied by, header information that is materially false or misleading," 15 U.S.C. § 7704(a)(1). ECF No. 275 at 9-14. Second, the Court held that Power Ventures, by intentionally circumventing technical barriers to take, copy, or make use of data from the Facebook website without permission, violated California Penal Code § 502, which provides that a person is guilty of a public offense if he (1) knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network; (2) knowingly and without permission uses or causes to be used computer services; or (3) knowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network. California Penal Code §§ 502(c)(2)(3) & (7). ECF No. 275 at 14-17. Third, the Court held that Power Ventures, by accessing Facebook without authorization, and obtaining information from the Facebook website, violated the provision of CFAA that imposes liability on any party that "intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains . . . information from any protected computer," 18 U.S.C. § 1030(a)(2)(C). ECF No. 275 at 17-19.
The Court must decide whether Vachani should be held personally liable for violating these statutory provisions. The Ninth Circuit has held that "a corporate officer or director is, in general, personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf." Comm. for Idaho's High Desert, Inc. v. Yost,
In this case, the Court must assess whether there is a genuine issue of material fact as to whether Vachani directed and authorized the specific activities giving rise to Power Ventures' liability to a degree that reflects more than simply his supervisory role as CEO of the company. More specifically, the Court assesses whether he was a "guiding spirit" or "central figure" in Power Venture's unlawful access to and use of the Facebook website.
First, with respect to the creation of the Launch Promotion
Second, with respect to Power Venture's circumvention of Facebook's technical barriers to take, copy, or make use of data from the Facebook website without permission, the undisputed facts show that Vachani anticipated Facebook's attempts to block Power Venture's access and oversaw the implementation of a system that would be immune to such technical barriers so that Power Ventures could access Facebook's network. Vachani admitted that he directed the company's decision to circumvent Facebook's blocks of Power Venture's IP addresses. ECF No. 299-3 at 6-7 (Vachani deposition in which he admits he "was the person making the executive decision . . . to ensure that Facebook could not block Power.com"); ECF No. 299-3 at 28-29 (Vachani deposition admitting he controlled and directed employees' activities related to ensuring that Power Ventures continued to have access to Facebook); see also ECF No. 232-2 at 5-6 (Power Venture's Response to Interrogatories noting that Vachani was the "director responsible for developing the technology to allow Power or Power users to continue to access the Facebook website following Facebook's IP blocking"). There is also other evidence that Vachani instructed employees to circumvent the blocks he anticipated. ECF No. 236-6 at 2 (Email from Vachani to staff members stating that "we need to be prepared for Facebook to try and block us . . ."); ECF No. 299-5 at 2 (Email from Vachani to employee noting, "please just make sure they cannot block us").
Third, with respect to obtaining information from the Facebook website without authorization, Defendants admitted that they "took, copied, or made use of data from the Facebook website without Facebook's permission to do so." ECF No. 241-3 at 6 (Defendants' Reponses to Interrogatories). Vachani's admission that he controlled and directed "the activities related to the use of the Power 100 campaign in conjunction with Facebook users," ECF No. 299-3 at 27, suffices to show that there is no genuine dispute regarding whether he led the company's quest to obtain proprietary Facebook information, as that information was a necessary ingredient to the Power 100 Campaign. Ultimately, the Court concludes that these uncontroverted facts demonstrate Vachani was the "guiding spirit" behind Power Venture's efforts to send the misleading spam emails to Facebook users, and thus should be held personally liable.
Defendants' arguments to the contrary are unpersuasive. First, Defendants concede that corporate officers may be held liable for torts they authorize or direct, see Defendants' Damages/Liability Brief at 4-5, but claim that "corporate executives like Vachani cannot be held liable merely by virtue of their office for the torts of the corporation." Id. at 5. This argument neglects to take into consideration Vachani's specific acts with respect to the Power 100 Campaign that went above and beyond his merely advisory role as CEO of the company. Second, Defendants note that "there is no precedent for holding a CEO liable in this type of computer fraud and tort action where the CEO is not the exclusive owner or director . . ." Defendants' Inj. Opp. at 6. Vachani himself similarly argues he was never the sole owner, controlling shareholder, or controlling board member of Power Ventures, which he claims had six other executive officers and multiple board members who had significant influence in decision-making as well. See Vachani Damages/Liability Brief at 5-7, 15. It is true that the cases holding corporate officers personally liable for violations of CFAA, CAN-SPAM, or California Penal Code § 502 have involved factual situations in which the officer was either the sole officer or a majority shareholder of the company or some combination of both. F.T.C. v. Sili Neutraceauticals, L.L.C., No. 07-C-4541, 2008 WL 474116, at *3 (N.D. Ill. Jan. 23, 2008) (finding that sole officer of defendant corporation who formulated, directed, and controlled the acts giving rise to CAN-SPAM liability by the corporation was individually liable under CAN-SPAM); Facebook v. Fisher, No. C 09-05842, 2011 WL 250395 (N.D. Cal. Jan. 26, 2011) (finding that sole officer of defendant corporation who conducted the acts giving rise to CAN-SPAM and CFAA liability by the corporation was individually liable under CAN-SPAM and CFAA); Hanger Prosthetics &Orthotics, Inc., v. Capstone Orthopedic Inc.,
In its memorandum in support of its request for injunctive relief, Facebook expressly waives its entitlement to attorneys' fees under the CFAA and its right to exemplary damages under California Penal Code § 502. Facebook Inj. Brief at 2.
A. Facebook is entitled to damages under the CAN-SPAM ACT
Under the CAN-SPAM Act, a plaintiff may elect to recover monetary damages in an amount equal to the greater of actual losses or statutory damages. 15 U.S.C. § 7706(g)(1)(B). Facebook elects to recover statutory damages. It is well established that "[a] plaintiff may elect statutory damages regardless of the adequacy of the evidence offered as to his actual damages and the amount of the defendant's profits . . . and if statutory damages are elected, the court has wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima." Facebook v. Wallace, No. 09-798, 2009 WL 3617789, at *2 (N.D. Cal. Oct. 29, 2009) (citation omitted) (internal quotations omitted). However, a statutory damages award may violate the due process rights of a defendant "where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable." United States v. Citrin,
CAN-SPAM Act statutory damages are calculated as follows:
15 U.S.C. § 7706(g)(3).
In this case, Facebook seeks to recover statutory damages pursuant to 15 U.S.C. §x7706(g)(3)(A)(i), which are calculated by multiplying the number of Header violations by up to $100.
In light of this evidence, the Court finds that a statutory damages award is warranted in this case. While Defendants argue that the Court should not award any damages under the CAN-SPAM Act because Facebook did not suffer "any specific harm" as a result of the email messages, citing Gordon v. Virtumundo Inc.,
The Court also finds trebling unnecessary given the large size of the primary award amount. This finding is consistent with past cases where, despite defendants' willful and knowing violation of the statutes in question, courts refused to treble damages. See Fisher, 2011 WL 250395 (holding that although defendants willfully and knowingly violated the statutes by engaging in the circumvention of Facebook's security measures, the requested maximum statutory award was disproportionate to the gravity of defendants' acts, and thus the court awarded plaintiffs $50 per violation and declined to treble damages); Wallace, 2009 WL 3617789 at *2 (holding that although defendant "willfully violated the statutes in question with blatant disregard for the rights of Facebook and the thousands of Facebook users whose accounts were compromised by his conduct," and even violated a temporary restraining order and preliminary injunction, the requested maximum statutory award was not merited and the court awarded plaintiffs $50 per violation and declined to treble damages); Tagged, 2010 WL 370331 (awarding $25 for each of 6,079 spam emails for a total amount of $151,975 and declining to treble damages because although defendant's violations were allegedly intentional and willful, a $2,000,000 award was not justified).
B. Facebook is entitled to compensatory damages under the CFAA
Under the CFAA, "[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief." 18 U.S.C. § 1030(g) (emphasis added). This Court previously held that Facebook suffered "loss" as a result of Defendants' violation of CFAA. ECF No. 275 at 18. Facebook is thus entitled to recover compensatory damages under the statute. Facebook has established through undisputed testimony
VI. PERMANENT INJUNCTIVE RELIEF
Facebook moves for permanent injunctive relief to prevent future statutory violations by Defendants Vachani and Power Ventures. The CAN-SPAM Act authorizes the Court to grant a permanent injunction "to enjoin further violation by the defendant." 15 U.S.C. § 7706(g)(1)(A). Likewise, the CFAA provides that "[a]ny person who suffers damage or loss by reason of a violation of [§1030] may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief." 18 U.S.C.A. § 1030(g). California Penal Code § 502 also allows a plaintiff to obtain injunctive relief. California Penal Code § 502(e)(1).
A party seeking a permanent injunction must make a four-part showing: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. See eBay Inc. v. MercExchange, L.L.C.,
A. Irreparable Harm
Facebook has shown irreparable injury as a result of Defendants' violations of the law. Judge Ware's previous order granting Facebook summary judgment cited undisputed evidence that Defendants created a software program to access Facebook's website, scraped user information from Facebook, repeatedly changed Power Venture's IP address in order to circumvent technical barriers Facebook had installed, and used that information to cause Facebook's servers to send spam emails to Facebook users with "@facebookmail.com" mailing addresses. ECF No. 275 at 9-13. These activities constituted irreparable harm by harming Facebook's goodwill with its users because Facebook users receiving these emails are likely to associate the spam messages with Facebook. ECF No. 213 at ¶¶ 4-5. Hotmail Corp. v. Van $ Money Pie Inc., 1998 U.S. Dist. LEXIS 10729, at *20-21 (N.D. Cal. Apr. 16, 1998) (holding that customer confusion from source of spam emails, which can lead to loss of goodwill, constituted irreparable harm to plaintiff); Meineke Car Care Centers, Inc. v. Quinones, 2006 WL 1549708, *3 (W.D.N.C. 2006) (finding, in preliminary injunction context, that possible loss in customers resulting from defendants' deceptive suggestion that they were associated with plaintiff constituted irreparable harm). While Defendants argue that Facebook has not produced evidence that its reputation or goodwill with its users has been damaged as a result of Defendants' activities, see Defendants' Inj. Opp. at 5, 9, Defendants cite no case law suggesting that such specific and direct evidence is needed to prove harm to goodwill. C.f. Optinrealbig.com, LLC v. Ironport Sys., Inc.,
B. Inadequacy of Money Damages
Facebook has established that "remedies available at law, such as monetary damages, are inadequate to compensate for [its] injury," eBay, 547 U.S. at 391, for three reasons. First, money damages will not ensure that Defendants will not take steps again in the future to spam Facebook users, which is a possibility. Defendants may still possess the software that enabled their illegal activities, and like in other cases in this district, Defendants also "deliberately implemented other tactics to circumvent plaintiff's security measures." Tagged, 2010 WL 370331, at *12. Defendants may even still possess Facebook-user data which they misappropriated. Because there is a "reasonable likelihood of defendant's future violations," injunctive relief is warranted. Id; Pyro Spectaculars North Inc. v. Souza,
In rebuttal, Defendants argue they never misappropriated Facebook user data. Defendants' Inj. Opp. at 8.
C. Balance of Hardships
The balance of hardships analysis also weighs in favor of granting Facebook a permanent injunction. Defendants have been found liable for violating various laws, see ECF No. 275, and while an injunction would simply serve to force their compliance with the law, see Myspace v. Wallace,
D. Public Interest
The public interest weighs in favor of an injunction as well, and courts in this district have reached this conclusion in analogous cases. See, e.g., Craigslist, Inc. v. Troopal Strategies, Inc., 2011 U.S. Dist. LEXIS 15625, at *11 (N.D. Cal. 2011) (holding injunction would be in the public interest where defendant violated CFAA). Injunctive relief would serve the public interest by preventing Defendants from impermissibly spamming Facebook users again and setting an example to members of the public who may consider violating these various statutes as well. In passing the CAN-SPAM Act, Congress recognized the burdens which commercial spam poses to the public. 15 U.S.C. § 7701(a)(2) ("The convenience and efficiency of electronic mail are threatened by the extremely rapid growth in the volume of unsolicited commercial electronic mail."). Namely, the public "is forced to incur the costs of needlessly expended energy and time evaluating and eventually discarding defendants' unsolicited messages[.]" F.T.C. v. Phoenix Avatar, LLC, 2004 WL 1746698, *14 (N.D. Ill. July 30, 2004) (enjoining defendants for violations of the CAN-SPAM Act). Because Defendants' activities fall within those activities Congress deemed detrimental to the public, this factor weighs in favor of Facebook. Defendants' arguments to the contrary are unavailing. While Defendants claim the injunction will pose "unacceptable risks for innovators" and enhancements in social networking technology, Defendants' Inj. Opp. at 11, this argument fails to recognize that the injunction will serve to deter only conduct that violates the law. The law explicitly provides for injunctive relief. Thus, to the extent that granting Facebook injunctive relief for Defendants' violations of CFAA and CAN-SPAM may have negative "impacts on innovation, competition, and the general `openness' of the internet," courts have held that it is up to Congress, not the courts, to decide whether to amend those statutes. Craigslist Inc. v. 3Taps, No. CV 12-03816 CRB, 2013 WL 4447520, at *25 (N.D. Cal. Aug. 16, 2013) ("[I]t is for Congress to weigh the significance of those consequences and decide whether amendment would be prudent.")
E. Balance of all four equitable factors
The balance of all four factors weighs strongly in favor of granting an injunction in this case. Thus, the Court grants Facebook its request for permanent injunctive relief against both Power Ventures and Vachani in his individual capacity.
1. Defendants, their agents, officers, contractors, directors, shareholders, employees, subsidiary companies or entities, affiliated or related companies and entities, assignees, and successors-in-interest, and those in active concert or participation with them, are permanently enjoined from:
A. Sending, or assisting others in the sending of, or procuring the sending of unauthorized or unsolicited commercial electronic text messages to users of the Facebook website, www.facebook.com, or via the Facebook website or service.
B. Making, or assisting others in making, any false or misleading oral or written statement or representation of material fact when advertising, promoting or selling any good or service, including, but not limited to any false or misleading statement or representation that Defendants, their representatives, or any other person is affiliated or associated with, under contract with, acting in partnership with, endorsed or approved by, or otherwise connected to Facebook or to a service offered by Facebook.
C. Accessing or using, or directing, aiding, facilitating, causing, or conspiring with others to use or access the Facebook website or servers for any purpose, without Facebook's prior permission.
D. Using any data, including without limitation Facebook-user data and data regarding Facebook's website or computer networks, obtained as a result of the unlawful conduct alleged in the operative complaint in this action.
E. Developing, using, selling, offering for sale, or distributing, or directing, aiding, or conspiring with others to develop, sell, offer for sale, or distribute, any software that allows the user to engage in the unlawful conduct alleged in the operative complaint in this action.
2. Defendants, their agents, officers, contractors, directors, shareholders, employees, subsidiary companies or entities, affiliated or related companies and entities, assignees, and successors-in-interest, and those in active concert or participation with them shall destroy any software, script(s) or code designed to access or interact with the Facebook website, Facebook users, or the Facebook service. They shall also destroy Facebook data and/or information obtained from Facebook or Facebook's users, or anything derived from such data and/or information.
3. Within three calendar days of entry of this permanent injunction and order, Defendants shall notify their current and former officers, agents, servants, employees, successors, and assigns, and any persons acting in concert or participation with them of this permanent injunction.
4. Within seven calendar days of entry of this injunction and order, Defendants shall certify in writing, under penalty of perjury, that they have complied with the provision of this order.
5. The Court shall continue to retain jurisdiction over the parties for the purpose of enforcing this injunction and order.
The Court finds Defendants have failed to set forth grounds pursuant to Civil L.R. 7-9(b) for leave to file a motion for reconsideration of Judge Ware's February 16 order. Thus, the request for leave is DENIED. The Court finds Vachani personally liable as a matter of law for violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM Act"), 15 U.S.C § 7701; the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030; and California Penal Code § 502. The Court further finds Facebook is entitled to statutory damages in the amount of $3,031,350, compensatory damages in the amount of $_____, and permanent injunctive relief as described above. The Clerk shall close the file.
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