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03 Sep 2007
The Seventh Circuit has issued its opinion in the continuing saga of E360 Insight vs. the Spamhaus Project. While it is not a complete victory for Spamhaus, they did about as well as anyone could have hoped for under the circumstances. E360 won on the procedural issue, while Spamhaus won on the substance.
The procedural issue was whether the default judgement against Spamhaus was properly granted last September. The court session was so odd that the appeals decision quotes several pages of the transcript. Spamhaus got some dreadful legal advice, and their lawyers simply withdrew from the case in the middle of a hearing, at which point the judge, seeing no further opposition, granted the default judgement that E360 had already asked for. Spamhaus in their appeal offered a variety of arguments that they hadn't been properly served and other technical defects, but the judge's position, affirmed by the appeals court, was that Spamhaus' lawyers were in court, they knew what the judge was going to do because he told them (it's in the quoted part of the transcript), so tough, they waived their defenses when they walked out so the default stands.
Then the appeals court considered the amount of the judgement, $11 million, based on affidavits from E360's David Linhardt that he would have gotten that much business if not for Spamhaus' listing. After citing some precedents, the court threw out the entire $11 million in a few sentences, noting that his affidavit says nothing
about the status of his relationship with those businesses before e360 was listed on the ROKSO. That is, the affidavit claims profit loss in absolute numbers, but provides no information whatsoever to support a finding that such future profits were certain prior to Spamhaus' act.
They remind the trial court that an award requires a standard of "reasonable certainty", not a mere assertion by the plaintiff.
Finally, they turn to the injunction, which they take to pieces.
On its face, the relief awarded does not bear a legitimate relationship to the facts necessary to support the entry of a default judgment.
The court was supposed to accept the claims in the complaint as true, since Spamhaus defaulted, but those only claim that the initial listing was false. Should E360 keep spamming, Spamhaus is entitled to re-list them. Similarly, the requirement that Spamhaus continuously post a notice that E360 is not a spammer is flawed. Futhermore, the injunction says that Spamhaus can only re-list E360 if E360 has violated CAN SPAM, but the appeals court correctly observed that was never Spamhaus' criterion in the past, and the court has no business making it their criterion in the future. They conclude by noting that the injunction probably has First Amendment problems, but since there's already more than enough grounds to vacate the injunction, they don't need to address them. Rather than trying to fix the injunction's problems, they sent it back to the trial court with instructions to start over.
By my reading this is as close to a complete victory as Spamhaus could have hoped for. There was no chance the appeals court would throw out the default, since that would have been an invitation to every losing defendant in the midwest to tell their lawyers to withdraw so they could start the case over again. Beyond that, E360 now has no damages and no injunction, and a steep hill to climb to get either of them back.
To get damages, E360 will have to document their lost income, which I expect would mean they'd have to get affidavits from third parties saying (under penalty of perjury) that they were about to sign a million dollar contract for E360 to do their mail blasting until those Spamhaus meanies interfered. That seems unlikely, considering how reluctant E360 has been in the past year even to disclose who their actual customers are, in complaints that Spamhaus is blocking them in violation of the now-voided injunction.
As I read the decision, the only injunction that E360 is entitled to at this point is one forbidding Spamhaus from saying that E360 was spamming in September 2006. (Well, OK.) If they have been spamming since then, which I happen to know they have since they've sent quite a lot of it to users on my network, Spamhaus is free to re-list them, and any plausible injunction forbidding that would fail as prior restraint.
Judge Kocoras certainly had reason to be fed up with Spamhaus last September, but the appeals court quite strongly reminded him that even so, he has to follow the law, and he did not. Now that this case is on the appeals court's radar, we can be sure that next time, he'll be very, very careful to craft decisions that will stand up on appeal.
It'll be interesting to see what E360 does next. I wouldn't be astonished if they just gave up. The facts they'd need to reinstate the damages are unlikely to be available, and even if he came up with some basis for an ongoing injunction, there's a whole round of First Amendment challenges that hasn't even started yet.
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