Important Email Marketing Legal Decision by California Court of Appeals by Richard B. Newman, June 28, 2021 On June 21, 2021 in the matter of Greenberg et al. v. Digital Media Solutions LLC, the Court of Appeal of the State of California held that: (i) a recipient of a commercial email advertisement sent by a third party is not precluded as a matter of law from stating a cause of action under section 17529.5 against the advertiser for the third party’s failure to provide sufficient information disclosing or making traceable the third party’s own identity (in other words, a principal may be held liable for an agents’ use of misleading information in headers of unsolicited promotional emails); (ii) email recipients are not precluded as a matter of law from stating a cause of action under 17529.5 (a)(2) based on certain domain-name allegations; and (iii) the trial court correctly dismissed the recipients’ challenge made to the emails’ subject lines. ———————————————– Here, Plaintiffs Marta Greenberg, John Judge, Karen Mandel, Andrew Monroe, and Katie Van Cleave (collectively, the recipients) initiated this action in late 2018. Their complaint alleges that they received at least 282 unsolicited commercial email advertisements that advertised products sold by defendant Digital Media Solutions, LLC (DMS), which does business as Platinum Auto Warranty. The emails were not allegedly sent by DMS itself, but instead by third party “marketing partners” of DMS, including defendant Bilco Media Inc. which was alleged to be an unknown entity of an unknown organization with an unknown place of business, defendants Allan Hughes and other defendant marketing partners. The recipients sued DMS under California Business and Professions Code Section 17529.5, which makes it unlawful to advertise in commercial emails under specified circumstances. The recipients alleged that DMS contracted with these marketing partners to send email advertisements on its behalf, and these partners sent “some, if not all,” of the 282 unsolicited emails. The complaint contained one cause of action under section 17529.5, subdivision (a)(2) (subdivision (a)(2)). Specifically, the complaint alleged that the emails the recipients received contained “materially false and deceptive information” pertaining to the emails’ domain names, “From Names,” and “Subject Lines.” Domain Name Allegations As to the domain names, the complaint alleged that the 282 emails included dozens of different ones, most of which neither identified the actual sender on their faces nor were readily traceable. The complaint reproduced a “representative sample” of an email received by plaintiff Greenberg, which was purportedly sent by “Vehicle.Service.Plan@badealz.com.” The complaint alleged that “81% of the emails at issue were sent from domain names,” like badealz.com, “that were registered to defendant Bilco Media Inc., an entity that does not exist, and that claims an address at a commercial mail receiving agency without specifying the box number.” From Name Allegations As to the from names, the complaint alleged that they often consisted of the phrase “ ‘Vehicle Service Plan,’ which was generic text that misrepresented whom the spam was really from.” Other times, the from names consisted of the similarly generic phrase of “Vehicle Protection Info.” According to the complaint, the emails “did not identify the sender in their bodies, so the only way a recipient could even attempt to identify the marketing partner responsible for the spam was to click on a link contained in the spam or search the source code of the email.” Subject Line Allegations Finally, as to the subject lines, the complaint alleged that they contained “falsified and/or misrepresented information.” The subject line of the sample email to Greenberg included her email address as follows: “[username]@yahoo.com, please confirm your extended warranty plan.” According to the complaint, subject lines containing the recipient’s email address and referring to an existing warranty plan “falsely referenced a preexisting business relationship that does not in fact exist, for the purpose of inducing the recipient into believing that the email was from an entity with whom the recipient has done business, which was designed to lure the recipient into clicking and opening the spam, and ultimately, sending money to” DMS. The body of the sample email stated: “Your Vehicle’s Warranty May Be Expiring Within 28 Days” “View your warranty options below and see how you can prevent car trouble from breaking your bank” “Protect yourself from costly vehicle repairs. Without protection, auto issues could lead to severe financial hardship” A box below this text read, “View Your Warranty Options Here.” This box was a hyperlink to platinumautowarranty.com, a website allegedly operated by DMS. The body of the email closed with an unsubscribe notice and the following business name and address: “Transparent Auto Warranty, 7000 W. Palmetto Park Rd. Suite 210, Boca Raton, FL 33433.” Trial Court Observations DMS objected to the complaint, arguing that the recipients could not state a claim for a violation of subdivision (a)(2) in light of Rosolowski v. Guthy-Renker (2014) 230 Cal.App.4th 1403 (Rosolowski). The trial court largely agreed. In sustaining the objection, the court noted that the bodies of the emails identified Transparent Auto Warranty, and the recipients stated they could amend the complaint to allege that DMS is the registrant and operator of transparentautowarranty.com. The court also observed that the complaint alleged a recipient could click on a hyperlink in the emails’ bodies and be taken to platinumautowarranty.com, another website registered to DMS. The court determined that the recipients therefore could not “plausibly allege that DMS attempted to conceal its identity, as the clear purpose of its e-mails, apparent from their face, was to drive traffic to its Platinum Auto Warranty website.” Although the trial court ruled that the recipients could not state a claim regarding the emails’ subject lines under subdivision (a)(2), it granted leave to amend the complaint to allege a claim that the subject lines were misleading under section 17529.5, subdivision (a)(3) (subdivision (a)(3)). After the recipients declined to amend the complaint, the court dismissed it with prejudice and entered judgment in favor of DMS. In relevant part, subdivision (a) of section 17529.5 provides that “[i]t is unlawful for any person or entity to advertise in a commercial e-mail advertisement either sent from California or sent to a California [email] address under any of the following circumstances: . . . “(2) The e-mail advertisement contains or is accompanied by falsified, misrepresented, or forged header information. . . . ; “(3) The e-mail advertisement has a subject line that a person knows would be likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message.” Thus, subdivision (a)(2) makes it illegal to advertise with email that has header information that is falsified, misrepresented, or forged, and subdivision (a)(3) makes it illegal to advertise with email that has a subject line that is reasonably likely to mislead a recipient about a material fact. If the representation in the header information or subject line is not material, its regulation is preempted by the CAN-SPAM Act. (See Kleffman v. Vonage Holdings Corp. (2010) 49 Cal.4th 334, 346 (Kleffman); Omega World Travel, Inc. v. Mummagraphics, Inc. (4th Cir. 2006) 469 F.3d 348, 355.) The trial court held that the recipients could not state a claim under subdivision (a)(2) regarding the emails’ subject lines, because that provision regulates headers, and the court concluded that headers do not include subject lines. The court determined that the language and structure of section 17529.5, as well as the Supreme Court’s analysis in Kleffman, compelled a conclusion that claims based on an email’s subject line may be cognizable under subdivision (a)(3), but not under subdivision (a)(2). At oral argument, the recipients clarified their position. In their view, the trial court erred because challenges to emails’ subject lines may be cognizable under both subdivision (a)(2) and subdivision (a)(3), depending on the nature of the challenge. They accepted that such a challenge is cognizable under subdivision (a)(3) when it alleges that a subject line contains information that “would be likely to mislead a recipient . . . about a material fact regarding the contents or subject matter of the email message.” (§ 17529.5, subd. (a)(3)). But they argued that such a challenge is also cognizable under subdivision (a)(2) when header information is “falsified, misrepresented, or forged” within the meaning of that provision, irrespective of the contents or subject matter of the email. And, according to them, “header information” under subdivision (a)(2) includes subject lines. Court of Appeal Observations Subject Lines The Court of Appeal agreed with the trial court that the recipients’ challenge to the emails’ subject lines fails under subdivision (a)(2). In arguing that “header information” under that provision includes subject lines, the recipients cited many cases from other jurisdictions that have stated or assumed that an email’s subject line is part of the email’s header. While the Court of Appeal accepted that in many contexts and cases email headers are considered to include subject lines, section 17529.5 regulates subject lines separately from headers, under subdivision (a)(3) instead of subdivision (a)(2). As Kleffman observed, “California statutes do not define either the word ‘header’ or the phrase ‘header information.’ ” But the Supreme Court did quote the CAN-SPAM Act’s definition of “header information,” which is “ ‘the source, destination, and routing information attached to an email message, including the originating domain name and originating email address, and any other information that appears in the line identifying, or purporting to identify, a person initiating the message.’ ” Thus, “header information” should be interpreted in line with the federal definition—which undisputedly does not include subjectline information. Even if challenges to emails’ subject lines could be brought under subdivision (a)(2), the court held that it would be hard pressed to conclude that the subject lines alleged in this case contained information that was both material and “falsified, misrepresented, or forged.” The court again pointed to Kleffman, which rejected the argument that subdivision (a)(2) prohibits information that is merely misleading. As the Supreme Court explained, “ ‘when different words are used in contemporaneously enacted, adjoining subdivisions of a statute, the inference is compelling that a difference in meaning was intended.’ ” Thus, “the meaning of the word ‘misrepresented’ in [subdivision (a)(2)] takes color from the other words listed in the same provision—‘falsified’ and ‘forged’—not from the distinctly different ‘likely to mislead’ language” in subdivision (a)(3). In other words, header information is not actionable under subdivision (a)(2) if it is merely “ ‘misleading’ or ‘likely to mislead.’ ” The subject lines at issue allegedly set forth the recipient’s email address followed by a comma and phrases like “Confirm Your Auto Warranty Plan Extension” or “Your Auto Warranty is Running Out!” The complaint alleged that these subject lines violated subdivision (a)(2) because they “falsely reference[d] a preexisting business relationship that does not in fact exist.” While the court accepted that these subject lines are ambiguous and arguably misleading by suggesting the recipient already has an auto warranty with the sender, it stated that is far more questionable that the statements can be considered material and “falsified, misrepresented, or forged.” To begin with, subdivision (a)(2) governs header information, which mainly concerns the source of emails. In this context, the phrase “falsified, misrepresented, or forged” more naturally addresses the falsification of existing electronic information rather than the assertion of a new misrepresentation unrelated to an email’s source. But even if the phrase addresses such assertions, it does not easily cover the subject lines alleged. A directive to confirm one’s auto warranty plan or extension does not make any affirmative factual representation whatsoever, said the Court of Appeal. And while a phrase like “Your Auto Warranty is Running Out!” is a factual statement, the Court of Appeal said that it is either technically true or immaterial. If a recipient has an auto warranty, the statement that the warranty is running out is technically true, the Court of Appeal held. And if a recipient does not have a warranty, the recipient is presumably aware of that, rendering the statement immaterial in the sense that a reasonable such recipient would not likely be influenced by it. In short, the Court of Appeal held that the trial court properly rejected the portion of the recipients’ claim challenging subject lines under subdivision (a)(2). From and Domain Names However, a closer question was presented by the recipients’ claim that the emails’ domain names and from names violated subdivision (a)(2). As previously referenced, the recipients alleged that the header information was unlawful both because the from names consisted of generic phrases like “Vehicle Service Plan” or “Vehicle Protection Info” and the domain names failed to identify the actual senders—i.e., DMS’s marketing partners—or provide enough information to make them readily traceable using a publicly available online database. Here, the court concluded that the recipients may proceed on the portion of the claim involving domain names. Applicable case law warrants consideration. Several decisions bear on the analysis, starting with Kleffman. The plaintiff in that case alleged that the defendant, through its marketing partners, sent him unsolicited email advertisements for its broadband telephone services using a variety of peculiar domain names, such as superhugeterm.com; urgrtquirkz.com; and ourgossipfrom.com. The plaintiff asserted that the defendant was liable under subdivision (a)(2) because these domain names failed to identify the true sender and reduced the likelihood that the email would be identified and blocked as spam. The Supreme Court rejected the plaintiff’s claim. It concluded that the emails “neither contained nor were accompanied by ‘falsified . . . or forged header information’ within the meaning of [subdivision (a)(2)],” because the domain names “actually exist[ed] and [were] technically accurate, literally correct, and fully traceable to [the defendant’s] marketing agents.” The plaintiff argued that even if the information was not falsified or forged, it was nonetheless “misrepresented” because the domain names’ random nature created the misleading impression that the emails were from different entities when in fact it was all from the defendant, albeit sent through its marketing agents. While the Kleffman court declined to define the full scope of the statutory phrase “ ‘misrepresented . . . header information,’ ” it held that “a single e-mail with an accurate and traceable domain name neither contains nor is accompanied by ‘misrepresented . . . header information’ within the meaning of [subdivision (a)(2)] merely because its domain name is . . . ‘random,’ ‘varied,’ ‘garbled,’ and ‘nonsensical’ when viewed in conjunction with domain names used in other e-mails. “An e-mail with an accurate and traceable domain name makes no affirmative representation or statement of fact that is false . . . [and] cannot reasonably be understood to be an implied assertion that the source of that e-mail is different from the source of another e-mail containing a different domain name.” Subsequently, email advertisements whose domain names did not identify the actual sender were not considered “readily traceable to the sender.” (Balsam v. Trancos, Inc.). Unlike the Kleffman defendant, the main defendant in Balsam was not the actual advertiser but instead a third-party Internet advertising business that advertisers paid to send offers to email addresses the third party had acquired. It was undisputed for purposes of the appeal that the third party “intentionally used only privately registered, meaningless domain names in order to prevent e-mail recipients from being able to identify it as the sender, or to contact it except by sending a blind reply e-mail to an address the [recipient] would have no way of linking to [the third party].” In affirming a posttrial judgment entered against the third party, Balsam held that “header information in a commercial e-mail is falsified or misrepresented for purposes of [subdivision (a)(2)] when it uses a sender domain name that neither identifies the actual sender on its face nor is readily traceable to the sender using a publicly available online database such as WHOIS.” There was “good reason” to conclude that “a commercial e-mailer’s deliberate use of untraceable, privately registered domain names to conceal its identity” violates subdivision (a)(2), given that each of the millions of spam sent each month “has the potential to cause harm to the recipient, ranging from mere annoyance or offense to more tangible harms such as inducing the recipient to visit Web sites that place malware or viruses on their computer, defraud them out of money, or facilitate identi[t]y theft.” Two years after Balsam, the Second District Court of Appeal decided Rosolowski. In that case, the sender of the emails at issue was the actual advertiser. The plaintiffs sued on the basis that “instead of identifying the sender as [the defendant], [the emails] indicated the sender was ‘Proactiv Special Offer,’ ‘Wen Hair Care,’ ‘Proactiv Special Bonus Deal,’ ‘Wen Healthy Hair,’ ‘Wen by Chaz Dean,’ ‘Proactiv Bonus Deal,’ ‘Proactiv Bonus Gift,’ and ‘Proactiv: Special Offer,’ which are not names or registered fictitious business names of existing entities, and are not traceable to [the defendant] via a WHOIS search.” The Second District concluded that the plaintiffs failed to state a cause of action under subdivision (a)(2), however, because “the body of the e-mails was sufficient to enable the recipient to identify . . . the sender.” As the court explained, “The e-mails were advertisements for [the defendant’s] various consumer brands. The emails provided a hyperlink to [the defendant’s] website, and provided an unsubscribe notice as well as a physical address.” Thus, the plaintiffs could not “plausibly allege that [the defendant] attempted to conceal its identity, as the clear purpose of e-mails was to drive traffic to [the defendant’s] Web site.” The court held that “a header line in a commercial e-mail advertisement does not misrepresent the identity of the sender merely because it does not identify the official name of the entity which sent the e-mail, or merely because it does not identify an entity whose domain name is traceable from an online database, provided the sender’s identity is readily ascertainable from the body of the e-mail.” With these cases in mind, the Court of Appeal consider the recipients’ allegations in the case at hand. It began by agreeing with DMS that the recipients cannot state a cause of action under subdivision (a)(2) based on the allegations that the emails’ from names consisted of generic phrases like “Vehicle Service Plan” or “Vehicle Protection Info.” The recipients contend that these generic phrases “misrepresent who[m] the spams are from.” But similar to the domain names in Kleffman, which also failed to “make clear the identity of either the sender or the merchant-advertiser on whose behalf the e-mail advertisement is sent,” such phrases “do not make any ‘representation’ regarding the e-mail’s source, either express or implied, within the common understanding of that term, so [they] cannot be said to constitute ‘misrepresented’ information within the meaning of [subdivision (a)(2)].” Moreover, as in Kleffman, the Court of Appeal stated that “a contrary conclusion would raise significant preemption problems,” given federal authority holding that the CAN-SPAM Act preempts “a state law requiring an e-mail’s ‘from’ field to include the name of the person or entity who actually sent the e-mail or who hired the sender.” The court came to a different conclusion, however, as to the allegations regarding the domain names. Similar to the facts established in Balsam, the recipients’ allegations here were that the domain names neither disclosed the senders’ identities nor provided sufficient information to trace those identities. “The circumstances in Rosolowski were “different” because the sender there was also the actual advertiser, and its identity was disclosed in the body of the email. In contrast, nothing here made the “sender’s identity readily ascertainable from the body of the e-mail[s].” The Court of Appeal stated that even assuming, without deciding, that Rosolowski correctly held that information in the body of an email may “cure” header information that would otherwise violate subdivision (a)(2), nothing in the body of the emails made the identities of DMS’s marketing partners readily ascertainable. The Court of Appeal recognized, as stated above, that a domain name is not required to explicitly state the name of the sender, and any state law so requiring would likely be preempted. But while “an e-mail with an accurate and traceable domain name makes no affirmative representation or statement of fact that is false, an e-mail with a made-up and untraceable domain name affirmatively and falsely represents the sender has no connection to [the actual sender].” The complaint here alleged that the domain names were essentially made-up and untraceable, and the Court of Appeal held that the materiality of such representations was not appropriate to resolve at the motion to dismiss stage. Particularly given Balsam’s discussion of the issue, the Court of Appeal said that it could not conclude as a matter of law that reasonable spam recipients would attach no importance to knowing or being able to trace the identity of the senders. A crucial difference between Balsam and this case is the nature of the defendants. In Balsam, the defendant was not the advertiser but a third party that sent email on the advertiser’s behalf, and it was sued for failing to identify itself sufficiently. Here, in contrast, DMS is the advertiser, and it is being sued for third-party senders’ failure to identify themselves sufficiently. But as DMS acknowledged, “[s]ection 17529.5 is specifically aimed at advertisers so that advertisers can be held liable for abuses perpetrated by their marketing agents.” (See Hypertouch, Inc. v. ValueClick, Inc. (2011) 192 Cal.App.4th 805, 820 [“by its plain terms, the statute is not limited to entities that actually send or initiate a deceptive commercial e-mail, but applies more broadly to any entity that advertises in those e-mails”]; The Court of Appeal rejected DMS’ claim that it is immune from liability based on the emails’ domain names so long as it is identified in the body of an email, and it perceived no other reason it should not be responsible for its marketing partners’ misrepresentation of their own identities. This opinion should be of interest to those that operate within the email marketing ecosystem, including brand advertisers, networks and affiliate publishers. Contact an experienced SPAM law attorney if you are interested in discussing the substantive legal considerations contained therein. Richard B. Newman is an advertising practices attorney at Hinch Newman LLP. Informational purposes only. Not legal advice. May be considered attorney advertising. Filed under: Blue Book, Featured, Revenue, Revenue Blog Tagged under: Email marketing, FTC Compliance, FTC defense attorney About the Author Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP. He is a nationally recognized FTC defense lawyer and advertising compliance attorney. He regularly provides advertising counsel and represents clients in high-profile investigations (CIDs) and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard’s practice also concentrates upon transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements.