California judge blunts Internet false advertising law

LOS ANGELES (Reuters) - A California judge on Monday threw out a $45 million false advertising lawsuit against online advertising company ValueClick Inc, in a decision that defense attorneys said could blunt the most aggressive state law regulating commercial email.

Los Angeles Superior Court Judge Richard Adler granted summary judgment in favor of ValueClick, its subsidiaries and co-defendant PrimaryAds Inc in the action brought last year by Internet service provider Hypertouch Inc under a state law barring false and misleading commercial emails.

Adler ruled that Hypertouch’s claims -- that its customers were barraged by 45,000 emails containing false claims -- were preempted by the federal CAN-SPAM Act because the company had not demonstrated actual fraud or deception by the defendants.

The state law prevails where plaintiffs allege and satisfy the elements of fraud, including intent.

“Because plaintiffs cannot establish any of the traditional fraud elements for even a single asserted email, CAN-SPAM’s preemption clause mandates dismissal of (the) claims,” the judge write in an opinion filed on Monday.

Hypertouch’s attorney, Lawrence Riff of Steptoe & Johnson LLP in Los Angeles, said the issue has been addressed by federal trial courts in California, Maryland and Washington that reached differing conclusions concerning preemption of state anti-spam statutes.

Although Hypertouch “has taken no firm decision as to its next steps, I expect and look forward to seeking appellate review in the California court of appeal.”

“It is important to the people of California that the law be clarified,” Riff said. “Judge Adler’s carefully considered decision provides an excellent record for appellate review.”

ValueClick’s attorneys, Kevin Rosen and Ashlie Berenger of Gibson Dunn & Crutcher in Los Angeles, said the ruling, believed to be the first by a California court on anti-spam preemption, would be significant for commercial advertisers and companies that facilitate advertising across the nation.

“The California statute has the most aggressive damages scheme of any state statute in the country ... and that’s why plaintiffs have been focusing primarily on bringing claims (here),” Berenger said.

Hypertouch had accused the defendants of “using spam email ads with fraudulent and misleading headers, often to randomly generated, harvested or stolen email addresses.”

The case was Hypertouch v. ValueClick, LC081000, in Los Angeles Superior Court.

Reporting by Gina Keating; Editing by Richard Chang