In Facebook's seven count complaint against Defendant MaxBounty Inc. for its allegedly fraudulent advertising scheme aimed at Facebook users, the social networking giant defeated MaxBounty's motion to dismiss Facebook's claim under the CAN-SPAM Act by successfully arguing that the fake advertising pages posted by MaxBounty on the social networking site constituted "electronic mail messages" under the Act. Facebook, Inc. v. MaxBounty, Inc., No. CV-10-4712-JF, 2011 WL 1120046 (N.D. Cal. Mar. 28, 2011). The District Court for the Northern District of California held that Facebook sufficiently pled its claim under 15 U.S.C. § 7701 ("CAN-SPAM Act"), thereby adopting Congress' broad interpretation of the term "electronic mail message."
MaxBounty is an advertising and marketing company that facilitates companies' advertisements on various websites using a "cost-per-action" model, in which the company pays for any traffic MaxBounty routes to its website. Facebook alleged that MaxBounty created sham Facebook pages that re-directed its users to third-party commercial sites under the guise of a false promise of a "free gift" if the user completed a short registration process. The registration process required the user to, among other things, become a "fan" of the fake page and invite the user's friends to join the page. After a "successful" registration, the user was directed to a third party commercial website with the promise of receiving the "free gift." However, the external site then requires the user to complete an additional registration process to receive the promised item, which is typically an offer for memberships in subscription services.
Facebook brought suit against the company alleging several counts, including violation of the CAN-SPAM Act, which prohibits "the transmission . . . of a commercial electronic mail message . . . that contains . . . information that is materially false or materially misleading." Arguing that its advertisements posted on Facebook are not covered by the definition of "electronic mail messages," MaxBounty filed a motion to dismiss the count pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted.
Under the Act, an "electronic mail message" is defined as "a message that is sent to a unique electronic mail address." Citing two analogous cases involving MySpace scams, the Court noted that "a broad interpretation of the CAN-SPAN Act 'supports the stated purpose of the Act, namely, curtailing the rapid and detrimental growth of commercial electronic mail that has overburdened electronic mail systems." In both MySpace cases, the courts concluded that "electronic mail addresses" can include "alternate forms" of communications, particularly in light of the fact that "Congress was aware of 'various forms of electronic communications when it drafted the Act.'" Adopting this approach, the Court reasoned that in order for the false Facebook pages to be considered "electronic mail messages," it must be shown that they were "sent to a unique electronic mail address."
Applying this framework to MaxBounty's advertising scheme, the Court reasoned that when a user becomes a "fan" of a page or invites all of his/her "friends" to view the advertiser's fake page, such actions transmit the page to the user's wall, news feed, home page, Facebook inbox, and external e-mail address. Because this process involves routing activity by Facebook, it "necessarily implicates issues regarding volume and traffic utilization of infrastructure-issues which CAN-SPAM seeks to address." The Court concluded by finding that the MaxBounty communications fell within the definition of "electronic messages," a result "consistent with the intent of Congress to mitigate the number of misleading commercial communications that overburden infrastructure of the internet." Accordingly, the Court held that Facebook sufficiently stated a claim for relief with respect to its CAN-SPAM Act claim.
Facebook's common law fraud and conspiracy claims however did not fare as well as its CAN-SPAM claim. The Court granted MaxBounty's motion to dismiss with respect to both counts, finding that Facebook failed to plead such claims with particularity as required under Fed. R. Civ. P. 9(b). In doing so, the Court noted that Facebook failed to allege "facts concerning who at MaxBounty had knowledge of the alleged scheme, what those individuals knew, or how MaxBounty contributed to the alleged fraud." Similarly, the Court held that Facebook's "conclusory allegations" of conspiracy fell short of its heightened pleading requirement, but granted Facebook leave to amend both counts.
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