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Spamhaus Default Upheld But Not Injunction

The Spamhaus Project waived its right to contest a default judgment concerning its designation of e360 Insight as a spammer. Based on the evidence, however, the trial court went too far in awarding e360 over $11 million in damages and entering an injunction restricting Spamhaus from designating e360 as a spammer in the future.

The Seventh Circuit found that when Spamhaus withdrew its answer in the case, it waived its right to contest the court’s jurisdiction and that the trial court properly entered a default judgment against the internet watchdog group based in the United Kingdom.

The case arose after Spamhaus placed e360 on its Register of Known Spam Operators (ROKSO), a “three-strikes list” for internet users it believes are responsible for creating and distributing spam messages. e360 is an internet marketing company in Wheeling, Illinois, that uses email to market products for other businesses. e360 brought an action against Spamhaus for tortious interference with contractual relations, tortious interference with prospective economic advantage, defamation per se and defamation per quod.

Spamhaus removed the case from state court to federal court and filed an answer. However, at a prehearing conference in federal court, the attorney for Spamhaus announced the company did not want to defend and that the attorney was withdrawing from the case. The court then granted e360’s motion for default judgment, awarded $11 million in damages and issued a permanent injunction. The $11 million award was based on e360’s affidavit.

However, the appellate court found that the affidavit contained conclusory statements on the lost value of business and provided “no information whatsoever to support a finding that such future profits were certain prior to Spamhaus’ act.” The court remanded the case for the court to take evidence on the actual loss.

The trial court prohibited Spamhaus from taking any action to block e360’s emails “unless Spamhaus can demonstrate by clear and convincing evidence that Plaintiffs have violated relevant United States law.” The appellate court found the injunction was overbroad. It found that the case involved Spamhaus posting that e360 was a spammer and was based on Spamhaus criteria, not United States law. “That the label was false when originally posted does not mean that, applying Spamhaus’ generally applicable criteria for determining what a spammer is, e360 out to be given a free pass for all time,” the appellate court wrote. “Rather, it simply means that, whatever the initial factual basis Spamhaus had used to list e360 on the ROKSO, Spamhaus may not rely on that basis in the future. If Spamhaus were to discover additional evidence that e360 meets the ROKSO criteria and subsequently were to place e360 on the ROKSO on the basis of new evidence, Spamhaus would be entitled to a separate judicial determination that this new label is in fact false and that it is liable for defamation. An injunction that bars Spamhaus from referring to e360 as a spammer prospectively, without taking account of the actual grounds for liability in this action, is not tailored to the scope of the violation.” The appellate court directed the trial court to redraft the injunction as well.

e360 Insight v. The Spamhaus Project, 7th Cir. No. 06-3779 and 06-4169, dated August 30, 2007.