HYPERTOUCH, INC., v.VALUECLICK, INC










Filed 1/18/11





CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

HYPERTOUCH, INC., Plaintiff and Appellant, v. VALUECLICK, INC. et al., Defendants and Respondents.

B218603 (Los Angeles County Super. Ct. No. LC081000)

APPEAL from a judgment of the Superior Court of Los Angeles County. Richard Adler, Judge. Reversed and remanded.
Steptoe & Johnson, Richard K. Willard, Lawrence P. Riaff and Lynn R. Levitan, for Plaintiff and Appellant.
Gibson, Dunn & Crutcher, Daniel M. Kolkey, Kevin Rosen and S. Ashlie Beringer, for Defendants and Respondents ValueClick Inc., E-Babylon, Inc., Hi-Speed Media, Inc., VC E-Commerce Solutions, Inc., Webclients, Inc. and Commission Junction, Inc.
Kenoff & Machtinger, and Leonard S. Machtinger, for Defendant and Respondent PrimaryAds, Inc.
_______________________

INTRODUCTION

Appellant Hypertouch, Inc. filed an action alleging that ValueClick, Inc., various ValueClick subsidiaries and PrimaryAds, Inc. (Respondents) violated Business & Professions Code section 17529.5[1], subdivision (a), which prohibits entities from advertising in a commercial electronic message that contains various types of deceptive content. Respondents moved for summary judgment, arguing that Appellant’s claims were preempted by the “Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003” (CAN-SPAM Act), 15 U.S.C. §§ 7701, et. seq. Alternatively, Respondents argued that (1) Appellant had failed to establish a triable issue of fact as to whether Respondents had violated section 17529.5, and (2) any claim predicated on an e-mail received more than one year prior to the filing of the complaint was barred by the one-year statute of limitations in Code of Civil Procedure section 340, subdivision (a).
The trial court granted summary judgment, ruling that the CAN-SPAM Act preempted Appellant’s section 17529.5 claims. Although the Act expressly exempts from preemption state laws prohibiting “falsity or deception” in commercial e-mail, the court concluded this exemption was only intended to apply to state statutes that require a plaintiff to establish each element of common law fraud. The court entered judgment dismissing the case in its entirety and awarded Respondents approximately $100,000 in costs.
On appeal, Appellant argues that the court erred in ruling that the CAN-SPAM Act preempts claims arising under section 17529.5. In addition, Appellant argues that: (1) it introduced sufficient evidence to establish a triable issue of fact as to whether Respondents violated section 17529.5; (2) section 17592.5 claims are governed by the three-year statute of limitations in Code of Civil Procedure section 338, rather than the one-year period described in section 340, subdivision (a); and (3) the trial court abused its discretion in awarding Respondents $100,000 in costs.
We reverse the trial court’s grant of summary judgment, concluding that the CAN-SPAM Act does not preempt Appellant’s claims and that Appellant has raised a triable issue of fact regarding whether Respondents violated section 17529.5.

FACTUAL AND PROCEDURAL BACKGROUND

I. Description of the Parties
A. Appellant Hypertouch, Inc.
Hypertouch, Inc. provides electronic mail service to approximately 100 customers located inside and outside of California, including internet start-up companies, corporations, charitable organizations and various people related to the President of Hypertouch, Joseph Wagner. Since its inception, Hypertouch’s customers have received “massive quantities” of unsolicited commercial e-mail, commonly referred to as “spam.” Some Hypertouch users have complained about “their spam load and the difficulties that it causes them.” Hypertouch alleges that it has been forced to spend a considerable amount of money on “hardware and software as a direct result of the yearly increasing onslaught of spam e-mails.”
B. Respondent ValueClick, Inc. and its Subsidiaries
ValueClick and its subsidiaries (collectively ValueClick) provide online marketing services to third-party advertisers who promote retail products. ValueClick contracts with these third-party advertisers to place promotional offers on websites that are owned and operated by various ValueClick entities. Consumers, in turn, can visit ValueClick’s websites and earn rewards in exchange for participating in the advertised promotional offers.
ValueClick contracts with thousands of independent “affiliates” to drive traffic to their websites through e-mail placements and other forms of advertising. The particular method “used to drive that traffic is determined by each [affiliate], in its discretion.” ValueClick provides affiliates with the creative material associated with any given promotion. The affiliates, in turn, send out commercial e-mail advertisements that include a link redirecting the consumer to a promotion on ValueClick’s websites. In many cases, the affiliates hire sub-affiliates to conduct the e-mailing. Normally, each e-mail advertisement contains a tracking code indicating the affiliate or sub-affiliate responsible for driving the consumer to ValueClick’s website. If a consumer clicks through an e-mail advertisement and participates in a promotional offer, the affiliate or sub-affiliate who sent the initial e-mail is then compensated for generating a customer “lead.”
According to ValueClick, “the identity of [affiliate’s] sub-affiliates is highly proprietary and generally not disclosed to ValueClick.” ValueClick further alleges that, as a result of its business model, it has no “knowledge of, or control over, the e-mail delivery methods or header information used by [affiliates] or their sub-affiliates.”
C. Respondent PrimaryAds, Inc.
Respondent PrimaryAds, Inc. is an online marketing service that owns and operates a private website containing creative content associated with numerous third-party promotional offers. PrimaryAds contracts with a network of independent affiliates who download advertisement materials from PrimaryAds’ website and “utilize the . . . [advertisements] in [commercial] e-mails”
“When an affiliate places downloaded creative material in an e-mail . . . [consumers] may click on a link in the e-mail,” which directs them to the PrimaryAds’s website and then immediately redirects them to the third-party advertiser’s website which contains the promotional offer.[2] PrimaryAds, in turn, tracks which affiliate is responsible for driving traffic to the third-party advertiser’s offer page. If the consumer participates in the promotional offer, a tracking link notifies PrimaryAds, and the affiliate receives a commission. PrimaryAds is compensated by the third-party advertiser each time a consumer participates in an offer.
Before providing access to its private website and allowing affiliates to e-mail its advertising materials, PrimaryAds requires each affiliate to sign a contract prohibiting it from issuing spam or violating any anti-spam laws. Like ValueClick, PrimaryAds alleges that it has “no control over the e-mail delivery methods used by affiliates.”
II. Hypertouch’s Complaint and the Trial Court Proceedings
On April 3, 2008, Hypertouch filed a complaint against ValueClick, numerous ValueClick subsidiaries, and PrimaryAds (collectively Respondents) alleging that, between April 2, 2004 and the date the action was filed, Respondents had advertised in over 45,000 e-mails received by Hypertouch customers that contained deceptive “header information” in violation of section 17529.5. The complaint also included a separate cause of action alleging Respondents had violated section 7200.
During discovery, Hypertouch produced thousands of e-mails that allegedly contained links to Respondents’ promotional offers. According to Hypertouch, each e-mail also contained one of three categories of deceptive header information that violated section 17529.5. First, Hypertouch alleged that numerous e-mails contained “falsified” header information because the “From” or “To” fields did not accurately reflect the identity of the sender or recipient of the e-mail. Second, Hypertouch alleged that the subject lines of many e-mails contained statements likely to mislead recipients into believing that they could obtain a free gift when, in fact, the gift could only be obtained by paying a fee or participating in additional promotional offers. Finally, Hypertouch alleged that some of the e-mails contained a “third-party’s domain name without the permission of the third party.”
Approximately 10 months after the case was filed, ValueClick filed a motion for summary judgment, which PrimaryAds joined. ValueClick argued that Hypertouch’s section 17529.5 claims were preempted by “the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003” (CAN-SPAM Act), 15 U.S.C. §§ 7701, et. seq., which contains a preemption clause barring any state statute “that expressly regulates the use of electronic mail to send commercial messages except any . . . statute . . . [that] prohibits falsity or deception in any portion of [an e-mail].” (15 U.S.C., § 7707, subd. (b)(1).) ValueClick argued that the exemption for state statutes prohibiting “falsity or deception” was only intended to permit state law claims based on all of the elements of common law fraud, including knowledge of falsity, intent to deceive, reliance and damages proximately caused by the misrepresentation. Respondents further argued that because Hypertouch had no evidence Respondents actually knew about the alleged e-mails or that any Hypertouch customer relied on or was harmed by the deceptive content in the e-mails, its claims were necessarily preempted. Alternatively, ValueClick argued that it was entitled to summary judgment because the allegedly “deceptive” content in the e-mails did not violate the substantive prohibitions described in section 17529.5.
PrimaryAds also filed a motion for summary judgment, which was accompanied by a motion for summary adjudication, raising two additional arguments. First, PrimaryAds contended that section 17529.5 required the plaintiff to establish that the defendant actually sent or had knowledge of the unlawful e-mails, which Hypertouch had failed to do. Second, PrimaryAds argued that, pursuant to Code of Civil Procedure, section 340, it was entitled to summary adjudication on any claim predicated on an e-mail received more than one year prior to the filing of the action.
In its opposition, Hypertouch conceded that it could not establish all of the elements associated with common law fraud, but argued that section 17529.5 only required evidence that Respondents had “advertised” in e-mails containing any category of content prohibited by section 17529.5. Hypertouch also argued that section 17529.5 was not preempted by the CAN-SPAM Act because it prohibited “falsity and deception,” and therefore fell within the narrow exception recognized in the federal statute’s preemption clause.
The trial court granted ValueClick and PrimaryAds’ summary judgment on all of Hypertouch’s claims. The court first concluded that, under section 17529.5, Respondents could only be held liable for e-mails that they actually sent to Hypertouch customers. It further concluded that Hypertouch had only established that Respondents sent 24 of the 45,000 e-mails at issue and, as a result, those were the only e-mails at issue in the suit.
The court next considered whether the CAN-SPAM Act preempted Hypertouch’s section 17592.5 claims and concluded that it did. The court agreed with Respondents’ interpretation of the CAN-SPAM Act, ruling that it barred any state laws regulating falsity or deception in commercial e-mails “unless such claims are for ‘common law fraud or deceit.’” The court further stated that “Plaintiff has neither adduced evidence . . . that any elements of fraud exist in this case. . . . [E]ven if the Court ignores all the other elements of fraud, Plaintiff’s complaint is preempted by federal law since Plaintiff’s complaint omits intent to deceive or intent to cause deception.”
The court entered judgment in favor of Respondents and subsequently awarded Respondents approximately $100,000 in costs. Hypertouch filed a timely appeal of the trial court’s judgment.

DISCUSSION

This appeal raises three issues. First, we must determine whether the CAN-SPAM Act preempts claims arising under section 17529.5. Because we conclude that section 17529.5 is not preempted, we must next determine whether Hypertouch has established a triable issue of fact as to whether Respondents violated section 17529.5. Third, we must determine whether PrimaryAds is entitled to summary adjudication on any claim predicated on an e-mail that Hypertouch received more than one year prior to the filing of the complaint.
I. Standard of Review
“The standard for deciding a summary judgment motion is well-established, as is the standard of review on appeal.” (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 572.) “A defendant moving for summary judgment has the burden of producing evidence showing that one or more elements of the plaintiff’s cause of action cannot be established, or that there is a complete defense to that cause of action. [Citation.] The burden then shifts to the plaintiff to produce specific facts showing a triable issue as to the cause of action or the defense. [Citations.] Despite the shifting burdens of production, the defendant, as the moving party, always bears the ultimate burden of persuasion as to whether summary judgment is warranted. [Citations.]” (Garcia v. W & W Community Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)
“On appeal, we review de novo an order granting summary judgment. [Citation.] The trial court must grant a summary judgment motion when the evidence shows that there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. [Citations.] In making this determination, courts view the evidence, including all reasonable inferences supported by that evidence, in the light most favorable to the nonmoving party. [Citations.]” (Garcia v. W & W Community Development, Inc., supra, at p. 1041.)[3]
II. Hypertouch’s Section 17529.5 Claims Are Not Preempted By the CAN-SPAM Act
A determination whether the clams are preempted by the CAN-SPAM Act requires the analysis of both section 17529.5 and the CAN-SPAM Act. (See generally Gordon v. Virtumundo (9th Cir. 2009) 575 F.3d 1040, 1047 (Virtumundo) [interpreting breadth of Washington state statute before determining whether preemption applied].)
A. Overview of Section 17529.5 and the CAN-SPAM Act
1. California Business and Professions Code section 17529.5
a. Overview of Senate Bill 186 and Section 17529.5
In 2003, the California Legislature passed Senate Bill 186, which imposed broad restrictions on advertising in unsolicited commercial e-mail advertisements sent from or to a computer within California. (See § 17529, et seq.) According to the Legislature’s “findings and declarations,” the bill was adopted to address the “skyrocket[ing]” costs and annoyances associated with “spam,” which the statute defines as “unsolicited commercial e-mail advertisements.”[4] (§ 17529, subds. (a), (b), (c), (d) and (e).) The Legislature concluded that, to effectively regulate the abuses associated with spam, it was necessary to target not only the entities that send unsolicited commercial advertisements, but also the advertisers whose products and services are promoted in those e-mails:
Many spammers have become so adept at masking their tracks that they are rarely found . . . . [¶] There is a need to regulate the advertisers who use spam, as well as the actual spammers, because the actual spammers can be difficult to track down . . . . [¶] The true beneficiaries of spam are the advertisers who benefit from the marketing derived from the advertisements.

(§ 17529, subds. (i), (j) and (k).)
Although S.B. 186 includes a provision that prohibits the transmission of any “unsolicited commercial e-mail advertisement[s],” (see § 17529.2), the statute also prohibits certain deceptive practices in commercial e-mail, which are enumerated in section 17529.5, subdivision (a):
(a) It is unlawful for any person or entity to advertise in a commercial e-mail advertisement either sent from California or sent to a California electronic mail address under any of the following circumstances:

(1) The e-mail advertisement contains or is accompanied by a third-party’s domain name without the permission of the third party.

(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.

Section 17529.5, subdivision (b), in turn, contains an enforcement provision that permits the “Attorney General,” “an electronic mail service provider” or “a recipient of an unsolicited commercial e-mail advertisement” to “bring an action against a person or entity that violates any provision of this section.” (§ 17529.5, subds. (b)(1)(A)(i)-(iii).)
Section 17529.5, subdivision (b) also lists the remedies available under the statute, which include “either or both of the following: [¶] (i.) Actual damages. [¶] (ii.) Liquidated damages of one thousand dollars ($1,000) for each unsolicited commercial e-mail advertisement transmitted in violation of this section, up to one million dollars ($1,000,000) per incident.” (§ 17529.5, subds. (b)(1)(B)(i), (ii).) The statute further provides, however, that if the court finds the “defendant established and implemented, with due care, practices and procedures reasonably designed to effectively prevent unsolicited commercial e-mail advertisements that are in violation of this section, the court shall reduce the liquidated damages . . . to a maximum of one hundred dollars ($100) for each unsolicited commercial e-mail advertisement, or a maximum of one hundred thousand dollars ($100,000) per incident.” (§ 17529.5, subd. (b)(2).)
b. Section 17529.5 does not include many elements associated with traditional common law fraud
Like several other California consumer protection statutes targeting deceptive advertising practices, section 17529.5 dispenses with many of the elements associated with common law fraud, which normally requires the plaintiff to prove “(a) [a] misrepresentation . . . ; (b) knowledge of falsity (or ‘scienter’; (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638; see Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1255 [“A claim based upon the fraudulent business practice prong of the [section 17200] is ‘distinct from common law fraud. “A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for . . . relief’ under [section 17200]’”].) Section 17529.5 differs from common law fraud in at least three ways.

(i.) Section 17529.5 prohibits “advertising” in a deceptive commercial e-mail, rather than sending or initiating a deceptive e-mail
First, unlike traditional common law fraud, section 17529.5 does not require the plaintiff to show that the defendant actually made a false or deceptive statement. (Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th 429, 434 [fraud claim requires plaintiff to establish “‘defendant represented to the plaintiff that an important fact was true [and that the] representation was false’”].) Instead, section 17529.5 makes it unlawful for a person or entity “to advertise in a commercial advertisement” that contains any of the deceptive statements described in subdivisions (a)(1)-(3). Thus, 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.
Other portions of the statute confirm that the Legislature did not intend the statute to apply solely to those entities that actually send or initiate a deceptive e-mail. For example, the legislative findings in section 17529. state that “[t]here is a need to regulate the advertisers who use spam . . . because the actual spammers can be difficult to track down” and have become “adept at masking their tracks.” (§ 17529, subds. (i), (j).) The Legislature further concluded that regulating advertisers, rather than merely the senders of spam, was necessary because they are the “true beneficiaries . . . who benefit from the marketing derived from the [spam] advertisement.” (§ 17529, subd. (k).)
Similar statements appear throughout the legislative history. (See generally In re Microsoft I-V Cases (2006) 135 Cal.App.4th 706, 719 [“Even when a statute is unambiguous, it is nevertheless common for a court to review legislative history in order to confirm its statutory analysis”].) For example, the Assembly Committee on the Judiciary’s analysis of S.B. 186 includes a statement summarizing the purpose of the statute: “[t]his bill will get at the real solution to unsolicited e-mails by allowing people to sue the advertisers of unsolicited e-mails. SB 186 seeks to get to the heart of the matter by penalizing the actual advertiser of the spam e-mails . . . We need to go after the companies that are profiting by these e-mails and allow recipients to hold the advertisers financially responsible.” (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 186 (2003-2004 Reg. Sess.) as amended June 26, 2003.) Similarly, in a memo prepared for the Senate Business and Professions Committee, the author of S.B. 186 explained that “[t]he real problem lies with the actual businesses whose products are advertised through these e-mails. Those companies are just as responsible if not more for these e-mails and need to be held accountable. They are profiting at the expense of the consumer.” (Senate Bus. & Prof. Com., Background Information Sheet for SB186, (2003-2004 Reg. Sess.) April 7, 2003.)
In sum, both the text and legislative history of S.B. 186 make clear that section 17529.5 was intended to apply to entities that advertise in deceptive commercial e-mails, not only the spammers who send them.
(ii.) Section 17259.5 does not contain a “scienter” element

The second way in which section 17529.5 differs from traditional common law is that it does not include any “scienter” or intent requirement. Specifically, the statute does not contain “qualifying language such as ‘knowingly’ or ‘intentionally[,]’ . . . [which] indicates the [Legislature] . . . did not intend guilty knowledge or intent to be elements of a violation.” (Margarito v. State Athletic Com. (2010) 189 Cal.App.4th 159, 168; In re Marley (1946) 29 Cal.2d 525, 529-530; see also Khan v Medical Board (1993) 12 Cal.App.4th 1834, 1844-1845; Northern Wind v. Daley (1st Cir. 1999) 200 F.3d 13, 19 [“As a general matter, scienter is not required to impose civil penalties for regulatory violations when the regulation is silent as to state of mind”].) Thus, like other California statutes prohibiting false or misleading business practices, the statute makes an entity strictly liable for advertising in a commercial e-mail that violates the substantive provisions described in section 17529.5, subdivision (a) regardless of whether the entity knew that such e-mails had been sent or had any intent to deceive the recipient. (See generally Paduano v. American Honda Motor Co., Inc. (2009) 169 Cal.App.4th 1453, 1468 [explaining that section 17200 “‘“imposes strict liability”]; People ex rel. Van de Kamp v. Cappuccio (1988) 204 Cal.App.3d 750, 760-761.)[5]
Although the Legislature chose to impose liability without regard to knowledge or intent, the statute’s remedy provisions include a mechanism that allows a defendant to significantly reduce its liability if it can show that it adopted “practices and procedures reasonably designed to effectively prevent unsolicited commercial e-mail advertisement that are in violation of [section 17592.5].” (§ 17592.5, subd. (b)(2).) If the defendant makes such a showing, the trial court is required to “reduce liquidated damages . . . to a maximum of . . . $100 per e-mail or $100,000 per incident.” Thus, rather than facing liquidated damages of $1,000 per e-mail or $1,000,000 per incident (see § 17592.5, subd. (b)(B)(ii)), an entity that violates the statute despite its good faith effort to prevent deceptive commercial e-mail might only be subject to nominal liquidated damages. (See The TJX Companies, Inc. v. Superior Court (2008) 163 Cal.App.4th 80, 85-86 (TJX Companies) [statute imposing maximum penalty of $250 provided trial court discretion to impose “‘range of penalties’” that “could span between a penny . . . to the maximum amounts authorized by the statute”].)

c. Section 17259.5 does not require reliance or damages
Finally, section 17259.5 differs from common law fraud in that it does not require the plaintiff to prove that it relied on the deceptive commercial e-mail message or that it incurred damages as a result of the deceptive message. (See Asis Internet Servs. v. Consumerbargaingiveaways, L.L.C. (N.D. Cal. 2009) 622 F.Supp.2d 935, 941 (Consumerbargaingiveaways) [“Section 17529.5 (a) does not . . . purport to require reliance or actual damages”].)[6]
2. Overview of the CAN-SPAM Act
a. Summary of the CAN-SPAM Act’s Substantive Provisions
Shortly after California adopted S.B. 186, Congress enacted the CAN-SPAM Act, which, like S.B. 186, was passed “in response to mounting concerns associated with the rapid growth of spam e-mails.” (Virtumundo, supra, 575 F.3d at p. 1047.) The Act does “not ban spam outright, but rather provides a code of conduct to regulate commercial e-mail messaging practices. Stated in general terms, the CAN-SPAM Act prohibits such practices as transmitting messages with ‘deceptive subject headings’ or ‘header information that is materially false or materially misleading.’ [Citation.] The Act also imposes requirements regarding content, format, and labeling. For instance, unsolicited e-mail messages must include the sender’s physical postal address, indicate they are advertisements or solicitations, and notify recipients of their ability to decline further mailings. [Citation].” (Id. at pp. 1047-1048.)
The Act’s enforcement provision “empowers the Federal Trade Commission, state attorneys general, and other state and federal agencies to pursue legal actions to enforce the Act[] . . . . Congress also provided a limited private right of action, which states: A ‘provider of Internet access service adversely affected by a violation of’ [the prohibited acts . . .] ‘may bring a civil action in any district court’ to enjoin further violation by a defendant or to recover either actual or statutory damages, whichever is greater.” (Virtumundo, supra, 575 F.3d at p. 1048.) Thus, unlike section 17529.5, the CAN-SPAM Act only provides a private cause of action to internet service providers that have been “adversely affected” by prohibited commercial e-mails[7] and does not extend a cause of action to the recipients of such e-mails.
The substantive provisions of the Act prohibit any person from “initiat[ing] the transmission” of any commercial e-mail containing “header information that is materially false or materially misleading” or “a subject heading” that is “likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message.” (15 U.S.C., § 7704, subds. (a)(1), (2).) The Act requires the plaintiff to prove that the defendant acted with knowledge and intent in some instances, but not others. For example, government entities seeking injunctive relief are not required to prove the defendant’s “state of mind.” (15 U.S.C., § 7706, subds. (e), (f)(2).) Internet service providers and state government agents seeking damages, however, must generally prove that the defendant acted with “actual knowledge” or consciously avoided knowledge of the statutory violations. (15 U.S.C., § 7706, subds. (f)(9), (g)(2).)
b. The CAN-SPAM Act’s Preemption Provision
The CAN-SPAM Act includes a provision that expressly preempts state statutes that regulate the use of commercial e-mail “except to the extent that any such statute . . . prohibits falsity or deception in any portion of a commercial [e-mail].” (15 U.S.C., § 7707, subd. (b)(1).) The preemption clause reflects one of the primary goals of the CAN-SPAM Act: to regulate commercial electronic mail “on a nationwide basis.” (15 U.S.C., § 7701, subd. (b)(1).) As stated in the Congressional findings accompanying the Act, the federal statute was intended to “to implement ‘one national standard’ [citation]” regarding the content of commercial e-mail because “the patchwork of state laws had proven ineffective.” (Virtumundo, supra, 575 F.3d at pp. 1062-1063.)
The legislative history also makes clear, however, that the Act’s preemption provision was largely intended to target state statutes imposing content requirements on commercial e-mails, while leaving states free to regulate the use of deceptive practices in commercial e-mails in whatever manner they chose. For example, the Senate Report that accompanied the legislation states:
[the Act] supersede[s] State and local statutes . . . that expressly regulate the use of e-mail to send commercial messages except for statutes . . . that target fraud or deception in such e-mail. Thus, a State law requiring some or all commercial e-mail to carry specific types of labels, or to follow a certain format or contain specified content, would be preempted. By contrast, a State law prohibiting fraudulent or deceptive headers, subject lines, or content in commercial e-mail would not be preempted. . . . [I]n contrast to telephone numbers, e-mail addresses do not reveal the State where the holder is located. As a result, a sender of e-mail has no easy way to determine with which State law to comply. Statutes that prohibit fraud and deception in e-mail do not raise the same concern, because they target behavior that a legitimate business trying to comply with relevant laws would not be engaging in anyway.

(S. REP. 108-102, S. Rep. No. 102, 108TH Cong., 1ST Sess. 2003, 2003 WL 21680759, 2004 U.S.C.C.A.N. 2348.)
B. The CAN-SPAM Act Does Not Preempt Claims Arising Under Section 17529.5
The trial court concluded that the CAN-SPAM Act’s savings clause, which permits states to regulate “falsity or deception” in a commercial e-mail, only applies to state statutes that require the plaintiff to establish every element of common law fraud. For the reasons that follow, we disagree with the trial court’s interpretation of the CAN-SPAM Act and hold that the federal statute does not preempt state laws claims arising under section 17529.5.
1. General Principles Governing Preemption
“Under the supremacy clause of the United States Constitution (art. VI, cl. 2), Congress has the power to preempt state law concerning matters that lie within the authority of Congress. [Citation.] In determining whether federal law preempts state law, a court’s task is to discern congressional intent.” (Farm Raised Salmon Cases (2008) 42 Cal.4th 1077, 1087 (Farm Raised Salmon).) “Congress may indicate pre-emptive intent through a statute’s express language or through its structure and purpose. [Citation.] If a federal law contains an express pre-emption clause, it does not immediately end the inquiry because the question of the substance and scope of Congress’ displacement of state law still remains.” (Altria Group, Inc. v. Good (2008) 129 S.Ct. 538, 543 (Altria).)
“Although the analysis of the scope of preemption begins with the text, ‘interpretation of that language does not occur in a contextual vacuum.’ [Citation.] Rather, this inquiry is guided by two principles about the nature of preemption. First, there is a presumption against supplanting ‘the historic police powers of the States’ by federal legislation ‘unless that [is] the clear and manifest purpose of Congress.’ [Citation.]” (Virtumundo, supra, 575 F.3d at p.1060.) This “presumption against preemption” applies “with particular force” in the context of “consumer protection laws” that regulate “the prevention of deceptive sales practices.” (Farm Raised Salmon, supra, 42 Cal.4th at p. 1088.) As a result, we must give the express preemption clause a “narrow interpretation,” (Virtumundo, supra, 575 F.3d at p.1060), and if the text “is susceptible of more than one plausible reading, . . . ‘accept the reading that disfavors pre-emption.’ [Citation.]” (Altria, supra, 129 S.Ct. at p. 543.)
“Second, the preemption analysis is guided by the ‘oft-repeated comment . . . that the purpose of Congress is the ultimate touchstone in every preemption case.’ [Citations.] ‘As a result, any understanding of the scope of a pre-emption statute must rest primarily on a fair understanding of congressional purpose,’ and calls for courts to consider not only the language of the statute itself but also the ‘statutory framework’ surrounding it and the ‘structure and purpose of the statute as a whole.’ [Citation.]” (Virtumundo, supra, 575 F.3d at p. 1060; see also Altria, supra, 129 S.Ct. at p. 543].)
“It is with these principles in mind that we consider whether it was the ‘“clear and manifest purpose”’ of Congress [citation] to preclude states from” regulating deceptive commercial e-mail messages in a manner that does not require proof of each and every element of common law fraud. (Farm Raised Salmon, supra, 42 Cal.4th at p. 1088.)
2. The language of the CAN-SPAM Act does not support the trial court’s interpretation

The preemption clause at issue states:
This Act supersedes any statute, regulation, or rule of a State or political subdivision of a State that expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such statute, regulation, or rule prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto.

(15 U.S.C., § 7707, subd. (b)(1).)
The savings clause does not reference either fraud or the common law, but rather permits any state law that prohibits “‘falsity and deception in any portion of a commercial electronic mail message.’” (Asis Internet Services. v. Suscriberbase Inc. (N.D. Cal. April 1, 2010, Case No. 09-3503 SC) 2010 U.S. Dist. LEXIS 33645, *38 (Subscriberbase).) As a result, the text of the statute “betrays no intention by Congress to limit state regulation to the simple codification of common law fraud in its purest form.” (Id. at pp. *34-35.) Congress “is certainly familiar with the word fraud and choose not to use it; the words ‘falsity or deception’ suggest broader application.” (Consumerbargaingiveaways, supra, 622 F.Supp.2d at p. 942.)
Other sections of the CAN-SPAM Act indicate that the phrase “falsity and deception” was not intended to apply only to common law fraud. First, the provision that immediately follows [15 U.S.C., s]ection 7707, subdivision (b)(1)’s preemption clause states that, in addition to permitting state laws prohibiting falsity or deception in commercial e-mails, the CAN-SPAM Act does not preempt “State laws that are not specific to electronic mail. including . . . tort law [] or. . . [¶] . . . other state laws to the extent that those laws relate to acts of fraud or computer crime.” (15 U.S.C., § 7707, subd. (b)(2)(B).) Interpreting the phrase “falsity or deception” to mean fraud, when the very next section of the statute actually uses the word fraud, would “contravene[ ] the principle that ‘when different words are used in contemporaneously enacted, adjoining subdivisions of a statute, the inference is compelling that a difference in meaning was intended.’ [Citation.]” (Kleffman v. Vonage Holdings Corp. (2010) 49 Cal.4th 334, 343 (Kleffman).)




TO BE CONTINUED AS PART II….




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