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Daniel L. Balsam v. Trancos

February 24, 2012


(San Mateo County Super. Ct. No. CIV471797) Trial Judge: Hon. Marie S. Weiner

The opinion of the court was delivered by: Margulies, J.


Defendant Trancos, Inc. (Trancos) appeals from a judgment awarding statutory damages and attorney fees to plaintiff Daniel Balsam under Business and Professions Code*fn1 section 17529 et seq. (Anti-spam Law). Balsam cross-appeals from portions of the judgment denying him relief under the Consumers Legal Remedies Act, Civil Code section 1750 et seq. (CLRA), and finding Trancos's chief executive officer (CEO), Brian Nelson, not personally liable for the judgment along with Trancos. We affirm the judgment in all respects.


Balsam filed suit against Trancos, Nelson, and other individuals and entities*fn2 in April 2008, alleging causes of action for (1) violations of section 17529.5,*fn3 (2) violations of the CLRA, and (3) declaratory relief as to the legality of the defendants' actions under these statutes.

A court trial commenced on October 14, 2009. At the outset of the trial, the court ruled Balsam lacked standing to sue under the CLRA because he was not a "consumer" of any goods or services as defined in Civil Code section 1761, subdivision (d) and he did not sustain any damages caused by defendants' conduct as required by Civil Code section 1780. The court further held Balsam's Anti-spam Law cause of action was not preempted by federal law, as asserted by defendants. Balsam agreed to the dismissal of his declaratory relief cause of action before trial.

A. Trial Evidence

1. The Parties

Nelson is the CEO and founder of Trancos, which operates several Internet advertising businesses. In 2007, Trancos operated a division called Meridian E-mail (Meridian). Through Meridian, Trancos acquired the right to use e-mail address lists from nine entities, including Hi-Speed Media (Hi-Speed), which is owned by ValueClick. Under its agreement with Hi-Speed, Trancos found advertisers who would pay to have their offers and promotions sent out to Hi-Speed's list, and Trancos would split the revenues with Hi-Speed.*fn4 Trancos hired a consultant, Joe Costeli, to "manage" the list, which meant he would upload the content the advertiser provided for the subject line and body of the e-mail to Trancos's e-mail servers, and send them out. Costeli would generate the domain name used in the "From" line.

Nelson testified he believed Hi-Speed obtained e-mail addresses by using promotions and Web sites in which the consumer gave his or her broad consent to receive future commercial e-mail messages from Hi-Speed or any of its "partners." Nelson maintained such a consent extended to Trancos as well as to any advertiser whose messages Trancos sent out to Hi-Speed's e-mail list, subject to the recipient's right to unsubscribe or "opt out" of future messages, which was offered as an option in all of the commercial e-mail messages Trancos sent.

Balsam is a licensed California attorney with experience in consumer protection litigation. Balsam has been either a named plaintiff or has represented plaintiffs in dozens of lawsuits against companies for unsolicited e-mail advertising. He maintains a Web site and blog with information on spammers and spam litigation. He maintains over 100 e-mail addresses.

2. The E-mails

Balsam owns four computers, all of which are located in California. In the summer of 2007, Balsam received eight commercial e-mails sent by Trancos to one of his e-mail addresses using Hi-Speed's e-mail list. According to each of the eight e-mails, Balsam allegedly gave consent for use of his e-mail address on " '2007 July 11' " by responding to an offer on a Web site owned by Hi-Speed using a computer with the Internet protocol address or IP address Balsam presented uncontradicted evidence he could not have accessed Hi-Speed's Web site from that IP address on that date, and did not otherwise provide his e-mail address to or consent to its use by Hi-Speed, Trancos, or any of the advertisers named in the eight e-mails.

The e-mails Balsam received had the following relevant content:

E-mail No. 1 stated on the "From" line that it was from " 'Paid Survey' " with an e-mail address of The subject line stated: "Get paid 5 dollars for 1 survey." The content in the body of the e-mail was a commercial advertisement purportedly by "Survey Adventure." Paid Survey was not the name of any existing company. There was no company named misstepoutcome and no Web site at*fn5 The latter is a fanciful name Trancos gave to one of the 477 domain names it has privately registered.*fn6 *fn7 As in all eight of the e-mails, Trancos's name does not appear anywhere in the e-mail.

In regard to opting out of future e-mails, e-mail No. 1 stated the recipient could do so by writing to "Strategic Financial Publishing, Inc." at an address in Indiana or by clicking on a link to "!=2." There was a second opt-out link near the end of the e-mail stating in part "if you no longer wish to receive our emails please click here." The name "" appeared at the end of the e-mail with a specified street address and suite number on Santa Monica Boulevard in Los Angeles. The domain name,, is privately registered to Trancos, but there is no actual company named, no such entity is registered as a dba of Trancos, and there is no Web site at The street address given for it is the address of The UPS Store, where Trancos rented a post office box in the name of The suite number referenced in the e-mail was actually Trancos's mail box number at The UPS Store. *fn8

E-mail No. 2 stated it was from " 'Your Business' " with an e-mail address of There was no actual business named Your Business, no actual entity named modalworship, and no Web site at The subject line stated: "Be Your Own Boss! You could own a franchise!" The body of the e-mail consisted of a commercial advertisement purportedly by Franchise Gator. E-mail No. 2 advises recipients they may opt out by sending a copy of the e-mail to Franchise Gator at a Seattle address or by clicking on a link. Like all eight of the e-mails sent to Balsam, e-mail No. 2 provides a second opt-out link and the name and same Santa Monica Boulevard street address for

E-mails Nos. 3 through 8 contained "From" lines stating the sender was, respectively, " 'Christian Dating,' " " 'Your Promotion,' " " 'Bank Wire Transfer Available,' " " 'eHarmony,' " " 'Dating Generic,' " and " 'Join Elite.' " Each purported to be from an e-mail address at a different one of the fancifully named domain names privately registered to Trancos (e.g. "," ""). Only one of the e-mails, e-mail No. 6 purporting to be from eHarmony, contained the name of an actual, existing company on its "From" line, although the return e-mail address, "," referenced a domain name privately registered by Trancos, not one belonging to eHarmony.

Nelson testified Trancos privately registered its domain names due to past incidents of retaliation and threats, and to protect its employees. According to Nelson, one person angry with the company had bombarded it with millions of e-mails, knocking out Trancos's network for three days and costing the company approximately $120,000. Trancos had also received angry and threatening telephone calls demanding the caller's e-mail address be removed from its list. Nelson testified he had been advised that private registration was a good idea because "what if there's a complaint, you know, I don't want someone like Dan Balsam . . . driving through my front window or coming in there and harassing us or . . . phoning us and badgering us."

3. The Anti-spam Law

Section 17529.5 makes it unlawful as follows to send e-mail advertisements containing certain falsified or misrepresented header information: "(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: [¶] . . . [¶] (2) The e-mail advertisement contains or is accompanied by falsified, misrepresented, or forged header information. This paragraph does not apply to truthful information used by a third party who has been lawfully authorized by the advertiser to use that information."

The California statute does not define the term "header information," but the California Supreme Court in Kleffman v. Vonage Holdings Corp. (2010) 49 Cal.4th 334 (Kleffman) applied a definition borrowed from the federal CAN-SPAM Act of 2003 (15 U.S.C. § 7701 et seq.),*fn9 which makes it unlawful to initiate transmission of a commercial e-mail message that contains or is accompanied by " 'header information that is materially false or materially misleading.' " (Kleffman, at p. 340, fn. 5, quoting from 15 U.S.C. § 7704(a)(1).) The federal spam law defines "header information" as "the source, destination, and routing information attached to an electronic mail message, including the originating domain name and originating electronic mail address, and any other information that appears in the line identifying, or purporting to identify, a person initiating the message." (15 U.S.C. § 7702(8), italics added.) Although this case was tried before Kleffman was decided, it was undisputed by the parties that the "header information" in the Trancos e-mails, for purposes of section 17529.5, included the purported sender names, domain names, and e-mail addresses that appeared on the e-mails' "From" lines.

Section 17529.5 of the Anti-spam Law provides a recipient of an unsolicited commercial e-mail advertisement may bring an action against a person or entity that violates its provisions for either or both actual damages or liquidated damages of $1,000 for each unsolicited commercial e-mail violating the section. (§ 17529.5, subd. (b).) The prevailing plaintiff in such an action may recover reasonable attorney fees and costs. (Ibid.)

B. Statement of Decision

The trial court found all of the e-mails except the eHarmony e-mail violated section 17529.5, subdivision (a)(2) (hereafter section 17529.5(a)(2)). The court found the header information on each of these e-mails was falsified or misrepresented because it did not accurately represent who sent the e-mail: "All of these emails came from Defendant Trancos, but none of the emails disclose this in the header (or the body or the opt-out). The emails were sent on behalf of eight different advertisers . . . but only eHarmony was a real company. The rest of the 'senders' identified in the headers . . . do not exist or are otherwise misrepresented, namely, Paid Survey, Your Business, Christian Dating, Your Promotion, Bank Wire Transfer Available, Dating Generic, and Join Elite[.] In those same headers reflecting the 'from' line of the email, the referenced sender email is a non-existen[t] entity using a nonsensical domain name reflecting no actual company . . . ." The court added that the issue was not the use of multiple domain names to send spam, which it noted was before the California Supreme Court in the Kleffman case. Instead, the court held the falsity or misrepresentation consisted in the fact "that the 'sender' names (or domain names used) do not represent any real company, and cannot be readily traced back to the true owner/sender." (Italics added.)

The trial court awarded Balsam $1,000 in liquidated damages against Trancos for each of the seven e-mails it found to have violated section 17529.5 of the Anti-spam Law, and found Trancos liable for his reasonable attorney fees and costs. It found Nelson was not personally liable for the award. Balsam thereafter ...

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