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Facebook, Inc. v. Power Ventures, Inc.

United States District Court, N.D. California, San Jose Division

May 2, 2017

FACEBOOK, INC., Plaintiff,
v.
POWER VENTURES, INC., et al., Defendants.

          ORDER REGARDING REMEDIES AND DENYING MOTION FOR STAY

          LUCY H. KOH UNITED STATES DISTRICT JUDGE.

         On December 9, 2016, the Ninth Circuit issued an order affirming in part and reversing in part the Court's grant of summary judgment. ECF No. 401. The Ninth Circuit remanded for this Court to reconsider the issue of remedies in light of the Ninth Circuit's order. Id. at 22. The Court held a case a management conference on February 15, 2017, ECF No. 412, and set a briefing schedule on the remanded issue of remedies, ECF No. 410. Facebook filed its initial brief on March 8, 2017. ECF No. 416. Defendants filed their responsive brief on March 30, 2017. ECF No. 423. Facebook filed a reply on April 7, 2017. ECF No. 424.

         On April 24, 2017, Defendant Steven Vachani (“Vachani”) filed a motion to stay all proceedings in the case pending resolution of his petition for certiorari in the United States Supreme Court. ECF No. 428. Facebook filed an opposition to this motion on April 24, 2017. ECF No. 429. On April 26, 2017, Vachani filed a letter stating that Facebook had not filed a brief in opposition to the petition for certiorari. ECF No. 431. On May 1, 2017, Vachani filed a reply to Facebook's opposition to the motion for a stay. ECF No. 434.

         Having considered the briefing of the parties, the record in the case, and the relevant law, the Court finds that Facebook is entitled to $79, 640.50 in compensatory damages and a permanent injunction as described below. The Court also DENIES Vachani's motion for a stay.

         I. BACKGROUND

         A. Factual Background

         Facebook owns and operates the social networking website located at facebook.com. First Amended Complaint (“FAC”) ¶ 2. Power Ventures (“Power”) is a corporation incorporated in the Cayman Islands and doing business in California. Answer ¶ 10. At the times relevant to the instant case, Power has operated the website www.power.com, which offers to integrate users' various social media accounts into a single experience. FAC ¶ 5; Answer ¶ 5. Vachani is the Chief Executive Officer of power.com. Answer ¶ 11.

         In December 2008, Facebook brought against Defendants this action, which alleges violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CANSPAM Act”), 15 U.S.C § 7701; the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030; California Penal Code § 502; and the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201; copyright infringement under 17 U.S.C. § 101; trademark infringement under 15 U.S.C. §§ 1114 and 1125(a) and under California law; and violations of California Business and Professions Code Section 17200. ECF Nos. 1, 9. Facebook complains that Defendants employ Facebook's proprietary data without its permission by inducing Facebook users to provide their login information and then using that information to “scrape” Facebook's proprietary material. FAC ¶¶ 49, 50, 52. Defendants then display Facebook's material on power.com. FAC ¶ 52. Facebook asserts that it never gave Defendants permission to use its material in this way. FAC ¶ 54.

         Facebook also accuses Defendants of sending unsolicited and deceptive email messages to Facebook users. FAC ¶¶ 65-69. To launch their site, Defendants promised power.com users a chance to win $100 if they invited and signed up the most new users to Defendants' site. FAC ¶ 65. Defendants provided to their users a list of the users' Facebook friends from which the users could choose people to whom to send the invitation. FAC ¶ 66. Power.com sent commercial emails to those friends that included on the “from” line a “@facebookmail.com” address. FAC ¶¶ 66, 68. The content of the message included a line that the message was from “The Facebook Team.” FAC ¶ 69, 70. Facebook contends that it never gave permission to send these messages and that the emails were deceptive because they “do not properly identify the initiators of the messages, nor do they provide clear or conspicuous notice that the messages are advertisements for” power.com. FAC ¶ 71.

         B. Procedural History

         On February 18, 2011, Judge Ware granted the parties' stipulation to dismiss Facebook's DMCA claim, copyright and trademark infringement claims, and claims for violations of California Business and Professions Code Section 17200. ECF No. 97. On May 9, 2011, Defendants moved for summary judgment on Facebook's CFAA, Section 502, and CAN-SPAM Act claims. ECF No. 98. On November 17, 2011, Facebook moved for summary judgment on Facebook's § 502 and CFAA claims. ECF No. 214 (“§ 502/CFAA Motion”). On November 18, 2011, Facebook moved for summary judgment on Facebook's CAN-SPAM Act claim. ECF No. 215. On February 16, 2012, Judge Ware issued an order denying Defendants' motion for summary judgment and granting summary judgment in Facebook's favor as to Facebook's § 502, CFAA, and CAN-SPAM Act claims. ECF No. 275 (“February 16, 2012 order”).

         In the February 16, 2012 order, Judge Ware requested additional briefing regarding Vachani's individual liability and the amount of damages Facebook should receive in light of the February 16, 2012 order. Id. at 19. On March 30, 2012, Facebook filed its supplemental brief regarding damages and the liability of Vachani. ECF No. 299 (“Facebook Damages/Liability Brief”). The same day, Defendants lodged with the court a brief regarding damages and the liability of Vachani. ECF No. 288 (“Defendants' Damages/Liability Brief”). On August 15, 2012, Vachani also submitted a supplemental brief regarding damages and his personal liability. ECF No. 317 (“Vachani Damages/Liability Brief”).

         On June 4, 2012, the attorneys representing Vachani and Power moved to withdraw as counsel. ECF Nos. 302, 303. On July 2, 2012, Judge Ware granted the motions to withdraw. ECF No. 306. In the order granting the withdrawal requests, Judge Ware required Vachani and Power to file Notices of Identification of Substitute Counsel no later than July 17, 2012. Id. Judge Ware noted that although Vachani could proceed pro se, Power had to be represented by a member of the bar pursuant to Civil Local Rule 3-9(b). Civil L.R. 3-9(b) (“A corporation, unincorporated association, partnership or other such entity may appear only through a member of the bar of this Court.”). Judge Ware cautioned Defendants that a failure to file timely Notices of Identification of Substitute Counsel may result in default of the case. Id.

         On July 19, 2012, after neither Vachani nor Power had filed a Notice of Identification of Substitute Counsel, Judge Ware ordered both parties to appear on August 6, 2012 to respond to an Order to Show Cause regarding Defendants' failure to obtain counsel. ECF No. 308. On August 6, 2012, the parties appeared for the hearing, and on August 8, 2012, Judge Ware issued an order regarding Defendants' failure to obtain counsel (“August 8, 2012 order”). ECF No. 313. Because Power had failed to identify replacement counsel, Judge Ware found good cause to strike Power's answer to Facebook's complaint and enter default against Power. Id. Judge Ware permitted Vachani a short extension to find new counsel, which was conditioned on Vachani's immediate filing of a Notice of Self-Representation. Id. The Clerk entered default against Power on August 9, 2012. ECF No. 314.

         On August 15, 2012, new counsel filed a Notice of Appearance on behalf of Power. ECF No. 316. That same day, Power moved for leave to file a motion for reconsideration of Judge Ware's August 8 order requiring entry of default against Power. ECF No. 318. Judge Ware gave Power leave to file a motion for reconsideration on August 21, 2012. ECF No. 320. On August 23, 2012, Power filed its motion for reconsideration. ECF No. 321.

         On August 27, 2012, Facebook filed its response and simultaneously requested entry of default judgment against Power. ECF No. 322. On August 27, 2012, Defendants provided notice that both Power and Vachani had filed for bankruptcy. ECF Nos. 323, 324. Noting that pursuant to 11 U.S.C. § 362(a)(1), a voluntary petition for bankruptcy operates as an automatic stay of any judicial actions involving the petitioners, Judge Ware stayed the proceedings and administratively closed the case on August 29, 2012. ECF No. 325. In the same order, Judge Ware denied as premature Power's motion for reconsideration of the August 8 order requiring entry of default. Id.

         On March 20, 2013, Facebook notified the Court that the Bankruptcy Court had dismissed Power's bankruptcy case and had granted Facebook's request for relief from the automatic stay in Vachani's bankruptcy case. ECF No. 327. Facebook sought to reopen the case. Id. Facebook also sought reassignment to a new judge because on August 31, 2012, while the automatic stay was in effect, Judge Ware resigned from the bench. Id. On April 8, 2013, the undersigned judge, as the Duty Judge at the time Facebook filed its motion, granted Facebook's request. ECF No. 328. The undersigned judge ordered that the stay be lifted, the case be reopened, and the case be reassigned. Id. The case then was reassigned to the undersigned judge. ECF No. 329.

         On April 25, 2013, Vachani moved for clarification of Judge Ware's February 16, 2012 order regarding whether Vachani's liability had been determined in the February 16, 2012 order. ECF No. 332. On April 29, 2013, Facebook filed a case management statement in which Facebook again requested that default judgment be entered against Power. ECF No. 333. On the same day, Defendants filed a consolidated case management statement in which Power again sought to set aside default. ECF No. 334. Defendants also stated their intent to request leave to file a motion for reconsideration of the February 16, 2012 order. Id. In Facebook's and Defendants' respective case management statements, the parties acknowledged that Vachani's liability and the issues of damages and injunctive relief still needed to be addressed. ECF No. 333, 334.

         On May 2, 2013, following a case management conference, the Court issued a case management order. ECF No. 340. In that order, the Court clarified that the February 16, 2012 order did not decide Vachani's liability. Id. The Court granted Power's request to set aside default and denied Facebook's request for entry of default judgment against Power. Id. The Court also set a briefing schedule for the damages and injunctive relief issues. Id. The Court set a hearing date of September 26, 2013 to consider Vachani's liability and the issue of remedies. Id.

         On August 1, 2013, Power filed its request for leave to file a motion to reconsider Judge Ware's February 16, 2012 order. ECF No. 353. On August 1, 2013, Facebook filed its supplemental memorandum in support of its request for injunctive relief. ECF No. 354 (“Facebook Injunction Brief”). On September 25, 2013, Facebook filed a supplemental motion for a permanent injunction. ECF No. 369.

         On August 7, 2013, Magistrate Judge Spero issued an order requiring Vachani to pay Facebook $39, 796.73 as a discovery sanction because of Vachani's noncompliance during a Rule 30(b)(6) deposition. ECF No. 356. Following Judge Spero's order, Vachani immediately appealed the discovery sanction to the Ninth Circuit on September 6, 2013. ECF No. 360. Despite the appeal, this Court retained jurisdiction over aspects of the case unrelated to the discovery sanctions.

         On September 25, 2013, the Court filed an Order Denying Leave to File Motion for Reconsideration, Finding Defendant Steven Vachani Liable as a Matter of Law, and Granting Damages and Permanent Injunctive Relief. ECF No. 373. In the order, the Court first found that Defendants had not identified any new material facts, changes in law, or issues that Judge Ware manifestly failed to consider in his February 16, 2012 order. The Court therefore denied leave to file a motion for reconsideration of the February 16, 2012 order. Id. at 15. The Court also found that because Vachani directed and authorized the activities at issue, Vachani was personally liable for violations of the CAN-SPAM Act, CFAA, and California Penal Code § 502 along with Power. Id. at 17.

         The Court then addressed the issue of damages for the first time. The Court noted that under the CAN-SPAM Act, Facebook was entitled to elect between monetary damages in the amount of actual losses and statutory damages. Id. at 22. Facebook elected to recover statutory damages, and the Court ordered Defendants to pay $50 for each of 60, 627 spam messages sent, for a total of $3, 031, 350. Id. at 25-26. The Court then held that Facebook was entitled to compensatory damages under the CFAA. The Court held that “Facebook has established through undisputed testimony that it expended $80, 543 to investigate Defendants' actions and for outside legal services in connection with the Defendants' actions.” Id. at 26.

         Finally, the Court issued a permanent injunction against Defendants. The Court found that each of the applicable four factors - (1) irreparable injury, (2) no adequate remedy at law, (3) balance of hardships, and (4) the public interest - favored granting a permanent injunction. Id. at 27 (citing eBay v. MercExchange, L.L.C., 547 U.S. 388, 390 (2006)). In doing so, the Court considered Defendants' CAN-SPAM Act violations as well as Defendants' violations of the CFAA and § 502. The Court granted a permanent injunction that enjoined Defendants from (1) making any misleading statement in advertising, including statements that Facebook had authorized a particular communication; (2) accessing Facebook's website or servers “for any purpose” without Facebook's prior permission; (3) using any data obtained from the unlawful conduct; and (4) developing or using any software to commit the illegal acts alleged in the complaint. Id. at 33-34. The injunction also required Defendants to destroy all the software at issue, destroy all data obtained from Facebook with the illegal software, and take measures to ensure that the injunction was obeyed. Id. at 34. The Court entered judgment against Defendants the same day, September 25, 2013. ECF No. 374.

         On October 23, 2013, Defendants appealed the Court's grant of summary judgment. ECF No. 379. On November 21, 2013, the Ninth Circuit dismissed Vachani's appeal of Magistrate Judge Spero's August 7, 2013 order granting discovery sanctions because the August 7, 2013 order was not final or appealable. ECF No. 386.

         On December 9, 2016, the Ninth Circuit affirmed in part and reversed in part the Court's grant of summary judgment. ECF No. 401. The Ninth Circuit reversed the Court's finding that Defendants had violated the CAN-SPAM Act because the Ninth Circuit found that Facebook initiated the email messages at issue and that the sender of the messages was not materially misleading within the meaning of the CAN-SPAM Act. Id. at 9-13. The Ninth Circuit then held that Defendants had violated CFAA, but only for the period “after receiving written notification from Facebook on December 1, 2008.” Id. at 19. The Ninth Circuit held that by sending the December 1, 2008 notification, Facebook revoked Defendants' permission to use Facebook's computers. Id.

         With respect to damages, the Ninth Circuit held that “[i]t is undisputed that Facebook employees spent many hours, totaling more than $5, 000 in costs, analyzing, investigating, and responding to Power's actions.” Id. at 14. However, in light of the Ninth Circuit's finding that the violation began only after Facebook sent its cease and desist letter, the Ninth Circuit remanded to “calculate damages only for the period after Power received the cease and desist letter . . . .” Id. at 22.

         After remand, the Court initially scheduled a case management conference for January 11, 2017. However, Defendants filed a motion requesting a continuance of the case management due to “ongoing personal considerations.” ECF No. 405. The Court granted this motion and continued the case management conference to January 25, 2017. Facebook then filed a motion requesting a continuance due to scheduling problems with the January 25, 2017 date. ECF No. 407. The Court therefore continued the case management to February 15, 2017. ECF No. 408.

         The Court held a case management conference on February 15, 2017. At the case management conference, the Court set a briefing schedule for the remanded issue of remedies. ECF No. 410. In doing so, the Court warned that “the parties shall limit their arguments to the issues that the Ninth Circuit remanded for consideration. The parties shall not present arguments regarding aspects of the Court's decision which the Ninth Circuit did not reverse on appeal. . . . The parties shall carefully review the Ninth Circuit's opinion and the record in this case to ensure that the parties argue only those issues that the Ninth Circuit ordered the district court to address on remand.” ECF No. 410, at 1-2. The Court also ordered Defendants to pay by March 15, 2017 the $39, 796.73 discovery sanction that the Ninth Circuit affirmed.[1]

         Pursuant to the briefing schedule, Facebook filed its supplemental remedies brief on March 8, 2017. ECF No. 416. On March 9, 2017, Defendants filed a petition for certiorari with the United States Supreme Court. ECF No. 418. Defendants failed to pay the $39, 796.73 discovery sanction by the March 15, 2017 deadline and still have not done so. Subsequently, on March 28, 2017, Vachani filed an “urgent motion” requesting that the Court stay all district court proceedings for 90 days or grant a 45-60 day extension because Vachani had been unable to contact Power's attorney for over a month. ECF No. 420. The same day, Vachani filed a letter with the Court stating that although he has not paid the $39, 796.73 discovery sanction, Vachani is “in compliance with this court's order” because he is “in an active bankruptcy proceeding.” ECF No. 421.

         On March 29, 2017, the Court denied Vachani's motion for a stay and for an extension of time. ECF No. 422. On March 30, 2017, Power's attorney filed Defendants' supplemental brief regarding remedies. ECF No. 423. On April 17, 2017, Facebook filed a reply brief. ECF No. 424.

         II. LEGAL STANDARD

         A. Damages Under the CFAA

         Under the CFAA, “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C. § 1030(g) (emphasis added). The CFAA defines “loss” to mean “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.” Id. § 1030(e)(11); see also ECF No. 401, at 13-14. Thus, pursuant to the Ninth Circuit's order, the Court's task is to calculate the amount of Facebook's “loss” under the statute after Facebook sent a cease and desist letter on December 1, 2008 and thus revoked Power's authorization to access Facebook's computer.

         B. Injunctive Relief

         The CFAA provides that “[a]ny person who suffers damage or loss by reason of a violation of [§1030] may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C.A. § 1030(g). California Penal Code § 502 also allows a plaintiff to obtain injunctive relief. California Penal Code § 502(e)(1).

         A party seeking a permanent injunction must make a four-part showing: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. See eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390 (2006). The Court has discretion to grant or deny permanent injunctive relief. Id. at 391.

         III. ...


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