United States District Court, N.D. California, San Jose Division
ORDER REGARDING REMEDIES AND DENYING MOTION FOR
H. KOH UNITED STATES DISTRICT JUDGE.
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.
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.
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.
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.
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.
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.
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,
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Damages Under the CFAA
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
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).
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.