United States District Court, N.D. California, San Jose Division
ORDER DENYING MOTION FOR WITHDRAWAL OF REFERENCE RE:
DKT. NO. 1
H. KOH, UNITED STATES DISTRICT JUDGE
instant case arises from the motion of Plaintiff Facebook,
Inc. (“Facebook”) to withdraw the reference to
bankruptcy of Adversary Proceeding No. 13-4226 against
Defendant Steven Vachani (“Vachani”), which is
now pending before Bankruptcy Judge Roger L. Efremsky. Civ.
ECF No. 1-1. Pursuant to Bankruptcy Local Rule
5011-2(b), upon filing of the motion for withdrawal of
reference in the Bankruptcy Court, the motion was assigned a
new civil case number in the District Court and assigned to
the undersigned judge. Having considered the briefing of the
parties, the relevant law, and the record in the instant case
and all related cases, the Court DENIES Plaintiff's
motion for withdrawal of reference.
instant case is related to the case Facebook, Inc. v.
Power Ventures, Inc. (“Power
Ventures”), No. 08-CV-05780. The instant case and
the Power Ventures case share the same factual
background. Facebook owns and operates the social networking
website located at facebook.com. Power ECF No. 9,
¶ 2. Power Ventures (“Power”) is a
corporation incorporated in the Cayman Islands and doing
business in California. Id. ¶ 10. At the times
relevant to the instant case and the Power Ventures
case, Power has operated the website www.power.com, which
offered to integrate users' various social media accounts
into a single experience. Id. Vachani is the Chief
Executive Officer of power.com. Power Ventures
Answer ¶ 11.
December 2008, Facebook brought against Power and Vachani
(“Power Ventures Defendants”) the
Power Ventures case, 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. Power
ECF Nos. 1, 9. Facebook complained that the Power
Ventures Defendants employed 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. Power ECF No. 9, ¶¶
49, 50, 52. The Power Ventures Defendants then
displayed Facebook's material on power.com. Id.
¶ 52. Facebook asserts that it never gave the Power
Ventures Defendants permission to use its material in
this way. Id. ¶ 54.
also accuses the Power Ventures Defendants of
sending unsolicited and deceptive email messages to Facebook
users. Power FAC ¶¶ 65-69. To launch their
site, the Power Ventures Defendants promised
power.com users a chance to win $100 if they invited and
signed up the most new users to the Power Ventures
Defendants' site. Id. ¶ 65. The Power
Ventures 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. Id.
¶ 66. Power.com sent commercial emails to those friends
that included on the “from” line a
“@facebookmail.com” address. Id.
¶¶ 66, 68. The content of the message included a
line that the message was from “The Facebook
Team.” Id. ¶ 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. Id. ¶ 71.
The Court initially entered judgment in the Power
Ventures case on September 25, 2013. Power ECF
No. 374. After remand from the Ninth Circuit, the Court
entered a revised judgment in the Power Ventures
case on May 2, 2017. Power ECF No. 437.
discussed below, during the pendency of the Power
Ventures case, Vachani filed for personal bankruptcy on
August 27, 2012. Bankr. ECF No. 1; Power Ventures
ECF Nos. 353-54. As part of that bankruptcy, Facebook filed
the adversary proceeding at issue here, which alleged that
the debt that Vachani owed Facebook as a result of the
judgment in the Power Ventures case was
nondischargeable. Adv. ECF No. 1. On May 30, 2017, Facebook
filed the instant motion for withdrawal of reference of the
adversary proceeding. Adv. ECF No. 36.
Relevant Procedural History of Power
December 30, 2008, Facebook filed the complaint in the
Power Ventures case. Power ECF No. 1. On
January 13, 2009, Facebook filed a First Amended Complaint.
Power ECF No. 9. 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. Power
ECF No. 97. On May 9, 2011, Defendants moved for summary
judgment on Facebook's CFAA, Section 502, and CAN-SPAM
Act claims. Power Ventures ECF No. 98. On November
17, 2011, Facebook moved for summary judgment on
Facebook's § 502 and CFAA claims. Power ECF
No. 214 (“§ 502/CFAA Motion”). On November
18, 2011, Facebook moved for summary judgment on
Facebook's CAN-SPAM Act claim. Power 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. Power ECF
No. 275 (“February 16, 2012 order”).
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 April 17,
2012, Facebook filed its supplemental brief regarding damages
and the liability of Vachani. Power ECF No. 299
(“Facebook Damages/Liability Brief”). On August
15, 2012, Vachani submitted a supplemental brief regarding
damages and Vachani's personal liability. Power
ECF No. 317.
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.
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.
Power ECF No. 327. Facebook sought to reopen the
Power Ventures 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.
Power 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. Power 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. Power Ventures ECF No. 332. On April
29, 2013, the Power Defendants filed a case
management statement in which they stated their intent to
request leave to file a motion for reconsideration of the
February 16, 2012 order. Power ECF No. 334. In
Facebook's and the Power Defendants'
respective case management statements filed on April 29,
2013, the parties acknowledged that Vachani's liability
and the issues of damages and injunctive relief still needed
to be addressed. Power ECF No. 333, 334.
2, 2013, following a case management conference, the Court
issued a case management order. Power ECF No. 340.
In that order, the Court clarified that the February 16, 2012
order did not decide Vachani's liability. 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.
August 1, 2013, Power filed its request for leave to file a
motion to reconsider Judge Ware's February 16, 2012
order. Power 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.
Power 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. Power ECF No. 356.
Specifically, Judge Spero found that Vachani “was not
prepared for his Rule 30(b)(6) deposition, read from [a
prepared] declaration, and was ‘argumentative' and
‘evasive.'” Id. at 5. In the same
order, Judge Spero noted that Defendants had committed
another discovery violation by failing to timely disclose
relevant emails. Id. Following Judge Spero's
order, Vachani immediately appealed the discovery sanction to
the Ninth Circuit on September 6, 2013. Power ECF
No. 360. Despite the appeal, this Court retained jurisdiction
over aspects of the case unrelated to the discovery
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. Power 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 statutory damages and monetary
damages in the amount of actual losses. 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
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 the Power Defendants the
same day, September 25, 2013. Power ECF No. 374.
October 23, 2013, Defendants appealed the Court's grant
of summary judgment. Power 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. Power ECF No.
December 9, 2016, the Ninth Circuit affirmed in part and
reversed in part this Court's grant of summary judgment.
Power 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 on December 1,
2008, 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 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. The Court also ordered Defendants to
pay by March 15, 2017 the $39, 796.73 discovery sanction that
the Ninth Circuit affirmed.
2, 2017, after briefing on the issue was complete, the Court
ruled on the remanded issue of damages. Power ECF
No. 435. The Court found that Facebook was entitled to $79,
640.50 in compensatory damages. This figure did not include
the $3, 031, 350 in CAN-SPAM damages that were reversed by
the Ninth Circuit. This figure also did not include $902.50
in damages incurred on or before December 1, 2008, when
Facebook sent the cease and desist letter. Instead, this
figure reflected only the damages incurred by Facebook after
December 1, 2008 in responding to Defendants' CFAA
violation. The Court also issued a permanent injunction
against Defendants that was narrowly tailored to
Defendants' CFAA violation. Finally, the Court ...