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September 4, 2007

Seventh Circuit Sends Spamhaus Case Back to Trial Court

The Seventh Circuit has sent the Spamhaus case back to the District Court, vacating the damages award and the injunction that ordered Spamhaus to remove plaintiff from its spam list.  The facts were that e360 Insight  sued Spamhaus for placing e360 on a spammer list.  Spamhaus, a non-profit U.K. entity at first appeared in the case and then withdrew thinking that they were beyond the reach of U.S. courts.  The District Court then entered a default judgment against Spamhaus to the tune of some $11.7 million dollars and an order to remove e360 from the spammer list it maintains.

Spamhaus filed a Rule 60 motion to vacate the judgment which the District Court denied.  The appeal to the Seventh Circuit ensued.  That Court upheld the default judgment but struck down both the damage award and the injunction.  The $11.7 million dollar amount was based on conclusory statements by e360.  Even though e360 won a default judgment, they still had to prove their damages with evidence and not mere allegations.

The injunction was just as problematic.  The District Court had to conduct a review of the appropriateness of the remedy under the four part test for when an injunction should issue.  The Court articulated this as:

“According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (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.” [quoting eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837 (2006), slip op. at 21.]

The Court stated that the lower court issued the injunction on the basis of the default and not whether it was an appropriate remedy.  The Court also touched on potential First Amendment issues in granting an injunction under these circumstances.

The Spamhaus case is notable because the lower court at one time considered ordering the domain registration of Spamhaus to be canceled as part of a contempt of court order.  That did not happen.  Now the case goes back to the District Court so it can re-evaluate the type and amount of damages.  The default judgment stands, however.

The Seventh Circuit slip opinion is here.

September 4, 2007 | Permalink

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