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Spamhaus award reduced from $11m to $3

A UK anti-spam company that had previously been ordered to pay more than $11 million in damages for 'blacklisting' a US marketing company will only need to pay a nominal $3 amount following a US court ruling.07 Sep 2011

Spamhaus is a UK company that blacklists businesses that it says are behind spam emails. It had been ordered to pay e360 more than $11 million in damages in 2006 by a US court after the company successfully claimed that it had lost business as a result of blacklisting by Spamhaus.

In 2007 an appeals court dismissed the ruling on damages and a district court later revised the figure to $27,000. The US District Court for the Northern District of Illinois said that e360's calculations of the damages it was owed – which ranged from an initial $11m and at one point reached $135m - could not be relied on.

The Court found that e360 was responsible for the sending of 6.6 billion emails containing adverts or product offers from its clients. The man behind e360, David Linhardt, calculated the damages in a way that was "fundamentally unsound", the Court said.

Both e360 and Spamhaus appealed that ruling with e360 arguing that the $27,000 damages award was too low and Spamhaus claiming it was too high.

The US Court of Appeals has now ruled that the district court incorrectly awarded e360 $27,000 because it was based on lost revenues rather than lost profits. However the court ruled that e360 had failed to provide admissible additional evidence about the lost profits it had suffered since the district court had ruled that Linhardt's evidence was not credible. It said that therefore the company should only be awarded the "nominal" $3 amount.

Claims made by e360 that the district court had erred by not considering all the evidence it had provided were rejected. The company had provided late and inadmissible evidence that was outwith the scope of its discovery order, the court said. A discovery order is an order a court can issue to summon specific evidence requested by the opposing parties.

"We conclude that the district court properly struck most of e360’s damages evidence, either as an appropriate discovery sanction or for proper procedural reasons, and we reject e360’s challenges to the judgment," the court said in its ruling.

"We also agree with Spamhaus that the evidence failed to support the modest award of $27,000 in actual damages because e360 based its damage calculations on lost revenues rather than lost profits. We vacate and remand with instructions to enter judgment for e360 in the nominal amount of three dollars," the ruling said.

"By failing to comply with its basic discovery obligations, a party can snatch defeat from the jaws of certain victory. After our earlier remand, all e360 needed to do was provide a reasonable estimate of the harm it suffered from Spamhaus’s conduct," said the ruling. " Rather than do so, however, e360 engaged in a pattern of delay that ultimately cost it the testimony of all but one witness with any personal knowledge of its damages."

"That lone witness lost all credibility when he painted a wildly unrealistic picture of e360’s losses. Having squandered its opportunity to present its case, e360 must content itself with nominal damages on each of its claims, and nothing more," the ruling said.