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Hall v. Earthlink Network

United States District Court, Southern District of New York


December 19, 2003

PETER HALL AND BIG BAD PRODUCTIONS, INC. PLAINTIFFS,
v.
EARTHLINK NETWORK, INC. DEFENDANT

The opinion of the court was delivered by: Owen, J.

MEMORANDUM & ORDER

Plaintiff Peter Hall, from 1992 to 1999, independently wrote and filmed his first movie called "Delinquent", which he was endeavoring to market through his corporation, Big Bad Productions. According to Hall's complaint, ¶ 21, "Delinquent was scheduled for its commercial premieres on September 12, 1997, in both Los Angeles and New York City.... Subsequent engagements for the film, and the revenue generated from such engagements, depended substantially upon the number of customers and film industry professionals attending the L.A. and New York premieres." At that time, Hall had a contract with defendant Earthlink, an internet service provider, pursuant to which he paid $19.95 per month for personal use of e-mail and internet services, rather than business use for which Earthlink charges a higher monthly rate. Hall's e-mail address was lot99@earthlink.net and he alleges that he was known in the independent film community by that e-mail name. Notwithstanding that business use of his Earthlink e-mail account was prohibited, Hall concededly did use his Earthlink e-mail services to directly contact people in the film and media community to inform them of Delinquent's New York and L.A. premieres, and to endeavor to obtain a showing at the earlier Chicago Underground Film Festival.

On August 5, 1997, UUNet, a third-party that provided "backbone" services to Earthlink, notified Earthlink that lot99 was a "spammer,"*fn1 a term for e-mail users who send mass junk e-mail (called "spam" in computer jargon). Earthlink, attempting to deal with growing internetwide concerns about spam, immediately cut off the lot99 e-mail account and posted "lot99" on a web list of e-mail abusers called a Net Abuse Report. The list did not mention Hall's name. On August 11, 1997, six days later, after a series of phone calls between Hall, Harris Schwartz of Earthlink, and reporter Dan Mitchell of internet industry magazine Wired News (whom Hall had contacted about the matter), Earthlink learned from UUNet that UUNet had made a mistake and lot99 was not a source of spam. UUNet sent a letter to Hall confirming that it had misidentified lot99 as a source of spam, and Earthlink apologized, posted a retraction on the board where it had previously identified lot99 as a spammer, and offered free service. Earthlink also forwarded 16 e-mails to a new non-Earthlink e-mail account Hall had set up between August 5 and August 11. Hall declined to accept the free service and apparently made no effort to mitigate the alleged damages, instead suing Earthlink for $1,000,000 in lost profits from Delinquent.

Hall's subscriber agreement is governed by California law. Kids' Universe v. In2Labs, 95 Cal.App. 4th 870, 883 (Cal.App.2002) (emphasis in original) states that:

where the operation of an unestablished business is prevented or interrupted, damages for prospective profits that might otherwise have been made from its operation are not recoverable for the reason that their occurrence is uncertain, contingent and speculative. But although generally objectionable for the reason that their estimation is conjectural and speculative, anticipated profits dependent on future events are allowed where their nature and occurrence can be shown by evidence of reasonable reliability.

Simply put, lost profits of this nature are entirely too speculative to support Hall's breach of contract claim. Summary judgment is therefore appropriate and would limit Hall's contract damages to actual losses suffered from the alleged breach, such as telephone and new stationery costs.*fn2

Hall next asserts damage to reputation. This libel claim comes under New York law. He alleges that Earthlink defamed him by posting lot99 on its Net Abuse Report. Under New York law, the elements of a libel claim are a false and defamatory statement about the plaintiff, publication to a third party, fault, and special harm or per se actionability. Hall, in his own complaint, ¶¶ 13 and 14, defines "spam" as "electronic communications transmitted over the Internet, to persons at their Internet addresses, without prior authorization, request, or permission of the users of such addresses to transmit such communication to them." He defines "spamming" as "the practice of transmitting spam to large numbers of persons, often for a commercial or financial purpose, such as advertising." His complaint further states that spamming is considered "undesirable and harmful to the Internet, and detrimental to the full use and enjoyment of the Internet." While this is hardly complimentary to lot99, it is not a defamation of Hall, which our courts define as causing injury to a person's reputation. See Albert v. Loksen, 239 F.3d 256, fn. 13 (2d Cir.2001).*fn3 Under these circumstances, Hall can not claim that the impairment to lot99's use of his personal internet account damaged his business, which is required to establish libel per se.

Having failed to establish libel per se, Hall would have to show special damages in order to make a libel claim, but he has failed to do so. "Special damages must be alleged with sufficient particularity to identify actual losses and be related causally to the alleged tortious act." Beck v. General Tire and Rubber Co., 98 A.D.2d 756, 469 N.Y.S.2d 785, 787 (2d Dep't.1983). Actual losses, if properly alleged and causally linked to the defamatory statement, constitute "special damages". Speculative damages in the form of alleged lost profits on a debut to-be-shown independent film do not constitute special damages, and Hall himself, in his deposition, acknowledged that any damages suffered on account of having his e-mail address listed on the Net Abuse Report "would be speculation." Summary judgment is granted dismissing the libel claim.

Hall asserts a statutory claim under the Federal Wiretap Act as codified at Title I of the Electronic Communications Privacy Act 18 U.S.C. §§ 2511(1)(a) and 2520, claiming that Earthlink illegally intercepted his e-mail after terminating his service rather than "bouncing" e-mails back to senders so they would be on notice that lot99 was not receiving mail any longer, or forwarding e-mail to Hall's new address. Hall alleges that this is an intentional interception of electronic communications in contravention of the ECPA. However, Earthlink did not intentionally intercept anything, but merely received and stored e-mails precisely where they were sent-to an address on the Earthlink system. Crowley v. Cybserource Corp., 166 F.Supp.2d 1263, 1269 (N.D.Cal.2001). Summary judgment is granted dismissing this claim.

Finally, Hall brings three separate tort claims with $1,000,000 claims as to each. First, he seeks creation of two new torts: negligent appropriation of electronic communications, and intentional appropriation of electronic communications. Whether a time may come for torts of this nature to be recognized in an increasingly electronic communication-reliant world, under the facts of this case, I decline to do so. Even if such torts were properly recognized, the fact remains that the damages sought by Hall are entirely too speculative to sustain a claim: "The damages recoverable in tort actions cannot be contingent, uncertain, or speculative." BD ex rel. Jean Doe v. DeBuono, 193 F.R.D. 117, 139 (S.D.N.Y.2000) (quoting 36 N.Y.Jur.2d Damages § 17). Here, as already noted, any attempt to assess the damage to Hall from Earthlink's failure to bounce or forward his e-mail would be an exercise in speculation. Summary judgment is granted dismissing these tort claims.

As an alternative, Hall claims prima facie tort. As with libel, prima facie tort requires special damages. Where damages are speculative, no prima facie tort claim can lie. In Vigoda v. DCA Productions Plus Inc., 293 A.D.2d 265, 741 N.Y.S.2d 20, 23 (1st Dep't 2002), the court held that "[a]ll that plaintiffs have alleged is lost future income, conjectural in identity and speculative in amount. As such, this is an insufficient allegation of damages to support a cause of action for prima facie tort." Here, Hall's losses are conjectural in identity and speculative in amount. Summary judgment is granted dismissing this claim.

Given the speculative nature of almost all of Hall's damage claims, all that is now left before me are claims that encompass his alleged actual losses, such as telephone calls, stationery, and costs for securing a new internet provider. The amount in controversy obviously falls well below the $75,000 threshold for diversity jurisdiction, and there is no longer a federal question since the ECPA claim was dismissed. Accordingly, there is no basis for federal jurisdiction over Hall's claims and this action is dismissed with prejudice.

So ordered.


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