Iowa ISP Wins $1 Billion in Spam Suit

Spam fighters yesterday hailed a decision handed down last week by a federal court in Iowa ordering three spammers to pay more than US$1 billion to an Internet service provider for clogging its system with unsolicited e-mail messages.

However, the anti-spammers were divided on what impact the decision may have on the spam problem in coming months.

"This is a big issue to a lot of people, and the court's action is sending a strong message to spammers that this sort of conduct is not going to be tolerated," Aaron Kornblum, Internet safety enforcement attorney for Microsoft (Nasdaq: MSFT) in Redmond, Washington, told TechNewsWorld.

Amazing Decision

"This sends a message that no matter how large or small an ISP is, spamming is a crime," added Phyllis Schneck, vice president for strategic development for CipherTrust, an e-mail security firm in Atlanta.

Another e-mail security professional, Scott Chasin, chief technology officer with MX Logic in Denver, called the decision "amazing."

"I think we will see more states getting fairly aggressive on prosecuting spam-related crimes," he told TechNewsWorld.

More Litigation Expected

He maintained that ISPs are coming under increased pressure from their subscribers to do something about the spam problem. Over the next year, he continued, responses to that pressure will include more litigation and states passing their own anti-spam laws.

In a default judgment filed last Friday, U.S. District Judge Charles R. Wolle ordered payments by three spammers to Robert Kramer, operator of CIS Internet Services in Clinton, Iowa.

According to Kramer's attorney, Kelly Wallace, a partner with Wellborn & Wallace in Atlanta, AMP Dollar Savings, of Mesa, Arizona, was ordered to pay the ISP operator $720 million; Cash Link Systems, of Miami, Florida, $360 million; and TEI Marketing Group, also located in Florida, $140,000.

Largest Award Ever

"It's most definitely the largest anti-spam lawsuit that we've ever seen," said Trevor Hughes, executive director of Email Service Provider Coalition, an e-mail marketing industry group based in York, Maine. "It's encouraging to see enforcement, to see activity against spammers."

While the award by the court was large, some spam fighters were skeptical about how much of it would ever be recovered. "The spammers in question are based mainly in Florida where we know the money will never be collected," Steve Linford, CEO and founder of the SpamHaus Project, told TechNewsWorld via e-mail.

"Florida is the world's spam capital," he said. "Spammers from all over the U.S. base themselves in Florida to take advantage of Florida's laws, which are designed to protect the assets of criminals. Florida-based spammers in particular have total contempt for U.S. law and courts, as demonstrated by these spammers not even bothering to show up in court."

Higher and Higher Math

What pumped up the damages in the case to such lofty levels was an Iowa law that allowed the court to impose a penalty of $10 for each spam message sent to an ISP. Then those damages were tripled by applying the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) to the award.

In his lawsuit, filed in 2000 against some 300 spammers, Kramer claimed his inbound mail servers received up to 10 million spam messages a day.

"The Iowa statute made the numbers big, but everything prohibited in that statue is prohibited by the common law and now the new federal law in every state," Wallace observed. "This should be a warning to folks who want to do this kind of marketing that ISPs will come after them."

Questionable Impact

Since the lawsuit was filed before the federal Can-Spam act became law, the court's decision will have a limited impact on future law, according to Jeffrey D. Neuburger, an attorney with Brown Raysman Millstein Felder & Steiner in New York City. "But it's a symbolic victory," he told TechNewsWorld.

As to the decision having an impact on the volume of spam on the Internet, Chasin, of MX Logic, was pessimistic. "After news of this billion dollar award has been circulating all over the world, I can tell you that spam will continue to increase," he said. "Prosecutions and convictions have done little to deter the sophisticated spammer out there."