Robert Kramer, III v. Suzanne Bartok ( 2010 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 08-3841
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Robert W. Kramer, III, doing *
business as CIS Internet *
Services, *
*
Plaintiff - Appellee, *
*
v. * Appeal from the United States
* District Court for the Southern
Henry Perez, * District of Iowa.
*
Defendant, *
*
Suzanne Bartok, *
*
Defendant - Appellant, *
*
Gary C. Brown, *
*
Defendant. *
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Submitted: October 20, 2009
Filed: February 19, 2010
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Before COLLOTON, BEAM, and BENTON, Circuit Judges.
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BEAM, Circuit Judge.
Suzanne Bartok appeals the district court's order holding her jointly and
severally liable to Robert Kramer for $236,480,660 in statutory damages under Iowa's
anti-spam statute, formerly located in Iowa Code Chapter 714E.1 Since Bartok cannot
be held liable for her conduct under the statute's plain language, we reverse.
I. BACKGROUND
The following facts are derived from the district court's findings.2 At all times
material, Robert Kramer operated an internet service provider (ISP) in Clinton, Iowa,
doing business as CIS Internet Services (CIS). Henry Perez and Suzanne Bartok,
citizens of Arizona, owned and operated AMP Dollar Savings (AMP), a corporation
that did business under its own name as well as under other names such as
Mortgageleads.tv and Plastic Profits. Gary C. Brown was a certified public
accountant and did some corporate accounting work for Perez and Bartok.
In 2001, Mortgageleads.tv entered into an agreement to provide mortgage leads3
to a California mortgage broker named Cal Capital. Bartok signed a letter confirming
this agreement. In 2003, in an apparent attempt to generate mortgage leads,
Mortgageleads.tv sent a large quantity of spam (unsolicited bulk e-mail) advertising
1
Iowa Code Chapter 714E was repealed in May 2005 and replaced with Iowa
Code Chapter 716A. See Kramer v. Perez, 579 F. Supp. 2d 1164, 1169 n.4 (S.D. Iowa
2008). However, we consider this appeal under Iowa Code Chapter 714E, as it was
the law in effect at the time in question.
2
We note that the district court's factual findings are based substantially on
deposition testimony not received into evidence during trial. Because we reverse the
district court's decision on other grounds, we need not decide whether the district
court's reliance on such depositions constitutes reversible error.
3
A "mortgage lead" is "the name and contact information for a person who has
expressed an interest in financing or refinancing a residential mortgage." Kramer, 579
F. Supp. 2d at 1165.
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mortgage refinancing services to "cis.net" e-mail addresses. CIS's spam filter blocked
all but twenty-three of those e-mails. To determine the source of this spam, Kramer's
attorney opened one of the twenty-three e-mails CIS received, followed a link in the
e-mail to a mortgage refinancing website, and submitted a mortgage solicitation form
using his actual telephone number. Shortly thereafter, a Cal Capital employee
contacted Kramer's attorney using the telephone number he provided on the
solicitation form.
Before conducting Mortgageleads.tv's spamming operation, Perez gained
experience sending spam on behalf of Plastic Profits. Specifically, while working as
Plastic Profits, Perez sent up to 50,000 spam e-mails per day to advertise his
commercial services. Plastic Profits later entered into the business of selling mortgage
leads. However, the district court did not make any findings with regard to Bartok's
prior experience sending spam.
In 2004, Kramer filed a multi-count complaint against Perez, Bartok, and
Brown, alleging, among other things, that they sent millions of spam e-mails to CIS
in violation of Iowa's anti-spam statute. Kramer sought civil damages under the
statute's private cause of action. Unfortunately, Perez and Bartok produced almost
nothing during discovery because Perez disassembled and sold all of AMP's
computers and either discarded or erased the computers' hard drives. Perez also
collected all AMP documents in his possession and shredded them. The district court
determined that Bartok assisted Perez in destroying AMP's records.
Following a bench trial on the merits, the district court held that Perez and
Bartok violated Iowa's anti-spam statute, concluding that more than 23.6 million spam
e-mails sent to CIS "originated with" Perez and Bartok. Kramer v. Perez, 579 F.
Supp. 2d 1164, 1169 (S.D. Iowa 2008). Then, the district court held Perez and Bartok
jointly and severally liable to Kramer for over $236 million in statutory damages–$10
per spam e-mail transmitted–under the anti-spam statute's private cause of action. Id.
at 1170-72. In doing so, the district court rejected Bartok's argument that she could
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not be held individually liable for her conduct under the anti-spam statute. Id. at 1169.
The district court explained that "[w]hile Bartok may not have been the 'person' hitting
the 'send' button to create the spam e-mail," she was still civilly liable for conspiring
with Perez to send the spam and for aiding and abetting "Perez's spamming operation."
Id. at 1170. The district court emphasized the following facts to support its theory of
Bartok's liability: (1) Bartok was half owner of a business whose sole source of
income was predicated on illegal spamming; (2) Bartok signed Mortgageleads.tv's
2001 agreement to provide mortgage leads to Cal Capital; and (3) Bartok aided Perez
in destroying AMP's records. Id.The district court found no evidence linking Brown to the spamming operation
and accordingly rejected Kramer's claim against Brown under the anti-spam statute.
Id. at 1169. Moreover, the district court ruled in favor of Brown, Perez, and Bartok
on all of Kramer's remaining claims,4 holding that Kramer failed to prove the actual
damages elements of those claims. Id. at 1170. Bartok subsequently filed this appeal.
Perez did not appeal the district court's decision.
II. DISCUSSION
At the heart of Bartok's appeal lies her assertion that the district court
incorrectly interpreted and applied Iowa's anti-spam statute to hold her jointly and
severally liable for over $236 million in statutory damages. In an appeal from a
judgment following a bench trial, we review the district court's conclusions of law de
novo. Speer v. City of Wynne, 276 F.3d 980, 984-85 (8th Cir. 2002). Thus, the
4
In addition to his claim under the Iowa anti-spam statute, Kramer also asserted
a federal RICO claim, a federal Computer Fraud and Abuse Act claim, an Iowa
Ongoing Criminal Conduct Act claim, an unauthorized computer access claim, and
common law claims of unfair competition, conversion, trespass, unjust enrichment,
intentional interference with contract and intentional interference with prospective
business advantage. Kramer, 579 F. Supp. 2d at 1170.
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district court's statutory construction is subject to de novo review. Davey v. City of
Omaha, 107 F.3d 587, 591 (8th Cir. 1997).
Iowa Code Chapter 714E.1 contains two key sections. First, Iowa Code section
714E.1(2) makes it unlawful "for a person to use an interactive computer service to
initiate the sending of bulk electronic mail that the sender knows, or has reason to
know" violates the provisions of section 714E.1(2)(a)-(e). Then, section 714E.1(3)
creates private causes of action for those injured by a violation of section 714E.1(2).
Bartok argues that the district court erred when it held her civilly liable to Kramer for
violating section 714E.1(2) despite also finding that she was not "the 'person' hitting
the 'send' button to create the spam e-mail." Kramer, 579 F. Supp. 2d at 1170. We
agree.
Generally, while interpreting section 714E.1, we would "accept the decisions
of the Iowa Supreme Court as the controlling precedent." HOK Sport, Inc. v. FC Des
Moines, L.C., 495 F.3d 927, 934-35 (8th Cir. 2007). But, because the Iowa Supreme
Court has not interpreted this statute, we must predict how the Iowa Supreme Court
would do so. In re Gen. Am. Life Ins. Co. Sales Practices Litig., 391 F.3d 907, 911
(8th Cir. 2004). In making such a prediction, "we may consider relevant state
precedent, analogous decisions, considered dicta, . . . and any other reliable data." Id.(quotation omitted) (alteration in original).
The Iowa Supreme Court recently explained that "[w]hen a statute . . . is plain
and its meaning is clear, the rules of statutory construction do not permit courts to
search for meaning beyond its express terms." Office of Consumer Advocate v. Iowa
Utils. Bd., 744 N.W.2d 640, 643 (Iowa 2008). Moreover, Iowa courts "generally
presume words contained in a statute . . . are used in their ordinary and usual sense
with the meaning commonly attributed to them." Id.We believe that section 714E.1(2) is plain and its meaning is clear. As
discussed above, to violate this section, a person must use an "interactive computer
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service" to "initiate the sending" of spam e-mail. Iowa Code § 714E.1(2). Section
714E.1(1)(e) defines "interactive computer service" as "an information service,
system, or access software provider that provides or enables computer access by
multiple users to a computer server, including specifically a service or system that
provides access to the internet, and such systems operated or services offered by a
library or an educational institution." Since section 714E.1 does not define "initiate"
or "send," we must apply the "accepted usage" of those terms. Office of Consumer
Advocate, 744 N.W.2d at 643. According to The American Heritage College
Dictionary 714 (4th ed. 2007), "initiate" means "[t]o set going by taking the first step."
Moreover, "send" means "[t]o cause to be conveyed by an intermediary to a
destination" or "[t]o dispatch, as by a communications medium." Id. at 1262.
After considering the above definitions within the context of the statute as a
whole, we hold that Bartok cannot be held directly liable for her conduct under section
714E.1(2). The district court's findings of fact simply do not support a conclusion that
Bartok used an interactive computer service to initiate the sending of spam. Kramer
argues that Bartok violated section 714E.1(2) because her actions, in a broad sense,
"initiated the sending" of spam. Specifically, Kramer argues that Bartok "initiated"
the sending of spam by acting as a liaison between AMP and mortgage lead
purchasers such as Cal Capital and by ensuring that Perez's spamming operation was
profitable. As such, Kramer argues, Bartok "initiated," or took the "first step," in
sending spam. Indeed, if section 714E.1(2) merely made it unlawful for "a person to
initiate the sending" of spam, Kramer's argument may have some merit. However, the
statute makes it unlawful for "a person to use an interactive computer service to
initiate the sending" of spam. Iowa Code § 714E.1(2) (emphasis added). Since there
is no evidence that Bartok ever used an interactive computer service to initiate the
sending of spam, Bartok cannot be held liable for violating section 714E.1(2).
While the district court conceded that "Bartok may not have been the 'person'
hitting the 'send' button to create the spam e-mail," Kramer, 579 F. Supp. 2d at 1170,
it held Bartok civilly liable for violating section 714E.1(2) under civil conspiracy and
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aiding and abetting theories. Id. Bartok argues that she cannot be held liable under
such theories because the statute's plain text does not create liability for conspiracy
and/or aiding and abetting. Further, she argues that she cannot be held liable under
common law theories of civil conspiracy and aiding and abetting because Kramer did
not prove the damages elements of those claims. We agree.
First, Bartok cannot be held liable under section 714E.1 for civil conspiracy
and/or aiding and abetting because the statute's text creates no such liability. Section
714E.1(3)(a)(2) creates a private cause of action for a spam recipient only against "a
person who transmits or causes to be transmitted electronic mail in violation of
[section 714E.1(2)]." Similarly, section 714E.1(3)(b)(1) creates a private cause of
action for an interactive computer service only against "a person who transmits bulk
electronic mail without authority" in violation of section 714E.1(2). We refuse to
create a private cause of action for civil conspiracy and/or aiding and abetting where
section 714E.1(3)'s text creates no such liability. See Lee v. Grinnell Mut.
Reinsurance Co., 646 N.W.2d 403, 407 (Iowa 2002) (explaining that a "court cannot
enlarge or otherwise change the terms of the statute"); cf. Central Bank of Denver v.
First Interstate Bank of Denver, 511 U.S. 164, 191 (1994) (holding that a private
plaintiff could not maintain a civil aiding and/or abetting suit under a federal securities
statute's private cause of action where the text of the statute did not prohibit aiding and
abetting).
Further, Bartok cannot be liable under Iowa common law civil conspiracy
and/or aiding and abetting theories because Kramer did not prove the actual damages
elements necessary to prevail under such claims. Under Iowa law, plaintiffs must
prove actual damages to prevail under civil conspiracy and/or aiding and abetting
theories of liability. S. N.Y. Ry., Inc. v. Fort Dodge, Des Moines & S. Ry. Co., 316
N.W.2d 840, 844 (Iowa 1982) ("[U]nless actual damage has resulted from something
done by one or more of the conspirators in furtherance of the object of the conspiracy,
no civil action lies against anyone."); Reilly v. Anderson, 727 N.W.2d 102, 107 (Iowa
2006) (affirming jury instruction's list of elements for aiding and abetting, which
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included "[t]he amount of damage"); Iowa Civil Jury Instructions 3500.4 (2004) ("In
order to recover for the claim of aiding and abetting, the plaintiff must prove . . . [t]he
nature and extent of damage."). As the Iowa Supreme Court explained in Basic
Chems., Inc. v. Benson, 251 N.W.2d 220, 233 (Iowa 1977):
Courts have recognized a distinction between proof of the fact that
damages have been sustained and proof of the amount of those damages.
If it is speculative and uncertain whether damages have been sustained,
recovery is denied. If the uncertainty lies only in the amount of
damages, recovery may be had if there is proof of a reasonable basis
from which the amount can be inferred or approximated.
(quotation omitted).
Here, the district court found that "Kramer's evidence of his actual damages
[was] impermissibly speculative" and, accordingly, held that "Kramer has not
sufficiently proven his actual damages." Kramer, 579 F. Supp. 2d at 1171. Based on
this holding, the district court denied all of Kramer's alternative theories of liability.
Id. at 1170-71. Thus, assuming arguendo that a person could be liable for conspiring
to send and/or aiding and abetting the sending of illegal spam e-mail under Iowa
common law, a judgment against Bartok cannot stand under such theories because
Kramer failed to prove the damages elements of those claims.
Bartok raises several additional issues on appeal, including her argument that
the district court erred when it based its decision on deposition testimony not admitted
into evidence at trial and her argument that there is insufficient evidence to sustain the
$236 million judgment because only 23 e-mails (not 23.6 million e-mails) were
admitted into evidence. Since our determination that Bartok cannot be held liable for
violating section 714E.1(2) is sufficient to dispose of this case, we need not address
Bartok's remaining arguments.
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III. CONCLUSION
We reverse the district court's decision to hold Bartok jointly and severally
liable to Kramer for $236,480,660 in statutory damages under Iowa Code § 714E.1,
and remand for proceedings consistent with this opinion.
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