Court tosses $11 million judgment against Spamhaus

At least for now, Spamhaus, the popular British spam-blacklisting organization, won't have to cough up $11.7 million as part of a spat with an Illinois e-mail marketing company.

The U.S. Court of Appeals for the Seventh Circuit on Thursday vacated a lower court's decision last fall to award the damages and to impose an injunction, which required the organization to cease causing any e-mail sent by e360insight or Linhardt to be "blocked, delayed, altered, or interrupted in any way" and to publish an apology (click here for a PDF of the opinion).

(Credit: spamhaus.org)

The three-judge panel concluded the lower court's action was "overbroad" because it had not conducted an "extensive" or "substantial" enough inquiry into the situation before calculating its damage award and imposing other conditions on Spamhaus. The district judge based the damages solely on a sworn statement from Linhardt about his estimated lost future profits, which contained "no information whatsoever to support a finding that such future profits were certain prior to Spamhaus' act," the appeals court opinion said.

By sending the case back to the district court for further proceedings, the court did not, however, seem to take issue with the lower court's ruling that Spamhaus was liable under U.S. law. That runs contrary to the U.K.-based organization's position.

Here's a little history: e360insight and Linhardt sued Spamhaus early last year, accusing the organization of wrongly placing the company on its "Register Of Known Spam Operations," a list reserved for people or businesses that have been knocked off at least three Internet service providers for violating their terms of use, according to the appeals court opinion. Spamhaus has steadfastly maintained it has ample evidence that Linhardt is a spammer, although neither his name nor his company's name seemed to show up on that list at press time. (The official e360insight Web site wasn't loading.)

But the case never got to that point. The multimillion-dollar judgment came about by default after Spamhaus voluntarily dropped its defense--largely on the grounds that it was a British company and therefore wasn't subject to U.S. laws or court orders.

"As spamming is illegal in the U.K., an Illinois court ordering a British organization to stop blocking incoming Illinois spam in Britain goes contrary to U.K. law which orders all spammers to cease sending spam in the first place," Spamhaus wrote in a lengthy explanation posted to its Web site at the time.

The case took on a new twist last October, when e360insight asked the federal judge presiding over that case to order the Internet Corporation for Assigned Names and Numbers, or ICANN, and registrar Tucows to suspend Spamhaus' domain name registration. But ICANN, for one, said it couldn't grant that request.

Attempts to reach Linhardt were unsuccessful. Spamhaus representatives did not immediately respond to requests for comment.

Wired News first reported the opinion on Thursday evening.

Update at 12:30 p.m. PDT: In an e-mail interview with CNET News.com Friday, Spamhaus CEO Steve Linford said the organization was still finalizing its response to the ruling. As for e360insight's allegations, he said the company and its proprietor have never been on its "Register Of Known Spam Operations" list. Rather, the company is listed on its Spamhaus Block List, a free database available to e-mail administrators, which is currently employed in the management of some 1.2 billion mailboxes.