This is an "odds and ends" month for Legal Commentary, focusing on relevant developments in the law in various areas, rather than a single topic. Much is going on.
First and foremost, the Supreme Court now has heard arguments in Round Two of the COPA litigation, and the results should be knocking on the door around the time, or not long after this issue hits the streets. Obviously, whatever the Court does with that case will be the subject of an entire column because of the dramatic impact that the decision will have on the adult online industry. Fingers are crossed.
The other thing that is "in the oven," so to speak, is the FTC's promulgation of the "do not spam" list, and that brings us to the next topic of the month, the similar "do not call" list. Although the new federal spam regulations place restrictions on commercial e-mail, particularly that involving sexually-oriented content, the "do not spam" list stands to have a profoundly more significant impact. Why? Because the "do not spam" list will generate complaints. There will be an avalanche of complaints from busybodies, reporting to the FTC a list of spam received after being placed on the no-spam listing. Presumably the FTC will create some automated method of sorting out these complaints; there would be an incentive for the FTC to do that because, given the huge monetary penalties that can be exacted upon illegal spammers, it could be a very profitable endeavor for the impoverished federal government. Thus, the importance of the do-not-call case.
Recall that the "do not call" list was struck down by two federal district courts, one court doing so on First Amendment grounds and the other because of a finding that Congress had not done enough to authorize the list. As to the latter, it took Congress about a week to remedy what the district court found to be the deficiency in the underlying legislation, which gives you an idea of how Congress understands its constituents' feelings about telephone calls "at dinner time" (read: during Survivor) offering a special deal. Congress has a similar and perhaps accurate view of the feelings of its constituency concerning spam, which is why it is so surprising that the federal anti-spam law turned out so much weaker than the California law that it trumped. As a result of that activity in Congress, the court of appeals found that any issue of Congressional authorization for the do-not-call list no longer existed.
Certainly more significant is that the court found that the "do not call registry" did not offend the First Amendment, a finding that looms large for the spam industry. You should understand the significance of this case, or the lack of it. This is an opinion by a three-judge panel of the Tenth Circuit Court of Appeals, which is the court in Denver that hears federal appeals from Colorado and a handful of surrounding states from Big Sky Country to Oklahoma. The do-not-call losers have a right to ask the entire composition of the court to hear the case and, failing at that, to ask the Supreme Court to jump in; neither the full court nor the Supreme Court is under any obligation to hear the case. Oddly enough, the Supreme Court is perhaps more likely than the en banc panel of the Tenth Circuit. Reportedly, and to the surprise of many, the Direct Marketing Association will drop any further challenge to the law, and have agreed to not call any of the 57 million phone numbers that have been submitted to the FTC. However, the American Teleservices Association has vowed to fight on, so the law will be further tested.
Some of the arguments that the Tenth Circuit rejected in the "do not call" case will apply to the spam industry, assuming the opinion stands. The court rejected arguments that plainly will impact the "do not spam" list when the FTC sets it up.
For any of you who are really seasoned adult veterans of the adult entertainment industry, you may recall the Supreme Court's 1970 decision upholding the "prohibitory list," which in contemporary terms might be dubbed the "do not mail" list. Rowan v. United States Post Office Department, 397 U.S. 728 (1970). Under that law, a postal customer is allowed to trundle down to the local post office and demand that delivery of unsolicited, sexy (by the customer's standards) mail be halted. "A man's home is his castle," the court opined, and therefore what the customer didn't want, the customer could stop, at least if it fell into the sexy category. The court in the "do not call" case embraced that line of thinking. The Rowan case, however, was decided before the Supreme Court very seriously acknowledged the proposition that commercial speech enjoys meaningful protection under the First Amendment. Today, there currently is one school of thought that the Court is very close to affording commercial speech full protection under the First Amendment.
In any event, the Tenth Circuit made relatively short work of the argument that excluding charitable and political callers from the list rendered it underinclusive, and thus at odds with the First Amendment. Also significant, especially to the upcoming COPA decision, is that the court found that caller identification and other technologies, by virtue of which the recipient could block calls, unreasonably placed the technological burden on the consumer - "Forcing the consumers to compete in a technological arms race with the telemarketing industry is not an equally effective alternative to the do-not-call registry," the court said. One cannot help but wonder the extent to which the court's decision was influenced by the number of calls that the judges had received, interrupting dinner with a pitch for a new long-distance service or low-interest credit card. Mainstream Marketing Services, Inc, et al. v. Federal Trade Commission, et al., ___ F.3d ___, 2004 WL 296980 (10th Cir., Feb. 17, 2004).
Now, you absolutely are going to love this next item. Recall from earlier Legal Commentaries that a class of merchants - some five million of them, as it turns out - sued Visa and MasterCard, claiming antitrust violations by freezing out competitors in the debit card business. Well, apparently Plastic realized that they had a problem, because they settled for roughly $3.4 billion - that is billion with a "b" - in cash, plus injunctive relief estimated to be worth between $25 and $87 billion. The court cut the attorneys fees to roughly $220 million, a little over a third of what was requested, which is why lawyers don't like to do contingency fees unless the case is a slam-dunk, rear-end collision with a phone company truck. Anyway, it is difficult to imagine that $100 billion is chump change to Visa and MasterCard, but $3.4 billion is $680 per merchant, assuming the five million of them. It figures that Plastic can stuff that into processing fees. Visa has of late hired one of the nation's leading antitrust lawyers as their in-house, general counsel, which tells you where they think their problems lie. In re Visa Check/Mastermoney Antitrust Litigation, 297 F.Supp.2d 503 (E.D.N.Y. 2003).
And Plastic is in yet more legal trouble, although still far less than they deserve. The publisher of Perfect 10, the magazine that appears to have been more successful suing people than publishing its magazine, has sued Visa and MasterCard in federal court in San Jose, accusing the dynamic Plastic duo (and others) of financing the distribution of millions of stolen photos and clips. The plaintiff summarizes its claim in the complaint:
"Hidden in undisclosed locations around the world, thieves from every country are operating... "Stolen Content Websites" that routinely offer for sale to the public stolen still and moving images [including]... scans from Perfect 10 Magazine and images from its Website perfect10.com.... Webmasters who run Stolen Content Websites also typically engage in consumer fraud or other illegal acts....
"Stolen Content Webmasters cannot exist without the knowledge and assistance of the financial institutions who process the credit card transactions for such unlawful material and who, as a result, effectively act as knowing fences for the sale of billions of dollars worth of stolen property."
Because of that, Perfect 10 claims, the defendant credit card companies and financial institutions owe Perfect 10 lots of money. It will be interesting to see how this one pans out.
Clyde DeWitt is a partner in the Los Angeles, Calif.-based, national law firm of Weston, Garrou & DeWitt. He can be reached through AVN Online's offices, at his office at 12121 Wilshire Boulevard, Suite 900, Los Angeles, CA 90025, or at [email protected]. This column does not constitute legal advice but, rather, serves to inform readers of legal news, developments in cases, and editorial comment about legal developments and trends. Readers who believe anything reported in this column might impact them should contact their personal attorneys.
