Marketing’s Weekly Dose of the Truth

Ken Magill

About Us

e360 Beats Spamhaus! Um ... to the Tune of $3

9/6/11

By Ken Magill

Dave Linhardt, president of now-defunct email marketing firm E360 Insight, got a $3 slap in the mouth last week when a judge vacated his claim against anti-spam outfit Spamhaus for that amount.

Thing is, he apparently had a real opportunity to get some actual damages—not the millions he was aiming for, but substantially more than the three-dollar judgment he got.

However, by allegedly engaging in delaying tactics and presenting wildly different estimates on the amount of damages Linhardt claimed Spamhaus cost his business by placing e360 on its blocklist, Linhardt damaged his credibility with the court so much, Judge David Hamilton effectively told him to take a hike.

“By failing to comply with its basic discovery obligations, a party can snatch defeat from the jaws of certain victory,” Judge Hamilton wrote in his opinion handed down Sept. 2. “[A]ll e360 needed to do was provide a reasonable estimate of the harm it suffered from Spamhaus’s conduct.

“Rather than do so, however, e360 engaged in a pattern of delay that ultimately cost it the testimony of all but one witness with any personal knowledge of its damages. That lone witness lost all credibility when he painted a wildly unrealistic picture of e360’s losses."

That one lone witness was Linhardt.

“Having squandered its opportunity to present its case, e360 must content itself with nominal damages on each of its claims, and nothing more,” Hamilton wrote.

Spamhaus maintains a list of IP addresses it contends are used by spammers. An unknown number of e-mail system administrators use the list to help determine whether or not to block incoming e-mail as spam.

Linhardt sued Spamhaus in 2006, claiming the group began erroneously listing his IP addresses in 2003, resulting in as much as 65 percent of his e-mail getting blocked from reaching would-be recipients.

Spamhaus succeeded in getting the case moved to federal court and then inexplicably failed to show up and defend itself.

As a result, Linhhardt won an $11.7 million default judgment.

Spamhaus tried unsuccessfully to get the default ruling overturned. A district court eventually knocked the damages down to $27,000.

Both appealed that award to the Seventh Circuit, Spamhaus claiming it was too high, Linhardt claiming it was too low.

And that’s when Linhardt’s alleged delays and wildly differing damages claims came back to haunt him.

For one example, according to Hamilton, when e360 submitted some amended “interrogatory responses” or written answers during the discovery process to written questions by Spamhaus’s lawyers, rather than having been merely amended, the responses were drastically changed.

“It added sixteen new witnesses, and it increased its damages estimate by a full order of magnitude,” Hamilton wrote. “Even setting aside e360’s previous discovery delays, these changes provided powerful evidence that e360 was not engaging in the discovery process in good faith.”

He added: “There is no way that e360 could have believed in good faith that its last-minute disclosure of so many new witnesses and a radically inflated damages estimate was even remotely appropriate. …

“All indications are that this late disclosure was meant to prolong discovery and inflict additional costs on Spamhaus by forcing it to request additional time to depose those witnesses and learn the details of the inflated new damage estimate.”

At one point, Linhardt estimated his damages at $135,173,577, according to District Court Judge Charles Kocoras. Previously, he had estimated them at $122,271,346, according to Kocoras. During the final argument, the claimed amount was $30 million, according to the judge.

The district court upon whose decision Hamilton was ruling--Kocoras's--came up with $27,000 based on the amount Linhardt demonstrated his contracts were worth on a monthly basis.

However, Spamhaus argued that even that amount was too high because it was e360’s gross revenue, not its profit.

e360 defended the use of gross revenue, claiming that the email was all profit because it had already been sent, according to Hamilton.

However Hamilton wrote: “Lindhardt admitted that e360 still had to pay additional royalty fees whenever its emails generated revenue.

“These fees and e360’s failure to account for them in its damages calculation doom the damages award.”

Doomed to a grand total of three bucks.

Linhardt published a statement on the case. Read it here.

Comments

Show: Newest | Oldest

Post a Comment
Your Name:
Subject:
Comments:
Verification:
Please type the letters in the image above

Terms: Feel free to be as big a jerk as you want, but don't attack anyone other than me personally. And don't criticize people or companies other than me anonymously. Got something crappy to say? Say it under your real name. Anonymous potshots and personal attacks aimed at me, however, are fine.

Posted by: William Silverstein
Date: 2012-02-04 11:54:12
Subject: Malpractice or fraud

After listening to the hearing and reading the decision, the only logical conclusion is that either one of the following is true: 1. Linhardt/e360's attorneys are guilty of malpractice by not providing the evidence of the damages and being sanctioned for not providing it; 2. The lawsuit was a fraud , as there was never damages to provide evidence of; or 3. That Linhardt just did not want to win any money from Spamhaus, so he made a decision to disobey discovery orders. I think options one or two are more likely than three.

Xverify