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XMission, L.C. v. Click Sales, Inc.

United States District Court, D. Utah

April 11, 2019

XMISSION, L.C., Plaintiff,
CLICK SALES, INC., Defendant.



         This matter is before the court on Defendant Click Sales, Inc.'s Motion to Dismiss First Amended Complaint for Lack of Personal Jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure and Plaintiff XMission L.C.'s Renewed Motion for Preliminary Injunction pursuant to Rule 65(a) of the Federal Rules of Civil Procedure. On March 8, 2019, the court held a hearing on the motions. At the hearing, Plaintiffs were represented by Jordan K. Cameron and Defendant was represented by Tyler G. Newby and Brian E. Lahti. The court took the motion under advisement. After carefully considering the memoranda filed by the parties and the law and facts relevant to the pending motion, the court issues the following Memorandum Decision and Order.


         XMission is a Utah-based Internet Service Provider, (“ISP”) founded in 1993, which has offered a variety of Internet connectivity services throughout the years. XMission owns all the hardware through which it offers its services, and its hardware is located in Utah. XMission has had to consistently upgrade its hardware to deal with spam problems. Throughout the years, XMission has also expended significant sums of money, bandwidth, technological resources, and employee time and resources to deal with the problems spam causes.

         Click Sales is a Delaware corporation with its principal place of business in Boise, Idaho. Click Sales does business as ClickBank and operates an online marketplace and affiliate marketing program. Because Click Sales does business as ClickBank, the court will refer to Click Sales as ClickBank throughout this order. ClickBank's online marketplace allows third-parties to sell their products on the ClickBank platform. ClickBank does not sell its own products on the ClickBank website. By operating the ClickBank online marketplace, Click Sales facilitates and processes purchases between buyers visiting the website and the vendors offering their products for sale on the ClickBank website. ClickBank charges a fee for processing the transaction.

         ClickBank's affiliate marketing program is designed to drive traffic to websites promoting various ClickBank offers. Third-party affiliates create accounts with ClickBank in order to promote offers on ClickBank's website in exchange for commission payments. ClickBank's website explains the process: “1. You find a product to promote and create a customized HopLink. 2. You promote the product online. 3. A customer clicks on your HopLink, goes to the vendor's website, and ends up purchasing the product from ClickBank. 3. You receive credit for promoting the sale. Your commission is calculated based on the net sale price . . . and credited to your account within two minutes of the sale.”

         A ClickBank “HopLink” is a link used to direct traffic to ClickBank offers and to track the affiliates' traffic for commission purposes. A HopLink can exist in two forms: (1) an encrypted HopLink that does not identify the vendor or affiliate to the public, or (2) a readable HopLink that includes the vendor and affiliate names in the link. ClickBank provides its affiliates with the tools to encrypt HopLinks to ensure that the parties responsible for the emails are hidden from the public. Some affiliates choose to use encrypted HopLinks to prevent other third parties from interfering with their HopLinks, which may affect the record of their transactions and sale proceeds.

         Each vendor selling its products on ClickBank's platform determines what percentage of the product's sale price it will share with the marketing affiliate for completed sales. ClickBank processes the orders and distributes sale proceeds to the vendor and the affiliate. ClickBank charges its own service fee to the vendor for processing the sale, as it does for sales completed without any affiliate promotion.

         One of the ways ClickBank's affiliates transmit the HopLinks is through emails. The affiliates deliver HopLinks to prospective customers' in-boxes and drive traffic to ClickBank offers hosted on various websites. The websites identify ClickBank as the “retailer of products on this site.” If a customer purchases a product, ClickBank earns its fee and pays a commission to the affiliate who transmitted the HopLink.

         ClickBank requires its affiliates and vendors to abide by ClickBank's terms of service with respect to promotional activity, including a requirement that the vendors and affiliates comply with all federal and state laws and regulations. In order to determine that its affiliates are generating legitimate traffic to ClickBank's offers, “ClickBank will withhold payment of any balance until an account shows a minimum of 5 sales using at least two of the following payment methods: American Express . . . Discovery . . . MasterCard . . . Visa.”

         From 2015 to date, XMission has received over 116, 000 commercial emails on its Utah servers promoting ClickBank that have contributed to a spam problem. Each of the emails contains “HopLinks” through which ClickBank is identified as the responsible party. XMission's Terms of Service allow it to opt-out or unsubscribe from email traffic for its customers. Given the enormous number of ClickBank emails, XMission has used an automated system to attempt to click on available unsubscribe links in each of the emails. But the automated system has not appeared to have had any significant effect. In a recent declaration from ClickBank's Chief Technology Officer, it states that ClickBank does not have any mechanism to unsubscribe email addresses.

         ClickBank claims that, with the exception of limited historical promotions for digital products about how to use ClickBank, ClickBank did not send emails promoting products listed on the ClickBank marketplace. ClickBank also does not review or approve of the emails its affiliates send in order to generate commissions within the ClickBank affiliate marketing program.

         XMission has received 30, 800 customer reports of spam from its customers in relation to the spam emails from ClickBank affiliates and ClickBank. XMission received nearly 2, 000 customer reports of spam in June and July 2018, and nearly 60% of the ClickBank emails received on XMission's servers in July 2018 generated customer reports of spam.

         In July 2018, XMission filed the present case against ClickBank alleging that all of the ClickBank emails violate provisions of the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM”), 15 U.S.C. §§ 7701-7713. After XMission filed its original motion for preliminary injunction, it stipulated to stay a hearing on the motion based on ClickBank's representation that it would mediate the matter. When it became clear to XMission that ClickBank had changed its position on mediation, XMission renewed its motion for preliminary injunction.


         Because “personal jurisdiction is a prerequisite to granting injunctive relief, ” the court will address ClickBank's motion to dismiss first. National Union Fire Ins. Co. v. Kozeny, 115 F.Supp.2d 1231, 1236 (D. Colo. 2000) (citing Citizens Concerned for Separation of Church and State v. City and County of Denver, 628 F.2d 1289, 1299 (10th Cir. 1980)).

         ClickBank's Motion to Dismiss for Lack of Personal Jurisdiction

         Pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, ClickBank moves to dismiss XMission's Complaint for lack of personal jurisdiction over ClickBank in Utah. XMission has the burden of demonstrating that the court has jurisdiction over ClickBank. Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011).

         To defeat a motion to dismiss, a plaintiff must make a prima facie showing of personal jurisdiction. Old Republic Ins. v. Cont'l Motors, Inc., 877 F.3d 895, 903 (10th Cir. 2017). The court accepts the well-pled allegations of the plaintiff's complaint as true unless the defendant contradicts those allegations in affidavits. Kennedy v. Freeman, 919 F.2d 126, 128 (10th Cir. 1990). If the parties submit conflicting affidavits, the court resolves any factual disputes in the plaintiff's favor. Id. In this case, the parties dispute whether the Declaration of Peter Ashdown contains admissible evidence. But the evidence provided in the Declaration is based on his personal observations, and the court has ...

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