Motion to Quash

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT, an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,
Defendant.

DEFENDANT’S MOTION TO QUASH CITATION TO DISCOVER ASSETS
NOW COMES the Defendant The Spamhaus Project, by and through its attorneys Jenner & Block LLP, and requests that this Court quash the citation to discover assets under Federal Rule of Civil Procedure 34(b).1
In support of this Motion, Defendant states as follows:
1. For the reasons stated in the separate Motion to Vacate, which is incorporated herein by reference, Defendant expressly objects to the enforcement of the Citation to Discover Assets based on this Court’s lack of personal jurisdiction. The Citation commands that an individual appear on behalf of The Spamhaus Project and present documents relating to the Company’s assets. However, the individual commanded to appear does not reside in the United
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1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because it is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiff’s failure to properly effect service of process. These objections are made notwithstanding Defendant’s filing of this motion, and had previously been raised in the Notice of Removal and the Answer that was withdrawn with leave of this Court.
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States, and is not subject to the subpoena power of this Court. Furthermore, The Spamhaus Project is not subject to personal jurisdiction in any Illinois court because it is based solely in the United Kingdom and does not conduct or transact business in Illinois.
2. The Citation to Discover Assets should be also be denied as premature because of the outstanding Motion to Vacate and Motion to Stay that were filed contemporaneously with this Motion to Quash.
2. If this Court requires any additional basis for the granting of the Motion to Quash, we respectfully request a briefing schedule.
3. Additionally, even if the Court finds that the Citation to Discover Assets is proper and orders that the Defendant must comply, the information requested necessitates the entering of a protective order under Federal Rule of Civil Procedure 26(c), because it consists of confidential proprietary information. By the terms of the Citation, the information requested calls for non-public financial and proprietary information.
WHEREFORE, Defendant The Spamhaus Project respectfully requests that this Court enter an order quashing the Citation to Discover assets under Federal Rules of Civil Procedure 34(b).
Respectfully submitted,
THE SPAMHAUS PROJECT
Dated: October 26, 2006 By: s/Matthew M. Neumeier_________
Matthew M. Neumeier
Craig C. Martin
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484

Response to Citation to Discover Assets

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT, an individual,

Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,

Defendant.

DEFENDANT’S RESPONSE TO CITATION TO DISCOVER ASSETS
NOW COMES the Defendant The Spamhaus Project and responds as follows to Plaintiff’s Citation to Discover Assets:1
1. Any and all corporate minute books maintained by The Spamhaus Project, LTD;
ANSWER: Spamhaus does not hold corporate meetings. Spamhaus will provide the company documents setting it up as a Limited Liability Company.
2. Any and all monthly, quarterly, annual and/or all other accounting and financial statements, including but not limited to payroll and accounts receivable records, prepared by or on behalf of The Spamhaus Project, LTD for the past three years;
ANSWER: As a non-profit company, Spamhaus does not have any accounting or financial statements other than one tax return addressed in response to number seven. Spamhaus does not employ any formal accounting procedures throughout the year. Rather, at the end of the
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1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiff’s failure to properly effect service of process. These objections are made notwithstanding Defendant’s good faith effort to comply with this Court’s order that it respond to the Citation to Discover Assets.
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year, Spamhaus’ accountant determines how much money Spamhaus received throughout the year through donations, but no formal accounting or financial statements are done. The company does not have any employees and there are no payroll records. The company does not have any accounts receivable records.
3. Any and all information regarding any and all stocks, funds, bonds, securities and/or other investments or other assets held, gained, sold or lost by The Spamhaus Project, LTD or otherwise associated with The Spamhaus Project, LTD in any way, for the past three years;
ANSWER: Spamhaus does not have any stocks, funds, bonds, securities or any other investments. Spamhaus’ assets consist only of one Macintosh computer and a bank account located in London, United Kingdom for approximately $14,000, which are addressed in response to number six and nine.
4. Any and all information regarding any and all property, both real and personal, held, bought, sold, transferred, exchanged, leased, deeded or otherwise acquired, lost or otherwise maintained by or on behalf of The Spamhaus Project, LTD for the past three years, such information should include title to any vehicles owned or otherwise controlled by The Spamhaus Project, LTD and deeds to any real property owned or maintained by The Spamhaus Project, LTD;
ANSWER: Spamhaus does not own any property other than the Macintosh computer and bank account addressed in response to number six and nine.
5. For all such property identified in Number 4 herein, provide any and all information related to any and all profits, losses, gains, offsets, taxes paid or credited, along with any and all other tax or other related financial consequences, resulting from the sale, gain, purchase or ownership of such property; further, identify where all such property is located and how and in what ways such property is currently being used and how such property has been used for the past three years;
ANSWER: Because Spamhaus does not own any property, as described in response to number 4, this question is not applicable.
6. Any and all information regarding all bank, money or other financial accounts, including but not limited to bank statements and check ledgers, in the name of The Spamhaus Project, LTD, and/or its officers and/or directors, along with such information for any of The Spamhaus Project, LTD’s subsidiaries, successors or other related entities; for all such information, provide the name of the accounts, account numbers, amount of money currently held in each account and monthly statements for each said account for the past three years;
ANSWER: Spamhaus has been in existence for two years and will provide information relating to that time period. Spamhaus has one bank account, for which it receives monthly bank statements. Those bank statements are in the process of being collected and will be forwarded within a reasonable period of time. However, any personal information, such as Steve Linford’s personal address, will be redacted. Spamhaus has no subsidiaries, successors, or other related entities as that term is understood.
7. Copies of all income tax returns filed for the past three years, on behalf of The Spamhaus Project, LTD, along with copies of any and all tax refund checks issued during these years, and any and all information regarding how such refund money was used and/or where such money was held and is currently being held, whether by The Spamhaus Project, LTD and/or any other entity or individual affiliated or associated in any way with The Spamhaus Project, LTD;
ANSWER: Spamhaus has been in existence for two years. During that time, it has only filed one income tax return. However, no tax refund check has been issued. The income tax return is in the process of being collected and will be forwarded within a reasonable period of time.
8. Any and all information regarding any and all loan documents related to The Spamhaus Project, LTD, including any and all documents related to any receipts or disbursements of money related to such loans, for the past three years.
ANSWER: Spamhaus does not have any loan documents.
9. A list of all assets regardless of their present location.
ANSWER: Spamhaus has one computer (a Mac G4 Tower) located at a donated space in the United Kingdom. Spamhaus also has one bank account at HSBC in London, United Kingdom, with a balance of approximately $14,000. Pursuant to the response to number six, the documentation relating to the bank account is in the process of being collected and will be produced within a reasonable period of time.
10. A list of all liabilities regardless of their present location.
ANSWER: Spamhaus does not have any liabilities.
11. Audited financial statements for the last five years.
ANSWER: Spamhaus does not have any audited financial statements.
Respectfully submitted,
THE SPAMHAUS PROJECT
Dated: November 10, 2006 By: __s/Matthew M. Neumeier__
Matthew M. Neumeier
Craig C. Martin
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484
========================
CERTIFICATE OF SERVICE
I, Matthew M. Neumeier, an attorney, hereby certify that I served the foregoing Defendant’s Response to Citation to Discover Assets upon:
Joseph L. Kish
Kristen M. Lehner
Bartly Joseph Loethen
Synergy Law Group, L.L.C.
730 West Randolph Street
6th Floor
Chicago, IL 60661
Phone: (312) 454-0015
Fax: (312) 454-0261
by depositing a copy of same in the United States Mail, postage prepaid, on this 10th day of November 2006.
s/Matthew M. Neumeier_________
Matthew M. Neumeier

Opposition to Motion to Show Cause

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT, an individual,

Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,

Defendant.

DEFENDANT’S RESPONSE TO PLAINTIFFS’ MOTION
FOR A RULE TO SHOW CAUSE
NOW COMES the Defendant The Spamhaus Project,1 by and through its attorneys Jenner & Block LLP, and submits the following in response to Plaintiffs’ motion for rule to show cause alleging that Spamhaus has failed to comply with the citation to discover assets that it served on October 23, 2006:
1. Plaintiffs’ counsel asserts that pursuant to Local Rule 37.1, he emailed counsel for Spamhaus on March 13, 2007, in an attempt to resolve the matter without need for court intervention. However, the proper rule for meet and confer, as referenced on this court’s website, is Local Rule 37.2. According to that rule, there must be “consultation in person or by telephone and good faith attempts to resolve differences.” One letter sent via email on March 13,
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1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiff’s failure to properly effect service of process.
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2007 is insufficient to satisfy the meet and confer standard. See Sondker v. Philips Elecs., No. 03-C-2167, 2004 U.S. Dist LEXIS 14477, at *5-7 (N.D. Ill. July 27, 2004) (holding that a letter requesting production of attachments to an email used by opposing party in a summary judgment motion does not satisfy the meet and confer requirements of Local Rule 37.2). Plaintiffs’ counsel did not attempt to resolve these differences in good faith through consultation with Spamhaus prior to filing this motion.
2. Rather, Plaintiffs’ counsel sent a letter via email on March 13, 2007, to which Spamhaus replied on March 15, 2007. Spamhaus at that time reiterated that it has no subsidiaries, successors, parent companies, or other such related entities. Thus, Spamhaus answered the question presented by Plaintiffs. After receiving Spamhaus’ answer on March 15, 2007, Plaintiffs’ counsel sent an email stating “I respectfully disagree and think the court will disagree as well. Our motion will be forthcoming.” The motion was filed the same day, without any attempt by Plaintiffs’ counsel to call Spamhaus’ counsel to explain his disagreement or request additional information. This does not satisfy the spirit of meet and confer in the Northern District of Illinois — as this Court has noted, “Local Rule 37.2 is not a suggestion to the parties, rather it is a mandate…‘failure to comply with the local rules is not merely a “harmless technicality,” but can be a “fatal” mistake.’” Biedrzycki v. Town of Cicero, No. 04-C-3277, 2005 U.S. Dist. LEXIS 16423, at *6-7 (N.D. Ill. Aug. 8, 2005) (quoting Ridge Chrysler Jeep L.L.C. v. Daimler Chrysler Servs. N. Am., L.L.C., 2004 U.S. Dist. LEXIS 26861, 2004 WL 3021842 at *4 (N.D. Ill. 2004)). Plaintiffs’ failure to properly attempt to meet and confer with Spamhaus regarding this difference of opinion is fatal to its Motion for Rule to Show Cause under Local Rule 37.2.
3. Spamhaus originally responded to the October 23, 2006 citation on November 10, 2006. In that response, Spamhaus answered Plaintiffs’ questions and Steve Linford provided an affidavit certifying those responses. Furthermore, Steve Linford expressed his willingness to sit for a telephonic deposition relating to the assets of The Spamhaus Project. Plaintiffs never pursued the option of a telephonic deposition of Steve Linford. Nor did they ever object to the responses provided by Spamhaus on November 10, 2006.
4. Instead, Plaintiffs waited almost 3 months to complain about the answers asserted in the November 10, 2006 response. On January 31, 2007, Plaintiffs filed a second citation to discover assets that was substantively and procedurally defective. Upon receiving a letter from counsel for Spamhaus regarding the defective nature of the citation to discover assets, Plaintiffs withdrew the second citation.
5. On March 7, 2007, acting in good faith, Spamhaus answered the additional questions presented by Plaintiffs. However, that same day, Spamhaus learned that Plaintiffs had been serving subpoenas to third parties without serving those subpoenas on Spamhaus as required by Fed. R. Civ. P. 5(a).
6. In their motion, Plaintiffs allege that through the use of these illicit subpoenas, they discovered an entity named Spamhaus Technology, LTD, which Plaintiffs believe is owned by Steve Linford.2 Steve Linford is not a named defendant in this lawsuit and The Spamhaus Project does not have any subsidiaries, successors, parent companies, or other such related entities, as requested by the citation to discover assets.
7. Plaintiffs claim that Spamhaus Technology, LTD is at least a “related entity” as the term was used in the citation to discover asset. However, the terms used were “subsidiaries,
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2 Steve Linford only role in this litigation is as the director of The Spamhaus Project, not as an individual defendant.
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successors, parent companies, or other such related entities” (emphasis added). Therefore, the term “related entity” as used by Plaintiffs infers that the related entity should be similar to a subsidiary, successor, or parent company. Spamhaus Technology, LTD is not a “such related entity” to The Spamhaus Project, as it is a separate company that is not a “subsidiary, successor or parent company” to The Spamhaus Project, nor is it owned by The Spamhaus Project.
WHEREFORE, Defendant The Spamhaus Project respectfully requests that this Court deny Plaintiffs’ motion for a rule to show cause.
Respectfully submitted,
THE SPAMHAUS PROJECT
Dated: March 19, 2007 By: s/Matthew M. Neumeier_________
Matthew M. Neumeier
Craig C. Martin
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484
======================
CERTIFICATE OF SERVICE
I, Carrie A. Fino, an attorney, hereby certify that I served the foregoing Defendant’s Response to Plaintiffs’ Motion For A Rule to Show Cause upon:
Joseph L. Kish
Kristen M. Lehner
Bartly Joseph Loethen
Synergy Law Group, L.L.C.
730 West Randolph Street
6th Floor
Chicago, IL 60661
Phone: (312) 454-0015
Fax: (312) 454-0261
by depositing a copy of same in the United States Mail, postage prepaid, on this 19th day of March 2007.
s/Carrie A. Fino ____________
Carrie A. Fino

Order on Motion to Show Cause

UNITED STATES DISTRICT COURT
FOR THE Northern District of Illinois − CM/ECF LIVE, Ver 3.0
Eastern Division
e360 Insight, LLC, et al.
Plaintiff,
v. Case No.: 1:06−cv−03958
Honorable Charles P. Kocoras
Spamhaus Project, The
Defendant.
NOTIFICATION OF DOCKET ENTRY
This docket entry was made by the Clerk on Tuesday, March 20, 2007:
MINUTE entry before Judge Charles P. Kocoras :Motion hearing held on
3/20/2007. Plaintiffs' motion [75] for a rule to show cause is denied for the reasons stated
in open court. Defendant is directed to respond to all reasonable questions. Mailed
notice(sct, )
ATTENTION: This notice is being sent pursuant to Rule 77(d) of the Federal Rules of
Civil Procedure or Rule 49(c) of the Federal Rules of Criminal Procedure. It was
generated by CM/ECF, the automated docketing system used to maintain the civil and
criminal dockets of this District. If a minute order or other document is enclosed, please
refer to it for additional information.
For scheduled events, motion practices, recent opinions and other information, visit our
web site at www.ilnd.uscourts.gov.

Opposition to Motion for Order to Show Cause

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual,

Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD.,

Defendant.

DEFENDANT’S RESPONSE TO E360’S MOTION
FOR RULE TO SHOW CAUSE, AND DEFENDANT’S REQUEST
FOR LEAVE TO CONDUCT LIMITED DISCOVERY, REQUEST FOR
CLARIFICATION OF THE PERMANENT INJUNCTION, AND REQUEST
TO STAY ENFORCEMENT OF THE INJUNCTION PENDING CLARIFICATION

NOW COMES the Defendant The Spamhaus Project,1 by and through its attorneys Jenner & Block LLP, and submits the following in response to Plaintiffs’ Motion for Rule to Show Cause alleging a violation of the Permanent Injunction, and requests (1) for leave to conduct limited discovery in order to comply with the Permanent Injunction entered on September 13, 2006; (2) clarification of that Injunction; and (3) stay of enforcement of the Injunction pending clarification:
1. On September 13, 2006, this Court entered an order for default judgment in favor of Plaintiff and against Defendant, including a Permanent Injunction. The order for default
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1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiff’s failure to properly effect service of process. These objections are made notwithstanding Defendant’s filing of this Motion, and had previously been raised in the Notice of Removal and Answer to the Complaint that was withdrawn with leave of this Court.
__________________________________
judgment and Permanent Injunction is currently on appeal and fully briefed before the United States Court of Appeals for the Seventh Circuit.
2. The Permanent Injunction states that:

1. Spamhaus shall not take any action to cause emails sent by Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs to be blocked, delayed, altered, or interrupted in any way (including, without limitation, by listing Plaintiffs on Spamhaus’s ROKSO list, within an SBL listing on Spamhaus’s website, using blacklisting technology in concert or conjunction with others, or taking any other action to cause any such interference) unless Spamhaus can demonstrate by clear and convincing evidence that Plaintiffs have violated relevant United States law. Such clear and convincing evidence may only be shown after providing Plaintiffs with an opportunity to review any alleged offending email, including a review of the email header and content (in its entirety), and providing Plaintiffs with an opportunity to show the offending email was not send in violation of the United States law to the satisfaction of a reasonable person.
2. If such clear and convincing evidence is shown, then and only then may Spamhaus list the Internet Protocol (IP) address, and only the IP address, from which the offending email was sent on its website.
3. Spamhaus shall post, within five business days of the date of this order, on its website both the main home page and at the ROKSO jump page, a message of 1 inch by 1 inch, the text which is to be reasonably approved by Plaintiffs, and which, generally, indicates that Plaintiffs were erroneously listed on the website as spammers and that Plaintiffs are not spammers. Defendant Spamhaus shall leave such message on its site for a period of six months.

3. Spamhaus obtained evidence that spam was being sent from anonymous domains within the IP address ranges 63.161.113.0 to 63.161.113.255 (consisting of 255 IP addresses). On March 1, 2007, Spamhaus created SBL record SBL51828 listing 63.161.113.0/24. After investigation, Spamhaus found that the 63.161.113.0/24 netblock was registered to “Rocky Mountain Internet Service, LLC” of Colorado. The registration appears as follows:

OrgName: Rocky Mountain Internet Services, LLC
OrgID: RMIS-3
Address: 102 S. Tejon Street
Address: 11th Floor
City: Colorado
StateProv: CO
PostalCode: 80903
Country: US

As Exhibit A, a sample of six records obtained from the IP range, demonstrates, there was no other identifier present in the IP address registry to suggest the 63.161.113.0/24 IP range was owned by anyone other than Rocky Mountain Internet Services, LLC. The 255 IP addresses and domain name, rockymountaininternetservices.com, was registered through a Florida company, Moniker Privacy Services of Pompano Beach, Florida, that provides anonymous domain registration services.
4. Spamhaus further obtained evidence that spam was being sent from anonymous
domains within the IP address ranges 71.5.99.0 to 71.5.99.128 (consisting of 128 IP addresses). On March 13, 2007, Spamhaus created SBL record SBL52363 listing 71.5.99.0/25. After investigation, Spamhaus found that the 71.5.99.0/25 netblock was registered to “XO Communications” of Reston, Virginia. The registration appears as follows:

OrgName: XO Communications
OrgID: XOXO
Address: Corporate Headquarters
Address: 11111 Sunset Hills Road
City: Reston
StateProv: VA
PostalCode: 20190-5339
Country: US

As Exhibit B, a sample of eight records obtained from that IP range, demonstrates, there was no other identifier present in the IP address registry to suggest the IP range was owned by anyone other than XO Communications. The 80 anonymous domain names within the IP range were all registered through Moniker Privacy Services of Pompano Beach, Florida, a company that provides anonymous domain registration services.
5. e360 contacted Spamhaus claiming that it owned and controlled the IP addresses listed under SBL 51828 and SBL 52363, and requested that Spamhaus remove the addresses from the SBL list in order to comply with the terms of the Permanent Injunction.
6. In response to e360’s request, Spamhaus repeatedly requested further evidence regarding e360’s ownership and control of the IP addresses at issue. (See Exhibit C - Letters from February 14, 2007; March 7, 2007; and March 15, 2007). e360 never responded to these requests. Furthermore, in an effort to comply with the Permanent Injunction and to avoid unnecessary future disputes over Spamhaus’ compliance, Spamhaus additionally requested a list of all of e360’s anonymous domains, the location of such domains, and e360’s relationship with those domains (i.e. whether the domain was directly owned by e360 or was an affiliate, subsidiary, or related company owned or controlled by e360 or David Linhardt). This information is critical because Spamhaus has reason to believe that the number of anonymous domains operated by e360 is significant in scope, and without this information Spamhaus is in an untenable position and exposed to repeated threats and Motions for Rule to Show Cause from Plaintiffs regarding compliance with the Permanent Injunction.
7. e360 steadfastly refused to provide any of the evidence reasonably requested by Spamhaus. Instead, on March 16, 2007, e360 provided an affidavit from David Linhardt opining in conclusory fashion that IP addresses 63.161.113.0/24 (SBL 51828) and 71.5.99.0/25 (SBL 52363) are “controlled by e360Insight, LLC and David Linhardt as that term is used in the Default Judgment Order entered in the case of e360 Insight, LLC et al vs. The Spamhaus Project on September 13, 2006.” (Ex. D at ¶¶ 5, 7.) The affidavit did not include any supporting documentation for David Linhardt’s bald assertion that he “controls” the IP addresses at issue, nor did the affidavit include any documentation or evidence of ownership or registration of the IP addresses in question by e360. Furthermore, the affidavit provided no statement or evidence regarding how exactly the IP addresses are “controlled” by David Linhardt.
8. After receiving Linhardt’s affidavit, Spamhaus agreed to remove references to bargaindepot.net from the ROKSO on March 16, 2007. In meet and confer discussions with e360 regarding the Injunction, e360’s counsel stated that it believes the term “affiliates” includes e360’s independent business partners. Thus, Spamhaus has reason to believe that these “anonymous” companies are not actually “controlled” by e360 or David Linhardt, which places them outside of the terms and scope of the Injunction. Therefore, Spamhaus refused to remove SBL listings 51828 and 52363 without actual documentary evidence demonstrating e360’s ownership or “control” of the IP address ranges at issue, and renewed its request for a list of all of e360’s anonymous domains, the location of such domains, and e360’s relationship with those domains in order to ensure that Spamhaus could fully comply with the Permanent Injunction. e360 again refused to provide this information.
9. On April 4, 2007, e360 filed its Motion for Rule to Show Cause, alleging that the IP addresses included in SBL listings 51828 and 52363 were listed in violation of the Permanent Injunction because these IP addresses were allegedly controlled by e360, and Spamhaus never provided “clear and convincing evidence” that Plaintiffs violated U.S. law prior to listing the IPs, as required under the Permanent Injunction. (Motion for Rule to Show Cause ¶ 4). e360 also requested that this Court:

1. Sanction Defendant in the amount of Plaintiffs’ reasonable attorney’s fees in connection with bringing this motion;
2. Require Defendant to comply with the September 13, 2006 Order by removing SBL 51828 and SBL 52363 within 24 hours of the entry of this order;
3. Bar any internet service providers from using Defendant’s Block list until Defendant complies with this the September 13, 2006 Order; and,
4. Require the Internet Corporation for Assigned Names and Numbers (“ICANN”) to suspend the domain spamhaus.org until Defendant complies with the September 13, 2006 Order.

(Id. at pp. 4-5). e360’s Motion for Rule to Show Cause is without merit, for a plethora of reasons.
10. First, the Permanent Injunction applies solely to “Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs.” The bulk emails that caused Spamhaus to list the IP ranges within SBL listings 51828 and 52363 were sent from anonymous domain names within those IP ranges, and the IP ranges are registered to Rocky Mountain Internet Services, LLC and XO Communications, respectively. In fact, the use of Moniker Privacy Services to register the domain names within the IP ranges covered by the SBL listings at issue demonstrates that the domain names are intentionally registered anonymously. Because the IP ranges in question are registered to companies that are not a party to this lawsuit or the Injunction, and the domain names within those IP ranges are registered anonymously, SBL listings 51828 and 52363 do not violate the Permanent Injunction because they do not concern “Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs.” The SBL listings were generated without any knowledge by Spamhaus that these IP ranges could be “Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs.” e360 has never provided any documentation to contradict these facts that Spamhaus discovered in publicly available records.
11. In support of its Motion for Rule to Show Cause, e360 attached Exhibit B, representing it to be the “allegedly spam e-mail.” Motion for Rule to Show Cause at ¶ 5. Not only was this “allegedly spam e-mail” attached without any authentication, it also was not the spam email that led to the creation of SBL 52363. According to Spamhaus’ website (http://www.spamhaus.org/sbl/index.lasso), the offending spam email was actually sent from the domain titmon.com. (Ex. E.) Furthermore, the very domain names mentioned by e360 in the exhibits in support of its Motion for Rule to Show Cause (namely “haogdam.com,” “gotdop.com,” and “ifbeam.com”) (Motion for Rule to Show Case at Exhibits B and E) are registered anonymously with Moniker Privacy Services under the IP address ranges covered by SBL listings 51828 and 52363, which are registered to Rocky Mountain Internet Services, LLC and XO Communications. (Exhibits A and B, respectively). As such, nothing in the registry of either the domain names at question, or the IP ranges from which these domain names operate indicates that these domain names or IP ranges are “Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs.”
12. Second, while e360 relies on the affidavit of David Linhardt as proof that the IP ranges identified by SBL 51828 and 52363 are “controlled by e360Insight, LLC and David Linhardt as that term is used in the Default Judgment Order entered in the case of e360 Insight, LLC et al vs. The Spamhaus Project on September 13, 2006,” this affidavit is legally insufficient. An affidavit must be based on personal knowledge, set forth facts that would be admissible in evidence, and show affirmatively that the affiant is a competent witness on those matters. Fed. R. Civ. P. 56(e); Johnson v. Nordstrom, Inc., 260 F.3d 727, 736 (7th Cir. 2001). Statements in affidavits about opinion, belief, or conclusions of law are to be given no effect. See Eden v. Klaas, 165 Neb. 323, 328 (Neb. 1957). In this case, Linhardt’s affidavit contains only his legal conclusion that he “controls” the IP addresses at issue “as that term is used in the Default Judgment.” However: (1) the term “controlled” was never defined in the Permanent Injunction; (2) e360 and Linhardt never explain how they believe “control” was “used in the Default Judgment;” and (3) despite repeated requests by Spamhaus, e360 and Linhardt have provided no actual admissible evidence or documentation (such as ownership records or registration records) to support the affidavit’s conclusory assertion that Linhardt “controls” the IP addresses listed by SBL 51828 and 52363.
13. Third, e360 fails to submit an affidavit or other admissible evidence to support the “facts” alleged in their motion. For example, in Paragraph 8 of e360’s Motion for a Rule to Show Cause, e360 contends that “Spamhaus’ actions are continuing to cause irreparable harm to e360 and are inhibiting e360’s ability to conduct its lawful business,” that “Spamhaus [sic] actions have directly resulted in lost revenue for e360,” and that “e360 is forced to spend additional legal fees to respond to Spamhaus’ improper acts.” e360, however, provides no admissible evidence to support any of these contentions — no evidence of “irreparable harm,” no evidence that e360’s business is indeed lawful, no evidence of “lost revenue,” no evidence of expenditures for legal fees, and most importantly, no evidence that Spamhaus’ actions were the cause of any alleged and unsupported harms that may have befallen e360. Similarly, in Paragraph 9 of e360’s Motion for a Rule to Show Cause, e360 alleges that “Spamhaus [sic] SBL listing was the sole reason provided by Time Warner for terminating e360’s services, provided by J3 Networks.” This allegation, too, is offered without the support of any admissible evidence – nowhere in e360’s exhibits in support of its motion is there any evidence from Time Warner stating or suggesting that Time Warner terminated e360’s service because of Spamhaus. e360’s Motion for a Rule to Show Cause is devoid of any admissible evidentiary support and should be denied.
14. Fourth, without any admissible proof regarding e360’s ownership or control of the IP ranges listed under SBL 51828 and 52363, Spamhaus should have no obligation to remove the Case listings from the SBL. By allowing e360 to claim “control” or ownership of IP ranges registered to other entities and domain names that were registered anonymously, it is possible (and, Spamhaus would argue, likely) that the Permanent Injunction may be abused to provide a windfall to parties that are not “Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs,” and thus not within the proper scope of the Injunction.
15. Fifth, Paragraph 10 of e360’s Motion for Rule to Show Cause is disingenuous because it attempts to show that Spamhaus refused to comply with the Permanent Injunction even though e360 provided Spamhaus with Linhardt’s affidavit evidence. However, Spamhaus has repeatedly (since February 2007) asked e360 for evidentiary proof regarding its control or ownership of the IP ranges at issue in an attempt to comply with the Permanent Injunction. Despite these repeated requests, e360 refuses to provide this proof, without ever explaining why it is unwilling to comply with this simple, reasonable request. Given e360’s reticence to provide any ownership or registration documentation concerning these IP ranges, Plaintiffs’ ownership or “control” of the IP address ranges at issue has never been demonstrated, and therefore these anonymous domains within the IP address ranges do not fall within the parameters of the Injunction.
16. Sixth, Spamhaus disagrees with e360’s characterization of the procedures of the Permanent Injunction. e360 argues that Spamhaus is prohibited from listing any IP addresses that are owned or controlled by Plaintiffs or their affiliates, subsidiaries, or related companies, and that upon e360 asserting that it has any ownership or control over any IP address, regardless of the sufficiency of proof, Spamhaus must immediately remove the IP address from the SBL list. While Spamhaus agrees that the Injunction prohibits it from listing Plaintiffs or their affiliates, subsidiaries, or related companies owned or controlled by Plaintiffs, the Injunction Case applies only to “companies owned or controlled by Plaintiffs.” The IP addresses at issues are anonymously registered and when they were listed, Spamhaus had no knowledge that e360 or David Linhardt claimed some sort of ownership or control. e360 has failed to provide Spamhaus with evidence sufficient to actually show that it owns or controls these domain ranges. Thus, this dispute falls outside the parameters of the Permanent Injunction.
17. Finally, the third and fourth requested relief by e360 is beyond the reach of the Permanent Injunction and this Court’s power. First, e360 requests that this Court “[b]ar any internet service providers from using Defendant’s Block list until Defendant complies with this the September 13, 2006 Order.” The millions of internet service providers in the universe are not parties to this case and this Court lacks the authority to order such relief. Second, e360 requests that this Court “[r]equire the Internet Corporation for Assigned Names and Numbers (“ICANN”) to suspend the domain spamhaus.org until Defendant complies with the September 13, 2006 Order.” As this Court noted in its October 19, 2006 Order on e360’s Motion for Rule to Show Cause (in which e360 similarly requested that this Court order ICANN to suspend the spamhaus.org domain), ICANN is not a party to this case. Furthermore, as this Court also noted, e360’s requested relief (both then, and now) is “too broad to be warranted in this case” because “there has been no indication that ICANN…[is] not an independent entit[y], thus preventing a conclusion that [ICANN] is acting in concert with Spamhaus to such a level that they could be brought within the ambit of Fed. R. Civ. P. 65(d)” and “suspension would cut off all lawful online activities of Spamhaus via its existing domain name, not just those that are in contravention of this Court’s order.”
18. In addition to denying e360’s Motion for Rule to Show Cause, Spamhaus requests an opportunity to conduct limited discovery relating to companies owned or controlled by e360 or David Linhardt, so that Spamhaus can attempt to reasonably comply with the Permanent Injunction. To avoid disputes over compliance with the Injunction and to conserve judicial resources in the future, Spamhaus requests that this Court order e360 to provide Spamhaus with a list of all of the anonymous domain names and IP ranges e360 uses to send bulk email, as well as documentation sufficient to demonstrate that e360 actually owns or “controls” such domains or IP ranges. As noted above, Spamhaus has repeatedly requested this information from e360, but e360 refuses to provide it. Spamhaus believes this request is both reasonable and not onerous in any manner upon e360.
19. Furthermore, Spamhaus also requests an opportunity to serve interrogatories and document requests regarding ownership and registration records for IP addresses and domain names owned or controlled by e360, and also an opportunity to take David Linhardt’s deposition regarding his or e360’s ownership or control of any anonymous IP addresses and domain names. The limited discovery requested by Spamhaus is necessary to avoid any future disputes regarding the terms of the Permanent Injunction, and will ensure Spamhaus’ ability to comply in good faith with the Injunction.
20. In addition to denying e360’s Motion for Rule to Show Cause and granting Spamhaus’ request for limited discovery, Spamhaus also requests clarification of the Injunction. The Injunction is not specific in terms of the parties covered. As shown above, e360 and David Linhardt have a multitude of businesses that they regularly create and register anonymously for the purpose of sending “bulk” email. It is unclear whether the Injunction covers only the companies owned or controlled by e360 at the time of the entry of the Injunction or forever into the future. Clarification on the scope of the Injunction’s coverage will assist Spamhaus in complying with the Injunction.
21. Clarification is also necessary regarding the procedure by which disputes regarding listings on the SBL and ROKSO lists are adjudicated. As Spamhaus understands the terms of the Injunction, Spamhaus must present “clear and convincing” evidence of a violation of U.S. law before listing on its SBL or ROKSO lists companies owned or controlled by Plaintiffs. However, this “clear and convincing” evidence may only be “shown” after providing the evidence to e360 to review and have an opportunity to prove no violation of US law to the satisfaction of a reasonable person. Finally, if “clear and convincing evidence” is shown, then Spamhaus may list the offending IP address.
22. The Injunction as presently constituted leaves a number of questions open for interpretation, placing this Court in the role of perpetual referee between the parties. As shown above, the first disputed area is the amount of and type of proof required for e360 to demonstrate ownership or control of an anonymously registered company. Second, the term “shown” is not defined in the Injunction, it is unclear how the “clear and convincing” evidence Spamhaus may acquire of a violation of U.S. law by e360 is to be “shown,” and it is unclear what constitutes a “violation of U.S. law” that would permit Spamhaus to list e360 on its SBL and ROKSO lists. Third, the Injunction fails to specify when or how this evidence should be presented, or indeed how Spamhaus is to initiate a proceeding. Fourth, the Injunction is unclear how much evidence is sufficient to reach the standard of “clear and convincing” in order to allow Spamhaus to list a company owned or controlled by e360, and who makes the determination that evidence indeed meets the “clear and convincing” threshold. Finally, when Spamhaus presents its evidence, e360 is permitted to refute the “clear and convincing” evidence to “the satisfaction of a reasonable person.” Beyond being unfair in the differing standard of proof required for each party, it is unclear who represents the “reasonable person” and who determines whether sufficient evidence has been presented. For all of these reasons, the process provided in the Permanent Injunction will require this Court to become involved on an almost daily basis to interpret and manage the Injunction’s enforcement.
23. Finally, in addition to denying e360’s Motion for Rule to Show Cause, and granting Spamhaus’ requests for limited discovery and clarification of the Permanent Injunction, Spamhaus respectfully further requests that this Court stay enforcement of the Permanent Injunction until all of the above issues are resolved. Spamhaus cannot begin to comply with the Injunction unless and until it is clear what IP ranges and domains are owned or controlled by e360, and until the procedures under the Injunction are clarified and established in regards to how Spamhaus is to present the Court with “clear and convincing” evidence about any potential violations of U.S. law by e360.
WHEREFORE, Defendant The Spamhaus Project respectfully requests that this Court deny Plaintiffs’ Motion for Rule to Show Cause, grant Spamhaus’ request to conduct limited discovery, and grant Spamhaus’ request for clarification of the Permanent Injunction.
Respectfully submitted,
THE SPAMHAUS PROJECT
Dated: April 9, 2006 By: s/Matthew M. Neumeier_________
Matthew M. Neumeier
Craig C. Martin
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484
Case 1:06-cv-03958 Document 82 Filed 04/09/2007 Page 13 of 14
CERTIFICATE OF SERVICE
I, Carrie A. Fino, an attorney, hereby certify that I served the foregoing Defendant’s
Response to e360’s Motion for Rule to Show Cause, and Defendant’s Request for Leave to
Conduct Limited Discovery, Request for Clarification of the Permanent injunction, and
Request to Stay Enforcement of the Injunction Pending Clarification upon:
Joseph L. Kish
Kristen M. Lehner
Bartly Joseph Loethen
Synergy Law Group, L.L.C.
730 West Randolph Street
6th Floor
Chicago, IL 60661
Phone: (312) 454-0015
Fax: (312) 454-0261
by depositing a copy of same in the United States Mail, postage prepaid, on this 9th day of April
2007.
__s/Carrie A. Fino________________________
Carrie A. Fino

Docket entry (Continuance)

UNITED STATES DISTRICT COURT
FOR THE Northern District of Illinois − CM/ECF LIVE, Ver 3.0
Eastern Division

Case No.: 1:06−cv−03958
Honorable Charles P. Kocoras

e360 Insight, LLC, et al.
Plaintiff,
v.
Spamhaus Project, The
Defendant.

NOTIFICATION OF DOCKET ENTRY
This docket entry was made by the Clerk on Tuesday, April 10, 2007:

MINUTE entry before Judge James B. Zagel :Motion hearing held on 4/10/2007 before Judge Zagel. Plaintiffs' motion [79] for a rule to show cause is entered and continued to 4/12/2007 at 1:30 p.m. before Judge Zagel. Mailed notice(sct, )

ATTENTION: This notice is being sent pursuant to Rule 77(d) of the Federal Rules of Civil Procedure or Rule 49(c) of the Federal Rules of Criminal Procedure. It was generated by CM/ECF, the automated docketing system used to maintain the civil and criminal dockets of this District. If a minute order or other document is enclosed, please refer to it for additional information.

For scheduled events, motion practices, recent opinions and other information, visit our
web site at www.ilnd.uscourts.gov.

Order on Motion to Show Cause

UNITED STATES DISTRICT COURT
FOR THE Northern District of Illinois − CM/ECF LIVE, Ver 3.0
Eastern Division
e360 Insight, LLC, et al.
Plaintiff,
v. Case No.: 1:06−cv−03958
Honorable Charles P. Kocoras
Spamhaus Project, The
Defendant.

NOTIFICATION OF DOCKET ENTRY

This docket entry was made by the Clerk on Thursday, April 12, 2007:

MINUTE entry before Judge James B. Zagel :Show cause hearing stricken. Status
hearing held on 4/12/2007. RULE to show cause [79] is denied as moot. Petition for fees denied as moot.Mailed notice(drw, )

ATTENTION: This notice is being sent pursuant to Rule 77(d) of the Federal Rules of
Civil Procedure or Rule 49(c) of the Federal Rules of Criminal Procedure. It was
generated by CM/ECF, the automated docketing system used to maintain the civil and
criminal dockets of this District. If a minute order or other document is enclosed, please
refer to it for additional information.

For scheduled events, motion practices, recent opinions and other information, visit our
web site at www.ilnd.uscourts.gov.

e360Insight Response to Opposition to Motion for Order to Show Cause

This is e360Insight's response to Spamhaus' opposition to e360Insight's Motion for Order to Show Cause.

The claims:

1. e360Insight doesn't need to give over a list of it's IP addresses
2. Spamhaus can list whatever it wants but upon a bare assertion of affiliation or control must remove the listing

Motion to Withdraw

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

E3601NSIGHT, LLC,
an Illinois Limited Liability Company, and DAVID LINHARDT, an individual

Plaintiffs, 06 CV 3958

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and organized tinder the laws of England, aka THE SPAMHAUS PROJECT LTD,

Defendant.

MOTION TO WITHDRAW PREVIOUSLY FILED MOTIONS

Plaintiffs, e3601nsight, LLC and David Linhardt (collectively Plaintiffs), by and through their attorneys, Synergy Law Group, LLC, respectfully requests that this Court allow Plaintiffs to withdraw their previously filed Motion for a Rule to Show Cause and Motion to Compel. In support of this motion Plaintiffs state:

1. On May 14, 2007, Plaintiffs filed a Rule to Show Cause and noticed it for May 31, 2007 at 9:30 a.m. Attached as Exhibit A is a copy of the Rule to Show Cause, without exhibits.

2. On May 22, 2007, Plaintiffs filed a Motion to Compel and noticed it for May 31, 2007 at 9:30 a.m. Attached as Exhibit B is a copy of the Motion to Compel without exhibits.

3. Plaintiffs wish to withdraw the Rule to Show Cause and the Motion to Compel.

WHEREFORE, Plaintiffs, e360Insight, LLC and David Linhardt, respectfully request that this Court allow Plaintiffs to withdraw their Motion for a Rule to Show Cause and their Motion to Compel without prejudice.

Respectfully submitted,

E360Insight, LLC. and David Linhardt

By: /s/ Daniel J. Peters
One of Their Attorneys

Bartly J. Loethen
Joseph L. Kish
Daniel J. Peters
Synergy Law Group, LLC 730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MotShowCause7CompelWithdraw.pdf	06/28/09 1:05 pm	211.33 KB
MotShowCause7CompelWithdrawOrder.pdf	06/28/09 1:05 pm	4.21 KB

Motion to Withdraw

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

E360INSIGHT, LLC,
an Illinois Limited Liability Company, and DAVID LINHARDT, an individual

Plaintiffs, 06 CV 3958

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and organized tinder the laws of England, aka THE SPAMHAUS PROJECT LTD,

Defendant.

MOTION TO WITHDRAW PREVIOUSLY FILED MOTIONS

Plaintiffs, e360Insight, LLC and David Linhardt (collectively Plaintiffs), by and through their attorneys, Synergy Law Group, LLC, respectfully requests that this Court allow Plaintiffs to withdraw their previously filed Motion for a Rule to Show Cause and Motion to Compel. In support of this motion Plaintiffs state:

1. On May 14, 2007, Plaintiffs filed a Rule to Show Cause and noticed it for May 31, 2007 at 9:30 a.m. Attached as Exhibit A is a copy of the Rule to Show Cause, without exhibits.

2. On May 22, 2007, Plaintiffs filed a Motion to Compel and noticed it for May 31, 2007 at 9:30 a.m. Attached as Exhibit B is a copy of the Motion to Compel without exhibits.

3. Plaintiffs wish to withdraw the Rule to Show Cause and the Motion to Compel.

WHEREFORE, Plaintiffs, e360Insight, LLC and David Linhardt, respectfully request that this Court allow Plaintiffs to withdraw their Motion for a Rule to Show Cause and their Motion to Compel without prejudice.

Respectfully submitted,

E360Insight, LLC. and David Linhardt

By: /s/ Daniel J. Peters
One of Their Attorneys

Bartly J. Loethen
Joseph L. Kish
Daniel J. Peters
Synergy Law Group, LLC 730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MotShowCause7CompelWithdraw.pdf	06/28/09 1:05 pm	211.33 KB
MotShowCause7CompelWithdrawOrder.pdf	06/28/09 1:05 pm	4.21 KB

Spamhaus Reply to Motion to Compel

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual,

Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD.,

Defendant. )

DEFENDANT’S RESPONSE TO PLAINTIFFS’ MOTION TO COMPEL

Introduction

Plaintiffs e360 Insight, LLC and David Linhardt’s (collectively “Plaintiffs”) motion to compel the production of documents from The Spamhaus Project, Ltd. (“Project”)1 is meritless and should be denied. Plaintiffs do not and cannot claim that Project has failed to produce documents relating to Project that are in the custody or control of Project. Instead, Plaintiffs’ motion is an overreaching attempt to obtain discovery from two other and separate entities, Spamhaus Technology, LTD (“Technology”) and Ultradesign, LTD. But Project does not own or otherwise control either Technology or Ultradesign. Plaintiffs have not sued or served either Technology or Ultradesign. And Plaintiffs have no evidence of any kind that Project has access to the documents of Technology or Ultradesign. In fact, as we repeatedly advised counsel for Plaintiffs before this motion was filed, Project has no access to those documents. And while Plaintiffs’ motion is made on “information and belief” that Project can access the documents of the other entities, we attach to this sworn testimony that it cannot. The Court should deny Plaintiffs’ improper attempt to shortcut the rules of service and, if Plaintiffs desire information regarding Technology and Ultradesign, they should go through the proper legal method to obtain discovery from these United Kingdom entities, Technology and Ultradesign.

[1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiffs’ failure to properly effect service of process.]

I. Factual and Procedural Background.

A. The Facts Regarding Project, Technology And Ultradesign.

These are post-judgment proceedings against a single defendant, Project. Plaintiffs have never sued or served any individual or any other entity in this action, let alone Technology or Ultradesign. Steve Linford, the sole director of Project, has provided in attached affidavits the following information regarding the three entities at issue in Plaintiffs’ motion:

1. Project.
The Spamhaus Project, Ltd. is a non-profit company organized under the laws of the United Kingdom whose mission is to track spam senders and publish lists of verified spam sources, which are available on the internet free of charge. (Ex. A, Linford Spam Teq Aff. ¶ 3.) Steve Linford is the sole Director of Project. (Id. ¶ 1.) Project is the only defendant in this lawsuit and the only entity over which the Court has purportedly exercised jurisdiction.

2. Technology.
Spamhaus Technology, Ltd., also known as SpamTeq, is a British data service company that manages data synchronization systems in the United Kingdom. (Linford Spam Teq Aff. ¶ 5.) Technology merges data derived from approximately four (4) open-source spam filter organizations (only one of which is the Spamhaus Project, Ltd.) into data formats utilized by the spam filter industry. (Id.) The company website is http://www.spamteq.com. (Id.) Technology has no offices or staff outside the United Kingdom, nor does it enter into any contracts outside the United Kingdom. (Id. ¶ 5.)

Technology has no parents, subsidiaries or related entities. (Id. ¶ 6.) Project and Technology are separate, independent legal entities, governed by separate boards of directors, incorporated under separate charters, and engaged in separate endeavors. (Id. ¶ 7.) Technology is a partnership governed by a Board of Directors consisting of five (5) members. (Id. ¶ 12.) Under the charter, decisions are made by the majority. (Id. ¶ 12; Ex. B, Technology Charter.) Thus, individually, Steve Linford has no authority over the books and records of Technology. (Linford Spam Teq Aff. ¶ 12.) Project has no ownership interest in Technology. (Id. ¶ 7.) Likewise, Technology has no ownership interest in Project. (Id.) Project receives no income from Technology. (Id. ¶ 8.) Likewise, Project does not pay any fees to Technology. (Id.)

Technology and Project maintain separate books and records that are kept in different locations. (Id. ¶ 9.) Technology and Project each have their own separate tax records and each company maintains its own separate computers. (Id. ¶ 10.)

3. Ultradesign.
Ultradesign.com, also known as Ultradesign LTD, is a United Kingdom based Internet hosting company that provides web hosting and email services. (Ex. C, Linford Ultradesign Aff. ¶ 5.) Ultradesign has no offices or staff outside of Europe, nor does it enter into any contracts outside the United Kingdom. (Id.) Ultradesign is registered at Suite 6, 50 Churchill Square, Kings Hill, West Malling, Kent ME 19 4YU. (Id. ¶ 6.) The registered company number is 04154838. (Id.)

Ultradesign has no parents, subsidiaries or related entities. (Id. ¶ 7.) Project and Ultradesign are separate, independent legal entities, governed by separate boards of directors, incorporated under separate charters, and engaged in separate endeavors. (Id. ¶ 8.) Ultradesign is a partnership consisting of two partners. (Id. ¶ 13.) The partnership decisions are only made unanimously. (Id.) Thus, individually, Steve Linford has no authority over the books and records of Ultradesign. (Id.) Project has no ownership interest in Ultradesign. (Id. ¶ 8.) Likewise, Ultradesign has no ownership interest in Project. (Id.) Project receives no income from Ultradesign. (Id. ¶ 9.) Likewise, Project does not pay any fees to Ultradesign. (Id.)

Ultradesign and Project maintain separate books and records that are kept in different locations. (Id. ¶ 10.) Although Ultradesign donates to Project a server in its server racks in the United Kingdom, Ultradesign and Project each have their own separate tax records and each company maintains its own separate computers. (Id. ¶¶ 8, 11.)

B. Project’s Compliance With The Court’s Orders And Provision Of Responsive Information.

Project originally responded to the October 23, 2006 citation on November 10, 2006. In that response, Project answered Plaintiffs’ questions and Steve Linford provided an affidavit certifying those responses. (Ex. D.) Those responses provided all of the information sought regarding Project. Furthermore, Steve Linford expressed his willingness to sit for a telephonic deposition relating to the assets of Project. Plaintiffs never pursued the option of a telephonic deposition of Steve Linford. Nor did they timely object to the responses provided by Spamhaus on November 10, 2006. Instead, Plaintiffs waited almost 3 months to complain about the answers asserted in the November 10, 2006 response. On January 31, 2007, Plaintiffs filed a second citation to discover assets that was substantively and procedurally defective. (Ex. E.) Upon receiving a letter from counsel for Project regarding the defective nature of the citation to discover assets, Plaintiffs withdrew the second citation. (Ex. F.)

On March 7, 2007, Project answered additional questions presented by Plaintiffs. (Ex. G.) On March 13, 2007, Plaintiffs asked Project to revise its answers to the citation to discover assets regarding its related companies. (Ex. H.) Project responded to that request by reiterating that it had disclosed its assets and that it does not own Technology. (Ex. I.) However, on March 15, 2007, Plaintiffs filed a Motion for Rule to Show Cause, alleging that Project should be held in contempt for wrongfully withholding information about Technology. The parties appeared before this Court on March 20, 2007. At that hearing, this Court denied the Motion for Rule to Show Cause and ordered Project to “respond to all reasonable questions” about Technology. (Ex. J, 3/20/07 Tr. at 6.)

After that hearing, counsel for Project engaged in numerous conversations with Plaintiffs’ counsel regarding the additional information sought, providing information telephonically and indicating that further information would be provided. On May 15, 2007, Project’s counsel contacted Plaintiffs’ counsel and agreed to provide “reasonable” information pursuant to an agreed protective order. On May 18, 2007, Project provided general information about Spamhaus Technology, including (1) the office address for Spamhaus Technology; (2) a list of officers, board members, investors, and owners of Spamhaus Technology; and (3) a copy of the Spamhaus Technology charter. (Ex. K - with information redacted pursuant to discussions on an agreed protective order.)

In addition to seeking information about Technology, Plaintiffs are now seeking information related to Ultradesign, based on their unsupported belief that Ultradesign is related to Project. (Mot. ¶ 11; see also Ex. L.) In fact, the only connections between Project and Ultradesign are the commonality of one director and that Ultradesign donates to Project a server in its server racks in the United Kingdom. As with Technology, counsel for Project informed Plaintiffs’ counsel that Ultradesign is not owned or controlled by Project and that Project does not possess any of the information sought about Ultradesign.

II. The Court Should Deny Plaintiffs Motion Because Project Has Complied With The Court’s Order And Does Not Control The Additional Information Plaintiffs Seek.

While reserving its right to contest jurisdiction (currently on appeal), Project has already provided certain general public information it was aware of regarding Technology. (See Ex. K, May 18, 2007 letter.) By disclosing this information, Project fully complied with this Court’s March 20, 2007 order directing Spamhaus Project to respond to “all reasonable questions.” The remaining information sought by Plaintiffs is non-public information that Project has no right to access or provide.2 Project cannot be compelled to provide information it does not have and cannot legally obtain, and Plaintiffs motion should be denied.

[2 Spamhaus has provided all of this information as it relates to Project. However, in addition to
the public information related to Technology that Project provided on May 18, 2007, Plaintiffs
demand the following information related to Spamhaus Technology, Ltd.: (1) the amount of
compensation paid to each officer or board member; (2) the amount of investment of any
investors; (3) a list of employees including their salaries and/or other payments made to the
employees for the past two years; (4) the percentage of ownership of each owner; (5) the
accounts receivable for the past two years (including a list of companies subscribing to
Spamhaus Technology, Ltd.’s services); (6) accounts payable for the past two years; (7) bank
statements for the past two years; (8) profit and loss ledgers for the past two years; and (9) the
dates and amounts of any dividends paid to shareholders. (Mot. ¶ 8.) Plaintiffs have made a
similar demand for information relating to Ultradesign. (Id. ¶ 15.)]

Under Federal Rule of Civil Procedure 34, a party may only be compelled to produce documents in that party’s ”possession, custody, or control.” However, if a party cannot “order” a third party to turn over documents to the party, the documents are not within the “custody or control” of that party. Chaveriat v. Williams Pipe Line, 11 F.3d 1420, 1426-27 (7th Cir. 1993). Indeed, “the fact that a party could obtain a document if it tried hard enough and maybe if it didn’t try hard at all does not mean that the document is in its possession, custody, or control; in fact it means the opposite.” Id.

In Chaveriat, plaintiff alleged that defendant contaminated its land, and retained Eiler to clean up the contamination. Id. at 1423. Eiler subsequently retained TSC to take soil samples of the land, and TSC then hired NET to test the soil samples that were collected and report its findings to TSC. Id. After receiving the results from NET, TSC reported its findings to Eiler. Id. After being sued for the cost of cleaning up the contamination, Defendant requested that Plaintiff produce the chromatograms related to the contamination testing. Plaintiff, however, only had the final reports of TSC and NET in its possession, not the chromatograms, which NET had prepared and still possessed. The Seventh Circuit held that under Rule 34(a)(1), Plaintiff did not have to produce the documents requested because Plaintiff did not have custody or control over the documents and could not order NET to surrender the documents to them. Id. at 1426-27. Furthermore, even though Plaintiff could have asked NET for the documents through a subpoena duces tecum and NET would have been required to comply, there was no duty on TSC to produce them. Id.

Furthermore, in In re Uranium Antitrust Litigation, 480 F. Supp. 1138, 1142-44 (N.D. Ill., 1979), a number of discovery demands were made involving a combination of foreign and domestic parents and subsidiaries. The Court found there was no control over the requested documents because (1) the parent company owned 43.8% of subsidiary; (2) a minority of subsidiary directors were officers of parent; (3) the subsidiary kept its own books and records; (4) the subsidiary held its own corporate meetings separate and apart from parent; and (5) the subsidiaries shares were publicly traded and owned by more than 11,000 shareholders. Id. at 1152. However, the Court found “control” over two subsidiaries because the subsidiaries were wholly-owned by the parent company. Id. at 1152-54. Thus, the Court held that the test for determining whether a court could order a corporation to produce the documents of an alleged subsidiary was “‘[I]f a corporation has power, either directly or indirectly, through another corporation or series of corporations, to elect a majority of the directors of another corporation, such corporation may be deemed a parent corporation and in control of the corporation whose directors it has the power to elect to office.’” Id. at 1144-45.

In addition, the Third Circuit has held that the mere fact that a director and minority shareholder of a U.S. corporation was the Chairman of the Board of a related Swiss Corporation was insufficient to compel the U.S. Corporation to produce documents in the possession of the non-litigating Swiss Corporation. Gerling Int'l Ins. Co. v. Commissioner, 839 F.2d 131, 141 (3d Cir. 1988).

Here, the simple fact is that Project has no possession or control over the documents Plaintiffs have requested regarding Technology or Ultradesign:

 Project does not own any percentage of Technology or Ultradesign.
 Technology shares only one director with Project and Ultradesign shares only one partner with Project, and therefore has no managerial control over either entity.
 Project, Technology, and Ultradesign each maintain separate books and records in different physical locations.
(Linford Spam Teq Aff. ¶¶ 7, 9, 11, 12; Linford Ultradesign Aff. ¶¶ 8, 10, 12, 13.) Steve Linford, individually or in his role as the Director of Project, has no authority to access the books or records of Technology or Ultradesign. (Linford Spam Teq Aff. ¶¶ 11, 12; Linford Ultradesign Aff. ¶¶ 12, 13.) Just as Al Gore, as a Director of both Google and Apple, would have no authority to provide documents relating to Apple in a suite (sic) against Google, Steve Linford lacks any authority as a Director of Project to provide any non-public information or documents relating to Technology or Ultradesign. Simply put, Plaintiffs want to force Steve Linford, as the Director of Project, to misuse his role as a Director of Technology and Ultradesign, in an attempt to force these companies to produce documents. That is improper.

Despite their opportunity to obtain documents from Project, and even to take a telephone deposition of Mr. Linford, Plaintiffs have not gathered or offered any factual basis, other than their abject speculation, that Project can “order” the production of documents by either of these separate entities as required by Chaveriat. And, like the parent company in In re Uranium Antitrust Litigation, Project has no “control” over Technology or Ultradesign. Plaintiffs have simply glossed over this threshold question. Plaintiffs’ motion is baseless and should be denied. The denial of Plaintiffs’ motion is not a ruling that they are not entitled to the information on relevance grounds, nor does it mean Plaintiffs cannot seek the information. Rather, Plaintiffs must use an available alternative route for obtaining the desired information - an attempt to obtain the information by obtaining proper service on the entities that do control the information, at which time those issues can be addressed in a UK court.

Respectfully submitted,

THE SPAMHAUS PROJECT

By: ___Craig C. Martin_____________________
Dated: June 13, 2007
Craig C. Martin
David Jimenez-Ekman
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484
Matthew M. Neumeier
Howrey, LLP
321 North Clark Street, Suite 3400
Chicago, IL 60610
Telephone: (312) 846-5640
Facsimile: (312) 264-0361

CERTIFICATE OF SERVICE
I, Carrie A. Fino, an attorney, hereby certify that I served the foregoing Defendant’s
Response to Plaintiffs’ Motion to Compel upon:
Joseph L. Kish
Bartly Joseph Loethen
Synergy Law Group, L.L.C.
730 West Randolph Street
6th Floor
Chicago, IL 60661
Phone: (312) 454-0015
Fax: (312) 454-0261
by depositing a copy of same in the United States Mail, postage prepaid, on this 13th day of June
2007.
s/ _Carrie A. Fino______________________

Attachment	Date	Size
MotCompelReduxResponse.pdf	06/28/09 1:05 pm	85.13 KB
MotCompelReduxResponseExh.pdf	06/28/09 1:05 pm	1.69 MB

Supplement Briefs

UNITED STATES DISTRICT COURT
FOR THE Northern District of Illinois − CM/ECF LIVE, Ver 3.0
Eastern Division

e360 Insight, LLC, et al.
Plaintiff,

v.

Spamhaus Project, The
Defendant.

NOTIFICATION OF DOCKET ENTRY

This docket entry was made by the Clerk on Thursday, June 14, 2007:

MINUTE entry before Judge Charles P. Kocoras :Motion hearing held on 6/14/2007. Plaintiffs are given to 6/21/2007 to supplement their motion [99] to compel. Defendant is given to 6/28/2007 to supplement its response to plaintiffs' motion to compel. Both supplemental briefs are limited to two (2) pages. The Court will rule by mail. Mailed notice(sct, )

ATTENTION: This notice is being sent pursuant to Rule 77(d) of the Federal Rules of Civil Procedure or Rule 49(c) of the Federal Rules of Criminal Procedure. It was generated by CM/ECF, the automated docketing system used to maintain the civil and criminal dockets of this District. If a minute order or other document is enclosed, please refer to it for additional information.

For scheduled events, motion practices, recent opinions and other information, visit our web site at www.ilnd.uscourts.gov.

Spamhaus Supplemental Brief

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual, Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD., Defendant.

SUPPLEMENTAL MEMORANDUM IN OPPOSITION TO PLAINTIFFS’ MOTION TO COMPEL

Plaintiffs’ assertions in their supplemental brief do not show that The Spamhaus Project (“Project”) can be compelled to produce documents from other entities over which it has no control.1

[1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiffs’ failure to properly effect service of process.]

First, Plaintiffs’ citation (¶ 6) to General Environmental Science Corp. v. Horsfall, 136 F.R.D. 130 (N.D. Ohio 1991) does not support their position because in that case, unlike the situation here, there was no dispute that the named defendants controlled the entities whose documents were sought. In Horsfall, defendants included three individual persons and a corporation. The court ordered production of the documents, reasoning that even if the corporation did not control the requested document, the named defendant, an individual person, who owned and controlled the non-party Swiss corporation had legal access and a “party to a lawsuit can be compelled to produce relevant information and documents relating to a non-party corporation of which it is an officer, director or shareholder.” Id. at 133 (emphasis added). Here, in contrast, Project is the sole defendant and it undisputedly does not serve as an “officer, director or shareholder” of Spamhaus Technology, Ltd. (“Technology”) or Ultradesign, Ltd. Steve Linford, who is not a defendant in this case and not subject to this court’s jurisdiction, has a relationship with those entities, but does not by himself control them. Plaintiffs’ incorrect assertion (¶ 4) that he controls the entities is simply irrelevant.

Second, Plaintiffs’ assertion (¶ 2) that the affidavits offered in support of the Response to Plaintiffs’ Motion to Compel are “conclusory” is demonstrably untrue; the affidavits state specific facts, relating to ownership, revenues, officers, control, maintenance of documents, and operations, that show that Project does not control Technology or Ultradesign.

Third, in response to paragraph 5(a), the small Project logo on the bottom-right corner of Technology’s invoice does not show control by Project because the logo was used solely as a quality mark similar to placing “Microsoft Certified” on stationary, or a restaurant’s using the Zagat seal. (Linford Aff. ¶ 12.)

Fourth, in response to paragraph 5(b), the only reason Technology for a time used an email address handled by the spamhaus.org mail server was because the Technology server could not withstand Distributed Denial of Service (DDoS) attacks, which knock out web and email servers; Technology no longer uses a spamhaus.org email address. (Id. ¶ 13.)

Fifth, in response to paragraph 5(c), the use of the same mail forwarding company, also used by thousands of other British companies (id. ¶ 6), does not show Project controls Technology.

Sixth, in response to paragraph 5(d), the fact is that “Spamhaus” is a not a unique name but a common internet jargon word defined as a “[p]ejorative term for an internet service provider that permits or even encourages spam mailings from its systems.” (http://dictionary.reference.com/browse/spamhaus). (Id. ¶ 5.)

Seventh, in response to paragraphs 5(e)-(f), the fact is that all data published by Project is free to the internet public and Project has no agreements for “resale,” arms-length or otherwise, with Technology or any other entity -- including the United States Courts, which use Project data for free. (Linford Aff. ¶¶ 8, 11.)

Eighth, in response to paragraph 5(g), while it is true that Ultradesign provides free hosting and servers to Project, that is no different than any other situation where an entity makes a donation in kind to a not-for-profit entity (which Project is) and certainly does not show control of the donor by the donee.

Respectfully submitted,

THE SPAMHAUS PROJECT
Dated: June 28, 2007

By: s/ David Jiménez-Ekman

Craig C. Martin
David Jiménez-Ekman
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350

Attachment	Date	Size
MotCompelReduxSpamhausSupp.pdf	06/28/09 1:05 pm	18.05 KB
MotCompelReduxSpamhausSuppAff.pdf	06/28/09 1:05 pm	848.56 KB

e360 Objection to Supplemental Brief

e360 Objects to the Spamhaus Supplemental brief on grounds of length and because the text relies on a declaration from Steve Linford and is therefore inadmissable hearsay.

=========================

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

E360INSIGHT, LLC, and
DAVID LINHARDT, an individual
Plaintiffs,

v.

THE SPAMHAUS PROJECT,
Defendant.

PLAINTIFFS’ OBJECTION TO SUPPLEMENTAL MEMORANDUM IN
OPPOSITION TO PLAINTIFFS’ MOTION TO COMPEL

Plaintiffs, e360Insight, LLC and David Linhardt (collectively Plaintiffs), by and through their attorneys, Synergy Law Group, LLC, object to the Supplemental Memorandum in Opposition to Plaintiffs’ Motion to Compel filed be The Spamhaus Project, aka The Spamhaus Project Ltd., (Defendant) as follows:

1. On June 14, 2007, this Court entered an Order directing both parties to file supplemental briefs regarding Plaintiffs’ Motion to Compel, limiting this briefing to two pages. (Docket # 102).

2. Pursuant to this Courts Order, Plaintiffs filed their two page supplemental brief on June 21, 2007.

3. On June 28, 2007, in violation of this Court’s Order, Defendant filed a five page supplemental brief.

4. Defendant’s supplemental brief should be stricken for failing to comply with this Court’s Order for this reason alone.

5. Defendant’s supplemental brief relies entirely on a declaration by Steve Linford that is based on inadmissible hearsay. Specifically, the Linford Declaration, at ¶ 1 states, alternatively, without any further direction, that it is based either on personal knowledge or “on the basis of information obtained from various sources…” (See Declaration of Steve Linford attached to Defendant’s supplemental memorandum. (Docket # 107))

6. Based on the contents of the Linford Declaration, only ¶4 can be unequivocally ascertained as within Mr. Linford’s personal knowledge. The remainder of the Linford Declaration is, or because of the lack of foundational facts contained in the Linford Declaration might, be inadmissible hearsay.

7. Statements based on hearsay are inadmissible. See Fed. R. Evid. 802. Defendant’s supplemental memorandum, which is premised entirely on the Linford Declaration, should thus be stricken.

Wherefore, Plaintiffs request that this Court strike Defendant’s supplemental brief and for any other relief that this Court deems just.

Respectfully submitted,

E360Insight, LLC. and David Linhardt

By: /s/ Daniel J. Peters
One of Their Attorneys

Bartley J. Loethen (6225484)
Joseph L. Kish (6197916)
Daniel J. Peters (6272859)
Synergy Law Group, LLC
730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MotCompelReduxE360Obj.pdf	06/28/09 1:05 pm	10.51 KB

Initial Status Hearing

This matter having been referred to Magistrate Judge Geraldine Soat Brown for proceedings with respect to plaintiffs' motion to compel, an initial status hearing is hereby set before Magistrate Judge Brown on 08/08/07 at 9:00 a.m. in Courtroom 1812 for the purpose of setting a schedule for such proceedings.

MOTION for Leave to File Status Report

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT, an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,
Defendant.

DEFENDANT’S MOTION FOR LEAVE TO FILE INSTANTER A STATUS REPORT ON SUGGESTED DEPOSITION

Defendant The Spamhaus Project (“Spamhaus”),1 by and through its attorneys Jenner & Block LLP, respectfully moves this Court for the entry of an order granting Spamhaus leave to file instanter the 4-page Status Report attached as Exhibit A. In support of this motion, Spamhaus states that the parties have agreed that the voluntary telephonic deposition of Steve Linford should not proceed because Plaintiffs’ counsel was not interested in taking the deposition within the scope of Steve Linford’s offer to provide testimony.

[1 Defendant expressly objects to this Court’s jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiffs’ failure to properly effect service of process.]

Because Your Honor suggested that Plaintiffs accept Steve Linford’s prior offer to sit for a telephonic deposition, Spamhaus respectfully desired to advise the Court, prior to the continued hearing date, that the deposition did not proceed and the reasons why it did not proceed.

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Respectfully submitted,

THE SPAMHAUS PROJECT
Dated: August 21, 2007

By: s/David Jiménez-Ekman _________

Craig C. Martin
David Jiménez-Ekman
Carrie A. Fino

JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484

Attachment	Date	Size
MotionLeaveStatusReport2.pdf	06/28/09 1:05 pm	21.42 KB

Status Report

EXHIBIT A

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT, an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,
Defendant.

STATUS REPORT ON SUGGESTED DEPOSITION
Defendant The Spamhaus Project ("Project")' files this status report to advise Your Honor, prior to the status hearing scheduled for August 24, 2007, that the parties agreed that the voluntary telephonic deposition of Steve Linford should not proceed because Plaintiffs' counsel was not interested in taking the deposition within the scope of Steve Linford's offer to provide testimony.

[1 Defendant expressly objects to this Court's jurisdiction over The Spamhaus Project because Defendant is based solely in the United Kingdom and does not conduct or transact business in Illinois. Moreover, Defendant reserves its arguments based on Plaintiffs' failure to properly effect service of process.]

Mr. Linford's offer to provide deposition testimony, which remains open, was purely voluntary. Mr. Linford:
• is not a party to this action; • is not a United States citizen; • has never traveled to the United States;

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• does not transact any business in his personal capacity in the United States; and • has not been served with any process in connection with this action.

Consequently, Mr. Linford is not producible on notice, or even on subpoena, to give deposition testimony in this case. Rather, in order to obtain compelled deposition testimony from him, plaintiffs would be required to effect proper international service of process via the Hague Convention, which plaintiffs have not done or attempted to do.

Nonetheless, as Your Honor noted at the status hearing on August 8, 2007, Mr. Linford previously offered to voluntarily provide telephonic deposition testimony in this case on a specific topic. That offer was formally made in a pleading on March 19, 2007. However, that offer was not made in the context of plaintiffs' current motion to compel the production of documents related to Spamhaus Technology, LTD and Ultradesign, LTD; the current motion was not even filed until about three months later, on June 11, 2007. Rather, Mr. Linford made that offer to resolve a motion over a dispute regarding the assets of the defendant in this case - The Spamhaus Project, Ltd. - and was specifically limited to that topic. Specifically, Mr. Linford "expressed his willingness to sit for a telephonic deposition relating to the assets of The Spamhaus Project." (Ex. A, Resp. to Mot. R. Show Cause ¶ 3 (emphasis supplied).) Mr. Linford remains willing to provide deposition testimony on that topic - "the assets of The Spamhaus Project." And, after counsel for The Spamhaus Project reported Your Honor's observations at the August 8, 2007 status conference to Mr. Linford, Mr. Linford also agreed to provide deposition testimony limited to the affirmative statements he made in his declaration opposing plaintiffs' current motion.

However, because of severe security concerns, Mr. Linford is not willing to answer questions beyond the scope of his original offer or the affirmative statements in his declaration
-3-
e.g., questions relating to the names of volunteers for The Spamhaus Project, or any information about the entities that are not defendants in this action, Spamhaus Technology, LTD or Ultradesign, LTD. The business and personal safety risks of The Spamhaus Project, which is devoted to eliminating internet spam, are well-publicized. In addition to creating the SBL and ROKSO list of known spammers and fighting for anti-spam legislation, Project also assists law enforcement agencies in an attempt to prevent and stop deceptive and criminal internet schemes. These criminal internet schemes often involve "gangs" or organized crime outfits. (Ex. B.) As a result of this work, Mr. Linford has received many death threats, was under the protection of the Scotland Yard for a period of time, and has been advised not to open any unexpected packages.
(Id.)

Consequently, while Mr. Linford remains willing to provide testimony regarding the assets of Project, and the lack of any control relationship between Project and the entities at issue in plaintiffs' current motion, Mr. Linford will not provide the names or addresses of any of Project's volunteers. Moreover, Mr. Linford, sitting solely in his capacity as the Director of Project, is unwilling to answer questions regarding the non-defendant entities (Spamhaus Technology, LTD and Ultradesign, LTD). Those answers would essentially provide the information sought in the motion to compel that is currently before this Court, and are not within the control of Project (the only defendant before this Court) as an entity, even though Mr. Linford may have personal knowledge on those topics acquired in his capacity as an officer of those other entities.

During two telephone conversations on August 16, 2007, plaintiffs' counsel advised counsel for Project that plaintiffs are not interested in proceeding with a deposition within the scope of Mr. Linford's offer. During those conversations, counsel for plaintiffs, Bartly Loethen,
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acknowledged that Mr. Linford could not be compelled to provide any testimony. Mr. Loethen also stated that he was not interested in proceeding with a deposition concerning the "assets of The Spamhaus Project" because he had "little doubt" that few, if any, assets were titled in that name. Mr. Loethen also stated that he did not desire to ask Mr. Linford questions regarding the declarations he submitted in connection with this motion, regarding the lack of a control relationship between Project and the two non-defendant entities (Spamhaus Technology and Ultradesign), unless Mr. Linford would provide additional information: the names of Project's volunteers, and specific information regarding those non-defendant entities, such as their revenues, the names of their employees and officers and the location of their servers. Because of the security concerns identified above, Mr. Linford is not willing to do that as part of his voluntary offer to provide testimony. Consequently, the parties mutually agreed that the deposition should not proceed, as memorialized in an e-mail from David Jimenez-Ekman to Mr. Loethen.

Because Your Honor suggested that plaintiffs accept Steve Linford's prior offer to sit for a telephonic deposition, Project desired to advise the Court, prior to the continued hearing date, that the deposition did not proceed and the reasons why it did not proceed.

Respectfully submitted,
THE SPAMHAUS PROJECT

Dated: August 21, 2007

By: s/ David Jimenez-Ekman

Craig C. Martin
David Jimenez-Ekman Carrie A. Fino
JENNER & BLOCK LLP 330 North Wabash Avenue Chicago, IL 60611
Telephone:
(312) 222-9350
Facsimile:
(312) 527-0484

Attachment	Date	Size
StatusReport2.pdf	06/28/09 1:05 pm	164.63 KB
StatusReport2Exhibits.pdf	06/28/09 1:05 pm	1.15 MB

MOTION for Leave to File Status Report

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

E360INSIGHT, LLC,
an Illinois Limited Liability Company, and
DAVID LINHARDT, an individual
Plaintiffs,

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and
organized under the laws of England, aka
THE SPAMHAUS PROJECT LTD,
Defendant.

MOTION TO FILE A STATUS REPORT

Plaintiffs, e360Insight, LLC and David Linhardt (collectively Plaintiffs), by and through their attorneys, Synergy Law Group, LLC, respectfully requests that this Court grant Plaintiffs leave to file a Status Report. In support of this motion Plaintiffs state:

1. Plaintiffs are seeking to obtain information on potential subsidiaries or affiliated companies of Defendant. To that end, Plaintiffs have sought discovery related to Spamhaus Technologies, LTD and UltraDesign, LTD.

2. On June 11, 2007, Plaintiffs filed a Motion to Compel (Docket No. 99) seeking to have the Court enter an order compelling Defendant to comply with a previous Court Order regarding responding to inquiries related to Spamhaus Technologies, LTD (Docket No. 78) and to comply with a Citation to Discover Assets.

-2-
3. On June 13, 2007, Defendant filed a Response to the Motion to Compel. (Docket No. 101).

4. On June 14, 2007 the Honorable Judge Kocoras entered an Order granting the parties leave to file supplemental briefs. (Docket No. 102).

5. The parties both filed supplemental briefs. (Docket Nos. 103 and 107).

6. On July 31, 2007, the Honorable Judge Kocoras referred this matter to this Court for a ruling on the Motion to Compel. (Docket No. 113).

7. On August 3, 2007, this Court set the matter for status on August 8, 2007. (Docket No. 114).

8. At the status conference before this Court, the Court advised Plaintiffs that it was the Court’s understanding that the director of the Defendant, Mr. Linford, had agreed to sit for a deposition as to the Motion to Compel and that it was the Court’s suggestion that Plaintiffs avail themselves of that opportunity. The Court confirmed with counsel for Defendant that Mr. Linford would sit for a deposition as to the matters related to the Motion to Compel. Counsel for Defendant knew that the Plaintiff sought to depose Mr. Linford on issues related to the Motion to Compel and advised this Court that Mr. Linford would sit for such a deposition. Mr. Linford has only agreed to sit for a deposition regarding the issues related to the assets of Spamhaus Technology and as to his previously filed affidavit but not as to any of the items sought by Plaintiff with respect to the information sought by the Motion to Compel.

9. Plaintiffs seek to file a Status Report advising this Court as to the status of events subsequent to the status conference.
-3-
WHEREFORE, Plaintiffs, e360Insight, LLC and David Linhardt, respectfully request that this Court enter an Order granting Plaintiffs leave to file a Status Report.

Respectfully submitted,

E360Insight, LLC. and David Linhardt

By: /s/ Daniel J. Peters
One of Their Attorneys

Bartly J. Loethen
Joseph L. Kish
Daniel J. Peters
Synergy Law Group, LLC
730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MotionLeaveStatusReport3.pdf	06/28/09 1:05 pm	20.08 KB

Status Report

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

E360INSIGHT, LLC,
an Illinois Limited Liability Company, and
DAVID LINHARDT, an individual
Plaintiffs,

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and
organized under the laws of England, aka
THE SPAMHAUS PROJECT LTD,
Defendant.

STATUS REPORT

Plaintiffs, e360Insight, LLC and David Linhardt (collectively Plaintiffs), by and through their attorneys, Synergy Law Group, LLC, respectfully submit the following Status Report to the Court:

1. On August 3, 2007, this Court set the matter for status on Plaintiffs’ Motion to Compel for August 8, 2007. (Docket No. 114).

2. At the status conference before this Court, the Court advised Plaintiffs that it was the Court’s understanding that the director of the Defendant, Mr. Linford, had agreed to sit for a deposition as to the Motion to Compel and that it was the Court’s suggestion that Plaintiffs avail themselves of that opportunity. The Court confirmed with counsel for Defendant that Mr. Linford would sit for a deposition as to the matters related to the Motion to Compel. Counsel for Defendant knew that the Plaintiff sought to depose
-2-
Mr. Linford on issues related to the Motion to Compel and advised this Court that Mr. Linford would sit for such a deposition. Mr. Linford has refused to sit for a deposition regarding the issues related to the Motion to Compel.

3. Plaintiffs seek to obtain discovery regarding the following information concerning Spamhaus Technology, LTD:

a. A list of officers or board members and compensation paid to each;

b. A list of investors, if any, identifying the amount of the investment;

c. A list of employees including their salaries and/or other payments made to the employees for the past two (2) years;

d. A list of owners (including percentage of ownership);

e. Accounts receivables for the past 2 years (including a list of companies subscribing to Spamhaus Technology, LTD’s services);

f. Accounts payable for the past 2 years;

g. Bank statements for the past 2 years;

h. Profit and loss ledgers for the past 2 years; and,

i. The dates and amounts of any dividends paid to shareholders.

4. Plaintiffs seek to obtain discovery regarding the following information concerning Ultradesign, LTD:
• The office address for Ultradesign, LTD;
• A list of officers or board members and compensation paid to each;
• A list of investors, if any, identifying the amount of the investment;
• A list of employees including their salaries and/or other payments made to the employees for the past two (2) years;
• A list of owners (including percentage of ownership);
• Accounts receivables for the past 2 years (including a list of companies subscribing to Ultradesign, LTD’s services);
• Accounts payable for the past 2 years;
• Bank statements for the past 2 years;
• Profit and loss ledgers for the past 2 years; and,
• The dates and amounts of any dividends paid to shareholders.

5. On information and belief, Mr. Linford has knowledge regarding all of the information being sought by Plaintiffs.

-3-
Respectfully submitted,

E360Insight, LLC. and David Linhardt

By: /s/ Daniel J. Peters
One of Their Attorneys

Bartly J. Loethen
Joseph L. Kish
Daniel J. Peters
Synergy Law Group, LLC
730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
StatusReport3.pdf	06/28/09 1:05 pm	28.97 KB

MINUTE Order

MINUTE entry before Judge Geraldine Soat Brown:In light of the Seventh Circuit Opinion issued 08/30/07, plaintiffs' motion to compel 99 is moot. All matters relating to the referral of this action having been concluded, the referral is closed and the case is returned to the assigned judge.

Spamhaus' Response in Partial Opposition to Motion for Expanding Time for Discovery

If you don't respond to discovery in the time set, you lose the ability to object to it. That's the lesson here.

=====================================
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited Liability Company, and DAVID LINHARDT,
an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company limited by guarantee and organized under the laws of England, a/k/a THE SPAMHAUS PROJECT, LTD.,
Defendant.

DEFENDANT THE SPAMHAUS PROJECT'S RESPONSE IN PARTIAL OPPOSITION TO PLAINTIFFS' MOTION FOR EXTENSION OF DISCOVERY

INTRODUCTION

Defendant The Spamhaus Project ("Spamhaus") does not oppose an extension in the time for fact discovery on the damages claims of Plaintiffs e360 Insight, LLC ("e360") and David Linhardt (collectively "Plaintiffs"). Indeed, as demonstrated below, Plaintiffs' continued complete failure to respond to Spamhaus' document requests served on November 30, 2007, failure to provide basic information in response to interrogatories served on the same day, and failure to show up at the depositions properly noticed for January 7-8, 2008 -- without seeking or obtaining any extension from Spamhaus or this Court -- requires such an extension of fact discovery. In fact, during the Rule 37.2 conference referenced in Plaintiffs' motion, we agreed to a fact discovery extension. However, when Plaintiffs sent us their proposed motion, they overreached in two respects to which we cannot agree. There are two aspects of Plaintiffs' deceptively simple motion which the Court should not adopt.

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First, the Court should reject the request in Plaintiffs' motion for a retroactive extension in their time to answer Spamhaus' written discovery requests. Because Plaintiffs let the time for their answers expire on January 2, 2008 without seeking an extension from the Court or Spamhaus until more than a month after the deadline, and because they have offered no explanation or excuse for their default, their objections are waived.

Second, while Spamhaus has no objection to setting an expert discovery schedule, Plaintiffs' proposal to give Spamhaus 15 days to make its expert disclosures -- after taking more than four months to make its own disclosures -- is insufficient and unfair. Spamhaus requests that it have at least 45 days after Plaintiffs' disclosures to make its own in this case seeking more than $11 million in damages.

BACKGROUND

On August 30, 2007, the Seventh Circuit reversed the damages award and remanded the case to this Court "for a more extensive inquiry into the damages to which e360 is entitled." e360 Insight, LLC v. The Spamhaus Project, 500 F.3d 594, 603 (7th Cir. 2007). After the remand for a determination on damages, Plaintiffs and Spamhaus appeared before this Court on October 23, 2007. (Ex. 1.) At that time, this Court granted discovery on the issue of damages. (Id. at 4:19-21.) Pursuant to the Court's order, Spamhaus served its First Requests for the Production of Documents and its First Sets of Interrogatories on Plaintiffs on November 30, 2007. (Ex. 2.)

During a December 5, 2007 status hearing, this Court ordered the close of discovery on February 28, 2008. (Ex. 3. at 5:17-22.) At that time, Spamhaus expressed its concern that a February 28, 2008 date may present a problem with the ability to conduct expert discovery. (Id. at 7:2-10.) Plaintiffs, however, specifically requested the early discovery close date, and the
-3-
Court indicated a willingness to consider the need for expert discovery after fact discovery closed. (Id. at 4:2-6, 5:23-25.)

Despite Plaintiffs' request for an early discovery close date, Plaintiffs have caused significant delays in the discovery process. Plaintiffs' responses to Spamhaus' First Requests for the Production of Documents and First Sets of Interrogatories were due on January 2, 2008. Plaintiffs neither responded to the discovery requests on the due date nor contacted Spamhaus to provide any notice of a delay or request an extension of time. As a result, Spamhaus contacted Plaintiffs on January 3, 2008 requesting that Plaintiffs send their responses immediately. (Ex. 4) Plaintiffs' counsel left a voicemail message on January 4, 2008, saying that Spamhaus would receive the responses "soon." However, Plaintiffs' counsel failed to provide a specific date by which they would respond to the discovery requests or a reason for the delay in complying with the discovery requests.

Although Spamhaus had served notices of deposition on David Linhardt and a Rule 30 (b)(6) witness for January 7, 2008 and January 8, 2008 respectively (Ex. 5), Spamhaus still had not received Plaintiffs' discovery responses on January 8, 2008. Plaintiffs also did not appear for their depositions; nor did they object to the notices or ask to arrange a different time or date for their depositions. Spamhaus again contacted counsel for Plaintiffs. During a telephone conversation, Spamhaus informed Plaintiffs' counsel that it considered Plaintiffs' failure to timely respond in any fashion to Spamhaus' discovery requests as a waiver of any objections Plaintiffs may have had to the requested discovery. Plaintiffs' counsel merely responded that everyone had reviewed the discovery responses and Spamhaus should receive them "soon." When Spamhaus' counsel requested a firm date for the responses, Plaintiffs' counsel stated that he would "check." However, during a telephone call later that same day,
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Plaintiffs' counsel again refused to provide a delivery date for their responses or any reason for their extensive delay in complying with the discovery requests.

On January 10, 2008, Spamhaus' counsel sent an email to Plaintiffs' counsel again noting that Plaintiffs had not requested nor received an extension of time for complying with the discovery requests (Ex. 6.) Spamhaus informed Plaintiffs that if the requested discovery materials were not received by the close of business on January 11, 2008, Spamhaus was formally requesting a Local Rule 37.2 conference on January 14, 2008, to discuss Plaintiffs' delinquent response to Spamhaus' discovery requests. (Id.)

Spamhaus did not receive any response from Plaintiffs' counsel by the close of business on January 11, 2008. As a result, on January 14, 2008, Spamhaus' counsel sent a follow-up email to Plaintiffs' counsel. (Ex. 7.) Plaintiffs' counsel responded that they would provide responses to the interrogatories by the end of the week (January 18, 2008) and responses to the document requests by the end of January. (Ex. 8.) On January 15, 2008, in an attempt to avoid unnecessary motion practice, Spamhaus' counsel agreed to delay filing a motion to compel based on Plaintiffs' counsel's representations. (Ex. 9.) Spamhaus' counsel reiterated that because Plaintiffs did not request and Spamhaus did not consent to an extension of time, Spamhaus' position is that Plaintiffs have waived any objection that they may have otherwise had. (Id.)

Plaintiffs failed to provide their responses to the interrogatories by January 18, 2008. As a result, Spamhaus' counsel sent a follow-up email to Plaintiffs' counsel on January 22, 2008. (Ex. 10.) After an email exchange about a potential protective order (Ex. 11), Plaintiffs sent their responses to Spamhaus' First Set of Interrogatories. (Ex. 12 at 4-5.) However, the responses were deficient and inadequate.

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On January 24, 2008, Spamhaus' counsel emailed Plaintiffs' counsel detailing the deficiencies in Plaintiffs' responses and requesting a Rule 37.2 conference.(Ex. 12 at 4.)

Plaintiffs' counsel failed to respond to Spamhaus' request for a Rule 37.2 conference. Therefore, Spamhaus sent another follow-up email on January 28, 2008, requesting a Rule 37.2 conference. (Ex. 12 at 1.) Plaintiffs' counsel responded on January 29, 2008, requesting an extension of the discovery deadlines. (Ex. 13.) Plaintiffs requested that their deadline to respond to written discovery be extended to February 18, 2008, that Plaintiffs disclose any experts by March 17, 2008, that Spamhaus disclose any experts by April 14, 2008, and that all discovery close by May 5, 2008.

Despite their own failure to respond to Spamhaus' discovery requests, Plaintiffs served their First Requests for the Production of Documents and First Sets of Interrogatories on Spamhaus on December 28, 2007. On January 30, 2008, Spamhaus filed its timely responses to Plaintiffs' discovery requests, which contained objections and provided both written responses to interrogatories and the request for production of documents. (Ex. 14.) Spamhaus additionally provided the documents it received in response to third-party subpoenas it had served. (Id.) That same day, Plaintiffs' counsel responded to Spamhaus' discovery responses by requesting a Rule 37.2 conference and expressing their intention to file a motion to compel. (Ex. 15.)

Plaintiffs failed to produce any documents in response to Spamhaus' document requests, as promised in their January 14, 2008 email, by the end of January. As a result, from January 30, 2008 to February 4, 2008, Spamhaus' counsel repeatedly requested and attempted to schedule a Rule 37.2 conference with Plaintiffs' counsel. (Ex. 16.) Counsel for Spamhaus and Plaintiffs met on February 5, 2008 for a Rule 37.2 conference. During that meeting, the parties agreed that additional time to complete the fact discovery would be necessary. The parties agreed that
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Plaintiffs' counsel would draft a proposed motion requesting an extension of time to conduct fact discovery and that Spamhaus would not object to the relief requested. While reserving all rights to make all objections to the discovery responses, the parties also agreed not to file any motions to compel without having an additional Rule 37.2 conference, at least until the Court ruled on a motion to extend time for fact discovery.

Spamhaus received Plaintiffs' proposed motion for extension of discovery schedule on February 7, 2008. (Ex. 17.) Plaintiffs' proposed motion contained a very detailed request for a discovery schedule. Spamhaus responded to the proposed motion by emailing Plaintiffs' counsel on February 8, 2008. (Ex. 18.) Spamhaus indicated that Plaintiffs' motion could not be filed as agreed for two reasons. (Id.) First, Spamhaus stated that it is not opposed to requesting an expert schedule, but would require at least 45 days after the close of fact discovery and Plaintiffs' disclosure of their experts before it can disclose its experts. (Id.) As discussed during the February 5, 2008 meeting, Spamhaus had informed Plaintiffs' counsel that any other expert schedule would be insufficient because Plaintiffs will have had 4 months to disclose their experts. Second, Spamhaus again reiterated its position that due to Plaintiffs' failure to provide timely responses, Plaintiffs have waived any objections to Spamhaus' Requests and Interrogatories, and that any agreed motion would have to preserve Spamhaus' position on that issue. (Id.) Plaintiffs refused to make the requested changes. (Ex. 19 at 2.)

ARGUMENT
We have made every effort to move discovery along, as both the Court and Plaintiffs indicated was their desire. However, it is Spamhaus that needs discovery from Plaintiffs' on Plaintiffs' damages claims, and Plaintiffs have defaulted on their obligations for more than 39 days of the four month discovery period they requested, despite diligent follow up from
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Spamhaus. Consequently, we respectfully agree that an extension in fact discovery is necessary, and we do not object to the period requested by Plaintiffs.

However, we request that any order entered by the Court contain two deviations from Plaintiffs' proposal. First, the Court should not extend the time for Plaintiffs to respond to written discovery without also indicating that Plaintiffs' objections to written discovery are waived. As detailed above, Plaintiffs have completely disregarded the time frames established and required by the Federal Rules of Civil Procedure. For interrogatories, under Rule 33(b)(2), "[t]he responding party must serve its answers and any objections within 30 days after being served with the interrogatories." Additionally, the amount of time allowed to respond to requests for production is clearly established in Rule 34(b)(2)(A), which states that "[t]he party to whom the request is directed must respond in writing within 30 days after being served".

The Rules clearly establish that when a party fails to serve a timely response, any objections are waived. Fed. R. Civ. P. 33 (b)(2); Fed. R. Civ. P. 34 (b)(2)(A). Plaintiffs' responses to Spamhaus' discovery requests were due on January 2, 2008. However, as discussed above, Plaintiffs failed to timely request an extension of time from Spamhaus or this Court. Instead, Plaintiffs totally ignored the due date. Plaintiffs' failed to provide any interrogatory responses until January 22, 2008 -- 20 days past the due date as required by Fed. R. Civ. P. 33 (b)(2). As of February 11, 2008, Plaintiffs' have failed to answer or provide any documents in response to Spamhaus' Request for Production -- 39 days past the due date as required by Fed. R. Civ. P. 34(b)(2)(A).

By failing to respond to Spamhaus' interrogatory requests within thirty days, the Plaintiffs have waived any objections they may have raised. Under Federal Rule of Civil Procedure 33(b)(4), "[a]ny ground not stated in a timely objection is waived unless the court, for
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good cause, excuses the failure." As the Plaintiffs have not made any timely objection to Spamhaus' discovery requests and have not offered any explanation for their failure to respond, any objections to Spamhaus' First Set of Interrogatories are waived. Similarly, because Plaintiffs failed to responded to Spamhaus' First Requests for Production of Documents within the thirty day timeframe, and have in fact still not provided any answer or documents in response, any objections Plaintiffs may have to Spamhaus' First Requests for Production of Documents are waived. Under Fed. R. Civ. P. 34(b)(2), objections are to be filed with the response, which must be filed within 30 days after service.

Second, if the Court enters an expert discovery schedule, it should provide Spamhaus at least 45 days after Plaintiffs make their expert disclosures to make its own disclosures. Plaintiffs will have had more than four months after discovery commenced to make their expert disclosures -- on a claim which they submitted a sworn prove-up affidavit more than 18 months ago. Since the case was remanded from the Seventh Circuit, Plaintiffs have had almost six months to put their damages case together. Fundamental fairness entitles Spamhaus to at least 45 days to find and disclose opinions from its experts to respond to Plaintiffs' experts on a claim seeking more than $11 million.

Respectfully submitted,

THE SPAMHAUS PROJECT

Dated: February 13, 2008

By: s/David Jimenez-Ekman
Craig C. Martin
David Jimenez-Ekman
Carrie A. Fino
JENNER & BLOCK LLP
330 North Wabash Avenue Chicago, IL 60611
Telephone: (312) 222-9350
Facsimile: (312) 527-0484

Attachment	Date	Size
MotOppExpDisco.pdf	06/28/09 1:05 pm	2.72 MB

Status hearing

NOTIFICATION OF DOCKET ENTRY

This docket entry was made by the Clerk on Thursday, February 14, 2008:

MINUTE entry before Judge Charles P. Kocoras :Motion hearing held on 2/14/2008. Plaintiff's motion [139] for an extension of the discovery schedule is granted as discussed in open court. All fact discovery to be completed by 4/28/2008. Plaintiff to disclose its expert and supply the expert's report by 4/28/2008. Status hearing is reset from 2/28/2008 to 5/6/2008 at 9:30 a.m.

MINUTE entry before Judge Charles P. Kocoras:Status hearing is reset from 8/5/2008 to 8/19/2008 at 9:30 a.m. Mailed notice (sct, ) (Entered: 05/12/2008)

Attachment	Date	Size
MotExtDiscoOrder.pdf	06/28/09 1:05 pm	4.26 KB

ORDER on MOTION to Compel

MINUTE entry before Judge Charles P. Kocoras: Motion hearing held on 4/29/2008. Defendant's motion to compel complete discovery responses and for an extension of time to complete discovery is granted. Plaintiffs are given to 5/13/2008 to comply with discovery requests. Status hearing and the discovery cut-off date are reset from 5/6/2008 to 8/5/2008 at 9:30 a.m. Cause to be referred to the magistrate judge for any remaining discovery disputes.

Ruling on Motion for Various Relief

MINUTE entry before the Honorable Charles P. Kocoras: Motion hearing held on 7/30/2008. Defendant's motion for various relief for persistent discovery defaults is granted in part and denied in part. Plaintiffs are ordered to pay the Court Reporter costs associated with the cancelled depositions of David Linhardt. Linhardt's deposition is ordered to be completed by 9/30/2008. Plaintiffs are ordered to pay defendant $200.00 as sanctions. Plaintiffs are given to 8/13/2008 to comply with all outstanding interrogatories. No new discovery may be propounded by either party.

Motion to Dismiss for Contempt

And it's come to this.

Spamhaus has filed its Motion to Dismiss alleging that e360 has just disregarded the Court's latest order mandating full and complete responses to discovery requests.

The only interesting thing in the exhibits is the addition of the transcript from the 7/30/08 hearing wherein Judge Kocoras allows his displeasure with e360's discovery games.

Attachment	Date	Size
MotDismissContempt.pdf	08/29/08 1:28 pm	334.95 KB
MotDismissContemptExh.pdf	08/29/08 2:26 pm	4.42 MB

Reply to Motion to Dismiss

This is e360's reply to Spamhaus' motion to dismiss.

"My lawyer ate my discovery responses" seems to be the order of the day as e360's attorneys try to blame a former attorney at the firm for not sending their discovery answers first and then blame Spamhaus' attorneys for not bringing this shortcoming to their attention sooner for STILL not filing their discovery responses.

Attachment	Date	Size
MotDismissContemptReply.pdf	09/09/08 2:08 pm	35.79 KB

Response to Supplemental Reply to Motion to Dismiss

Here is Spamhaus' response to e360's "The Lawyer Ate My Discovery Responses" attempt.

It is really rather predictable in that Spamhaus responds that even if Daniel Peters is the devil himself, that it doesn't excuse the lack of timely response, it doesn't excuse the pattern of abuse that has happened over the last 10 months, and Spamhaus also sent Bartly Loethen an email that summarized the Court's order, and then followed that up with the actual transcript of the hearing, so that "The Lawyer Ate My Discovery Responses" is really a laughable assertion. They also point out that having a busy trial schedule is no excuse for e360's attorneys not meeting their obligations in this case.

Spamhaus spends quite a bit of time emphasizing that this has been going on for ten months now, and we have been through three motions to compel and a motion for sanctions before this, whereas Spamhaus is in default after missing only one 30 day deadline. They also say that the supplemental responses e360 and Linhardt have provided still say "look at the documents we sent you" and that there were no substantive changes to 10 of the 18 interrogatories. Spamhaus' counsel is also astounded that e360 has suddenly added 16 new parties and increased its damages calculations by 1100%, all after the close of discovery (meaning that the new parties cannot be deposed to see what they know).

They also include, in their exhibits, the transcript of the hearing on September 4, 2008. It's pretty obvious that Judge Kocoras is getting pretty fed-up with e360. At one point, he says that e360's prior responses to orders of the court is "a little insulting" (p. 23 of the PDF).

However, I also get the feeling that the Judge is reluctant to grant Spamhaus' motion. Spamhaus is certainly trying hard though.

Attachment	Date	Size
MotDismissContemptSuppResponse.pdf	09/18/08 11:15 am	3.31 MB

Supplemental Response to Motion to Dismiss

This is the continuation of e360's "The Lawyer Ate My Discovery Responses" parade. Apparently, according to e360's argument, Daniel Peters is the terrible attorney responsible for not getting things done on time. He's no longer with the firm, and all of the blame for not getting discovery responses in on time should be laid squarely at his feet. And that's their story and they're sticking to it.

Anyway, they are also proving their desire to move forward with the case by attaching their discovery responses. So, we can see their damages claims (Spamhaus cost them between $95M and $135M) and a list of broken contracts (ISPs that cut them off and companies they were advertising for).

Of significance here is the claim that e360 has now sued itself out of business. On page 39 of the document (page 28 of e360's Interrogatory responses) it says, "The negative impact on e360's business has been completely devastating. e360 is now out of business. e360 ceased operations at the end of 2007 as a direct result of Spamhaus actions. Because of the devastating impact of these statements to e360's reputation, e360 can no longer operate as an email marketing company." And, on page 47 of the document (page 36 of e360's Interrogatory responses) you see this: "Ultimately, e360's reputation was irreparably harmed by Spamhaus actions which directly attributed [sic] to e360 [sic] ultimate demise."

So, if you have ever wondered who would buy services from a company that "[s]ome, perhaps even a majority of people in this country, would call ... a spammer"? In this filing, they'll tell you in the discovery responses they attached.

The list includes:

• SLKS, Inc.
• Smartbargains
• Bookspan
• Quinstreet
• Traffic Marketplace
• Silver Carrot
• OptinRealBig.com, LLC
• Loyalty Matrix (since purchased by Responsys)
• Liberty Mutual Insurance
• Acxiom e-Products, Inc.
• Topica, Inc.
• Virtumundo, Inc.
• Impulse Marketing Group, LLC
• Q Interactive

Attachment	Date	Size
MotDismissContemptSuppReply.pdf	09/13/08 9:40 am	2.59 MB

Supplemental Affidavits

Just so everyone is clear on how well communication happens in the offices of the Synergy Law Firm, they have filed three affidavits, from Daniel Peters (the evil attorney who didn't file the discovery supplement on time), Bartly Loethen (who was really responsible for filing the discovery supplement on time since Peters left the firm), and David Lindhart (who sued himself out of work).

Peters says that he was leaving and didn't think he was responsible for filing the supplement.

Loethen says that he was a very busy lawyer and was really displeased with the judge's order that he should have to supplement discovery responses while he was out of town taking care of another trial. And really dude, I would have been mad too, it's been almost a year now. It isn't like this deadline had not already come and gone back in December of 2007. If your lawfirm hadn't been engaging in gamesmanship, perhaps your trial dates would have been easier, no?

Lindhart says that he just did what his lawyers told him to do.

Attachment	Date	Size
MotDismissSuppAffidavits.pdf	09/26/08 3:14 pm	136.58 KB

ORDER on Motion to Dismiss for Contempt

Judges are loathe to dismiss cases and Judge Kocoras is no exception. He denies Spamhaus' motion to dismiss, but strikes the new people introduced in e360's responses, and all of their evidence about damages in excess of the $11.2 million claimed in the default.

People will think that this is a loss for Spamhaus, and maybe you can see it like that, but it's a much larger loss for e360. Now, their damages are capped. And, in trying to justify the $11.2 million in damages that they can still try to prove up, they can't call upon any of the 16 newly named people to support their case. That will make it more difficult to prove what's left of their case.

[UPDATE: Here's the list of people that he can call at the damages hearing as a witness: Dave Linhardt.

Here is the answer to Interrogatory #2 (people with knowledge of relevant facts): Dave Linhardt ("Linhardt"); counsel for e360 and Linhardt; Virgil Smith; Robert Horn; Mike Klein; Andrew Canellos; Jeff Nulsen; John Wright; Brian Haberstroh; Bill Farrell; John Rudnick; Darren Green; Michael Girard; Jerrold Son; Laura Cruz; Thomas Honec; Lynn Hoover; and Steve Chisholm

Here is the answer to Interrogatory #3 (people who may be called as witnesses by the Plaintiff): Dave Linhardt; Virgil Smith; Robert Horn; Mike Klein; Andrew Canellos; Jeff Nulsen; John Wright; Brian Haberstroh; Bill Farrell; John Rudnick; Darren Green; Michael Girard; Jerrold Son; Laura Cruz; Thomas Honec; Lynn Hoover; and Steve Chisholm

Now, start at the back of those lists and count off 16. Whoever is left may be called as a witness.]

=====================
This matter comes before the court on the motion of Defendant The Spamhaus Project (“Spamhaus”) for relief pursuant to Fed. R. Civ. P. 37(B)(2)(A). The motion comes after a long and involved discovery battle revolving around responses to interrogatories. Spamhaus initially propounded the interrogatories to Plaintiffs e360 Insight, LLC, and David Linhardt on November 30, 2007. Plaintiffs did not comply with their discovery obligations with respect to these interrogatories until September 12, 2008.

Plaintiffs’ delay and the resultant wrangling have caused a significant expenditure of time and effort on the part of Spamhaus and this court. The relief Spamhaus has primarily requested, dismissal of the entire action with prejudice, is in our view too onerous a remedy for the wrong it seeks to correct. However, the fact remains that the course of action Plaintiffs have pursued is unacceptable. Moreover, the September 12 responses identify 16 new parties as having knowledge or information pertinent to the case and contend that the level of damages at issue is not the initial $11.7 million Linhardt claimed but instead various amounts totaling over $135 million. Discovery closed more than a month before Plaintiffs provided their interrogatory responses, preventing Spamhaus from being able to probe further into this new information. Accordingly, we order stricken the 16 new names provided in e360 Insight’s Supplemental Amended Responses to Interrogatories 2 and 3 as well as any amounts stated in the Supplemental Amended Responses to Interrogatories 16 and 17 in excess of $11.7 million.

In addition, pursuant to Rule 37(b)(2)(C), we order Plaintiffs to pay the reasonable expenses, including attorneys’ fees, incurred in connection with the instant motion.

Attachment	Date	Size
MotDismissContemptOrder.pdf	10/16/08 4:48 pm	47.43 KB

ORDER on Motion to Compel

And now we know what the judge will do. The motion to compel is denied. Some form of discovery was agreed to as there is a mention of oral orders given in court this morning.

=======================

MINUTE entry before the Honorable Charles P. Kocoras:Status and motion hearing held on 10/30/2008. Plaintiffs' motion to compel is denied. All remaining discovery, which is allowed by the Court as discussed in open court, to be completed by 12/2/2008. Status hearing set for 12/2/2008 at 9:30 a.m.

Memorandum in Support of the Motion for Summary Judgment on Damages

This is actually more interesting than the motion itself. This lays out the reasons for Spamhaus' motion and why they think it means that they should win.

However, the redactions in the document render it useless for copying here. You'll just have to get the documents yourself.

Attachment	Date	Size
MotSJDamagesMemo.pdf	12/10/08 4:53 pm	484.97 KB
MotSJDamagesR56.pdf	12/10/08 4:54 pm	241.65 KB

Response to Motion for Summary Judgment on Damages

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

E360INSIGHT, LLC,
an Illinois Limited Liability Company, and
DAVID LINHARDT, an individual
Plaintiffs,

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and
organized under the laws of England, aka
THE SPAMHAUS PROJECT LTD,
Defendant.

e360INSIGHT, LLC AND DAVID LINHARDT’S RESPONSE IN OPPOSITION TO DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

Plaintiffs, e360Insight, LLC and David Linhardt (collectively “Plaintiffs”), by and through their attorneys, Synergy Law Group, L.L.C., and for their Response in Opposition to Defendant’s Motion For Summary Judgment, state as follows:

Plaintiffs obtained a default judgment against Defendant in the amount of $11,715,000 on September 13, 2006. Defendant then appealed. The Appellate Court upheld the entry of default judgment but remanded the case for a more extensive inquiry into Plaintiffs damages. Defendant has moved for summary judgment, alleging that Plaintiffs will be unable to prove any of their damages. As discussed below, Plaintiffs can establish their damages with a reasonable degree of certainty and summary judgment should therefore be denied.

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I. Plaintiffs Can Establish Damages to a Reasonable Degree of Certainty

a. Linhardt is Qualified to Testify as to the Damages Incurred by e360Insight and Linhardt

Linhardt, as president and owner of e360Insight, has personal knowledge of e360Insight’s business, its accounts and its income. (St. ¶¶1-2) As discussed in Plaintiffs Response to Defendants Motion to Exclude Linhardt’s testimony, Linhardt is qualified to testify as to the damages sustained by himself and e360Insight. Linhardt’s calculations of the damages sustained by the Plaintiff are based on the lost contracts and lost income due to the improper acts of Spamhaus. Specifically, Linhardt testified in his deposition regarding the contracts e360Insight lost due to the actions of Spamhaus (St. ¶¶4-10). Linhardt had personal knowledge of the value of these contracts. (Id.) Linhardt also had knowledge regarding e360Insight’s expectancy that these contracts would continue. (Id.) The Defendant has offered no evidence to the contrary. Defendant argues that Linhardt is not an expert in business valuation and therefore cannot testify as to any damages sustained by e360Insight. Computing the direct damages sustained by e360 does not require any specialized knowledge or expertise. These calculations are made by the president of the corporation based upon his personal knowledge. Defendant’s line of reasoning ignores the very nature of the direct damages sustained by e360Insight.

Linhardt has also calculated damages based on the loss of revenue due to Spamhaus blocks. As discussed in detail below, Linhardt calculated the direct revenue loss per blocked email message. Data relied upon by Linhardt included the number of email messages sent by e360Insight, the number of email messages blocked due to Spamhaus, and the revenue and profits earned by e360Insight on messages and accounts not blocked by Spamhaus. (St. ¶¶15-19). Linhardt has personal knowledge of this information as he regularly worked with and compiled this data.

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Accordingly, Linhardt is permitted to testify as to the value, the profits and projected profits of e360Insight.

Plaintiffs’ Damage Calculations

e360Insight lost substantial revenue due to Spamhuas unlawful actions. (St. ¶¶3, 17-19). e360Insight is an email marketing company and earned revenue through sending email campaigns on behalf of its clients. e360Insight would send email messages on behalf of their clients to recipients who opted to receive such communications. e360Insight would be paid on a performance basis, meaning that e360Insight would be paid by the client for each “action” taken by the recipient, such as clicking on a link in the email message or visiting the client’s website. Due to the improper acts of Spamhaus, e-mails sent by e360Insight were blocked and did not reach the intended recipients. (St. ¶14) Instead, e360Insight would receive an error message indicating that the email had been blocked due to Spamhaus. (St. ¶15) Linhardt was able to determine the number of emails blocked to due to Spamhaus. (St. ¶16) For example, in 2004, e360Insight sent [REDACTED] messages. Of those, [REDACTED], or [REDACTED], were blocked by Spamhaus. Id. Because not all of the email messages sent were blocked, e360Insight was able to generate revenue on the unblocked accounts. (St. ¶20) Based on the account history and success of other email campaigns, Linhardt determined average revenue per thousand messages. Because the demographic and other segmentation characteristics between the records blocked and those not blocked by Spamhaus were identical, e360Insight reasonably assumes the blocked email messages would perform in the same way as the unblocked messages. It therefore follows that the blocked messages would generate substantially similar click-through rates, conversion rates and revenue productivity as the unblocked messages. The total amount of lost revenue can then be determined by applying the campaign performance metrics of the unblocked messages to the blocked messages. In 2004,
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the average revenue per thousand messages sent was [REDACTED]. (St. ¶18) This amount is then multiplied by the number of records blocked by Spamhaus, [REDACTED], which yields a total direct revenue loss due to Spamhaus blocks in 2004 of [REDACTED]. (St. ¶¶18-19) This process was carried out for the years 2003-2007 and is detailed in Exhibit 4 to Plaintiff’s Rule 56.1 Statement of Additional Facts. These calculations yielded a total direct revenue loss due to confirmed Spamhaus blocks of $[REDACTED]. (St. ¶19).

Plaintiffs have also claimed damage for contracts lost due to Spamhaus’ interference. Specifically, Plaintiffs identified Smartbargains, Vendare, Optinbig and Net Blue as clients lost due to Spamhaus. (St. ¶4) The initial damage calculations were the estimated revenues for the contracts over a term of two years and totaled $2,465,000.00. (St. ¶¶7-13). e360Insight had an established history with the clients lost and the profit history of those clients was used to calculate the lost revenues. (St. ¶20). e360Insight also suffered numerous lost business opportunities and a loss in enterprise value in the amount of $9,250,000. (St. ¶12). Linhardt testified that e360Insight lost these contracts as a direct result of Spamhaus’ actions. (St. ¶¶2, 4-6). As president and owner of e360Insight, Linhardt has personal knowledge of the value of these contracts to e360Insight and can testify accordingly.

II. Plaintiff’s Damages are Not Commingled with Damages of Non Parties

Defendant repeatedly and wrongly suggests that Plaintiffs’ damages are “commingled” with damages suffered by non-parties Maverick and Bargain Depot. As Linhardt explained in his deposition, a consolidated tax return was filed by Maverick. The mere fact that a consolidated return was filed does not preclude Linhardt and e360Insight from proving their damages. e360Insight’s damages are based on the lost contracts and lost income due to the unlawful acts of Spamhaus. Specifically, Linhardt testified in his deposition regarding the contracts e360Insight lost
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due to the actions of Spamhaus (St. ¶¶2, 4-6). Linhardt had personal knowledge of the value of these contracts as well as personal knowledge that Spamhaus was the cause the clients cancelled. Id. The filing of a consolidated tax return has no effect on the value of these contracts or on the fact they were lost due to the unlawful actions of Spamhaus. In addition, e360Insight has also presented damages for the direct revenue lost per blocked email message. As discussed above, these damages were calculated using the revenue and profits earned by e360Insight from 2003 through 2007. Again, the filing of a consolidated tax return has no effect on what income e360Insight generated. In addition, no other entities owned by Maverick generated any revenue. (St. ¶21). The consolidated tax return has no effect on the Plaintiffs damage calculations.

III. The Illinois “New Business Rule” Does Not Bar Plaintiffs’ Damages

Defendant asserts the Plaintiffs’ damage claims are barred by the Illinois new business rule. The proffered justification for this rule is that “a new business has yet to show what its profits actually are.” SK Hand Tool Corp. v. Cocoran Partners, 284 Ill. App. 3d 417, 427 (1st Dist. 1996). However, there are many exceptions to this rule and courts have found that “evidence of prior profits is not the sine qua non of proof of damages ..”. Id. The cases relied upon by Defendants are clearly distinguishable from the present case. In both Dominion Nutrition and M.S. Distributing, the plaintiffs were new businesses with no profit history to use as a basis for their damages. Dominion Nutrition, Inc. v. Cesna, 467 F. Supp. 2d 870 (N.D. Ill. 2006); M.S. Distrib. Co. v. Web Records, Inc., 2003 U.S. Dist. LEXIS 8078 (N.D. Ill. 2003).

In contrast, e360Insight has a profit history on which its damage claim is based. Although Spamhaus’ unlawful conduct severely affected e360Insight’s business, e360Insight continued to operate and generate revenues from 2003 through 2008. (St. ¶20-21) As discussed in Linhardt’s deposition and as evidenced in e360Insight’s profit and loss statement, e360Insight generated total
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gross profits of [REDACTED] from 2003 through 2008. Id. This is not the case of a start-up company that never generated any revenues and has no basis on which to calculate lost profits. e360Insight was able to generate revenue on some of its campaigns despite Spamhaus’ actions that caused many of those emails to be blocked. The profits earned by e360Insight provide a reasonably certain basis on which to calculate its damages. “Where there is concrete evidence from which the lost profits for a new venture can be determined to a reasonable degree of certainty, they may be recovered.” Jamsports and Entertainment v. Paradama Productions, 2004 U.S. Dist. LEXIS 23605, *16 (N.D. Ill. Nov. 22, 2004). (Ex. A) Courts have also noted,

[W]hile damages cannot be based on pure speculation or guesswork, they also need not be proven with the certainty of calculus. And where the uncertainty of the damages stems from the defendants' illegal conduct, the defendants should not benefit from the uncertainty they created. Speculation has its place in estimating damages, and doubts should be resolved against the wrongdoer.

BE&K Construction Co. v. Will & Grundy Counties Building Trades Council, AFL-CIO, 156 F.3d 756, 770 (7th Cir. 1998).

e360Insight has an established profit history on which its damages are based. This case is clearly distinguishable from the cases cited by Defendant.

Conclusion

Summary judgment is only appropriate if the evidence shows that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law”. Fed. R. Civ. P. 56(c). A genuine issue of material fact exists if the trier of fact could find in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When considering a motion for summary judgment, a court should construe all facts and inferences in favor of the nonmoving party. Id.

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Defendant’s basis for its motion is that Plaintiffs cannot prove any of their damages. As discussed above, Plaintiffs have claimed damages for lost contracts, lost revenue and defamation. Even if some elements of Plaintiffs damage claims were barred, Plaintiffs would nevertheless be able to prove the remainder of their claims. Unless it is found that Linhardt may not testify as to any of the damages suffered by either him or e360Insight, Plaintiffs are entitled to damages and summary judgment is improper. e360Insight has an established profit history upon which its damages are based. Linhardt, as president and owner of e360Insight, has personal knowledge of the damage suffered both by e360Insight and himself and can testify accordingly. Plaintiffs have established that they will be able to prove damages with reasonable certainty and summary judgment should therefore be denied.

e360Insight, LLC and David Linhardt,
Plaintiffs.

By: /s/ Bartly J. Loethen
One of Their Attorneys
Bartly J. Loethen (6225484)
Joseph L. Kish (6197916)
Shaina A. Moss (6283585)
Synergy Law Group, LLC
730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MSJResponse.pdf	01/09/09 2:32 pm	92.14 KB

Motion to Strike Affidavit of David Linhardt

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD.,
Defendant.

THE SPAMHAUS PROJECT’S MOTION TO STRIKE THE JANUARY 7, 2009 AFFIDAVIT OF DAVID LINHARDT

The Spamhaus Project (“Spamhaus”), pursuant to Federal Rule of Civil Procedure 37(b)(2), moves this Court for entry of an order striking the January 7, 2009 Affidavit of David Linhardt and the exhibit to that affidavit.1 In support of this Motion, Spamhaus states:

[1 The January 7, 2009 Affidavit of Linhardt, and its accompanying Exhibit A entitled “Direct
Damages from Spamhaus ROKSO Listing,” was filed under seal per the Agreed Protective Order
in this case, and attached as Exhibit 1 to Plaintiffs’ Response in Opposition to Spamhaus’ Motion
in Limine (Doc. 190), and as Exhibit 2 to Plaintiffs’ Response to Spamhaus’ Rule 56.1 Statement
of Facts (Doc. 194).]

1. On August 30, 2006, Plaintiffs filed Linhardt’s first Affidavit. In his August 30, 2006 Affidavit, Linhardt claimed that Plaintiffs suffered damages of approximately $11.7 million. No exhibits or supporting calculations were produced in support of Linhardt’s August 30, 2006 Affidavit while fact discovery was still generally open.

2. When asked during his deposition about his methodology for arriving at the $11.7 million damages claim, or whether he had any underlying records or workpapers reflecting his
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calculations, Linhardt testified that he did not recall how he calculated the number, and that he did not have any supporting documentation or work-papers reflecting his calculations:

• “Q: Just to be clear, you are not able to testify today as to the precise methodology used to get from the numbers in Exhibit 10 to the number in Paragraph 32 of Exhibit 9, correct?

A: I don’t recall specifically.”

Q: And you don’t have any papers which reflect that, correct?

A: I do not.”
(Linhardt Dep. 286-87.)2

[2 Citations to “Linhardt Dep.” refer to the transcript of Linhardt’s November 10-11, 2008 Deposition in this case, previously provided to the Court as Ex. 1 to Spamhaus’ Memorandum of Law in Support of its Motion in Limine (Doc. 186).]

• “Q: And I am focusing on quantitative. There’s a number of $9.25 million. As you sit here today, can you tell me anything about the methodology that you used to come up with $9.25 million?

A: No, I don’t recall the specific methodology.

Q: And you don’t have any documents that reflect that, correct?

A: That’s correct.”
(Linhardt Dep. 288-89.)

3. In his January 7, 2009 Affidavit, Linhardt now claims, “Upon review of financial records I was able to recall how such damages were computed.” (January 7, 2009 Affidavit at ¶ 8.) Linhardt attached a spreadsheet to his January 7, 2009 Affidavit as Exhibit A entitled “Direct Damages from Spamhaus ROKSO Listing.” Spamhaus has never seen this document before and it was not produced to Spamhaus prior to or in the course of Linhardt’s deposition.

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4. Linhardt’s January 7, 2009 Affidavit is not the first time that Plaintiffs have submitted an untimely document in support of their damages calculation. (See Doc. 157 at 1-4.)

5. After months of delay and the close of discovery, Plaintiffs filed their Supplemental Amended Responses to Spamhaus’ Interrogatories on September 12, 2008, amending their damages claim to approximately $136 million.

6. When Spamhaus moved to dismiss for these discovery violations by Plaintiffs, this Court, in an Order dated October 15, 2008, ordered stricken any damages amounts in Plaintiffs’ Supplemental Amended Responses to Spamhaus’ Interrogatories in excess of $11.7 million, as well as Plaintiffs’ identification of 16 previously undisclosed witnesses in support of their damages, citing the fact that “the course of action Plaintiffs have pursued is unacceptable.” (Doc. 173.)

7. This Court should similarly strike the January 7, 2009 Affidavit of David Linhardt and the accompanying exhibit because Plaintiffs’ untimely submission continues a well-documented pattern of contumacious disregard for discovery deadlines and proper procedure. (See Doc. 157 at 1-4.)

8. Further, Plaintiffs’ use of Linhardt’s January 7, 2009 Affidavit would be prejudicial to Spamhaus because the affidavit directly contradicts Linhardt’s deposition testimony, and Spamhaus did not receive the Affidavit in the course of discovery and thus could not use it in the deposition of Linhardt, Plaintiffs’ sole witness on damages. Linhardt’s deposition was delayed numerous times, both due to Plaintiffs’ failure to appear to properly noticed depositions (Doc. 156) and due to Plaintiffs’ failure to provide timely responses to interrogatories and discovery requests regarding the basis for their damages claim. Spamhaus
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was forced to wait over 9 months for this necessary discovery prior to deposing Linhardt on Plaintiffs’ damages claim.

9. After this lengthy delay of Linhardt’s deposition, Linhardt’s testimony revealed that Plaintiffs had failed to produce all the documents underlying their damages claim. (Linhardt Dep. at 246-48, 267-68.) On the second day of Linhardt’s deposition, Plaintiffs produced a version of a spreadsheet containing a calculation of Plaintiffs’ direct damages that was different than versions previously produced to Spamhaus. (Linhardt Dep. at 246-48, 267-68.) Now, months later, Plaintiffs have produced yet another new, previously-undisclosed spreadsheet, that again claims to be a calculation and workpapers regarding Plaintiffs’ damages. Plaintiffs’ pattern of continually producing different, untimely, previously-undisclosed versions of their damages calculations is outrageous and begs the question of whether Plaintiffs actually know what damages, if any, they suffered due to Spamhaus’ alleged conduct.

10. Furthermore, Exhibit A to the January 7, 2009 Affidavit of Linhardt should also be barred because it fails to produce, attach, or cite any underlying numbers or data used in its calculations. During this litigation, Plaintiffs have repeatedly asserted varying claims of revenue lost, days of service lost, number of emails blocked, etc. without substantiating any of their claims. Exhibit A to the January 7, 2009 Affidavit of Linhardt is more of the same, and should be disregarded by the Court for its inherent unreliability.

11. In addition to being untimely, prejudicial, and unreliable, the January 7, 2009 Affidavit of Linhardt should also be barred by this Court as an attempt to create a sham issue of fact contrary to prior deposition testimony in order to escape summary judgment. The Seventh Circuit has “long followed the rule that parties cannot thwart the purposes of Rule 56 by creating ‘sham’ issues of fact with affidavits that contradict their prior depositions.” Bank of Illinois v.
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Allied Signal Safety Restraint Sys., 75 F.3d 1162, 1168 (7th Cir. 1996). Where a contradiction exists between earlier deposition testimony and an affidavit later submitted in opposition to a motion for summary judgment, the affidavit is properly disregarded. Ineichen v. Ameritech, 410 F.3d 956, 963 (7th Cir. 2005) (disregarding Plaintiffs’ later filed affidavit where she claimed that her coworkers made disapproving comments about her interracial relationship in contradiction to her earlier deposition where she stated that her coworkers never mentioned the interracial nature of her relationship). The Seventh Circuit refuses to accept these “sham” affidavits that contradict earlier deposition testimony because they are inherently unreliable, and a mere attempts to manufacture a factual dispute in order to defeat summary judgment. Lorillard Tobacco Co., Inc. v. A & E Oil, Inc., 503 F.3d 588, 592 (7th Cir. 2007) (holding that Defendant’s later filed affidavit contradicting his earlier deposition testimony that he always checked for counterfeit markings was an attempt to create a sham issue which “negate[d] his feigned ignorance”).

12. In this case, Linhardt explicitly testified at his deposition that he did not have any supporting records or documents to support the methodology or numbers comprising Plaintiffs’ $11.7 million damages claim. . (See Doc. 186 at 6-8, 14; Linhardt Dep. at 270, 272, 275-77, 279-81, 286-89.) He then directly contradicted his previously sworn to statements in his January 7, 2009 Affidavit. The January 7, 2009 Affidavit of Linhardt is explicitly disallowed under the law of the Seventh Circuit and thus properly stricken.

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Conclusion

For the foregoing reasons, Spamhaus asks this Court to grant its Motion to Strike the January 7, 2009 Affidavit of David Linhardt.

Dated: January 28, 2009

Respectfully submitted,

THE SPAMHAUS PROJECT
By: s/ David Jiménez-Ekman
Craig C. Martin
David Jiménez-Ekman
Chad Emerson Bell
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611

Attachment	Date	Size
MotStrikeLinhardtAff.pdf	01/30/09 5:41 pm	24.91 KB

Reply to Response to Motion for Summary Judgment on Damages

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD.,
Defendant.

THE SPAMHAUS PROJECT’S REPLY IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT

Introduction

In our opening brief, we demonstrated that Spamhaus is entitled to summary judgment on damages for three reasons: (1) Plaintiffs will have no evidence to prove their damages claims if our motion in limine directed at David Linhardt’s damages testimony is granted; (2) Plaintiffs cannot show damages to a reasonable certainty because their financial data is co-mingled with non-parties Maverick and Bargain Depot; and (3) Plaintiffs’ damages are barred by Illinois’ “new business” rule, which prevents the recovery as damages of lost profits for a new business. Plaintiffs’ response makes three principal arguments, none of which has merit.

First, Plaintiffs’ defense of the proffered testimony of Linhardt based on the response to the motion in limine fails for the reasons explained in our reply in support of our motion in limine. Second, Plaintiffs’ argument that a consolidated tax return does not mean damages cannot be separately proved for the entities, while correct, does not cure Plaintiffs’ admission
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that the books and records of e360 make separating that data out impossible. Third, Plaintiffs’ contention that the “new business” rule does not apply ignores that, at the time their claims arose, they were a “new business,” and even today, e360 has no history of revenues which could even come close to justifying the $11.7 million in damages they seek.

I. If The Court Grants Our Motion To Exclude Linhardt’s Testimony, Spamhaus Is Entitled To Summary Judgment Because Plaintiffs Have No Evidence To Meet Their Burden Of Showing Damages To “A Reasonable Certainty.”

In our opening memorandum (Doc. 187 (“Op. Br.”) at 5), we demonstrated that Spamhaus is entitled to summary judgment because the Court should exclude Linhardt’s damages testimony, and that is the only evidence Plaintiffs have to sustain their burden of proof on damages. In their response, Plaintiffs do not contest (i) that they bear the burden of proof, (ii) that they must show damages to a “reasonable certainty,” or (iii) that Linhardt’s testimony is the only evidence of their damages. Instead, Plaintiffs argue that Linhardt’s testimony is admissible based on the same arguments articulated in Plaintiffs’ opposition to our motion in limine. We rely on our Reply in Support of the Motion in Limine as a full reply to those arguments and, to the extent necessary, incorporate our reply here. However, Plaintiffs’ response makes clear that, if our motion in limine is granted, they have no defense to summary judgment, and it should be granted.

II. Alternatively, Plaintiffs Cannot Show Their Damages To A Reasonable Certainty Because They Are Commingled With Damages Suffered By Non-Parties, Maverick And Bargain Depot.

In our opening brief (Op. Br. at 6), we showed that Plaintiffs cannot recover damages in any event because there are no separate financial records for the only corporate party, e360. Instead, those records are inextricably commingled with financial data from non-parties, and
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therefore e360 cannot meet its burden of showing its own damages to a “reasonable certainty.” Plaintiffs’ response (Doc. 192 (“Resp.”) at 4-5) does not dispute the legal standard, the identity of the parties, or the inability of non-parties to recover damages. Instead, Plaintiffs claim they can proceed because, in their view (Resp. at 4), “The mere fact that a consolidated return was filed does not preclude Linhardt and e360Insight from proving their damages.”

But Plaintiffs’ claim (Resp. at 5) that the “filing of a consolidated tax return has no effect on the value” of contracts underlying their damages claims, or their damages claims themselves, mixes the apple of a consolidated tax return with the oranges of co-mingled books. We agree that the mere filing of a consolidated tax return does not, by itself, mean that Plaintiffs were unable to separate financial data of the party e360 from the non-parties Maverick and Bargain Depot. Certainly, even if consolidated tax returns are filed, separate books and accounting records can be kept, which would allow each entity to prove its own damages. But that is not what Linhardt testified to at his deposition. What he conceded, and is admitted by Plaintiffs in their Local Rule 56.1 statement, is:

• Non-party Maverick kept books on a “consolidated” basis; that is, “the books were kept
at the Maverick level, so there aren’t separate financial statements for Bargain Depot and
e360” (Doc. 194 at 2; Linhardt Dep. at 97-99); and

• There is “no way of separating out results and data for e360 from, for example, Bargain
Depot.” (Doc. 194 at 2; Linhardt Dep. at 99-100.)1

[1 Citations to “Linhardt Dep.” refer to the transcript of Linhardt’s November 10-11, 2008
Deposition in this case, previously provided to the Court as Ex. 1 to Spamhaus’ Memorandum of
Law in Support of its Motion in Limine (Doc. 186).]

Plaintiffs have no separate data for e360 which would allow them to offer testimony relevant to
e360’s damages whatsoever.

Nor can Plaintiffs rely on their current claim that only e360 generated revenue. Linhardt testified at his deposition that he included Bargain Depot’s numbers in his damages calculations

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for e360. In explaining the discrepancy between an older and more recent version of his quantitative analysis, Linhardt said, “Well, one thing I forgot to include was cost of goods sold for any e-commerce revenue. So, you know, the variable cost of the business of getting one email delivered where it would have otherwise been blocked, there’s a data royalty cost that’s included here, but I forgot to include e-commerce cost of goods sold. So if Bargain Depot sells a pair of sunglasses, there’s a product cost associated with that item that was not reflected, so I made an adjustment to account for that.” (Linhardt Dep. at 87-88.) Linhardt said that he included e-commerce revenue and cost of goods sold in his damages calculations, yet he later agreed that e360 did not sell any goods; Q: “I understood from your testimony this morning that e360 did not itself sell any physical goods or services other than e-mail marketing, correct?” A: “Correct.” (Linhardt Dep. at 97.) Linhardt further testified, “when a product is sold, the revenue goes to the Maverick-reported number, which is essentially – and the costs go there as well. There’s only one set of consolidated books.” (Linhardt Dep. at 100.) Linhardt also responded to the follow question: “Q: Is it your testimony that all revenue, regardless of the entity that generated it, including Bargain Depot, flowed into e360’s account?” A: “Yes.” (Linhardt Dep. at 103.)

Thus, while Plaintiffs now argue that “no other entities generated any revenue,” including, presumably, Bargain Depot, Linhardt’s own testimony undermines this statement. Furthermore, this position is in direct conflict with statements made by Plaintiffs (or, at least by Linhardt as indirect owner of Bargain Depot) in past litigation. In Maui Jim Inc. v. Bargain Depot Enterprises, LLC, No. 06-cv-01169 (C.D. Ill.) (Mihm, J.), Bargain Depot stated that it was “undisputed” that Bargain Depot “offered for sale sunglasses.” (Bargain Depot’s Response to Maui Jim’s Motion for Summary Judgment at 3, filed April 20, 2007, attached as Ex. 1.) If
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Bargain Depot were not generating revenue, it is unlikely that Bargain Depot would have even participated in a lawsuit regarding patent infringement (since Bargain Depot presumably could not infringe a sunglasses patent without producing or selling sunglasses), much less admit that it “offered for sale sunglasses.”

III. Alternatively, Plaintiffs Cannot Recover Damages Because Illinois Law Bars Lost Profits For A New Business.

In our opening brief (Op. Br. at 6-8), we demonstrated that Plaintiffs’ damages are barred by Illinois’ “new business” rule because e360 was started for $5,000 in 2003, and had no profit history before Spamhaus’ allegedly unlawful conduct later in 2003. In their response (Resp. at 5-6), Plaintiffs claim that the rule does not apply because e360 operated and has a history of revenue and profit from 2003 through 2008. Plaintiffs’ argument is unpersuasive for three reasons.

First, Plaintiffs’ assertion that e360 was not a new business based on its five years of operating and generating revenues from 2003 to 2008 ignores that their claims arose, not in 2008
or 2009, but in December 2003, only nine months after e360 began operations. The cases we cite in our motion for summary judgment support e360’s designation as a new business based on its status when its claims arose (Op. Br. at 7-8), and, given the purposes of the rule, that is what matters: the issue Plaintiffs must prove is what their profits would have been “but for” Spamhaus’ allegedly unlawful conduct.2 Plaintiffs’ revenues and profits after that conduct occurred cannot, by definition, show what the revenues and profits would have been but for Spamhaus’ conduct, and therefore are no way for Plaintiffs to make the showing required of
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causation. In fact, any revenue and profits by Plaintiffs’ after Spamhaus’ alleged conduct in late 2003 would go exclusively to the other side of the coin, and show Plaintiffs’ performance in the actual world (in the presence of Spamhaus’ conduct). The nine months or so of Plaintiffs’ performance prior to Spamhaus’ conduct places Plaintiffs’ claims squarely within the prohibition of the “new business” rule.

[2 We note that, due to the default, Your Honor will accept the truth of the factual allegations regarding Spamhaus’ conduct. However, Spamhaus respectfully believes that it has many defenses on the merits to Plaintiffs’ claims, and that it is Plaintiffs who engaged in unlawful conduct (spamming), not Spamhaus.]

Second, even if (contrary to fact) nine months of history were enough to avoid application of the new business rule, that history would not entitle Plaintiffs to any damages. That is because, according to Plaintiffs, the profit during that period was actually lower than it was after Spamhaus’ conduct. (Ex. 2 to Doc. 186 – e360Insight LLC Profit & Loss.) (We put aside that this profit was for all of the consolidated companies, not just e360, and therefore independently cannot prove Plaintiffs’ damages claims for the reasons discussed in Part II.) The net profits actually went up for the next three years after Spamhaus’ alleged conduct, which would prevent Plaintiffs from showing that Spamhaus was the “but for” cause of a reduction in any profit based on the short pre-conduct profit history available to Plaintiffs.

Third, the cases Plaintiffs cite do not rescue their claim from the new business rule. Plaintiffs’ reliance on Jamsports and Entertainment, LLC v. Paradama Productions, Inc., 2004 U.S. Dist. LEXIS 23605, *16 (N.D. Ill. Nov. 22, 2004) is misplaced because in that case, there was a specific competitor who operated the exact business that Jamsports would have operated but for defendant’s conduct which provided a basis for the “but for” showing. Here, Plaintiffs have no evidence of a directly analogous business, required by the Jamsports court, to circumvent the new business rule. The other case Plaintiffs cite, BE&K Construction Co. v. Will & Grundy Building Trades Council, AFL-CIO, 156 F.3d 756, 770 (7th Cir. 1998), is even farther afield: it does not address the application of the new business rule and instead is cited for the
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proposition that damages need not be proved “with the certainty of calculus.” While that may be true, it does nothing to weaken the application of the new business rule here.

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Conclusion
For the foregoing reasons, Spamhaus is entitled to summary judgment on all of Plaintiffs’ damages claims under Federal Rule of Civil Procedure 56.

Dated: January 28, 2009

Respectfully submitted,

THE SPAMHAUS PROJECT

By: s/ David Jiménez-Ekman
Craig C. Martin
David Jiménez-Ekman
Chad Emerson Bell
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611

Attachment	Date	Size
MSJDamagesReply.pdf	01/30/09 4:33 pm	29.84 KB
MSJDamagesReplyExh1.pdf	01/30/09 4:33 pm	208.33 KB

Memorandum in Support of Motion in Limine to Exclude Damages Opinion Testimony of David Linhardt

Again, these documents are far more interesting than the actual motion is. And again, the redactions make it kind of pointless to copy it here to text.

Attachment	Date	Size
MotLimineExclLinhardtTestimonyMemo.pdf	12/10/08 5:17 pm	927.22 KB
MotLimineExclLinhardtTestimony2-5.pdf	12/10/08 5:18 pm	1.14 MB
LindhardtDeposition.pdf	12/10/08 5:20 pm	4 MB
LindhardtDeposition2.pdf	12/10/08 5:22 pm	4.11 MB

Response to Motion in Limine to Exclude Damages Opinion Testimony of David Linhardt

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

E360INSIGHT, LLC,
an Illinois Limited Liability Company, and
DAVID LINHARDT, an individual
Plaintiffs,

v.

THE SPAMHAUS PROJECT,
a company limited by guarantee and
organized under the laws of England, aka
THE SPAMHAUS PROJECT LTD,
Defendant.

e360INSIGHT, LLC AND DAVID LINHARDT’S RESPONSE IN OPPOSITION TO DEFENDANT’S MOTION IN LIMINE TO EXCLUDE DAMAGES OPINION TESTIMONY OF DAVID LINHARDT

Plaintiffs, e360Insight, LLC and David Linhardt (collectively “Plaintiffs”), by and through their attorneys, Synergy Law Group, L.L.C., and for their Response in Opposition to Defendant’s Motion in Limine to Exclude Damages Opinion Testimony of David Linhardt, state as follows:

Plaintiff’s Business

e360Insight is an email based marketing company. e360Insight contracts with companies that wish to market their products or services using the internet. Clients of e360Insight compile the content of the message and e360Insight sends an email containing the client’s content to a list of recipients who have opted to receive such communications. e360Insight would be paid on a performance basis, meaning that e360Insight would be paid a pre-negotiated rate by the client for each “action” taken by the recipient, such as clicking on a link in the email message or visiting
the client’s website. Due to the unlawful acts of Spamhaus, e-mails sent by e360Insight were blocked and did not reach the intended recipients. Instead, e360Insight would receive an error message indicating that the email had been blocked due to Spamhaus. (Linhardt Dep., 109-110, attached as Exhibit 1 to Defendant’s Motion in Limine). Based on the error messages, Linhardt was able to determine which messages were blocked and how many of the blocked messages were due to Spamhaus’ activities. Id.

The default judgment previously entered by this court was upheld by the Court of Appeals. “As a general rule, ‘a default judgment establishes, as a matter of law, that the defendants [are] liable to plaintiff as to each cause of action alleged in the complaint.” Dundee Cement Co. v. Howard Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir. 1983) citing Breuer Electric Mfg. Co. v. Toronado Systems of America, Inc., 687 F.2d 182, 186 (7th Cir. 1982). “Upon default, the well-pleaded allegations of a complaint relating to liability are taken as true.” Id. Plaintiffs have therefore already established that Spamhaus committed the alleged unlawful acts, namely that Spamhaus wrongfully placed Linhardt and e360Insight on the ROKSO list and tortiously interfered with e360Insight’s existing and potential contracts. The Court of Appeals remanded the case for a more extensive inquiry into Plaintiffs’ damages due to Spamhaus’ unlawful conduct.

e360Insight sustained monetary damages as a result of Spamhaus’ improper conduct and lost several contracts due to Spamhaus’ interference. In addition, e360Insight lost revenue on the accounts it had because the emails were blocked due to Spamhaus and did not reach the intended recipients. Because the recipients did not receive the emails, they were unable to take any “action” on the emails and e360Insight was unable to generate revenue on those accounts. In addition, Linhardt sustained damages due to defamation by Spamhuas. Linhardt, the president
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and owner of e360Insight, has offered testimony support the plaintiffs’ damage claims. Defendants seek to exclude in limine Linhardt’s testimony.

I. Linhardt is Qualified to Testify as to the Damages Incurred by e360Insight and Linhardt

Linhardt, as president and owner of e360Insight, has personal knowledge of e360Insight’s business, its accounts and its income. e360Insight has presented direct damages stemming from its lost contracts and lost revenue as well as damages based on the lost value of the corporation. Defendant mischaracterizes the nature of e360Insight’s damages and mistakenly regards them as a single calculation.

Whether Linhardt’s testimony falls under the purview of Rule 701 or 702, Linhardt is qualified to testify as to the damages sustained by him and e360Insight. The advisory committee notes to Rule 701 explain that a business owner or officer is allowed to testify without being qualified as an expert because that testimony is tied to his or her personal knowledge:

[M]ost courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert. See, e.g., Lightning Lube, Inc. v. Witco Corp. 4 F.3d 1153 (3d Cir. 1993) (no abuse of discretion in permitting the plaintiff's owner to give lay opinion testimony as to damages, as it was based on his knowledge and participation in the day-to-day affairs of the business). Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business. The amendment does not purport to change this analysis.

Fed. R. Evid. 701 (advisory committee notes).

In Nichols v. Johnson, the plaintiff operated a farming business and sought to testify regarding both past and future profits. The court allowed the plaintiff to offer this testimony,
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finding that “the owner or officer of a business is entitled to offer testimony as to the profits of the business, without the need to qualify the witness as an accountant, appraiser or other type of expert.” Nichols v. Johnson, 2002 U.S. Dist. LEXIS 7745, *16-17 (N.D. Ill. April 30, 2002).
Linhardt’s calculations of the damages sustained by the Plaintiff are based on the lost contracts and lost income due to the unlawful acts of Spamhaus. Specifically, Linhardt testified in his deposition regarding the contracts e360Insight lost due to the actions of Spamhaus (Linhardt Dep., 268-284). Linhardt had personal knowledge of the value of these contracts. (Linhardt Dep., 185-187; Ex. 1, Second Affidavit of Linhardt, ¶¶4-19). Linhardt also had knowledge regarding e360Insight’s expectancy that these contracts would continue. Id. Defendants have offered no evidence to the contrary. Linhardt’s testimony regarding the value of e360Insight’s existing contracts falls under the purview of Rule 701.

Linhardt’s calculation of damages based on the loss of revenue due to Spamhaus blocks also falls under the purview of Rule 701. As explained in Linhardt’s deposition and as discussed in more detail below, Linhardt calculated the direct revenue loss per blocked email message. Data relied upon by Linhardt included the number of email messages sent by e360Insight, the number of email messages blocked due to Spamhaus, and the revenue and profits earned by e360Insight on messages and accounts not blocked by Spamhaus. Linhardt has personal knowledge of this information as he regularly worked with and accumulated this data. Computing the direct damages sustained by e360 does not require any specialized knowledge or expertise. These calculations are made by the president of the corporation based upon his personal knowledge. Defendant argues that Linhardt is not an expert in business valuation and therefore cannot testify as to any damages sustained by e360Insight. Defendant’s line of reasoning ignores the very nature of the direct damages sustained by e360Insight. Linhardt’s
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calculation of the direct damages fall within the purview of Rule 701. Accordingly, Linhardt is permitted to testify as to the value, the profits and projected profits of e360Insight without qualifying as an expert.

To the extent that Linhardt’s testimony is considered to be expert testimony, as defined by Federal Rule of Evidence 702, Linhardt is qualified to offer opinions regarding the value, the profits and projected profits of e360Insight. Rule 702 provides,

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Fed. R. Evid. 702.

Linhardt’s testimony is based on the data he collected as president and owner of e360Insight. Linhardt has knowledge of e360Insight’s revenue and profits, e360Insight’s contracts, the contracts lost by e360Insight due to Spamhaus, and the effect of Spamhaus’ conduct on e360Insight’s revenues. Linhardt has compiled the data regarding the number of emails blocked due to Spamhaus and has calculated the losses suffered because of the blocks. As the Seventh Circuit has held,

The notion that Daubert requires particular credentials for an expert witness is radically unsound. The Federal Rules of Evidence, which Daubert interprets rather than overrides, do not require that expert witnesses be academics or PhDs, or that their testimony be "scientific" (natural scientific or social scientific) in character. Anyone with relevant expertise enabling him to offer responsible opinion testimony helpful to judge or jury may qualify as an expert witness.

Tuf Racing Products, Inc. v. American Suzuki Motor Co., 223 F.3d 585 (7th Cir. 2000).

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Linhardt received a Bachelor of Science degree in Chemical Engineering from Purdue University and holds an MBA from Harvard Business School. (Linhardt Dep., 48-49). His studies at Harvard included courses on valuation of companies and valuation of development projects. (Id. at 50). Linhardt has substantial experience in the email marketing business. Through his experience as well as his position as president and owner of e360Insight, he is familiar with all facets of the email marketing industry. Linhardt is able to evaluate the value of his business, and in fact completed a valuation of his business prior to this litigation. (Linhardt Dep., 80-84). The Federal Rules do not require that a witness offering testimony under Rule 702 be an “expert” or a hired gun. The rules require that the testimony be based upon sufficient facts, is the product of reliable principles and methods, and the principles have been applied reliably to the facts. Linhardt’s testimony meets those three requirements and will assist the trier of fact.

II. The Plaintiffs’ Have Established their Damages with Reasonable Certainty

a. Plaintiffs Initial Damage Calculation

Plaintiffs initial damage calculation was based on the contracts lost due to Spamhaus’ interference. Specifically, Plaintiffs identified Smartbargains, Vendare, Optinbig and Net Blue as clients lost due to Spamhaus. The initial damage calculations were the estimated revenues for the contracts over a term of four years and totaled $2,465,000.00. (Exhibit 1, Second Affidavit of Linhardt; See Also Affidavit of Linhardt and Direct Damage Calculation, Attached as Exhibits 3 and 4 to Defendant’s Motion in Limine, respectivley). e360Insight had an established history with the clients lost and the profit history of those clients was used to calculate the lost revenues. (Exhibit 1, Second Affidavit of Linhardt). e360Insight also suffered numerous lost business
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opportunities and a loss in enterprise value in the amount of $9,250,000. (Affidavit of Linhardt, ¶¶33-34, Attached as Exhibits 3 to Defendant’s Motion in Limine). Linhardt testified that e360Insight lost these contracts as a direct result of Spamhaus’ actions. (Linhardt Dep., 185-187). As president and owner of e360Insight, Linhardt has personal knowledge of the value of these contracts to e360Insight and can testify accordingly.

Defendant mischaracterizes Linhardt’s testimony in stating that the initial $11.7 million dollar damage calculation is inaccurate. Linhardt did not testify that this calculation was inaccurate, but rather stated that his total damages exceeded his initial calculation. (Linhardt Dep., 258-259).

The Court entered judgment in favor of Plaintiffs for $11,715,000. (Doc. 24). The Appellate Court upheld the default judgment but remanded the case for a more extensive inquiry into Plaintiffs’ damages. Pursuant to the instructions by the Court of Appeals, Plaintiffs then presented a more detailed analysis of the damages they sustained. (See Ex. 2, e360 v. Spamhaus Direct Revenue Loss Analysis; Plaintiffs Supplemental Amended Responses to Defendant’s Interrogatories, #16, pp. 27-36, attached as Exhibit 5 to Defendant’s Motion in Limine). Upon performing a more detailed analysis, it was determined e360Insight suffered a direct revenue loss due to Spamhaus in the amount of [REDACTED].

In an order dated October 15, 2008, this Court struck “any amounts stated in the Supplemental Amended Responses to Interrogatories 16 and 17 in excess of $11.7 million.” (Doc. 173). Although Plaintiffs are barred from presenting damages in excess of $11.7 million, the Court did not strike the methodology. The supplemental damage analysis is not a new claim, but rather a more detailed analysis of the damages originally presented. Defendants have not
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raised any issue regarding the methodology employed by Plaintiffs in their revised damage calculation.

b. Plaintiffs’ Revised Damage Calculation

e360Insight lost substantial revenue due to Spamhuas unlawful actions. e360Insight is an email marketing company and earned revenue through sending email campaigns on behalf of its clients. e360Insight would send email messages on behalf of their clients to recipients who opted to receive such communications. e360Insight would be paid on a performance basis, meaning that e360Insight would be paid by the client for each “action” taken by the recipient, such as clicking on a link in the email message or visiting the client’s website. Due to the improper acts of Spamhaus, e-mails sent by e360Insight were blocked and did not reach the intended recipients. Instead, e360Insight would receive an error message indicating that the email had been blocked due to Spamhaus. Linhardt was able to determine the number of emails blocked due to Spamhaus (Linhardt Dep., 108-111). For example, in 2004, e360Insight sent [REDACTED] messages. (Ex. 2, e360 v. Spamhaus Direct Revenue Loss Analysis; Plaintiffs Supplemental Amended Responses to Defendant’s Interrogatories, #16, pp. 27-36, attached as Exhibit 5 to Defendant’s Motion in Limine) Of those, [REDACTED], or [REDACTED], were blocked by Spamhaus. Id. Because not all of the email messages sent were blocked, e360Insight was able to generate revenue on the unblocked accounts. Based on the account history and success of other email campaigns, Linhardt determined average revenue per thousand messages. Because the demographic and other segmentation characteristics between the records blocked and those not blocked by Spamhaus were identical, e360Insight reasonably assumes the blocked email messages would perform in the same way as the unblocked messages. It therefore
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follows that the blocked messages would generate substantially similar click-through rates, conversion rates and revenue productivity as the unblocked messages. The total amount of lost revenue can then be determined by applying the campaign performance metrics of the unblocked messages to the blocked messages. In 2004, the average revenue per thousand messages sent was [REDACTED]. Id. This amount is then multiplied by the number of records blocked by Spamhaus, [REDACTED], which yields a total direct revenue loss due to Spamhaus blocks in 2004 of [REDACTED]. This process was carried out for the years 2003-2007 and yielded a total direct revenue loss due to confirmed Spamhaus blocks from 2003 through 2007 of [REDACTED]. (Ex. 2, e360 v. Spamhaus Direct Revenue Loss Analysis and Plaintiffs Supplemental Amended Responses to Defendant’s Interrogatories, #16, pp. 27-36, attached as Exhibit 5 to Defendant’s Motion in Limine).

The methodology and underlying data provide a reliable basis for the calculation of Plaintiffs damages. Furthermore, any potential uncertainty in Plaintiffs calculations should be resolved against the Defendant. As the Seventh Circuit has noted,

[W]hile damages cannot be based on pure speculation or guesswork, they also need not be proven with the certainty of calculus. And where the uncertainty of the damages stems from the defendants' illegal conduct, the defendants should not benefit from the uncertainty they created. Speculation has its place in estimating damages, and doubts should be resolved against the wrongdoer.

BE&K Construction Co. v. Will & Grundy Counties Building Trades Council, AFL-CIO, 156 F.3d 756, 770 (7th Cir. 1998).

c. Plaintiffs’ Damages are Not Commingled with Damages of Non Parties

Defendant repeatedly and wrongly suggests that Plaintiffs’ damages are “commingled” with damages suffered by non-parties Maverick and Bargain Depot. As Linhardt explained in his deposition, a consolidated tax return was filed by Maverick (Linhardt Dep., 98). The mere
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fact that a consolidated return was filed does not preclude Linhardt and e360Insight from proving their damages. e360Insight’s damages are based on the lost contracts and lost income due to the acts of Spamhaus held to be improper. Specifically, Linhardt testified in his deposition regarding the contracts e360Insight lost due to the actions of Spamhaus (Linhardt Dep., 268-284). Linhardt had personal knowledge of the value of these contracts. (Linhardt Dep., 185-187). The filing of a consolidated tax return has no effect on the value of these contracts or on the fact they were lost due to the unlawful actions of Spamhaus. In addition, e360Insight has also presented damages for the direct revenue lost per blocked email message. As discussed above, these damages were calculated using the revenue and profits earned by e360Insight from 2003 through 2007. Again, the filing of a consolidated tax return has no effect on what income e360Insight generated. In addition, no other entities generated any revenue. (Linhardt Dep., 99). The consolidated tax return has no effect on the Plaintiffs damage calculations.

III. Defendant’s Motion to Exclude the Testimony of Linhardt Should be Denied

Linhardt is qualified to testify as to the damages sustained by both e360Insight and himself. He is qualified to testify as a lay witness, as he is the owner and president of 360 and has personal knowledge regarding its contracts, profits and value. To the extent any of his testimony is considered to be expert testimony under Rule 702, he is also qualified to offer those opinions for the reasons listed above. Mr. Linhardt is also able to testify regarding the damages he suffered due to Spamhaus’ defamation.

Linhardt can establish the Plaintiffs damages to a reasonable degree of certainty and should be permitted to testify at trial. Defendant’s criticism of Plaintiffs damage calculations
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goes to its weight rather than its admissibility. “Vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 596 (1993). Accordingly, Linhardt should be permitted to testify on the issue of Plaintiffs damages and Defendant’s motion should be denied.

e360Insight, LLC and David Linhardt,
Plaintiffs.

By: /s/ Bartly J. Loethen
One of Their Attorneys

Bartly J. Loethen (6225484)
Joseph L. Kish (6197916)
Shaina A. Moss (6283585)
Synergy Law Group, LLC
730 West Randolph, 6th Floor
Chicago, Illinois 60661
Telephone: (312) 454-0015
Facsimile: (312) 454-0261

Attachment	Date	Size
MotInLimineResponse.pdf	01/09/09 2:45 pm	63.29 KB

Reply to Response to Motion in Limine to Exclude Damages Opinion Testimony of David Linhardt

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

e360 INSIGHT, LLC, an Illinois Limited
Liability Company, and DAVID LINHARDT,
an individual,
Plaintiffs,

v.

THE SPAMHAUS PROJECT, a company
limited by guarantee and organized under the
laws of England, a/k/a THE SPAMHAUS
PROJECT, LTD.,
Defendant.

THE SPAMHAUS PROJECT’S REPLY IN SUPPORT OF ITS MOTION IN LIMINE TO EXCLUDE DAMAGES OPINION TESTIMONY OF DAVID LINHARDT

Introduction

In our opening brief, we demonstrated that Plaintiff David Linhardt’s proffered damages testimony is inadmissible because he admitted he is not an expert in the areas of his testimony, and he admitted that the only damages calculation that has not been stricken for discovery violations is not “accurate” and is based on financial data that is inseparable from the data of non-parties. Plaintiffs’ response does nothing to rehabilitate Linhardt’s proffered testimony. Each of Plaintiffs’ three principal arguments in response is unpersuasive.

First, Plaintiffs’ contention in their Response in Opposition to Spamhaus’ Motion in Limine (Doc. 190 (“Resp.”) at 3-5) that Linhardt’s testimony can be admitted as lay opinion under Rule 701 misapprehends the scope of the rule and the nature of Linhardt’s testimony. A party cannot evade “the reliability requirements set forth in Rule 702 . . . through the simple expedient of proffering an expert in lay witness clothing.” Fed. R. Evid. 701 cmt. 2000
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Amendments. And Linhardt’s testimony is plainly beyond the ambit of lay opinion testimony, as courts have routinely rejected lost profits testimony from business owners where the testimony was complex like the testimony Linhardt proffers here. (Part I below.)

Second, Plaintiffs attempt to avoid Linhardt’s admissions that he did not know how he prepared his initial damages estimate, and had no papers reflecting how he did so, by submitting a new declaration that squarely contradicts his deposition testimony. (Resp. at 6-7; January 7, 2009 Affidavit of Linhardt, Ex. 1 to Resp.)1 The Court should refuse to consider this declaration, not only because it is untimely given the Court’s prior orders and Plaintiffs’ discovery defaults, but also because the declaration contravenes the long-standing Seventh Circuit principle that a party cannot avoid a dispositive motion by submitting a declaration that contradicts prior sworn deposition testimony. Moreover, even if the declaration is considered on the merits, it fails to offer the indicia of reliability that Plaintiffs bear the burden of supplying. (Part II below.)

Third, Plaintiffs’ contention (Resp. at 7-9) that the Court should consider the methodology behind Linhardt’s later, $136 million damages estimate ignores the purpose of the order striking that estimate and fails to answer the specific gaps in reliability we pointed out in our opening brief. (Part III below.)

[1 This January 7, 2009 Affidavit of Linhardt (and an exhibit it included) was filed under seal with the Court pursuant to the Agreed Protective Order in this case, and is cited by reference here. The January 7, 2009 Affidavit and its exhibit was also attached as Exhibit 2 to Plaintiffs’ Response to Spamhaus’ Rule 56.1 Statement of Facts (Doc. 194).]

ARGUMENT

I. Linhardt Is Not Qualified To Offer The Damages Testimony He Proffers.

In our opening brief (Doc. 186 (“Op. Br.”) at 11-12), we demonstrated that Linhardt cannot offer testimony that e360 suffered damages because he admitted – in so many words – that he is not an expert in the areas of his testimony: damages, lost potential future revenues, and
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company valuations based on those revenues. In response, Plaintiffs claim that Linhardt should be able to offer his testimony as “lay opinion” under Rule 701, or, alternatively, that he has sufficient general qualifications to testify under Rule 702. Neither claim has merit.

A. Rule 701’s “Lay Opinion” Provisions Do Not Assist Plaintiffs.

Plaintiffs’ theory (Resp. at 3-5) that Linhardt’s damages opinion testimony is admissible as lay opinion under Federal Rule of Evidence 701, without regard to Linhardt’s qualifications, is unsupported by the law. A party cannot evade “the reliability requirements set forth in Rule 702. . . through the simple expedient of proffering an expert in lay witness clothing.” Fed. R. Evid. 701 cmt. 2000 Amendments. The commentary to Rule 701 on which Plaintiffs rely applies to basic facts and mathematical calculations supporting a lost profits claim, not to the complex calculations, with attendant complicated assumptions, Linhardt proffers. This principle is demonstrated clearly in the two cases Plaintiffs cite, Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1175-77 (3d Cir. 1993) and Nichols v. Johnson, No. 00-C-7785, 2002 WL 826482, *6 (N.D. Ill. May 1, 2002).

For example, in Lightening Lube, a quick-lube franchisor was permitted to offer testimony about lost profits allegedly sustained due to a motor oil supplier’s fraud, tortious interference with contract, and RICO violations. To reach his $74 million compensatory damages calculation in Lightning Lube, the franchisor used simple addition, division and multiplication – his testimony did not involve any complex statistical sampling or modeling, and was completely based on actual financial data within his control from franchises that had opened despite the motor oil supplier’s wrongdoing.2 Similarly, in Nichols v. Johnson, No. 00-C-7785,
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2002 WL 826482, *6 (N.D. Ill. May 1, 2002), owners of a hay business were able to use simple addition, multiplication and division of past company financial data to calculate lost profits for their business due to plaintiff’s injury in an automobile accident.

[2 Specifically, the Court in Lighting Lube said:

Venuto calculated future profits in two ways. First, he calculated the profits he would have earned on the 117 franchise contracts that he actually sold. Venuto predicted that after four years in business each center would have been generating $28,000 in royalty fees. Given this calculation, plus the money the franchisees would have earned in the first four years, Venuto predicted that he would have earned $27,729,000 in future profits from the 117 existing contracts through 1996. Next, Venuto calculated the lost profits on the franchises he expected to have sold. Based on projections he developed with an accounting firm when he was planning to take the company public, Venuto predicted that he would have sold 370 more franchises over the ten-year period, that all of them would have opened (37 a year), and that he would have earned $48,821,000 from these franchises using the formula discussed above.

4 F.3d at 1174-75.]

By contrast, courts have repeatedly rejected attempts to admit through a lay owner damages testimony that, as here, relied on specialized knowledge or expertise. As Rule 701’s commentary to the 2000 Amendments explains, opinion testimony based on statistical forecasts, sampling, estimates, and comparisons/multipliers based on financial data of other companies, if admissible, “must be scrutinized under the rules regulating expert opinion . . . [because it is ostensibly] testimony based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” This compelled the Tenth Circuit to reject the admission of a business owner’s testimony regarding lost profits as lay opinion under Rule 701 when the owner’s calculation “model concerned moving averages, compounded growth rates, and S-curves,” stating that the owner “could not testify about these technical, specialized subjects under Rule 701.” Lifewise Master Funding v. Telebank, 374 F. 3d 917, 929 (10th Cir. 2004). The Tenth Circuit noted that the line of cases in which owners could offer lay testimony under Rule 701

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regarding lost profits was limited to instances where “the owners had sufficient personal knowledge of their respective business and of the factors on which they relied to estimate lost profits” or where “owners offered valuations based on straightforward, common sense calculations.” Id. at 929-30.

The Seventh Circuit also addressed the precise difference between admissible Rule 701 lay opinion testimony regarding lost profits and damages testimony that must be admitted (if at all) as expert testimony under Rule 702 in a case we cited in our opening brief, Zenith Electronics Corp. v. WH-TV Broadcasting Corp., 395 F. 3d 416 (7th Cir. 2005). In Zenith, the Court barred the owners of WH-TV from admitting as Rule 701 lay opinion testimony internal projections regarding per-subscriber valuations of the business because these projections involved making complex statistical determinations and was thus properly assessed under the admissibility requirements for expert testimony in Rule 702. Id. at 420. As the Court noted, “Rule 701 . . . does not assist WH-TV, because its claimed losses depend on the inferences to be drawn from the raw data, rather than these data (or their internal appreciation) themselves. Reliable inferences depend on more than say-so . . . [a]nd per-subscriber valuations prepared in connection with potential sales of the business don’t provide a reliable estimate of the number of subscribers that WH-TV could have secured with better set-top boxes.” Id. (internal citations omitted).

Plaintiffs therefore cannot avail themselves of Rule 701 here. On its face, Linhardt’s revised $136 million damages estimate contains 10 pages of explanation, including statistical sampling, forecasting, and assumptions regarding factors outside of his knowledge. A lay witness cannot offer those opinions. Linhardt reached his $136 million damages opinion by repeatedly substituting assumptions, speculation, and statistical models for personal knowledge:
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regarding whether a message was being blocked by Spamhaus, the number of messages blocked by Spamhaus, the average revenue that would have been generated in an unblocked campaign, the similarity of response rates between blocked and unblocked emails, and e360’s comparative similarity to other, much larger email marketing companies. (Linhardt Dep. at 112-14, 118, 130-31, 135-38, 141-62, 164.)3

[3 Citations to “Linhardt Dep.” refer to the transcript of Linhardt’s November 10-11, 2008 Deposition in this case, previously provided to the Court as Ex. 1 to Spamhaus’ Memorandum of Law in Support of its Motion in Limine (Op. Br.).]

B. Linhardt Is Not Qualified As An Expert To Give His Proffered Testimony Under Rule 702.

Plaintiffs’ alternative contention (Resp. at 5-6) that Linhardt is qualified as an expert under Rule 702 likewise cannot advance their cause. Plaintiffs do not – because they cannot – dispute, or even address, the fact that Linhardt admitted, in so many words, that he is not an expert in damages, profit projections, or corporate valuations. (Linhardt Dep. at 68-69, 85, 305-08.) That is fatal to their contention.

But even if it were not, Linhardt’s admissions are plainly correct. Plaintiffs point out (Resp. at 5) that Rule 702 and Daubert do not necessarily require an expert to possess any particular credential. While that is true, Plaintiffs fail to address the plain requirement in the Seventh Circuit that, whatever the credentials are, they have a “close fit” to the testimony being offered. (See Op. Br. at 11-12 (citing Loeffel Steel Prods., Inc. v. Delta Brands, Inc., 387 F. Supp. 2d 794, 813 (N.D. Ill. 2005); Dura Automotive Systems of Indiana, Inc. v. CTS Corp., 285 F.3d 609, 614 (7th Cir. 2002); Carroll v. Otis Elevator Co., 896 F.2d 210, 212 (7th Cir. 1990)).) Plaintiffs likewise make no attempt to demonstrate how the qualifications they cite – an undergraduate degree in chemical engineering, an MBA, and experience in e-mail marketing
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companies (Resp. at 6) – would qualify Linhardt to offer the lost profits and lost business value damages testimony he proffers. They plainly do not.

II. Alternatively, The Court Should Exclude Testimony Regarding The Initial $11.7 Million Damages Estimate Because Linhardt Admits It Is Not “Accurate” And Because It Does Not Meet Rule 702 Standards.

In our opening brief (Op. Br. at 12-14), we demonstrated that Linhardt’s initial $11.7 million damages estimate cannot be admitted because Linhardt conceded that it is inaccurate and because, in fact, it fails to satisfy Rule 702’s reliability requirement. In response, Plaintiffs assert (Resp. at 6-8) that we have mischaracterized Linhardt’s concession at his deposition, and that – based on a new affidavit from Linhardt that directly contradicts his deposition testimony – his proffered testimony meets Rule 702’s requirements. Plaintiffs also claim that Linhardt has not commingled the financial information of the only corporate plaintiff, e360, with other parties, namely, Maverick and Bargain Depot. None of these assertions helps Plaintiffs’ admit Linhardt’s damages testimony.

First, Plaintiffs’ claim (Resp. at 7) that we “mischaracterize[]” Linhardt’s testimony is easily judged by Your Honor. The Court will recall the context: Linhardt initially estimated damages at $11.7 million; then Linhardt prepared an estimate, using a totally different methodology, that reached a result more than ten times that, of $136 million; then the Court struck the later estimate, leaving Plaintiffs with their original damages amount. It was in that context that the following question and answer occurred at Linhardt’s deposition (Linhardt Dep. at 258-59):

Q: . . . As of today, as you sit here today, and looking at the numbers in paragraph 34 of [your affidavit, the initial estimate], do you think that they are, as you sit here today, accurate?

A: I think they were the best estimate at the time, but I think that there – the revised estimate is more accurate.

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Q: So as you sit here today, do you think that the $9.25 million estimate is accurate today?

A: No. I think it is higher.

Respectfully, it is a tautological truth that an $11.7 million estimate, and an estimate of more than ten times that amount, cannot at the same time both be “accurate.” Apparently unaware during his deposition that the initial $11.7 million estimate was the only one still in play, Linhardt testified that the later, larger estimate was “more accurate,” and that he did not think the earlier estimate “is accurate today.” There is no mischaracterization. By itself, this concession precludes admission of the earlier opinion, as the Court cannot under Rule 702 admit an analysis that even the proponent admits is second best.

Second, Plaintiffs’ defense (Resp. at 6-7) of Linhardt’s methodology for the initial $11.7 million estimate, based on a new affidavit that contradicts his deposition testimony, is both outrageous and ineffective. It is outrageous because the Court will recall the long history of discovery defaults by Plaintiffs that resulted in the Court’s striking Plaintiffs’ $136 million revised estimate on the ground that the methodology was not timely disclosed. (See Doc. 157 at 1-4.) The principal driver of our motion, and we respectfully submit, the Court’s ruling, was Plaintiffs’ refusal to disclose the nature and basis for their damages claim. (Doc. 157 at 5-7; Doc. 173.) Because we needed that information to effectively depose Linhardt, it was only after that was resolved that we took his deposition. And at that deposition, Linhardt repeatedly testified not only that he had no recollection as to the methodology specifics, or assumptions, behind the $11.7 million estimate, but that he had no papers reflecting that methodology, which might be used to refresh his recollection. (See Op. Br. at 6-8, 14; Linhardt Dep. at 270, 272, 275-77, 279-81, 286-89.) In their response, Plaintiffs do not acknowledge – must less address – this testimony.

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Instead, without any explanation or acknowledgement, Plaintiffs submit a new, and totally contradictory, declaration from Linhardt. In it, Linhardt claims (January 7, 2009 Affidavit of Linhardt, Ex. 1 to Resp.):

7. At the deposition I did not have my financial records from the individual clients and thus could not specifically recall how the damages were computed.

8. Upon review of financial records I was able to recall how such damages were computed.

Linhardt goes on to give, client by client, a conclusion about his assumption for the monthly revenue of each client he claims Plaintiffs lost, the expected tenure of that client, and the calculation of the expected revenue times the tenure. (January 7, 2009 Affidavit of Linhardt, Ex. 1 to Resp. at ¶¶ 9-16, 19.) Linhardt attaches to his declaration a chart, which was never before produced to us, which purports to “document[]” his “calculations.” (Ex. A to January 7, 2009 Affidavit of Linhardt, Ex. 1 to Resp..) However, Linhardt’s second declaration provides no more basis for any of his assumptions or calculations than his first declaration or his deposition testimony.

Particularly in light of their history of discovery violations on this precise topic, Plaintiffs’ conduct is outrageous. Not only have they submitted contradictory testimony and materials after numerous ordered deadlines, and too late for us to ask any questions about them, but they have not bothered to advise the Court in their brief as to what they were doing. We are contemporaneously moving to strike the late-submitted affidavit and chart. But whether or not the Court formally strikes those materials for discovery violations, the Court should not credit Linhardt’s declaration when it is given in response to a dispositive motion and contradicts his deposition testimony. See, e.g., Bank of Illinois v. Allied Signal Safety Restraint Sys., 75 F.3d 1162, 1168 (7th Cir. 1996) (“parties cannot thwart the purposes of Rule 56 by creating ‘sham’ issues of fact with affidavits that contradict their prior depositions”); Ineichen v. Ameritech, 410
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F.3d 956, 963 (7th Cir. 2005) (disregarding plaintiffs’ later filed affidavit where she claimed that her coworkers made disapproving comments about her interracial relationship in contradiction to her earlier deposition where she stated that her coworkers never mentioned the interracial nature of her relationship); Lorillard Tobacco Co., Inc. v. A & E Oil, Inc., 503 F.3d 588, 592 (7th Cir. 2007) (holding that Defendant’s later filed affidavit contradicting his earlier deposition testimony that he always checked for counterfeit markings was an attempt to create a sham issue which “negate[d] his feigned ignorance”).

In addition to being improper, Plaintiffs’ conduct is ineffective. Even in his new declaration, Linhardt fails to provide any basis for the assumptions he made and conclusions he reached. Each assertion concerning a client follows this general format:

NetBlue was a potential client of e360Insight that was lost due [sic] the actions of
Spamhaus. It was expected that e360Insight would earn revenues of [amount
redacted] from Net Blue for a period of at least forty-eight months.

(January 7, 2009 Affidavit of Linhardt, Ex. 1 to Resp. at ¶ 15.) Linhardt does not explain where the monthly revenue or the time period came from, in his affidavit or anywhere else; he could not do so at his deposition, either. (Linhardt Dep. at 270, 272, 275-77, 279-81, 286-89.) Consequently, even if the Court considers this tardy declaration on the merits, it does not establish that Linhardt’s testimony is reliable and admissible under Rule 702.

Third, Plaintiffs’ claim (Resp. at 9-10) that the “filing of a consolidated tax return has no effect on the value” of contracts underlying their damages claims, or their damages claims themselves, mixes the apple of a consolidated tax return with the oranges of commingled books. We agree that the mere filing of a consolidated tax return does not, by itself, mean that Plaintiffs were unable to separate financial data of the party e360 from the non-parties Maverick and Bargain Depot. Certainly, separate books and accounting records can be kept, which would allow each entity to prove its own damages, while consolidated returns are prepared for tax
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purposes. But that is not what Linhardt testified to at his deposition. What he conceded, and is admitted by Plaintiffs in their Local Rule 56.1 statement, is:

• Non-party Maverick kept books on a “consolidated” basis; that is, “the books were kept
at the Maverick level, so there aren’t separate financial statements for Bargain Depot and
e360” (Doc. 194 at 2; Linhardt Dep. at 97-99); and
• There is “no way of separating out results and data for e360 from, for example, Bargain
Depot.” (Doc. 194 at 2; Linhardt Dep. at 99-100.)

Plaintiffs have no separate data for e360 which would allow them to offer testimony relevant to
e360’s damages whatsoever.

Nor can Plaintiffs rely on their current claim that only e360 generated revenue. Linhardt testified at his deposition that he included Bargain Depot’s numbers in his damages calculations for e360. In explaining the discrepancy between an older and more recent version of his quantitative analysis, Linhardt said, “Well, one thing I forgot to include was cost of goods sold for any e-commerce revenue. So, you know, the variable cost of the business of getting one email delivered where it would have otherwise been blocked, there’s a data royalty cost that’s included here, but I forgot to include e-commerce cost of goods sold. So if Bargain Depot sells a pair of sunglasses, there’s a product cost associated with that item that was not reflected, so I made an adjustment to account for that.” (Linhardt Dep. at 87-88.) Linhardt said that he included e-commerce revenue and cost of goods sold in his damages calculations, yet he later agreed that e360 did not sell any goods; Q: “I understood from your testimony this morning that e360 did not itself sell any physical goods or services other than e-mail marketing, correct?” A: “Correct.” (Linhardt Dep. at 97.) Linhardt further testified, “when a product is sold, the revenue goes to the Maverick-reported number, which is essentially -- and the costs go there as well. There’s only one set of consolidated books.” (Linhardt Dep. at 100.) Linhardt also responded to the following question: “Q: Is it your testimony that all revenue, regardless of the entity that
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generated it, including Bargain Depot, flowed into e360’s account?” A: “Yes.” (Linhardt Dep.
at 103.)

Thus, while Plaintiffs now argue that “no other entities generated any revenue,” including, presumably, Bargain Depot, Linhardt’s own testimony undermines this statement. Furthermore, this position is in direct conflict with statements made by Plaintiffs (or, at least by Linhardt as indirect owner of Bargain Depot) in past litigation. In Maui Jim Inc. v. Bargain Depot Enterprises, LLC, No. 06-cv-01169 (C.D. Ill.) (Mihm, J.), Bargain Depot stated that it was “undisputed” that Bargain Depot “offered for sale sunglasses.” (Bargain Depot’s Response to Maui Jim’s Motion for Summary Judgment at 3, filed April 20, 2007, attached as Ex. 1.) If Bargain Depot were not generating revenue, it is unlikely that Bargain Depot would have even participated in a lawsuit regarding patent infringement (since Bargain Depot presumably could not infringe a sunglasses patent without producing or selling sunglasses), much less admit that it “offered for sale sunglasses.”

C. Alternatively, The Court’s October 15 Order Bars Linhardt’s Revised $136 Million Damages Estimate, Which Also Cannot Be Admitted Under Rule 702.

In our opening brief (Op. Br. at 14-15), we showed that Linhardt’s later, $136 million damages estimate cannot be admitted because the Court struck it and, even if it had not been stricken, it does not meet the requirements of Rule 702. In response, Plaintiffs argue (Resp. at 7-9) that only the amount, not the methodology, was stricken, and that “the methodology and underlying data provide a reliable basis for the calculation of Plaintiffs’ damages.” Plaintiffs’
arguments are incorrect.

First, Plaintiffs’ claim that they are “barred from presenting damages in excess of $11.7 million [but] the Court did not strike the methodology” for the $136 million estimate appears, to us, to be inconsistent with the Court’s intent. The Court’s October 15, 2008 Order does not
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expressly say, one way or the other, whether Plaintiffs can proceed with the methodology underlying the $136 million estimate – it merely strikes the $136 million damages demand as well as Plaintiffs’ attempt to untimely identify 16 undisclosed witnesses. However, the interpretation Plaintiffs urge (1) is illogical because it implies that Plaintiffs can present a methodology that arrives at a $136 million number, but then be limited to $11.7 million, (2) ignores that the reason for the order in the first place was to sanction Plaintiffs for failing to disclose the methodology earlier, (3) would not address the prejudice to Spamhaus from Plaintiffs’ failure to timely disclose this methodology, and (4) would be inconsistent with the Court’s logic in striking the 16 untimely-disclosed witnesses. We respectfully urge the Court to affirm that the Court’s order precludes any recovery based on the untimely-disclosed methodology used to arrive at the $136 million estimate.

Second, even if the methodology had not been stricken, Plaintiffs have not addressed the specific methodological flaws that render it unreliable. In our opening brief (Op. Br. at 8-10, 15), we pointed out very specific assumptions or steps that rendered the methodology unreliable: unjustified assumptions regarding the cause of blocks, the use of the non-random samples which Linhardt further manipulated, and the admission that Linhardt could not find a good comparable company. In their discussion of this methodology in their response (Resp. at 8-9), Plaintiffs simply regurgitate a description of the steps. They make no attempt to explain why the assumption regarding the cause of blocks was reasonable or reliable, or why the use of nonrandom samples was reliable, or why the inability to find a good comparable company is not fatal. And, of course, the commingling of the financial data independently infects all of Linhardt’s estimates, including the later, stricken $136 million estimate.

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The Court cannot accept Plaintiffs’ slanted characterization of Linhardt’s methodology and qualifications – it must conduct a careful inquiry and act as a gate-keeper, barring the testimony if the requirements of Rule 702 are not met. Courts are required to determine “whether [expert] testimony has been subjected to the scientific method,” and to bar expert opinions that are based on “subjective belief or unsupported speculation.” Wintz v. Northrop Corp., 110 F.3d 508, 512 (7th Cir. 1997) (internal citations omitted). Thus, courts are required to “determine whether the testimony is reliable . . . by examining the expert’s methodology.” Evoy v. CRST Van Expedited, Inc., 430 F. Supp. 2d 775, 781 (N.D. Ill. 2006) (citing Smith v. Ford Motor Co., 215 F.3d 713, 718, 721 (7th Cir. 2000)) (internal citations omitted); accord Autotech Tech. Ltd. P’ship v. Automationdirect.com, 471 F.3d 745, 749 (7th Cir. 2006) (holding that the court is a “gate-keeper” who must assess the reliability of an expert’s methodology before admitting expert testimony). An expert must “substantiate his opinion; providing only an ultimate conclusion with no analysis is meaningless.” Huey v. United Parcel Serv., Inc., 165 F.3d 1084, 1087 (7th Cir. 1999) (internal citations omitted). Plaintiffs’ response offers nothing but conclusions and therefore Linhardt’s testimony is inadmissible under Rule 702.

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CONCLUSION
For all the foregoing reasons as well as those set forth in Spamhaus’ Motion in Limine, Linhardt’s damages opinion testimony should be barred as inadmissible under Rule 702.

Dated: January 28, 2009

Respectfully submitted,

THE SPAMHAUS PROJECT
By: s/ David Jiménez-Ekman
Craig C. Martin
David Jiménez-Ekman
Chad Emerson Bell
JENNER & BLOCK LLP
330 North Wabash Avenue
Chicago, IL 60611

Attachment	Date	Size
MotInLimineReply.pdf	01/30/09 4:54 pm	48.84 KB
MotInLimineReplyExh.pdf	01/30/09 4:55 pm	208.33 KB