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Response to Motion for Summary Judgment on Damages
IN THE UNITED STATES DISTRICT COURT FOR THE
THE SPAMHAUS PROJECT,
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.
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.
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,
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
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
[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.
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.
e360Insight, LLC and David Linhardt,
By: /s/ Bartly J. Loethen
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