Justia.com Opinion Summary:
Plaintiff alleged that NCS conducted a spam e-mail campaign that harmed his business, in violation of Iowa and federal law. After a bench trial, the district court entered judgment in favor of NCS and dismissed plaintiff's claims. The district court heard from plaintiff and NCS's principals in a bench trial and it found NCS's principals more credible than plaintiff. The court concluded that the evidence cited by plaintiff did not establish a clear error in the district court's determination. The court also concluded that the district court did not err by concluding that a salesman was an independent contractor rather than an employee of NCS. The court rejected plaintiff's contention that an employment relationship made NCS responsible for any e-mail activity by the salesman. The primary consideration was the hiring party's control over the means of performance and the court agreed with the district court that the weight of the evidence taken as a whole established an independent contractor agreement. Accordingly, the court affirmed the judgment.Receive FREE Daily Opinion Summaries by Email
Civil Case - Computer Fraud and Abuse Act. After a bench trial, judgment in favor of National Credit Systems on claim it conducted a spam e-mail campaign that harmed Kramer's business is affirmed. District court findings that NCS principals testimony were more credible are not clearly erroneous. Documentary evidence did not contradict testimony. District court did not err in concluding that NCS salesmen were independent contractors, not employees, as sales force was not obliged to follow manual or accept direction from principals and weight of evidence establishes an independent contractor arrangement.
United States Court of Appeals
For the Eighth Circuit
Robert W. Kramer, III, doing business as CIS Internet Services,
lllllllllllllllllllll Plaintiff - Appellant,
Cash Link Systems, A Florida corporation; AmeriP O S, Inc. a Florida
corporation; OTB Products, A Florida corporation; AMP Dollar Savings, Inc. an
Arizona corporation doing business as MortgageLeads.tv, doing business as
Leads.tv; Healthstop, Inc. a Minnesota corporation, doing business as Health Stop
Shop; Michael Moebeck, a Minnesota resident; Joseph Ingersoll, a Minnesota
resident; Internet Services Zocalo, a California corporation; GZ Media, Inc. a New
York corporation, doing business as 24/7 Downloads; TEI Marketing Group, a
National Credit Systems, Inc. a New York corporation,
lllllllllllllllllllll Defendant - Appellee,
Jerry Poole, a Florida resident; Carmen Lyman, a Massachusetts resident, also
known as Carmen Rodriguez; Kevin Hertz, a California resident; Mihir Teneja, a
Appeal from United States District Court
for the Southern District of Iowa - Davenport
Submitted: December 12, 2012
Filed: May 28, 2013
Before LOKEN, MELLOY, and COLLOTON, Circuit Judges.
COLLOTON, Circuit Judge.
Robert Kramer alleged that National Credit Systems (âNCSâ) conducted a
spam e-mail campaign that harmed his business, in violation of Iowa and federal law.
After a bench trial, the district court1 entered judgment in favor of NCS and dismissed
Kramerâs claims. Kramer appeals, and we affirm.
Robert Kramer owned and operated CIS Internet Services (âCISâ), a small
Internet service provider in Clinton, Iowa. Kramer claims that between 2001 and
2003, spam e-mails flooded CISâs server, interfering with the ability of CISâs
customers to access the Internet. Many of the spam e-mails advertised the debt
collection services of NCS.
After filing an initial complaint against 300 unnamed defendants, Kramer filed
an amended complaint in 2004, naming NCS, a New York corporation, as a
defendant, and asserting that NCS was responsible for many of the spam e-mails that
damaged CIS. Kramer alleged violations of the Iowa anti-spam statute in effect at the
time, Iowa Code Â§ 714E.1 (2003) (repealed 2005), the federal Racketeer Influenced
and Corrupt Organizations Act, 18 U.S.C. Â§ 1962, and the federal Computer Fraud
The Honorable Charles R. Wolle, United States District Judge for the Southern
District of Iowa.
and Abuse Act, 18 U.S.C. Â§ 1030. He also brought several Iowa common-law causes
of action. NCS denied the allegations, and the case proceeded to a bench trial.
At trial, Kramer sought to prove that William Stolars, a salesman, sent the emails on behalf of NCS. The e-mails at issue advertised NCSâs services, were similar
to other NCS advertisements, and contained accurate contact information for NCS.
But all of that information was publicly available, and an information-technology
specialist testified that the e-mails had been routed through servers in foreign
countries, so none of them could be traced to the original sender. Chris Rehkow and
Lynn Goldberg, the only shareholders of NCS, both testified that they neither sent the
spam e-mails themselves nor authorized any employee to send the e-mails.
Kramer and his former attorney, Pete Wellborn, testified that Stolars admitted
to sending the e-mails. In his deposition, Wellborn claimed that he called the
telephone number listed in the e-mails and spoke with Stolars. According to
Wellborn, Stolars admitted that he worked for NCS and that he was sending the spam
e-mails on behalf of NCS. Kramer testified that he spoke with Rehkow and Stolars,
both of whom acknowledged that Stolars was sending the e-mails. According to
Kramer, Rehkow admitted that Stolars was in charge of marketing and was running
the e-mail campaign. Rehkow denied ever speaking with Kramer. Stolars was
unavailable to testify because he died before the trial.
Goldberg acknowledged that a salesperson could have conducted the e-mail
campaign without telling him or Rehkow. But Goldberg explained that the entire
sales forceâincluding Stolarsâoperated as independent contractors, rather than as
employees. NCS introduced several sample contracts that it executed with its sales
force, all of which provided that the salespeople would be independent contractors.
Although Stolarsâs contract was lost, Goldberg stated that Stolars would have signed
a form contract similar to the contracts in evidence.
The district court entered judgment in favor of NCS. The court credited the
testimony of NCSâs principals, describing their testimony as âthe most persuasive
evidenceâ of Stolarsâs relationship to NCS. It also noted that Kramer and Wellborn
had reasons âto stretch the truth about what Stolars told them on the phone,â and
found that they were ânot sufficiently credibleâ to support key parts of their testimony
about the telephone calls. The district court did not make a finding about whether
Stolars sent the spam e-mails. But the court ruled that even if he did, then NCS was
not liable, because Stolars was an independent contractor, not an employee as Kramer
asserted. The court concluded that âneither Re[h]kow nor Goldberg, nor any other
authorized NCS agent, initiated SPAM e-mails to market NCSâs debt collection
business or for any other purpose.â
We dismissed Kramerâs first attempt to appeal the district courtâs decision for
lack of a final judgment. Now that all remaining defendants have been dismissed
with prejudice, the judgment below is final, and we have jurisdiction over this appeal.
See 28 U.S.C. Â§ 1291.
Kramer contends that the district court erred in rejecting two alternative
theories of recovery. First, he asserts that NCSâs principals, Rehkow and Goldberg,
authorized the spam e-mail campaign, and that the district court erred in finding to
the contrary. Second, he argues that NCS is accountable for the actions of its
employees, and that the district court erred by concluding that Stolars was not an
employee of NCS. While Kramerâs state-law claims are governed by the substantive
law of Iowa, see Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), the standard of review
is a procedural issue that is governed by federal law. Mayer v. Gary Partners & Co.,
29 F.3d 330, 334 (7th Cir. 1994); Felder v. United States, 543 F.2d 657, 664 (9th Cir.
1976); see Newberry v. Burlington Basket Co., 622 F.3d 979, 983 (8th Cir. 2010).
We thus apply Federal Rule of Civil Procedure 52(a), which provides that we must
not set aside the district courtâs findings of fact unless they are clearly erroneous.
Kramer argues that documentary evidence contradicts the testimony of Rehkow
and Goldberg that NCS did not engage in any âmass mail campaignsâ or direct
anyone to send spam e-mails. He contends that the inference is inescapable that the
principals employed e-mail marketing techniques, because the spam e-mails
advertised NCSâs services with a valid e-mail address, the messages were similar to
various online advertisements posted by NCS, and NCS elsewhere encouraged
customers to contact the company by e-mail. This evidence might support an
inference that NCSâs principals were involved with the e-mails, but it does not
compel that conclusion. The e-mails could not be traced to NCS, and anyone could
have composed the e-mails by copying and pasting text from NCSâs website or its
other advertisements. Therefore, the testimony of Rehkow and Goldberg on this
score was not contradicted by the documentary evidence.
Kramer also contends that the court should have credited his testimony that
Rehkow admitted over the phone that NCS was responsible for the e-mail campaign.
Kramer relies on an e-mail that he says was written to memorialize the conversation.
In the e-mail, Kramer wrote that after he called NCS to complain about spam e-mails,
a receptionist told him to expect a call from the chief executive officer of NCS, and
that he then received a call from a man named âChris,â which is Rehkowâs first name.
Chris purportedly said that âhe could not understand how anything like this could
happen,â and that âcis.net was not on their list.â
On its face, however, Kramerâs summary of the call does not reflect an
admission by Rehkow that NCS was responsible for the spam e-mails. The quoted
comments are more akin to a denial. The district court, moreover, thought Kramerâs
e-mail âdeserve[d] less weight than if it were notes handwritten or prepared at the
precise timeâ of the conversation. The court also was generally skeptical of Kramerâs
credibility, saying that he âexaggeratedâ his testimony about NCSâs responsibility and
damages, provided testimony that was ânot always consistent with the content of
documentary evidence,â and âgave guarded and unpersuasive answersâ about some
of his activities. It was not clear error for the court to find no admission by Rehkow.
If a witnessâs testimony is âcoherent and facially plausible,â and is not
contradicted by extrinsic evidence, then a district courtâs decision to credit the
testimony âcan virtually never be clear error.â Anderson v. City of Bessemer City,
470 U.S. 564, 575 (1985). The district court heard from Kramer, Rehkow, and
Goldberg in a bench trial, and it found NCSâs principals more credible than Kramer.
The evidence cited by Kramer does not establish a clear error.
Kramer next contends that the district court erred by concluding that Stolars
was an independent contractor rather than an employee of NCS. Kramer argues that
because Stolars sent the spam e-mails as an employee of NCS, the company should
be vicariously liable for his actions. The district court made no finding about whether
Stolars sent the e-mails, but it rejected Kramerâs theory of vicarious liability because
it concluded that Stolars was an independent contractor. Assuming for the sake of
analysis that NCS could be held responsible for the actions of its employee under
each of Kramerâs causes of action, we agree with the district court that Stolars is
better viewed as an independent contractor.
To urge that Stolars was an employee, Kramer relies on the test employed by
federal courts to determine whether a party is an âemployeeâ for the purposes of
federal statutes that use the term without defining it. See Nationwide Mut. Ins. Co.
v. Darden, 503 U.S. 318, 322-23 (1992); Cmty. for Creative Non-Violence v. Reid,
490 U.S. 730, 739-41 (1989). In Darden and Reid, the Supreme Court applied the
following common-law test:
In determining whether a hired party is an employee under the general
common law of agency, we consider the hiring partyâs right to control
the manner and means by which the product is accomplished. Among
the other factors relevant to this inquiry are the skill required; the source
of the instrumentalities and tools; the location of the work; the duration
of the relationship between the parties; whether the hiring party has the
right to assign additional projects to the hired party; the extent of the
hired partyâs discretion over when and how long to work; the method of
payment; the hired partyâs role in hiring and paying assistants; whether
the work is part of the regular business of the hiring party; whether the
hiring party is in business; the provision of employee benefits; and the
tax treatment of the hired party.
Darden, 503 U.S. at 323-24 (quoting Reid, 490 U.S. at 751-52). No single factor is
determinative, Reid, 490 U.S. at 752, and courts should consider âall aspects of the
working relationship.â Wilde v. Cnty. of Kandiyohi, 15 F.3d 103, 106 (8th Cir. 1994).
But the first factorâwhether the hiring party has the right to control the means of
performanceâis a âprimary consideration.â Schwieger v. Farm Bureau Ins. Co. of
Neb., 207 F.3d 480, 484 (8th Cir. 2000).
Although the parties do not mention it, Iowa law sets forth a similar but not
identical analysis for distinguishing employees from independent contractors. Iowaâs
test takes account of ten factors:
(1) the individualâs right to control the physical conduct and progress of
the work, except as to final results; (2) whether the individual was on the
employerâs payroll; (3) the method of payment, whether by time or by
job; (4) the individualâs obligation to furnish necessary tools, supplies,
and materials to accomplish the work; (5) the existence of a contract for
the performance by a person of a certain piece or kind of work at a fixed
price; (6) the independent nature of the individualâs business; (7) the
individualâs employment of assistants, with the right to supervise their
activities; (8) the time for which the individual is employed; (9) whether
the work is part of the regular business of the employer; and (10) the
intent of the parties.
Fesler v. Whelen Engâg Co., 688 F.3d 439, 442-43 (8th Cir. 2012) (citing Iowa Mut.
Ins. Co. v. McCarthy, 572 N.W.2d 537, 542-43 (Iowa 1997)). As under federal law,
âthe primary focus is on the extent of control by the employer over the details of the
alleged employeeâs work.â McCarthy, 572 N.W.2d at 542.
Whether an individual is an employee or an independent contractor is a
question of law, so we consider the question of employment status de novo. Fesler,
688 F.3d at 442. Because this case turns on factors common to the analysis under
both federal and state law, we analyze all of Kramerâs claims together.
Kramer disputes the district courtâs findings that the testimony of NCSâs
principals was âthe most persuasive evidenceâ of âStolarsâ relationship to NCS,â and
that the testimony was âentirely consistentâ with the sample contracts in evidence.
A typical sample contract provided that the sales representative âis at all times under
this Agreement an independent contractor to [NCS],â that he would be âfree of
Company direction and control,â and that he âshall determine his own hours, days,
and methods of selling National Credit Systemsâ services.â According to Kramer,
however, other evidence contradicted Rehkow and Goldberg and showed that Stolars
was an employee.
Kramerâs main argument for employee status is that NCS controlled the
activities of Stolars and other salespeople by requiring a rigorous training regimen.
Kramer relies on two pieces of evidence: that NCS gave its salespeople a lengthy
sales manual with specific directions about how to sell NCSâs services, and that
Rehkow testified he would call the salespeople five times a week to discuss their
progress and offer instruction.
While it is true that NCS distributed a sales manual and that Rehkow
maintained telephone contact, Kramer presented no evidence that the sales force was
obliged to follow the manual or to accept Rehkowâs advice. Instead, Rehkow
testified that the salespeople âcould market pretty much any way they wanted to,â and
that âtheir time [was] their own,â such that the sales force could choose how long to
work, and whether to work from the office or from home. In fact, the salespeople
usually only came to the office two or three times per week. Where a sales
representative has the option to set his own schedule and to train himself, he is not
subject to the sort of control that exists in the traditional employer-employee
relationship. See Schwieger, 207 F.3d at 484-85.
Other factors point in both directions. Some favor independent-contractor
status. Stolars was paid by commission. He was responsible for his own taxes and
insurance. See id. at 486. Kramer responds by citing factors that tend to show
employment status: NCS provided marketing brochures and order forms used by the
sales force; the job required no particular skills except those taught by NCS; and the
work of the sales force was an integral part of NCSâs business. The primary
consideration, however, is the hiring partyâs control over the means of performance,
and we agree with the district court that the weight of the evidence taken as a whole
establishes an independent contractor arrangement. As such, we reject Kramerâs
contention that an employment relationship makes NCS responsible for any e-mail
activity by Stolars.
The judgment of the district court is affirmed.