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Officers’ Liability in “Spam” Lawsuits

Spam Law - Barnea - Israeli law firm

It is not common knowledge that officers of companies who customarily disseminate advertising messages in a manner that constitutes a violation of the Israeli Anti-Spam Law are personally exposed to lawsuits, even to class actions at millions of shekels. This exposure increases substantially when these officers are the sole shareholders or directors of the company, or are personally responsible for disseminating the unlawful advertisements.


Recently, courts of all instances have ruled that there is no obstacle to suing officers of a company who commit violations of the Anti-Spam Law. The courts further note that doing so serves an important purpose – i.e. the principle of deterrence – despite the fact that forcing a private individual to pay compensation may be extremely hard on that officer and his/her family.


An officer of a company can be held personally liable in several ways. The first is the possibility the court will order a lifting of the corporate veil and attribute the company’s liabilities to its officers. This involves a very complex proceeding that is difficult to prove, in which the plaintiff must demonstrate to the court that the use of the company’s separate legal identity was done with fraudulent objectives, etc.


The second is by virtue of Section 30.A(h) of the Anti-Spam Law. This section prescribes that if the corporation violated provisions of the law, it shall be assumed that the manager also committed the violation, unless it is explicitly proven that the manager did everything possible to fulfill his/her legal obligation.


According to the wording of the law, this presumption applies only in the instance of a criminal proceeding, but there are still differing opinions about whether it may also be extended to civil proceedings. In other words, it must be proven that the officer was personally involved in disseminating the advertisement, or personally issued instructions to others to disseminate the advertisement.


Currently, the courts are becoming more and more vigorous in their examinations of officers’ conduct, and are slightly shifting the burden of proof in this context.


The third way is the direct way, in which the manager’s personal liability is proven. In such instance, in order to impose personal liability on an officer in respect of a violation of Section 30.A of the law (and not by way of lifting the corporate veil), the officer himself must be deemed to have been the party who disseminated the advertisement without having received prior consent from the recipients.


As stated, the courts have been petitioned numerous times recently to decide in what way and to what extent it would be right and equitable to impose personal liability on company managers, and through which of the aforesaid ways.


The Israeli Supreme Court, which deliberated the issue of the liabilities of the companies Mega Advanced Mathematical System, Lotonet, and New Sport, and their owners, took up the question of the liabilities of these corporations’ officers pursuant to the Anti-Spam Law. The court ruled that it suffices that the officers are the sole shareholders and directors of the companies under their control for it to establish a reasonable likelihood that they bear personal liability as parties who were actually involved in the commission of the violations. It was further ruled in the same judgment that it is reasonably likely that it will not be necessary to lift the corporate veil in order to impose personal liability on the officers, since their actions were intended to promote the businesses of the corporations employing them.


Considering the aforesaid judicial atmosphere, the courts today are examining whether an officer took reasonable measures to prevent the dissemination of unlawful advertisements. This scrutiny is particularly meticulous when the officer being sued is the owner, the CEO, or the person who was personally involved in engaging with the various advertisers and benefited from the advertising.


The presumption whereby if the company committed a violation of the provisions of the Anti-Spam Law then its manager is also “guilty until proven innocent,” and the broad interpretation that the courts are employing when examining the manager’s personal liability, are greatly expanding the scope of the liability usually attributed to an officer. This requires every relevant officer to show that he/she took active measures to comply with the provisions of the Anti-Spam Law.


Accordingly, more and more courts are ruling that there is cause of action against an officer when at issue is a violation of the Anti-Spam Law. This has received expression in civil suits (from small claims to wide-scale actions) and in the certification of class actions (at sums of millions of shekels). Consequently, the argument that a manager has no connection to the matter of disseminating advertisements, but rather only the company as a separate legal entity, is unlikely to be upheld in suits of this kind.


Source: barlaw.co.il