Seventh Circuit Cuts Damages Award Due to Lack of Evidence of Lost Profits

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The U.S. Court of Appeals for the Seventh Circuit dramatically reduced damages awarded to a defunct internet marketing company, finding that the company squandered its opportunity to provide a reasonable estimate of the harm it suffered as a result of the defendant’s conduct.

e360 Insight, Inc. (e360) sued the Spamhaus Project, a British nonprofit, in 2006. e360 accused Spamhaus of tortious interference and defamation arising out of Spamhaus’ addition of e360 to its list of known spammers. e360 initially obtained a default judgment against Spamhaus in a district court in Illinois. The District Court also awarded e360 damages of $11,715,000 based on an affidavit from e360’s founder. The Seventh Circuit vacated the damages award and remanded the matter for further inquiry as to the extent of damages suffered by e360. After a bench trial on the damages issue, the District Court lowered e360’s damages to $27,002: $27,000 for its tortious interference with contractual relations claim and nominal damages of $1 each on its tortious interference with prospective economic advantage and defamation claims. Both parties appealed, with Spamhaus arguing that the damages award was too high, and e360 arguing that it was too low.

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