Bloomberg News

TheGlobe.com Says Judge's Ruling May Force Bankruptcy (Update2)

March 06, 2007

TheGlobe.com (TGLO:US), found liable in Los Angeles federal court last week for sending spam e-mails to users of rival Web site MySpace.com, said it may be forced into bankruptcy by the judge's decision.

TheGlobe.com may face damages of as much as $120 million for violating California's anti-spam act, and $5.5 million for abusing MySpace's terms of use, the Ft. Lauderdale, Florida-based company said in a regulatory filing (TGLO:US) today.

As many as 400,000 e-mails are subject to damages of as much as $300 each under California's CAN-Spam law, TheGlobe.com said. An estimated 110,000 messages sent to MySpace users after March 17, 2006, are also subject to a $50 penalty, U.S. District Judge Gary Klausner said in a Feb. 28 ruling. The company said it is trying settle with News Corp. (NWSA:US)'s MySpace.

Ed Cespedes, president of TheGlobe.com, and Tracy Akselrud, a spokeswoman for MySpace in Los Angeles, didn't immediately return phone calls seeking comment.

Shares of TheGlobe.com closed unchanged at 6 cents in over-the-counter trading. They traded as high as $48.50 in 1998 and have declined 1.6 percent this year. New York-based News Corp., the third-largest media company after Time Warner Inc. and Walt Disney Co., gained 53 cents to $22.26.

U.S. District Judge Gary Klausner said in a Feb. 28 ruling that TheGlobe.com created at least 95 ``dummy'' MySpace profiles with corresponding e-mail addresses that it used to send messages advertising its services.

Convertible Notes

TheGlobe.com said it doesn't expect to appeal the ruling because the judge's order didn't resolve the entire case and a final judgment on damages hasn't been made.

The order may increase the likelihood that holders of $3.4 million in secured convertible notes demand payment, TheGlobe.com said. The company doesn't have the resources to pay, which could result in the noteholders seizing its assets.

Rupert Murdoch's News Corp. bought Intermix Media Inc., owner of MySpace.com, in 2005 for $580 million. MySpace.com, which the complaint says is the second most-visited Web site in the world, caters to teenagers and young adults with instant messaging, Web logs and chatrooms focused on music, television and movies.

To contact the reporter on this story: Michael White in Los Angeles at Mwhite8@bloomberg.net.

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net.


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Companies Mentioned

  • TGLO
    (theglobe.com inc)
    • $0.0 USD
    • -0.00
    • -11.11%
  • NWSA
    (News Corp)
    • $18.06 USD
    • -0.08
    • -0.44%
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