The Kansas City, Mo.-based firm, which distributes e-mail messages on behalf of advertisers, uses lists of recipients provided by third parties, in addition to collecting its own names on sites that it runs, such as TreeLoot.com
In its suits, Virtumundo charges that Mindset Interactive and Inurv, Inc. misrepresented the nature of the e-mail lists they had sold to Virtumundo. Specifically, Virtumundo says the lists were supposed to be fully "permission-based," though it alleged that data had been collected and sold without consumers' permission.
Furthermore, Virtumundo said the databases contained thousands of e-mail addresses for accounts that did not exist.
Spokespeople from Glendale, Calif.-based Inurv were not able to be reached for comment. A spokesman for Irving, Calif.-based Mindset Interactive said the company hadn't received the lawsuit and thus couldn't comment.
The suit asks the court to award damages because the alleged misrepresentations have compromised the integrity of Virtumundo's e-mail marketing practice, it said, as well as disrupted business operations, temporarily harmed its reputation with service providers, and "created lost profits."
Virtumundo said the problems came to light when it notified list members that they had been opted-in to Virtumundo mailings by dint of having earlier signed up for Mindset or Inurv's mailings.
"Whenever Virtumundo acquires data in this manner, it sends an introductory e-mail to members of these lists to verify their opt-in approval," said Virtumundo General Counsel Boyd Burnett. "After this verification email was sent to the names acquired from Mindset and Inurv, our customer support department received a high number of complaints. These complaints were also noticed by several of our clients and many Internet service providers. This is when we began looking into potential problems with the data."
Virtumundo President and Chief Executive Scott Lynn charged that Mindset and Inurv had used tactics like e-mail harvesting from public Web pages, and "dictionary spam," in which common names are appended to domain names, generating false addresses.
But Mindset Interactive spokespeople refuted the claims.
"Mindset has never and well never harvest e-mails," said a spokesman. "One hundred percent of its database is purchased through legitimate Web sites and through brokers, and [Mindset] regards all the allegations made by Virtumundo as totally untrue."
At any rate, Lynn said the firm had stepped up its efforts to weed out improperly obtained consumer information from its databases. "We have changed our business practice to become even more stringent when purchasing third-party data to prevent these types of problems from occurring again in the future," he said. "It's unfortunate that many companies are capitalizing on the sale of fraudulent data. These names were removed from our database immediately after the first indications of fraud were noticed."
What's most odd about the news is that Virtumundo has long been tainted by allegations of spamming. Indeed, blogs and horror stories posted around the Web accuse the firm of failing to unsubscribe e-mail recipients and claiming that list members had opted-in. Company spokespeople, meanwhile, routinely dismiss such claims.
In recent weeks, Virtumundo was accused in press accounts of taking advantage of the controversial mega-bankruptcy of energy trader Enron by using the Houston-based company's servers to send out unsolicited e-mail marketing. Company officials also denied that charge and pointed to a longstanding hosting agreement between Enron, which dabbled in the Internet sector, and Virtumundo.
Meanwhile, the legal move comes amid efforts by Virtumundo to paint itself as an upstanding, permission-friendly marketer. During the past year, the firm formed an internal privacy department which it says manages day-to-day privacy issues. The company also hired privacylaw.net founder Keith Enright to join the department, and has also begun working with privacy certification group TRUSTe on joint projects.
In addition, the company said it plans to form an advisory board of "well-known industry advocates" to deal with the issues of consumer privacy, server provider relations, and legal compliance.