interactive.wsj.com
March 1, 2001
U.S. Judge Dismisses Case
Alleging Online Defamation
By STACY FORSTER
WSJ.COM
In a ruling hailed by free-speech advocates, a federal judge in California
determined that two defendants who were sued for online defamation had
the right to freely express their opinions about a publicly traded company.
U.S. District Judge David O. Carter last
week dismissed a lawsuit by Global
TeleMedia International Inc., a
software-development company in Newport
Beach, Calif. The company filed suit without knowing the identities of the
defendants, who used screen names when they posted on the Raging Bull
investing-discussion site.
Listed in the suit as "John Does," the defendants' identities were disclosed
during the discovery period. They are Barry King, whose online moniker
was "Bdaman609," and Ron Reader, known as "Electrick_Man."
In dismissing the lawsuit, filed in California's Central District in Los
Angeles, the judge said Global TeleMedia was fair game for public
discussion about its performance because it is a publicly traded company
with thousands of shareholders and a following on Internet message
boards. The company trades on the OTC Bulletin Board under the symbol
GLTI.
"The point is that [Global TeleMedia] is not a matter of public interest
merely because of media attention or sensation, but rather because it has
had over 18,000 public investors and is the topic of literally thousands of
Internet postings," his ruling said.
The judge also determined that the plaintiff's
arguments didn't meet the required standards
for defamation, which includes the
dissemination of false information. He deemed
the defendants' comments to be opinion, not
fact, and therefore not subject to the plaintiffs'
claims of defamation.
Some observers of Internet-communications law said the judge's opinion
represents an important weapon for people who are sued for their postings
on Web message boards. But the company, which maintains that the
postings were untrue and defamatory, may appeal. And attorneys who
work with plaintiffs in these types of cases aren't convinced the decision
will survive above the appellate level.
"We look at the chat room as no less than the front page of a newspaper,
and if someone had paid for an advertisement [similar to the postings] on
the front page, that's an actionable offense," said Jonathon
Bentley-Stevens, president and chief executive of Global TeleMedia.
Company officials who bristle at comments on Internet message boards
are increasingly turning to the courts to unmask their critics' identities.
Blake Bell, an attorney at Simpson Thacher & Bartlett in New York,
tracks such cases and says about 120 have been filed so far, with numbers
growing.
Mr. Bentley-Stevens said the company is reviewing its options and will
soon decide whether to appeal or try another approach in its lawsuit.
Judge Carter cited provisions in California's so-called SLAPP law, which
stands for Strategic Litigation Against Public Participation. These laws vary
from state to state, and California's is among the most liberal.
Under this law, the plaintiffs must first show that the objectionable
information doesn't relate to an issue requiring public participation. Plaintiffs
must also demonstrate they have a likelihood of succeeding with their case
at trial; if they can't, the case is eligible for early dismissal.
Megan Gray, a Los Angeles attorney representing Mr. Reader, one of the
defendants, said the judgment is believed to be among the first to hold that
Internet message board discussions about stocks are in the public interest.
"This was a really early evaluation about whether or not this is a lawsuit
that was filed to punish protected speech or whether it should proceed to
trial," Ms. Gray said.
Free-speech advocates are cheering this development, saying it upholds
individuals' rights to participate in public debate without fear of being
silenced by frivolous lawsuits. "It will make companies very careful in
ensuring that the suits they bring have merit," Mr. Bell said.
But cyber-law watchers say this case is different because the judge's
decision acknowledged the different norms that operate in online stock
chats, which often include hyperbole and name calling, says Lyrissa C.
Barnett Lidsky, a law professor at the University of Florida.
"Anyone who has been on the message boards knows, but often you run
into judges who aren't very sophisticated about technology, and they have
a great deal of fear about cyberspace," Ms. Lidsky said.
Judge Carter cited examples of the postings, which included allegations
that officials were going to abscond with investors' money and for being
slow to deliver on business promises.
In one instance, Mr. King posted a message that said Global TeleMedia
officials were "headed for the calmer waters of the Caribbean (sic) where
your money will be safe from federal authorities." But the judge said that
the tenor and tone of the messages was often tongue-in-cheek, and the
average reader wouldn't confuse these posters' opinions with facts about
the company.
"Given the tone and context of the message, a reasonable reader would not
take this to be anything more than a disappointed investor who is making
sarcastic cracks about the company," Judge Carter said.
But Global TeleMedia's Mr. Bentley-Stevens says the postings in question
are not opinions but comments made with malicious intent.
"They were saying specific things about absconding with funds or alleging
criminal acts by management," Mr. Bentley-Stevens said. "We feel that is
not an opinion and those people are attempting to manipulate the market
for their own means ... That's hardly an opinion. That's something that
designed to scare unsophisticated investors into selling their shares."
Bruce Fischman, an attorney with the Miami law firm of Fischman, Harvey
& Dutton, said a higher level of court than the one in California will
ultimately set a precedent in these cases. Mr. Fischman is representing J.
Eric Hvide, the former chairman and chief executive of Hvide Marine Inc.
who is suing a group of message board posters who sought to preserve
their anonymity.
"The appellate courts are not going to treat defamation any differently on
the Internet than they will off the Internet," he said.
Write to Stacy Forster at stacy.forster@wsj.com.
KJC |
