Re: 9/28/00 - WSJ: Defending Right to Post Message: 'CEO Is a Dodo'
September 28, 2000
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Defending Right to Post
Message: 'CEO Is a Dodo'
By AARON ELSTEIN
WSJ.COM
Internet stock message boards are to Wall Street what talk radio is to current events: Occasionally crude, often wrong, frequently useless but nonetheless a vital and widely used forum where people can speak their minds.
Les French wants to keep them that way.
The 46-year-old Mr. French, a part-time limousine dispatcher from Portland, Ore., is leading a fight against what he views as an investing-world outrage. It's the growing tendency of companies to use libel suits to stifle online criticism.
In the last two years, more than 100 of these suits have been filed against investors who posted anonymous chat-room messages about stocks, sometimes on the slimmest of pretexts. One former employee who called the top executive of a public company an "old dodo" promptly found himself on the receiving end of such a suit.
But Mr. French thinks investors have a right to call a CEO an old dodo -- and a lot worse. His group, John Does Anonymous (www.johndoes.org), serves as a kind of American Civil Liberties Union for investor chat rooms, devoted to protecting speech that is free and freewheeling -- but not fraudulent or genuinely libelous -- about public companies. It's something Mr. French knows about from bitter personal experience: He started the group with a $40,000 court award he received after being sued for libel for posting critical -- but completely true -- information about a public company.
Why fight the fight? Because, says Mr. French, "any opinion about a publicly traded company is in the public interest."
The fact that Mr. French even has to worry about all this may surprise most people who post or read the messages on stock message boards, because it is widely assumed that these messages are as untraceable as urban graffiti. In fact, though, it is fairly easy for an Internet service company like America Online or an e-mail provider like Yahoo! to link a specific message with an actual person. Ordinarily, these companies never divulge the information, protecting the privacy of their members. But they are required to do so if they receive a court subpoena, which is invariably what happens after a libel suit is filed.
In fact, says Mr. French, that is why most of these suits are filed in the first place: to unmask the critics of a company and then intimidate them into silence with a barrage of legal documents. "Most companies don't ever intend to collect the damages they sue for," Mr. French says. "They just want to know who's posting the messages they don't like."
Many people agree the problem is growing. "In the past eight or 12 weeks, there has been a flood, an avalanche of these suits," says Blake Bell, a lawyer at Simpson Thacher & Bartlett in New York who tracks such cases.
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Companies say that to ignore the attacks, rumors and innuendo is to acknowledge, at least tacitly, that they are true. "The notion that people who publish anonymously are never accountable for their actions is a dangerous one," says Victor Polk, a lawyer at Bingham Dana in Boston, who has represented several companies that have taken online critics to court.
Shareholder advocacy groups and others are starting to become concerned about the rise in suits. Paul Levy, an attorney with Public Citizen, a Washington, D.C., consumer group, calls the Internet "the modern equivalent of Speakers' Corner in England's Hyde Park, where ordinary people may voice their opinions to all who choose to listen." Public Citizen, along with the ACLU, has filed briefs in some of these cases, trying to keep Internet companies from being forced to identify anonymous posters. Their argument: routinely turning over names will have a chilling effect on the Internet discussions that help investors make better decisions.
Mr. French's introduction to the world of cyberlibel started with a bit of dumpster diving he did in 1995 with Itex Corp., a barter exchange company where he had worked five years earlier. Itex was preparing to list its stock on the Nasdaq Stock Market, and Mr. French, suspecting the company was inflating its numbers, paid a janitor $1,500 to bring him Itex's trash.
The garbage was golden: Mr. French found documents suggesting the company was cooking its books and turned them over to the Securities and Exchange Commission and the National Association of Securities Dealers. The SEC started an investigation that led to charges the company was misstating earnings, but things weren't happening fast enough for Mr. French. So he started posting messages about the company using the handle "whadayaknow." A typical posting: "Management abused our trust and breached their fiduciary responsibility, [so] let's throw the bastards out!"
Itex sued for libel, naming "John Doe" as a defendant. Once the suit was filed, the company used a subpoena to unmask Mr. French. "It's quite a shock to have a company drop a pile of legal documents on your lap and say, 'See you in court,' " says Mr. French. "It's meant to scare you, and at first it does."
But if Itex was expecting Mr. French to be cowed into silence, it was disappointed. Mr. French threw himself into his own defense, learning about the law and legal procedure and filing a countersuit against Itex. The company eventually settled with the SEC, paying a $50,000 fine without admitting wrongdoing. Then new Itex management, eager to put this chapter behind it, settled Mr. French's countersuit, agreeing to pay the $40,000 that helped Mr. French set up johndoes.org. "We believe we could have proven we were in the right," says Itex CEO Collie Christensen. "But it was less expensive to cut a check than go through a long legal battle."
In his role as an advocate, Mr. French makes clear that there are limits to what people should be allowed to say online. He has no tolerance, for example, for provably false and defamatory statements -- like that of the message-board poster who said the CEO of a pharmaceutical company had been a "Nazi SS doctor." And he condemns anything that hints of stock manipulation or fraud, such as falsely claiming a small company is about to get a big order, or posting phony press releases, as happened recently to the networking company Emulex Corp. Those actions, in fact, are often criminal offenses that can land people in jail.
Instead, Mr. French wants to protect the frothy mix of often-hyperbolic declarations and rhetorical questions that First Amendment lawyers consider to be expressions of opinion, and thus fair game. One example: An investor was sued for libel after asking online, "Are big companies independently audited EVERY Q or only at random? If this quarter's figures look good, could this be a coverup by [the CEO] and the financial guys?"
Mr. French's group collects information about online defamation suits, has links to dozens of law-related sites and hosts a weekly chat session for people to swap stories. He also runs regular updates on the growing roster of lawsuits, a list Mr. French calls "The Dogs of the Doe." And he has scoured the country to find lawyers who will represent cyberlibel defendants free of charge; so far, five have stepped forward.
One reason he has become so involved: His own case took a heavy personal toll, helping bring about the end of his 24-year marriage.
But Mr. French says there have been some consolations, including discovering the ease with which he was able to fight his courtroom battles despite his lack of formal legal training. "I discovered that law was my first real love," Mr. French says.
Write to Aaron Elstein at aaron.elstein@wsj.com
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