Sounds like somebody I know....
Top Stories: Internet Message Boards Under Attack Again
By Gregg Wirth
Staff Reporter
12/16/98 3:03 PM ET
"If you can't say something nice, don't say anything at all."
That old adage, usually drummed into our heads by our mothers, might one day become
official policy in the online message board world. Two lawsuits, one just decided and one
just filed, have reopened debate (original article to follow) over where in cyberspace
free speech and defamation collide.
In a victory for the companies, the suit that was decided this week found an online
message board poster liable for more than $8 million in damages.
Tod Pauly, a message-board regular, says he worries about the trend toward more
lawsuits against online posters. "If we allow these companies to go after the posters, the
information needed to protect investors in some cases won't get out," Pauly says.
But on the other side, companies say they're trying to protect themselves from what at
times are false statements, which can depress their stock prices.
Jared Silverman, a private attorney who specializes in Internet-related cases, notes that
some of these lawsuits are similar to the so-called SLAPP, or Strategic Lawsuits Against
Public Participation, suits sometimes filed by companies to discourage public opposition
and negative publicity. "If this is a private action that goes out to silence somebody, then
that is troublesome," Silverman says.
Still, that doesn't give online posters free reign. "The standards of defamation still apply on
the Internet as far as posting things that are false," Silverman explains, adding that if it is
analysis or opinion the company seeks to squelch, that may be more of a problem.
On Monday, American Eco (ECGOF:Nasdaq) said it and a former executive were
awarded $8.3 million in a lawsuit against a single anonymous online poster. The lion's
share of that, a $7.75 million award in punitive and actual damages, went to the company's
former chief financial officer, David Norris. The online poster, who went by the alias of
PMMK1, posted what the company said were false statements about Norris' executive
history that resulted in Norris being suspended, according to the company.
The suit was filed in the 280th Judicial District Court of Harris County, Texas. The suit
names Jonathan Grossman, of Huntington Beach, Calif., as its defendant. A phone call to
the Huntington Beach number of a Jon Grossman was not returned.
An American Eco spokeswoman says the suit stemmed from a "particularly malicious"
series of messages posted on the Yahoo! boards about one year ago. The company was
able to learn the identity of the poster by issuing a subpoena to the message-board site,
she says. Norris and the company jointly agreed that he should step down because of all
the fuss the continuous postings were causing, she adds. Attempts to reach Norris were
unsuccessful.
"There's a big difference between posting opinions and posting false things as historical
fact -- this individual crossed that line," the spokeswoman notes. "People need to become
aware that if they shoot off their mouths, there may be consequences -- I think this is a
wake-up call to other posters."
But the debate continues on the boards. An online poster called Ripskii, writing in the
Yahoo! message board on American Eco's stock, exclaims: "I would point out that these
same management people who are so quick to sue over slander should guard their OWN
behinds. Go[d] knows they've given WE the STOCKHOLDERS, enough cause to bring
suit against them for a variety of reasons."
In the other case, Legacy Software's (LGCYC:Nasdaq) chairman last week filed a $10
million defamation suit against 11 defendants. All but one of the defendants were listed as
John Doe. Legacy's stock jumped 85% yesterday as word of the company's new lawsuit
was thrust onto the message boards.
In an odd move, Charles Solomont, a Boston attorney for Michael Zwebner, Legacy's
chairman, posted a copy of the defamation lawsuit on Silicon Investor last week. The legal
documents asked two online message board posters, who go by the aliases Spider Valdez
and Rico Staris, to waive their rights to be served with court papers in person. The
waivers would require the two anonymous defendants to disclose their real names.
The pair has not formally responded to the lawsuit yet, says Solomont, adding that he is
confident that he will eventually learn the real identities of the message posters. "Once we
find out their true names, we will pursue our claims against them," Solomont says.
Solomont says he doesn't believe a lawsuit can be decided and damages levied against an
alias on a message board -- that's why finding out the names of the posters is so
important. In previous cases, like American Eco's, companies learn the identities of
message posters by issuing subpoenas to the board operator. Both Yahoo! and Silicon
Investor have complied with past subpoenas.
The Legacy suit accuses the pair and a named individual, Dean Dumont of Milford, N.H.,
of posting false and defamatory statements about Zwebner. Dumont says the matter is
being handled by his attorneys and he declines further comment. The suit, filed in U.S.
District Court in New Hampshire, seeks $10 million in damages, and notes the amount
could be doubled or tripled under current laws.
The allegedly damaging posts were said to have been made on Silicon Investor in several
message boards, known as threads. The suit contends that the posters even created a new
thread, ironically called "Spider & Rico's 'No-Bash' Thread for LGCY," in which they
would ridicule Zwebner. Eugene Rosov, Legacy's president and chief executive, declined
to comment on the suit, referring questions to attorneys. Zwebner couldn't be reached for
comment.
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If companies continue to succeed in ferreting out the names of anonymous posters, the
entire culture of the message boards could change.
Top Stories: Tearing Down the Internet's Anonymous Posters
By Gregg Wirth
Staff Reporter
9/22/98 4:09 PM ET
"SELL SELL SELL SELL. . . This doggie is going into the toilet. Salvage what's left of
your investment."
-- Mr_Pink_esq,
on a Yahoo! message board for FirstPlus, Sept. 14.
Since stock message boards came into being, Internet posters have slung anonymous
missives like blackjacks to bludgeon the shares of target companies. Now, the companies
are fighting back, starting a trend that could change the very nature of the message
boards.
See Also
Transaction Network Confronts the Power of Suggestion
In several cases, companies have sued to unmask the anonymous posters, whose identities
Yahoo! (YHOO:Nasdaq) and other companies that run the message boards routinely
hand over when faced with court orders.
Once the posters' real names are discovered, the maligned companies have sought legal
and financial sanctions against them. For example, as far back as 1996 a lawsuit brought
by Fonix (FONX:Nasdaq) against an online poster was settled in an unusual way: The
poster not only had to apologize online, but also was required to buy shares of the
company.
The issue pits Americans' right to free speech against companies' right to protect
themselves against false and misleading statements. It also pits the Internet's Wild West
culture against the staid corporate world.
Just last week, FirstPlus (FP:NYSE), a Dallas subprime lender, issued a press release
saying it had identified a short-seller who "disseminated false and misleading information
about the company over the Internet." FirstPlus, which hasn't identified the individual or
said how it obtained the information, is forwarding the results of its investigation to the
Securities and Exchange Commission and reviewing its legal options.
If companies continue to succeed in ferreting out the names of anonymous posters, the
entire culture of the message boards could change. Now, posters revel in their ability to
attack -- and praise -- stocks behind a shield of anonymity. The practice has spawned
hundreds of message boards on stocks ranging from Microsoft (MSFT:Nasdaq) to Rocky
Mountain International. But it also has made it possible for unscrupulous operators to post
false information in a bid to move stocks for the sake of profit.
Mary Calhoun, president of Waltham, Mass.-based Calhoun Consulting, has tracked six or
so similar lawsuits in the past year and is a dogged follower of the message boards. So
far, the threats and lawsuits have not had a chilling effect on message-board conversation,
she says.
"I think now many more people know there might not be protection online" of anonymous
posters' identities, she said.
"But it's not easy to get subpoena power -- you have to have a strong case," Calhoun
explained. "There are prohibitions against filing a frivolous lawsuit." Calhoun's firm acts as
a consultant to securities attorneys and specializes in market-manipulation cases.
"Companies file these lawsuits, then use subpoenas to get the user info," said John Place,
Yahoo's general counsel, adding that his company has complied with subpoenas in the past
and provided names as requested. Place declined to detail any specific incidents.
FirstPlus is not the first company to go after an anonymous Internet haranguer. Itex
(ITEX:Nasdaq), a Portland, Ore., company, filed a lawsuit in a county circuit court Sept. 4
against 100 "John Does." The suit alleges that a number of postings on the Yahoo
message board critical of the company's management were defamatory. Itex is seeking to
learn the identities of such posters as orangemuscat and colojopa, both of whom were
named as defendants in the lawsuit.
In its lawsuit, Itex, which operates a retail barter exchange for brokers in the Portland
area, says the anonymous posters used their messages "for the purpose of undermining
the confidence of the public in the stock (of Itex) and to induce others with whom Itex
does business to lose faith in the operations and financial soundness of Itex."
Some of the messages mentioned in the suit claim that Itex inflates the value of its assets,
that members of top management had been fired and that the company is engaged in
prostitution. One claimed Graham Norris, Itex's president and chief executive, is a "pimp."
Itex says these messages are false and defamatory.
The lawsuit is about accountability, not the First Amendment, said Stephen Pearson, a
spokesman for Itex. The only people who should worry are the ones making false
postings, Pearson said. He concedes Itex' suit may have a chilling effect, but adds that
such a result might be necessary because people were posting comments on the Internet
they would not have dared publish in more traditional mediums. "We are not interested in
suppressing anyone's First Amendment rights," he said.
Others agree that while First Amendment rights are paramount, companies should be
allowed to fight back against this type of slander. "We'd all be better off if the stock
manipulators are brought to justice," said Jill McKinney, webmaster at another message
board site, Silicon Investor. She is uncertain whether more lawsuits are being filed
recently or if those filed are simply getting more attention. Silicon Investor has answered
about five or six requests for posters' names in the past three years, she says.
The most recent situation with FirstPlus brought some heated debate on the Yahoo!
message board, including a laughing, I-dare-them-to-sue-me series of posts from
Mr_Pink_esq himself, the person FirstPlus is believed to be targeting. In a mock transcript
of the case of "FirstPlus vs. Mr. Pink," a poster called justgivememoney jokingly relates
the difficulty FirstPlus would have convincing a judge that sophisticated money managers
actually sold their shares based on anonymous Internet postings.
The stock price of FirstPlus fell by about two-thirds in less than two months, from around
47 in mid-July to a low of 15 Sept. 11. It has since rebounded and was near 22 1/3 at
midday Tuesday. (FirstPlus also recently announced it was beginning talks with potential
acquirers about a purchase of the company. Trading in both its stock and options have
been active lately.)
The subprime lending arena has been hit especially hard in the recent market downturn.
For example, two other subprime rivals, United Cos. Financial (UC:NYSE) and Southern
Pacific Funding (SFC:NYSE), are down 34% and 81%, respectively, over a span in which
the benchmark S&P 500 fell 10%.
So whether the Internet messages actually hurt FirstPlus' stock price is open to debate.
But the investigation, and similar ones by other companies, could make bigger waves. |
