*** OT *** Sorta!!!
Medical Resorts sues chat site and posters
STOCKHOUSE AND ANONYMOUS POSTERS FACE $6-MILLION SUIT
by Stockwatch Business Reporter
Feeling that Medical Resorts International was the target of ongoing false and malicious
statements posted to an Internet discussion site operated by StockHouse Media
Corporation, president Robert Talbot requested that StockHouse provide the names
and addresses of the offending posters. "They told us to get a court order," Mr. Talbot
said. That is precisely what Medical Resorts did, launching a $6-million suit against
StockHouse and two anonymous posters in the process.
The statement of claim filed by Robert Talbot and Medical Resorts International in the
Court of Queen's Bench of Alberta in Edmonton names StockHouse Media
Corporation, StockHouse.com, John Doe 1 also known as Peter41, and John Doe 2
also known as Waitnsee, as defendants. The suit claims various damages including damages for defamation, negligent misrepresentation, and exemplary damages. Among other things, Medical Resorts alleges that "the Defendants Peter41 and Waitnsee have wrongfully made the false and malicious statements against the Plaintiffs, which were published by the Defendants Stockhouse Media and Stockhouse.com, with the intention of causing shareholders to sell their shares in the Plaintiff Medical Resorts and to purchase shares in companies that the Defendants are promoting or in which
they have a direct interest." StockHouse has not filed a statement of defence.
In a subsequent hearing before Madam Justice D. Sulyma on March 9, Medical Resorts
obtained a court order requiring Stockhouse Media Corporation to "produce and
surrender to the Plaintiffs all information in their possession pertaining to the identification
of the Defendants, JOHN DOE 1 also known as PETER41 and JOHN DOE 2 also
known as WAITNSEE including however not limited to proper names, addresses,
telephone numbers, other aliases, internet e-mail addresses, application and credit
information." It was also ordered that StockHouse cease publishing and remove all
posts on the Medical Resorts bulletin board authored by Peter41 and Waitnsee or any
other of their aliases. StockHouse has not complied with the order.
On March 19, a notice of motion was filed that an application would be made on
Friday, March 26 for an order citing StockHouse in civil contempt for failing to obey the
March 9 order to disclose the information regarding the anonymous posters and to
remove their posts. StockHouse did not make an appearance at the hearing on Friday.
Mr. Talbot says that he is prepared to take this "all the way" and that the case will likely
result in the institution of some standards regarding Internet posting. "A lot of these
people are real brave when they're hiding behind anonymity," he says. He notes that the
court order compels StockHouse to divulge all of the aliases of the named posters. He
is convinced that the same individuals using different aliases are responsible for other
negative posts regarding the company. According to Mr. Talbot, StockHouse is
"thumbing its nose" at Alberta judges by not obeying the order. He states that Medical
Resorts has "asked for certain remedies" the nature of which he would not disclose,
adding, "If we get them, StockHouse are not going to be very happy campers."
A call to StockHouse's president Jeff Berwick last Friday was returned by the
company's vice-president Mark Crowder who would not comment on specific matters
related to the legal action. He did remark that the sensitive issue of anonymity will
probably surface more often as the Internet is increasingly used by people looking for
investment information. According to Mr. Crowder, StockHouse had just received the
notification regarding the order to disclose the identity of the posters and it had been
passed on to the company's lawyer, Brian Kaminski. Mr. Crowder said that Mr.
Kaminski was quite surprised that Medical Resorts had obtained the court order. A call
to Mr. Kaminski of the law firm Bell Spagnuolo on Friday afternoon was not returned.
Anonymity is fiercely defended by posters using Internet stock discussion sites, and
attempts or threats to uncover the identities of posters are often met with a deluge of
protest from other discussion site participants. The anonymity of posters is also of some
concern to many of the companies who host discussion forums. Sites such as
StockHouse, which derive a large part of their revenue from advertising, face stiff
competition to attract 'hits' or visitors to the site. The more hits, the better able the
company is to sell advertising and the more exposure for its fee-based offerings, such as
the pay-per-view newsletters carried by StockHouse. According to a Feb. 8 article in
The Australian published during Mr. Berwick's promotional tour in Australia,
StockHouse is the top financial site in Canada, boasting about 100 million hits per
month. Whatever the number of hits, many are made by posters and 'lurkers' who
follow some of the more controversial threads where anonymous posters spin out yarns,
often with little regard for fact.
Becoming embroiled in a multi-million dollar lawsuit might be of more concern to
StockHouse, especially at this time, than protecting the identity of what several of its
users, particularly participants in the active Medical Resorts thread, consider to be a
couple of nuisance posters. Again according to The Australian, StockHouse is planning
multiple exchange listings, including Nasdaq and the Australian Stock Exchange, within
the next six to 12 months and such a suit could have unwanted ramifications for that
quest. Moreover, a San Francisco investment firm is purportedly conducting a
$6-million placement in advance of the Nasdaq listing and a legal action might turn
potential investors away. StockHouse apparently turned its attention to Nasdaq after
having its listing application declined by the Alberta Stock Exchange in September
1998, largely over concerns about the company's stock discussion forum. Mr. Berwick
has acknowledged that the message boards were once under scrutiny by U.S. and
Canadian securities regulators who feared that they allowed the possibility for the
release of insider information or fraudulent information.
While protecting anonymity, increasing 'hits', and the quest for an exchange listing may
be StockHouse's primary objectives, the number of publicly traded companies taking
action against anonymous posters and the sites that host discussion forums is growing. In
July 1998, troubled Philip Services reacted to a spate of negative and, in some
instances, threatening Internet discussion site posts by obtaining a court order obliging a
number of ISPs to reveal the identities of several anonymous posters. In September
1998, ASE-listed Hampton Court Resources took the unusual step of responding to
Internet hype by issuing a press release cautioning investors about false rumours
circulating on chat sites. Many of those rumours were initiated by an anonymous
StockHouse poster. In October 1998, Medinah Energy, a small U.S. mining company
launched a suit naming the Internet pseudonyms of posters the company contended
were making false and defamatory statements on message boards. In December 1998,
Nasdaq listed American Eco Corporation, was awarded punitive damages of $500,000
(U.S.) and direct damages of $75,000 in a lawsuit against a poster hiding behind an
alias while posting falsehoods about the company. In the same suit, the former chief
financial officer of the company, David Norris, was awarded a total of $7.75-million in
punitive and direct damages.
Whether in Canada or the United States, litigation can be expensive. Medical Resorts is
a small medical services and health tourism company deriving most of its revenue from
its resort on the Caribbean island of Anguilla which caters to dialysis patients. For the
six months ended December 31, 1998 the company reported a net income of $180,684
from operating revenue of $492,950. Nonetheless, Mr. Talbot is adamant that he is
committed to pursuing the matter. He was encouraged by the fact that Medical Resorts
was awarded costs in its court appearance on Friday. Mr. Talbot said he did not know
what amount had been awarded but the company's lawyer had just returned to the court
to have the judgment registered. The company's solicitor is Robert Burgener, a director
of Medical Resorts |
