SCN: Speech

Thu Jul 12 22:43:42 PDT 2001

x-no-archive: yes

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(Aaron Elstein, Wall Street Journal)---Free-speech advocates are 
hailing a New Jersey appellate-court decision this week that makes 
it harder for companies to track down and silence anonymous critics 
on online message boards.  

The opinion, issued Wednesday by the appellate division of the 
New Jersey Superior Court, affirmed a lower-court ruling against 
Dendrite International Inc. The ruling upheld that the Morristown, 
N.J., software company had no right to discover the identity of an 
online critic because it failed to show it had been harmed by his 
posting.  

The ruling is significant because many companies have been able 
to subpoena such Internet service providers as Yahoo! Inc. and AOL 
Time Warner Inc. to ferret out anonymous critics in hopes of later 
building cases against them.  

The appellate court also expanded the lower court's ruling, spelling 
out standards that companies must meet before they can subpoena 
their anonymous critics. More than 150 suits have been filed 
nationwide against unknown parties who posted messages on 
Yahoo, Raging Bull, Silicon Investor, and other stock-chat sites. In 
these so-called cybersmear suits, plaintiffs usually allege that 
anonymous parties have posted false and defamatory remarks to 
drive down a company's stock price.  

Among other things, the New Jersey court said plaintiffs must 
produce "sufficient evidence" supporting each element of their 
claim. The panel also said that even if a court concludes a company 
has a viable case, it "must balance the defendant's First 
Amendment right of anonymous free speech against the strength of 
the prima facie case presented."  

Although the appellate court's standard is binding only in New 
Jersey, Blake Bell, a lawyer at the New York firm of Simpson 
Thacher & Bartlett who tracks cybersmear suits, says the decision 
goes farther than any court to date in spelling out what companies 
must do to proceed with these suits.  

He says he expects Public Citizen, the American Civil Liberties 
Union and other activist groups who sometimes represent 
defendants in these suits to cite the New Jersey ruling as precedent. 

"I think the court was looking at the lay of the land and, realizing that 
this kind of litigation could come up repeatedly, decided to provide 
guidance that went way beyond what other courts have provided," 
says Mr. Bell.  

But other attorneys think the New Jersey court overstepped.  

Victor Polk, a lawyer at Bingham Dana in Boston who has brought 
cybersmear suits on behalf of corporations, says the appellate 
panel's ruling requires evidence of defamation that would be 
virtually impossible to produce. "What this standard does is give 
protection to people who are posting clearly defamatory messages 
on the Internet," he says.  

Mr. Polk says that cybersmear suits have presented courts with a 
tough legal challenge of trying to balance people's right to 
anonymous free speech against the rights of corporations to stop 
false and malicious statements about them. "Courts are really 
struggling to enunciate a standard on this issue," he says.  

Indeed, when the New Jersey appellate court applied its new 
standard to two separate cases, it reached different conclusions.  

The appellate court struck down the effort by Dendrite, which has 
sought to identify an unknown person who allegedly said on a 
Yahoo board that the company was cooking its books to inflate 
earnings, a charge Dendrite denies. The three-judge panel said that 
Dendrite failed to establish a "sufficient nexus" between the 
defendant's postings and the company's allegations of harm.  

Officials at Dendrite International referred questions to their outside 
counsel, Bob Weigel, who declined to comment.  

But in applying the same standard, the appellate court ruled in favor 
another company, Immunomedics Inc., Morris Plains, N.J.  

The panel affirmed a lower-court decision that allowed the company 
to proceed with its effort to discover an unknown online critic whom 
it had sued for posting a message on Yahoo. The message 
contained allegedly "confidential and proprietary" information about 
the developer of cancer treatments.  

Nicholas Stevens, a lawyer for Immunomedics, said the appellate 
court's standard is useful. "It was good to clear up what lawyers 
should do when preparing these cases," he said. Mr. Stevens 
declined to comment on Immunogenics' legal strategy going 
forward.  

Steven Stein, an attorney for the defendant, didn't return a call.  

Paul Alan Levy, an attorney at Public Citizen, a Washington 
consumer-action group that filed a friend-of-the-court brief on behalf 
of the defendants in both New Jersey cases, calls the appellate 
court's ruling in the Dendrite matter "a tremendous victory for free 
speech."  

The New Jersey appellate court's split-decision adds to a mixed bag 
of rulings that have favored both corporate plaintiffs and anonymous 
defendants.  

For example, an appeals court in Florida ruled last year that the 
former chief executive of Hvide Marine Inc., now known called 
Seabulk International Inc., has the right to find out who posted harsh 
messages about him in an online message board. That case is 
pending.  

But a federal judge in Los Angeles in February dismissed a 
cybersmear case brought by Global Telemedia International Inc., 
saying the company 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.  

In the meantime, cybersmear suits continue to be filed.  

An attorney for Yahoo told a California state judge last week that the 
Santa Clara, Calif., company gets "thousands" of subpoenas in 
these cases. The attorney, Thomas Laffey, said in an interview that 
he doesn't know if that's how many Yahoo gets in a year, or if the 
figure represents the total amount served over time. Complying with 
the subpoenas "keeps Yahoo's legal staff busy, that's for sure," he 
said. A Yahoo spokeswoman declined to comment.  

AOL Time Warner has said it received nearly 475 subpoenas 
seeking to identify its customers last year, a 40% increase over 
1999.  

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