Trade Libel

A&P v. D'Avella Update: "Produce Paradise" Lawsuit Settles

Tuna Chatterjee — Wed, 21 May 2008 09:46:20 -0400

David's post yesterday got us thinking about one of our favorite cases, A&P v. D'Avella. As some of you will recall, the case involved two brothers who worked at an A&P supermarket in New Jersey and created parodic rap songs with supermarket themes under the name "Fresh Beets." Their crowning achievement, of course, was a video called "Produce Paradise," which they made in the A&P store (after hours) and posted to YouTube and their website fakelaugh.com. A&P was not amused and sued the brothers for trademark infringement and dilution, defamation, and trade libel. To put it mildly, the supermarket's legal claims were questionable (see Sam's August 30th post on the case for details). Through a little digging, I've learned that the parties have settled the case, bringing to a close one of the more humorous episodes chronicled in our legal threats database.

In early May, the Courier News reported that A&P and the D'Avella brothers had agreed to settle. Although the terms of the settlement are confidential, the Courier News was able to confirm independently that A&P would not pursue its $1 million lawsuit if the brothers removed the "Produce Paradise" video from the web. Alas, the video has disappeared from YouTube and fakelaugh.com. But if you missed it the first time around, all is not lost. YouTube user "newsfast" posted a clip of a Fox news story about the case, which intersperses portions of "Produce Paradise" between the reporter's commentary.

I won't pretend to be thrilled about the outcome as I agree with Sam's analysis that A&P had no colorable claims against the brothers, but it could be worse. As it stands, the world can still see portions of the video on YouTube; A&P can ponder whether its legal maneuvering was worth the negative publicity; and the brothers can return to normal life and work on new projects for fakelaugh.com without bankrupting themselves or dealing with the hassle of litigation.

(Thanks to Wendy Seltzer at Chilling Effects for tracking down newsfast's YouTube clip of the Fox news story.)

Eagle Broadband v. Mould: Another Internet Defamation Suit Dismissed as SLAPP

Sam Bayard — Tue, 18 Dec 2007 11:10:40 -0500

It's been a busy month or so for the California anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16). In late October, a California trial court granted Perez Hilton's motion to strike in Ronson v. Lavandeira. More recently, another court granted the anti-SLAPP motion of Richard Silverstein and Joel Beinin in the poltically charged case, Neuwirth v. Silverstein. Adding to this list, last Friday, in Eagle Broadband v. Mould, 2007 WL 4358515 (Cal. Ct. App. Dec. 14, 2007), a California appellate court upheld the trial court's grant of Thomas Mould's motion to strike pursuant to the anti-SLAPP statute and reversed the trial court's denial of Richard Williams's similar motion. The appellate court also affirmed the trial court's award of approximately $65,000 in attorney's fees to Mould pursuant to the statute.

The case involved a number of critical postings about Eagle Broadband on a Yahoo! Finance message board. Among the appellate court's more interesting rulings was that Williams's posting of a "fake press release" in Eagle's name could not support a defamation or trade libel claim because "the average reader would recognize the mock press release as parody" and, as such, it "did not defame [plaintiff] by false attribution or presentation of false facts." Eagle, slip. 0p. at 43. The court also held that Eagle's trade libel claims against both defendants failed for lack of evidence of special damages (i.e., specific pecuniary harm). Eagle had submitted an affidavit from an expert indicating that Eagle's share price dropped 76% in the months surrounding the posting of the messages. The court rejected this evidence, however, emphasizing that it did not identify "particular customers and transactions of which [plaintiff] was deprived as a result of the libel." Id. at 44-45.

(For details and court documents, please see our database entry, Eagle Broadband v. Mould.)

Legal Threats Database Preview: Internet Solutions v. Marshall

Sam Bayard — Tue, 06 Nov 2007 17:40:32 -0500

Tomorrow we officially launch our Legal Threats Database, a catalog of the growing number of lawsuits, cease-and-desist letters, and other legal challenges faced by those engaging in online speech. As many of our readers are no doubt aware, the individual threat entries have been available for some time, but starting tomorrow users will be able to view the entire database and search the entries using a number of fields, including location, legal claim, publication medium, and content type.

The database already contains a fascinating array of lawsuits, as well as more informal threats like cease-and-desist letters and emails. Its several-hundred entries are growing daily. One of the most exciting aspects of the database is the ability it gives our users to input new threat entries, whether based on their own experiences or their knowledge of legal threats faced by friends or colleagues. One of our users, blogger Tabatha Marshall of Washington State, created a new threat entry this weekend. We followed up with her, obtained additional information, and edited the entry for publication. In this post, I'll excerpt for you the "Description" portion of the resulting database entry, Internet Solutions v. Marshall:

On November 1, 2007, Internet Solutions, a company that runs a number of employment recruiting and Internet advertising businesses, including VeriResume, sued blogger Tabatha Marshall in federal court in Florida.

Marshall runs a blog and website at http://www.tabathamarshall.com, on which she writes about suspicious online job solicitations and so-called "phishing" practices. Part of her site consists of the "PhishBucket," a "directory of companies/individuals suspected of targeting job seekers with deceptive offers." Included in the PhishBucket is an entry for "VeriResume (Internet Solutions)," which bears the statement "Pending Investigation Phisher" at the top-right of the page. The entry also contains physical and web addresses for the company, links to posts about it (internal and external), and names of affiliated companies. The PhishBucket also includes entries for other companies operated by Internet Solutions, including Ask America, Scout 2007, Too Spoiled, and USA Voice.

Marshall's site also contains articles relating her research and views about certain companies and their online job solicitations. Among these is a post entitled "Something's VeriRotten with VeriResume." In this post, Marshall excerpts a sample email from VeriResume soliciting job applications, criticizes the company's position on resume fraud, and links to other sites (like the Better Business Bureau) with information about VeriResume and Internet Solutions. She invites readers to "[c]heck out the research and YOU decide if you want to give them your info."

Several users submitted comments to the post that were critical of VeriResume. One user, who claimed to be a company employee, alleged that the company engages in a "bait-and-switch" routine after applicants submit their information, according to documents attached to the complaint. In an update to the post, Marshall summarized this and other comments as follows:

I thought they might be phishers because they don't appear to have a privacy policy, so they can pretty much do whatever they want with applicant data. But one of their employees commented later to say job seekers are apparently baited with jobs and then once contact is established, attempts are made to try to sell them educational programs. Numerous people have commented to say they had issues filling out their online application too or that someone there dropped the ball on a job lead.

Starting on October 30, 2007, a representative of VeriResume (or Internet Solutions -- the record is not clear on this point) contacted Marshall via email, claiming that information about VeriResume and other companies posted on Marshall's website was incorrect and asking her to remove it. According to Marshall, the company representative also contacted her landlord, claiming that Marshall was operating a business in her house, a claim that Marshall disputes. On October 31, 2007, one day before filing suit, counsel representing VeriResume and ten other Internet Solutions-affiliated companies sent a cease-and-desist letter to Marshall via email. (For more information on the emails and letter, please see the CMLP database entry, VeriResume v. Marshall (Email)). [Note: For research and searchability purposes, we create separate database entries for lawsuit threats and letter or email threats, even when these threats are part of the same controversy.]

Internet Solutions's complaint includes claims for defamation, false light invasion of privacy, and injurious falsehood (trade libel). It alleges that Marshall has "author[ed], post[ed], and publish[ed]" statements claiming that Internet Solutions engages in "phishing," "scams," and other criminal and fraudulent conduct. It requests compensatory and punitive damages, and an injunction requiring Marshall to remove the allegedly defamatory posts and prohibiting her from making future defamatory statements about the company.

Marshall was served with the complaint on November 3, and she has 20 days to respond. Marshall maintains that she merely posts her opinions, publicly available information, and third-party comments and asks her readers to draw their own conclusions. She is seeking legal assistance in this matter.

***

It strikes me that Marshall has a possible defense regarding the "phishing" categorization because she pretty assiduously avoids drawing (or appearing to draw) any definite conclusions about the companies that she investigates. Her PhishBucket is for companies and individuals "suspected" of deceptive practices, and the individual entries say "Pending Investigation Phisher," not "Phisher."

Likewise, the original VeriResume post contains few assertions of fact about the company and explicitly invites readers to draw their own conclusions. But the statements posted by users and later summarized by Marshall are another story, and they present one of the trickier aspects of the case. If Marshall had not restated the content found in the user comments, then CDA 230 clearly would have insulated her from liability for these statements. But Marshall's summary of the comments may fall outside the statute's protective reach. One hopes for her sake that the user-generated content was true.

Texas Judge Orders Discovery of Anonymous Blogger's Identity

Sam Bayard — Tue, 25 Sep 2007 15:47:15 -0400

A recent case from Texas highlights the difficulty of identifying the correct legal standard for determining when a court should order disclosure of the identity of an anonymous person engaging in speech on the Internet. In June 2007, a subsidiary of Essent Healthcare, Inc. filed suit in Texas state court against an anonymous blogger and an undefined number of anonymous posters to his blog. Essent's petition contains claims for defamation, trade disparagement, breach of contract, and breach of the duty of loyalty.

The case revolves around a blog called "The-Paris-site," which focuses on Essent's Paris Regional Medical Center (the "Hospital") in Paris, Texas. The operator of the blog goes by the pseudonyms "Frank Pasquale" (no relation to the law professor) and "fac_p". He posted critical remarks about the Hospital on the blog, including statements that, according to Essent, assert or imply that the Hospital is engaged in Medicare fraud. He also posted statements that allegedly accuse the Hospital of having a high incidences of bacterial infections and of post-surgical complications.

Anonymous users also posted comments on the blog. Some of the comments included information that Essent claims is confidential patient health information. Essent maintains that these anonymous posters (and possibly the blog operator himself) are current or former Hospital employees, and that these disclosures of patient information violate the Health Insurance Portability and Accountability Act ("HIPAA"). Essent's petition contains no claim for violations of HIPAA as such, but asserts that anonymous employee posters breached their employment contracts with the Hospital, and their duties of loyalty to it, by disclosing confidential information in violation of HIPAA.

Essent filed an ex parte request for an order compelling SuddenLink Communications, the anonymous blogger's internet service provider, to disclose his identity. On June 19, 2007, the court issued an order directing SuddenLink to do so, and SuddenLink subsequently sent notice to the blogger pursuant to the Cable Communications Act, which contains an interesting requirement that a cable operator may not disclose "personally identifiable information concerning any subscriber" unless the cable operator first notifies the subscriber. 47 U.S.C. 551(c).

On August 3, 2007, a lawyer representing the anonymous blogger wrote a letter to the court, opposing disclosure of his client's identity. On September 14, 2007, Scott McDowell, the district judge, issued a letter ruling, rejecting the blogger's objection, stating that he would sign an order requiring SuddenLink to disclose the blogger's name and address, and requesting that Essent prepare the order. It does not appear that this new order has issued yet, but the anonymous blogger is preparing to file a petition for a writ of mandamus in order to challenge the September 14 letter ruling.

As explained in our post last week, the primary question in cases seeking to uncover the identity of an anonymous defendant is how to balance that defendant's First Amendment-protected interest in engaging in anonymous speech against the plaintiff's interest in pursuing a valid cause of action for the effects of nonprotected speech. If a court chooses too permissive of a standard, then anyone can unmask an anonymous critic by simply stating that he has been defamed or claiming that his copyright has been infringed. If a court chooses too demanding of a standard, then a plaintiff will find herself forced to litigate her claim before knowing the identity of the defendant and without the benefit of ordinary discovery.

Unfortunately, courts have been all over the map on this question, and a number of competing standards have emerged.

The standard that is most protective of anonymous speech is found in Doe v. Cahill, 884 A.2d 451 (Del. 2005), in which the Supreme Court of Delaware held that a court should apply a "summary judgment" standard before ordering disclosure of an anonymous poster's identity. "Summary judgment" is a legal term of art, and applying this standard means that the plaintiff must show that it has sufficient evidence for each of the elements of its claim. The Delaware Supreme Court court loosened the standard somewhat, however, holding that a plaintiff in a defamation suit need not produce evidence showing actual malice at this initial stage of the litigation.

Another court that required the plaintiff to produce some evidence to support its claim, rather than just allegations, was the New Jersey Superior Court, Appellate Division, in Dendrite v. Doe, 775 A.2d 756 (N.J. Super. Ct. App. Div. 2001). The Dendrite court (confusingly) affirmed application of a "motion to dismiss" standard (which ordinarily requires only allegations viewed favorably to the plaintiff), while simultaneously approving the trial court's "more probing review" of the factual bases of the plaintiff's claim. The trial court had refused to order disclosure of the defendant's identity because the plaintiff brought forth no evidence of harm resulting from the alleged defamatory statements. See id. at 769-72.

Other courts have applied different, less protective standards -- some calling it a "prima facie" standard and others calling it a "good faith" standard. See, e.g., Doe v. 2TheMart.com, 140 F. Supp.2d 1088 (W.D. Wash. 2001); Alvis Coatings, Inc. v. Does, 2004 WL 2904405 (W.D.N.C. Dec. 2, 2004); In re Subpoena Duces Tecum to America Online, 2000 WL 1210372, at *6 (Vir. Cir. Ct. Jan. 31, 2000), rev'd in part on other grounds, 542 S.E.2d 377 (Va. 2001). The standards applied in these cases vary in formulation, but all require facially sufficient allegations of wrongdoing, and some apper to require a minimal evidentiary showing.

Not surprisingly, Judge McDowell's September 14 letter ruling in the Essent case makes a muddle of all this. First of all, it is bizarrely formatted -- the legal analysis is contained in two paragraphs that are italicized and indented from the rest of the letter, giving the impression that these paragraphs are quoted material, but without any indication of their source. Some independent researched turned up the following observations:

The first paragraph comes almost verbatim from Polito v. AOL Time Warner, Inc., 2004 WL 3768897, at *5 (Pa. Ct. Com. Pl. Jan. 28, 2004), a case involving a subpoena to uncover the identities of anonymous AOL subscribers who allegedly sent the plaintiff harassing e-mail messages. The language that Judge McDowell quotes from Polito, however, relates exclusively to another case, In re Subpoena Duces Tecum to America Online, Inc. (noted above). Specifically, Judge McDowell appears to be invoking the standard applied by that court -- namely, that "the pleadings or evidence" satisfy the court "that the party requesting the subpoena has a legitimate, good faith basis to contend that it may be the victim of conduct actionable in the jurisdiction where suit was filed." In re Subpoena Duces Tecum to America Online, 2000 WL 1210372, at *8. In that case, the court considered evidence outside the plaintiff's complaint, but it did not make clear whether that was required by its standard.

The second paragraph comes verbatim from Alvis Coatings, Inc. v. Does, 2004 WL 2904405, at *3 (W.D.N.C. Dec. 2, 2004), a case which applied an especially weak version of the "prima facie" standard. There, the court was content that the plaintiff had "averred that the statements are both false and damaging to the Plaintiff's trademark and to its business generally." Id. at 4.

McDowell's letter never explains which standard he is choosing to apply -- Polito, In re Subpoena Duces Tecum, Alvis -- they're all different standards, especially if you look at them closely. Worse, McDowell never even tries to apply the (as yet unknown) standard to the facts of the case. The letter ruling says only:

After considering the above [i.e., the two paragraphs taken nearly verbatim from different decisions], the Court hereby concludes that good cause has been shown and the burden by the plaintiff has been met to meet the requirements of the exceptions to the [Cable] Communication[s] Act to grant the request by Plaintiff for the Internet service provider to furnish the name and address of the subscriber.

Apparently, Judge McDowell believes that no evidence to support Essent's claim is required. That is bad enough, but it is a debatable proposition under the case law. He apparently also believes that no analysis of the allegations in the complaint for facial sufficiency is required. Whatever the standard, this is surely wrong.