Friday, August 21, 2015

Court finds misleading omissions can deprive ISP of 230 protection

General Steel Domestic Sales, LLC v. Chumley, No. 14-cv-01932, 2015 WL 4911585 (D. Colo. Aug. 18, 2015)
General Steel sued Chumley and Atlantic Building, of which he was CEO, for false advertising, libel, and intentional interference with prospective business advantage (plus civil conspiracy).  It alleged that defendants used the internet to harm General Steel and get business by running ads in response to searches for the words “General Steel,” “General Steel Buildings,” “steel buildings,” and “metal buildings.” Many of these ads allegedly contain derogatory information about General Steel and contain links to a portion of the Armstrong Steel Corporation website which does the same.
There were twenty statements on the Armstrong Steel website at issue.  One part of the website was called “Industry Related Legal Matters” (IRLM), created by Chumley; it had 37 posts, 20 of which were alleged to be unlawful.  Each post contains a “read more” button that links to third-party website; each post also contains an excerpt from the document which can be seen in full when the “Read More” button is pushed.  For example, one post’s heading was “Class Action Complaint - Heinbaugh et al v. General Steel Domestic Sales, LLC.” Its first paragraph was a quotation from describing a class action lawsuit filed against General Steel, with the words “U.S. District Court of Colorado” added before the quotation, which read: “General Steel Corp. and its CEO Jeffrey Knight ‘infamous’ telemarketers of steel-buildings, systematically defrauded their customers, in defiance of court orders, by, among other things, taking nonrefundable deposits and then refusing to deliver buildings for the price advertised, a class-action complaint claims in Federal Court.”
Other posts included “Attorney General Madrid Warns New Mexico Churches About Colorado Metal Building Company” and “General Steel Domestic Sales, LLC v. Chumley,” the latter of which described the claims and counterclaims in a 2010 case, but didn’t mention the dismissal of certain counterclaims.  Another post, “Rock Limo Service v. General Steel Domestic Sales,” included quotations from a court case describing a contract and ending with this sentence: “Petitioners demanded return of their deposit, but General Steel refused to pay it.” The “Read More” link led to the full text, affirming an arbitrator’s award finding that General Steel properly retained the deposit because Rock Limo breached the relevant contract.  The IRLM Page contains a general disclaimer: “These external hyperlinks represent allegations made by parties (which may or may not ultimately be adopted by a judge/jury) and findings of fact and law by judges/arbitrators. Some of the cases mentioned here may be ongoing, dismissed, settled and/or may not be final.”
As for defendants’ search ads, they included:
Don’t Send Them A Deposit - Ad
Until You’ve Seen These Lawsuits. Read This Before It’s Too Late!
Before You Send a Deposit - Do Your Research First Ad (855) 882-6555 Read This Before It’s Too Late!
View Gallery - Virtual Building - Design It Online - 1.800.345.4610
Steel Building *Lawsuits* - +1 800-345-4610 4.8 rating for
Rock Limo Lost $125,383 in Deposits *Beware* Research Before You Buy! Court Rulings · Lawsuits · Buyer Beware · Complaints
‘General Told Her ‘We Will Keep You In Court Until We Break You’ ‘
Court Rulings · Lawsuits · Buyer Beware · Complaints
General Steel argued that defendants “collected old documents from long-resolved General Steel litigation and wholly created a website conveying facts that are false as to General Steel’s current operations. In addition, the title of the IRLM Page, “Industry Related Legal Matters,” was allegedly misleading because it appeared to be an objective site disclosing industry lawsuits, but actually is a page targeting General Steel. 
Defendants argued that the CDA gave them immunity.  General Steel responded that they wholly or partially developed the information at issue, and thus didn’t qualify.  To be responsible, a service provider must “in some way specifically encourage[] development of what is offensive about the content,” which is to say what is unlawful or legally actionable.  (Interpreting the Accusearch case, which some worried represented an expansion of ISP liability—as with Roommates, it may be that the case actually sets a limit that preserves most ISPs’ immunity.)  Merely inviting or encouraging third parties to post content isn’t development of that content.  Even ratifying or adopting third party content, including through the posting of commentary, isn’t development.  Nor is minor editing, as long as the changes don’t contribute to the false, misleading, or otherwise unlawful nature of the underlying information.
General Steel pointed out that the posts weren’t submitted by third parties, but rather created by Chumley.  However, “nothing in § 230 or the relevant case law limits § 230 immunity to information submitted directly to a website by a third party.”  Here, everything came from the internet, so cases finding that §230 didn’t cover publication of material submitted to an ISP that was not intended for public distribution were irrelevant.  Thus, the links received § 230 immunity, and so did the summaries, because the addition of “U.S. District Court” was inconsequential.  General Steel claimed that the excerpts highlighted inflammatory and disparaging parts of the documents.  (With respect to the arbitration, a false light-like theory of responsibility for development would make sense to me—it’s kind of like editing out the “not” in an otherwise nondefamatory statement.) 
At many points, the defendants created their own summaries of allegations made by others.  Defendants also didn’t post a court order finding them liable for willful false advertising targeting General Steel.  Still, General Steel didn’t claim that the links went to inaccurate versions of the documents, or that the page contained inaccurate quotations.  Ultimately, the court found that defendants developed some of the information:
To the extent the defendants chose certain summaries and quotations describing the referenced court proceedings, failed to accurately describe the proceedings as a whole, and posted those quotations and summaries on the IRLM Page, the defendants developed the information they posted on that page. These editorial choices can be seen as a choice to emphasize unflattering allegations made against General Steel without summarizing or quoting information which reflects the nature and outcome of the court proceeding described…. Highlighting the unflattering allegations without providing other relevant information reasonably can be seen as contributing to the allegedly defamatory or otherwise actionable nature of the underlying information. Such actions specifically encourage development of what is allegedly unlawful or legally actionable about the content and, thus, constitutes development of the information for the purpose of § 230 immunity.
However, certain summaries and quotations were “reasonably accurate” summaries of the underlying information developed by third parties, and thus covered by §230. “By organizing, quoting, and summarizing this information, the defendants did nothing to specifically encourage the development of what General Steel claims is unlawful or legally actionable about the underlying content.”  By contrast, other posts highlighted content that was allegedly unlawful/actionable.
The search ads also weren’t subject to §230 immunity, since the defendants created and developed their content.
General Steel argued that Lanham Act claims were exempt from §230 immunity because of §230’s IP exclusion.  The court ruled that General Steel’s claim was brought under §43(a)(1)(A), but then called it a “false advertising claim,” which it is—and thus mistakenly held that General Steel’s Lanham Act claims weren’t subject to §230: “Particularly given this [statutory placement of false advertising language in a trademark law], a false advertising claim under § 1125 implicates trademark law, an ilk of intellectual property law.”  Sigh (though it’s not clear this matters to the outcome, since the court seemed to focus its analysis on the content it found defendants to have created).
For similar reasons, the court found the fair report privilege applicable to some of the posts, not others.
Truth: defendants argued that “Rock Limo Lost $125,383 in Deposits” was true.  But this created a material issue of fact about whether the statement clearly implied that the loss resulted from wrongful behavior by General Steel.  The court found that disputed issues of material fact about the ads precluded summary judgment on the grounds of truth for the Lanham Act/tortious interference claims.
Defendants argued that General Steel failed to present evidence of customer confusion.  Given General Steel’s theory of intentional deception, no extrinsic evidence of confusion would be required.  Likewise, General Steel’s experts provided sufficient evidence of the loss of one or more contracts to take the tortious interference claim to trial.

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