Wednesday, May 29, 2013

Creation of allegedly fake website leads to broad discovery of internet activity

Corizon, Inc. v. Wexford Health Sources, Inc., 2013 WL 791788 (E.D. Mo.)

The parties compete to provide healthcare services for correctional facilities.  Wexford allegedly directed its PR firm CHT to create a website at (plaintiff is also known as CMS) and controlled the content, which allegedly included false statements, many of which purported to be from a “CMS insider” who criticized plaintiff's business practices and ethics.

Wexford moved to dismiss Corizon’s request for punitive damages as unavailable under the Lanham Act or Maryland common law unfair competition.  The court concluded that Missouri law applied; Wexford argued that punitive damages were still unavailable because they required an underlying award of actual damages, which Corizon wasn’t seeking.  Corizon argued that its requests for attorneys’ fees, costs of investigating the origin of the website, and corrective advertising constituted actual damages.  The court agreed that corrective advertising costs were compensatory, and met the definition of actual damages.  Thus, punitive damages might be available under state law, though not under the Lanham Act.

The court also granted Corizon’s motion to compel responses to requests for information regarding other websites defendants created, authored, or maintained about Corizon, along with postings or statements on other sites about Corizon.  Given Corizon’s request for punitive damages and the resulting need to demonstrate defendants’ evil motive or reckless indifference, evidence relating to conduct “similar to” the creation of was relevant for punitive damages and injunctive relief, whether or not the websites were ultimately made publicly available.  (Some of the witnesses already deposed testified that they didn’t remember which comments they’d made, though there was evidence that certain comments came from the IP address of a hotel at which one of them was staying.  Individual comments can be hard to remember, especially if they are part of a broader PR campaign, as these appear to have been; yet another reminder of the new perils of targeted advertising/nonbroadcast promotional claims.)

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