Dirty Laundry Hanging Out On The Web

No more, of course. New media has dramatically altered the extent and the nature of publicly aired customer complaints ' any aggrieved customer with Internet has access to an almost limitless virtual audience for complaints. By now, there even are searchable Web sites that collect and organize so-called “gripe” sites (see, www.webgripesites.com).

For this reason, online objections to a corporation's products or services ' posted on “complaint” or “gripe” sites by former employees or consumers, or put elsewhere on the Web ' have a greater potential to be significantly more damaging to the target's operations than more traditional expressions of unhappiness.

In the Legal Forum

In recent years, the courts have addressed numerous cases against alleged speakers of the negative on the Internet. And there is general consensus that under '230 of the Communications Decency Act of 1996 (“CDA”), Internet service providers and other intermediaries are immune from liability for such postings and any tort liability (see, 47 U.S.C. '230, which states, “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”; and Barrett v. Rosenthal, 40 Cal. 4th 33 (2006)).

In so determining, the courts have referred to the congressional record for the CDA, which reflects that members of Congress made a conscious choice not to deter harmful online speech by penalizing companies that provide a forum for that speech. See, Gibson v. Craigslist, 2009 U.S. Dist. LEXIS 53246 (S.D.N.Y. June 15, 2009).

However, less clear are the cases that are or can be brought against the speakers themselves. For example, there is the case of two Yale Law School students who claimed they were defamed and threatened through anonymous postings. Their complaint apparently settled recently for undisclosed amounts with the subset of the individuals that they were able to identify as the posters. Although the terms of the settlement are confidential, they appear to permit the plaintiff further recourse should additional conduct by the settling posters warrant it (see, www.courant.com/news/connecticut/hc-autoadmit1022.artoct22,0,720137,print.story).

Despite their uphill battle, companies continue to bring actions in an effort to block negative commentary from being posted on the Web. Most recently, Manhattan Supreme Court Justice Judith J. Gische issued a decision rejecting a complaint arising from alleged Internet defamation. The court's decision in Intellect Art Multimedia Inc. v. Milewski, No. 117024/08 (Sup. Ct. N.Y. Co. Sept. 11, 2009), illustrates the difficulties for companies trying to block online content that they perceive as negative. It may also demonstrate that, as a practical matter, businesses should take other courses of action when facing these kinds of situations.

The Intellect Art case arose after the individual defendant allegedly posted a complaint expressing his displeasure with the services of the plaintiff, Intellect Art Multimedia Inc., on a site known as Ripoff Report. The site, www.ripoffreport.com, states, among other things, that:

By filing a Ripoff Report it's almost like creating your own Web site. And, it's FREE. Your Ripoff Report will be discovered by millions of consumers! Search engines will automatically discover most reports, meaning that within just a few days or weeks, your report may be found on search engines when consumers search, using key words relating to your Ripoff Report.

In Intellect Art, the plaintiff alleged it operated a college-level summer program under the trade name Swiss Finance Academy (“SFA”) that offered course work in finance, business consulting and entrepreneurship. The plaintiff claimed the individual defendant participated in SFA's Summer 2008 program in Lugano. It alleged that the defendant “engaged in disruptive behavior, including, but not limited to being rude and insulting to plaintiff's staff members and inappropriate behavior in class.”

The plaintiff claimed that, as a result of that behavior and the plaintiff's failure to pay the full tuition, he was expelled from the program. On July 19, 2008, the plaintiff alleged, a report was posted on ripoffreport.com regarding SFA. In that posting, the author, “Lilly,” accused the plaintiff of being a “bait & switch company,” making “false promises,” and being run “by two incompetent people.” The report also contained the following statements:

• “[i]t is a 100 percent bait and switch scam”;
• “[t]hey tell you where the location is then a week before the program starts they change the location and say no refunds whatsoever”;
• “[t]hey tell you a week before you come you must bring your OWN pillow, sheets, comforter and shower towels”;
• “all we got for breakfast was TOAST”;
• “everything they taught was a 'JOKE'”;
• “if I took a poll from the 150 people that went this summer 130 people would ask for a refund cause they know they got worked”;
• “[e]ven there [sic] phone number is fake”;
• “its [sic] all a joke and a scam that needs to be stopped”; and
• “[a]lmost all of the people where [sic] very disappointed with the program.”

The plaintiff asserted that the individual defendant was the author of the July 19, 2008, posting. The plaintiff also asserted a claim against “John Doe” defendants for subsequent postings made by individual(s) using different aliases, and sought to compel identification of the John Does.

It also contended that the site operator, Xcentric Ventures, LLC, played “a significant role in creating, developing, or transforming the information provided by its users” and that “[t]he very name and nature” of Ripoff Report was designed to “elicit” and “prompt” users to publish “defamatory information.” Moreover, the plaintiff claimed that because of the posting, the enrollment in its Summer 2009 program fell by approximately 70%.

In its complaint, the plaintiff asserted a variety of claims, including for defamation against the individual defendant, and against Xcentric and products liability against Xcentric. The defendants moved to dismiss.

Defamation Claims

The court explained that defamation was injury to one's reputation, either by written expression (libel) or oral expression (slander) (see, Morrison v. National Broadcasting Co., 19 N.Y.2d 453 (1967)), and that to prove a claim for libel, a plaintiff must demonstrate a false and defamatory statement of fact regarding the plaintiff that was published to a third party and that resulted in injury to the plaintiff (see, Idema v. Wager, 120 F.Supp.2d 361 (S.D.N.Y. 2000)).

The court added that a claim for defamation could be defeated by a showing that the published statements were substantially true (see, Newport Service & Leasing v. Meadowbrook Distributing Corp., 18 A.D.3d 454 (2d Dept 2005)), or that the material, when read in context, would be perceived by a reasonable person to be nothing more than a matter of personal opinion (see, Immuno AG v. Moor-Jankowski, 77 N.Y.2d 235 (1991)). Moreover, the court continued, in the context of statements pertaining to issues of consumer advocacy, courts have been reluctant to stifle someone's criticism of goods or services (see, Tzougrakis v. Cyveillance Inc., 145 F.Supp.2d 325 (S.D.N.Y. 2001), and Themed Restaurants Inc. v. Zagat Survey, LLC, 21 A.D.3d 826 (1st Dept 2005)).

The court then held that the defamation claim against the individual defendant had to be dismissed “because the challenged speech [was] merely an alleged statement of [the defendant's] personal opinion about the quality of services provided by plaintiff.”

Relying on the factors cited by the New York Court of Appeals in Brain v. Richardson, 87 N.Y.2d 46 (1995), for distinguishing fact from opinion ' namely, whether the language used has a precise meaning or whether it is indefinite or ambiguous; whether the statement is capable of objectively being true or false; and the full context of the entire communication or the broader social context surrounding the communication ' the court found that the Web site presented to others “as a personal statement by its maker.”

According to the court, the facts on which the maker based his conclusions were the maker's “experiences in dealing with plaintiff and while attending plaintiff's SFA program in June 2008.” The court found that the alleged defamatory statements in the complaint were susceptible “to ambiguous meanings,” and that
“[l]oose, figurative or hyperbolic statements, even if deprecating to the plaintiff,” were not actionable.

The court then stated that perhaps most compelling was the fact that the site, “when viewed in its full context,” revealed that the individual defendant was “a disgruntled consumer” and that his statements reflected his personal opinion based on his personal dealing with the plaintiff. They were “subjective expressions of consumer dissatisfaction” with the plaintiff and not actionable because they were the defendant's personal opinion.

The court also dismissed the defamation claim against Xcentric, initially ruling that the plaintiff failed to adequately plead defamation, which required that the plaintiff specifically plead the words that were the subject of the dispute. It is interesting to note that the court found that the plaintiff had alleged sufficient facts to show that Xcentric transacted business within New York through its Ripoff Report site, given the high level of interactivity of the site, the undisputed fact that information was freely exchanged between site users and Xcentric's solicitation of companies and individuals to “resolve” the complaints levied against them on Ripoff Report.

Plaintiff's general claim that Xcentric created defamatory headings for the individual defendant's purported posting did not substitute for specific pleading of the exact words that were used.

Moreover, the court found that the defamation claim against Xcentric had to be dismissed because, to the extent that it was premised on statements made by the individual defendant or the John Doe defendants, Xcentric was protected by the CDA.

Product Liability Claim

The court also dismissed the plaintiff's product-liability claim against Xcentric. It reasoned that the plaintiff failed to demonstrate that, as a matter of law, the Ripoff Report site was a product and, so, that Xcentric should be held strictly liable for any “injury” caused thereby.

The court rejected the plaintiff's argument that because the national trend was moving toward a more expansive definition of the term “product” in product-liability analysis, it had to find that the site in the context of plaintiff's claims was a “product” that would otherwise trigger the imposition of strict liability.

Here, the court found, the plaintiff's claims arose from the fact that the Web site was a service, that is, a forum for third-party expression. In any event, the court found that the plaintiff had not alleged that the site was in a defective condition, an essential element for recovery.

In essence, it was the individual defendant's purported posting that gave rise to the plaintiff's injuries, not Xcentric's site itself.

The claim that Ripoff Report was defectively designed to elicit defamatory statements from its users was “devoid of commonsense and reasoning” and was “unsupported by law,” the court ruled.

Amended Pleadings

The court summarily denied the plaintiff's application to add a plethora of alternative theories to substitute for the dismissed defamation actions that were not cognizable.

It concluded that it would be futile to permit the plaintiff to amend the complaint in an effort to resurrect its claims against Xcentric by pleading such causes of action as tortious interference with prospective business relationships or contract, breach of contract, common law negligence, or injurious falsehood.

The court also refused to compel Xcentric to identify the John Doe posters because, in light of the ruling that the postings were not actionable defamation, the plaintiff's interest in learning of the posters' identity did not overcome their interests in maintaining anonymity.

Finally, the court remanded to the Civil Court the only remaining claim ' plaintiff's $7,000 breach-of-contract claim against the individual defendant for the tuition he allegedly still owed. The court thereby rid itself of the entire controversy.

Conclusion

There well may be examples of consumer Web postings that are defamatory and that can subject the posters to liability and damages.

However, procedural hurdles, such as jurisdiction, conflicts of law and preemption by the Communications Decency Act, plus the substantive disfavor that courts have thus far demonstrated to site defamation claims, suggest that companies in these circumstances might want to consider alternatives to litigation. Such alternatives range from reaching out to the distressed consumer to using technology to get their own positions and viewpoint onto the Web.

All cases must be individually evaluated, but those kinds of steps generally might lead to a more positive resolution than proceeding in court.

Even the best-run companies, including cutting-edge, ahead-of-the-market, savvy-leader fueled e-commerce outfits, occasionally have dissatisfied customers.

Traditionally, a customer dispute was commenced ' and on most occasions concluded ' in private, whether through phone calls, letters or the aid of an uninterested, third-party mediator. In some cases, businesses have ombudsmen whose job is to keep customers happy and to provide redress for practices that produce the occasional dissatisfied customer.

In all but the most unusual circumstances (such as class actions or broadcast news' consumer-advocacy segments), publicity for any one consumer's complaints was limited by the loudness of his or her voice on the “street corner” and the limited access that a typical citizen had to traditional media.

No more, of course. New media has dramatically altered the extent and the nature of publicly aired customer complaints ' any aggrieved customer with Internet has access to an almost limitless virtual audience for complaints. By now, there even are searchable Web sites that collect and organize so-called “gripe” sites (see, www.webgripesites.com).

For this reason, online objections to a corporation's products or services ' posted on “complaint” or “gripe” sites by former employees or consumers, or put elsewhere on the Web ' have a greater potential to be significantly more damaging to the target's operations than more traditional expressions of unhappiness.

In the Legal Forum

In recent years, the courts have addressed numerous cases against alleged speakers of the negative on the Internet. And there is general consensus that under '230 of the Communications Decency Act of 1996 (“CDA”), Internet service providers and other intermediaries are immune from liability for such postings and any tort liability ( see , 47 U.S.C. '230, which states, “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”; and Barrett v. Rosenthal , 40 Cal. 4th 33 (2006)).

In so determining, the courts have referred to the congressional record for the CDA, which reflects that members of Congress made a conscious choice not to deter harmful online speech by penalizing companies that provide a forum for that speech. See, Gibson v. Craigslist, 2009 U.S. Dist. LEXIS 53246 (S.D.N.Y. June 15, 2009).

However, less clear are the cases that are or can be brought against the speakers themselves. For example, there is the case of two Yale Law School students who claimed they were defamed and threatened through anonymous postings. Their complaint apparently settled recently for undisclosed amounts with the subset of the individuals that they were able to identify as the posters. Although the terms of the settlement are confidential, they appear to permit the plaintiff further recourse should additional conduct by the settling posters warrant it (see, www.courant.com/news/connecticut/hc-autoadmit1022.artoct22,0,720137,print.story).

Despite their uphill battle, companies continue to bring actions in an effort to block negative commentary from being posted on the Web. Most recently, Manhattan Supreme Court Justice Judith J. Gische issued a decision rejecting a complaint arising from alleged Internet defamation. The court's decision in Intellect Art Multimedia Inc. v. Milewski, No. 117024/08 (Sup. Ct. N.Y. Co. Sept. 11, 2009), illustrates the difficulties for companies trying to block online content that they perceive as negative. It may also demonstrate that, as a practical matter, businesses should take other courses of action when facing these kinds of situations.

The Intellect Art case arose after the individual defendant allegedly posted a complaint expressing his displeasure with the services of the plaintiff, Intellect Art Multimedia Inc., on a site known as Ripoff Report. The site, www.ripoffreport.com, states, among other things, that:

By filing a Ripoff Report it's almost like creating your own Web site. And, it's FREE. Your Ripoff Report will be discovered by millions of consumers! Search engines will automatically discover most reports, meaning that within just a few days or weeks, your report may be found on search engines when consumers search, using key words relating to your Ripoff Report.

In Intellect Art, the plaintiff alleged it operated a college-level summer program under the trade name Swiss Finance Academy (“SFA”) that offered course work in finance, business consulting and entrepreneurship. The plaintiff claimed the individual defendant participated in SFA's Summer 2008 program in Lugano. It alleged that the defendant “engaged in disruptive behavior, including, but not limited to being rude and insulting to plaintiff's staff members and inappropriate behavior in class.”

The plaintiff claimed that, as a result of that behavior and the plaintiff's failure to pay the full tuition, he was expelled from the program. On July 19, 2008, the plaintiff alleged, a report was posted on ripoffreport.com regarding SFA. In that posting, the author, “Lilly,” accused the plaintiff of being a “bait & switch company,” making “false promises,” and being run “by two incompetent people.” The report also contained the following statements:

• “[i]t is a 100 percent bait and switch scam”;
• “[t]hey tell you where the location is then a week before the program starts they change the location and say no refunds whatsoever”;
• “[t]hey tell you a week before you come you must bring your OWN pillow, sheets, comforter and shower towels”;
• “all we got for breakfast was TOAST”;
• “everything they taught was a 'JOKE'”;
• “if I took a poll from the 150 people that went this summer 130 people would ask for a refund cause they know they got worked”;
• “[e]ven there [sic] phone number is fake”;
• “its [sic] all a joke and a scam that needs to be stopped”; and
• “[a]lmost all of the people where [sic] very disappointed with the program.”

The plaintiff asserted that the individual defendant was the author of the July 19, 2008, posting. The plaintiff also asserted a claim against “John Doe” defendants for subsequent postings made by individual(s) using different aliases, and sought to compel identification of the John Does.

It also contended that the site operator, Xcentric Ventures, LLC, played “a significant role in creating, developing, or transforming the information provided by its users” and that “[t]he very name and nature” of Ripoff Report was designed to “elicit” and “prompt” users to publish “defamatory information.” Moreover, the plaintiff claimed that because of the posting, the enrollment in its Summer 2009 program fell by approximately 70%.

In its complaint, the plaintiff asserted a variety of claims, including for defamation against the individual defendant, and against Xcentric and products liability against Xcentric. The defendants moved to dismiss.

Defamation Claims

The court explained that defamation was injury to one's reputation, either by written expression (libel) or oral expression (slander) ( see , Morrison v. National Broadcasting Co. , 19 N.Y.2d 453 (1967)), and that to prove a claim for libel, a plaintiff must demonstrate a false and defamatory statement of fact regarding the plaintiff that was published to a third party and that resulted in injury to the plaintiff ( see , Idema v. Wager , 120 F.Supp.2d 361 (S.D.N.Y. 2000)).

The court added that a claim for defamation could be defeated by a showing that the published statements were substantially true ( see , Newport Service & Leasing v. Meadowbrook Distributing Corp. , 18 A.D.3d 454 (2d Dept 2005)), or that the material, when read in context, would be perceived by a reasonable person to be nothing more than a matter of personal opinion ( see , Immuno AG v. Moor-Jankowski , 77 N.Y.2d 235 (1991)). Moreover, the court continued, in the context of statements pertaining to issues of consumer advocacy, courts have been reluctant to stifle someone's criticism of goods or services ( see , Tzougrakis v. Cyveillance Inc. , 145 F.Supp.2d 325 (S.D.N.Y. 2001), and Themed Restaurants Inc. v. Zagat Survey, LLC , 21 A.D.3d 826 (1st Dept 2005)).

The court then held that the defamation claim against the individual defendant had to be dismissed “because the challenged speech [was] merely an alleged statement of [the defendant's] personal opinion about the quality of services provided by plaintiff.”

Relying on the factors cited by the New York Court of Appeals in Brain v. Richardson , 87 N.Y.2d 46 (1995), for distinguishing fact from opinion ' namely, whether the language used has a precise meaning or whether it is indefinite or ambiguous; whether the statement is capable of objectively being true or false; and the full context of the entire communication or the broader social context surrounding the communication ' the court found that the Web site presented to others “as a personal statement by its maker.”

According to the court, the facts on which the maker based his conclusions were the maker's “experiences in dealing with plaintiff and while attending plaintiff's SFA program in June 2008.” The court found that the alleged defamatory statements in the complaint were susceptible “to ambiguous meanings,” and that
“[l]oose, figurative or hyperbolic statements, even if deprecating to the plaintiff,” were not actionable.

The court then stated that perhaps most compelling was the fact that the site, “when viewed in its full context,” revealed that the individual defendant was “a disgruntled consumer” and that his statements reflected his personal opinion based on his personal dealing with the plaintiff. They were “subjective expressions of consumer dissatisfaction” with the plaintiff and not actionable because they were the defendant's personal opinion.

The court also dismissed the defamation claim against Xcentric, initially ruling that the plaintiff failed to adequately plead defamation, which required that the plaintiff specifically plead the words that were the subject of the dispute. It is interesting to note that the court found that the plaintiff had alleged sufficient facts to show that Xcentric transacted business within New York through its Ripoff Report site, given the high level of interactivity of the site, the undisputed fact that information was freely exchanged between site users and Xcentric's solicitation of companies and individuals to “resolve” the complaints levied against them on Ripoff Report.

Plaintiff's general claim that Xcentric created defamatory headings for the individual defendant's purported posting did not substitute for specific pleading of the exact words that were used.

Moreover, the court found that the defamation claim against Xcentric had to be dismissed because, to the extent that it was premised on statements made by the individual defendant or the John Doe defendants, Xcentric was protected by the CDA.

Product Liability Claim

The court also dismissed the plaintiff's product-liability claim against Xcentric. It reasoned that the plaintiff failed to demonstrate that, as a matter of law, the Ripoff Report site was a product and, so, that Xcentric should be held strictly liable for any “injury” caused thereby.

The court rejected the plaintiff's argument that because the national trend was moving toward a more expansive definition of the term “product” in product-liability analysis, it had to find that the site in the context of plaintiff's claims was a “product” that would otherwise trigger the imposition of strict liability.

Here, the court found, the plaintiff's claims arose from the fact that the Web site was a service, that is, a forum for third-party expression. In any event, the court found that the plaintiff had not alleged that the site was in a defective condition, an essential element for recovery.

In essence, it was the individual defendant's purported posting that gave rise to the plaintiff's injuries, not Xcentric's site itself.

The claim that Ripoff Report was defectively designed to elicit defamatory statements from its users was “devoid of commonsense and reasoning” and was “unsupported by law,” the court ruled.

Amended Pleadings

The court summarily denied the plaintiff's application to add a plethora of alternative theories to substitute for the dismissed defamation actions that were not cognizable.

It concluded that it would be futile to permit the plaintiff to amend the complaint in an effort to resurrect its claims against Xcentric by pleading such causes of action as tortious interference with prospective business relationships or contract, breach of contract, common law negligence, or injurious falsehood.

The court also refused to compel Xcentric to identify the John Doe posters because, in light of the ruling that the postings were not actionable defamation, the plaintiff's interest in learning of the posters' identity did not overcome their interests in maintaining anonymity.

Finally, the court remanded to the Civil Court the only remaining claim ' plaintiff's $7,000 breach-of-contract claim against the individual defendant for the tuition he allegedly still owed. The court thereby rid itself of the entire controversy.

Conclusion

There well may be examples of consumer Web postings that are defamatory and that can subject the posters to liability and damages.

However, procedural hurdles, such as jurisdiction, conflicts of law and preemption by the Communications Decency Act, plus the substantive disfavor that courts have thus far demonstrated to site defamation claims, suggest that companies in these circumstances might want to consider alternatives to litigation. Such alternatives range from reaching out to the distressed consumer to using technology to get their own positions and viewpoint onto the Web.

All cases must be individually evaluated, but those kinds of steps generally might lead to a more positive resolution than proceeding in court.