New Cyberlaw Fad–Real Estate Developers v. Griping Homebuyers

By Eric Goldman

We appear to be seeing a mini-trend of homebuilders suing griping homebuyers. Overlawyered’s Walter Olson succinctly aggregated some cases, including:

* RSA Enterprises v. Bad Business Bureau and Google, a lawsuit doomed to failure (at least in Google’s case) due to 47 USC 230.

* WBG Builders v. ConsumerAffairs.com and Garlic. Depending on the facts, ConsumerAffairs.com may be protected by 47 USC 230, but the news report indicates that WBG is suing the posters as well.

* While not exactly a developer v. buyer lawsuit, a home contractor (Sieber/SCS Contracting) sued a number of defendants for defamation based on postings to Angie’s List. According to the DC Superior Court website, Sieber v. Mattera (Case # 2007 CA 002063 B) and Sieber v. Hammock (Case # 2007 CA 001726 B) each settled a month after filing, although Hammock’s lawsuit against Sieber for contract breach is still pending (see Case # 2006 CA 006940 B). Sieber also sued Angie’s List and some other defendants for malicious interference. Sieber v. Brownstone Publishing, Case # 2007 CA 002549. I think this claim is clearly barred by 47 USC 230 if it’s based on user postings. The lawsuit was dismissed May 31 but revived; then all of the individual defendants (but not the named defendant) were dismissed June 11.

What’s going on here? First, homebuilders are wasting their time suing sites that republish buyer complaints; those lawsuits should be preempted by 47 USC 230. Second, developers appear to be a little touchy. People always complain about their homes; as readers, we know that and can evaluate others’ complaints accordingly. So a developer’s lawsuit may appear to offer moral vindication, but chances are it’s a bad economic decision (assuming the developer has legitimate reason to complain in the first place).

The latest developer v. buyer case is Taylor Building Corp. v. Benfield, 2007 WL 1748694 (S.D. Ohio June 15, 2007). This lawsuit relates to a gripe site set up at the domain name “www.taylorhomes-ripoff.com” in 2003 that was taken offline in 2004. The developer sued for defamation, tortious interference and trade dress infringement. The court carefully rejects most of the defamation claim (for being substantially truthful) and the tortious interference claim for lacking the requisite scienter. The court also rejects the trade dress claim on several grounds, including the website’s nature as a gripe site:

Benfield clearly hoped to drive customers away from Taylor by posting his complaints about the home builder. Thus, it is arguable that he intended to cause Taylor economic harm. However, in keeping with the logic of Taubman and Lamparello, the Court concludes that, even if Benfield’s use of the website was commercial, his website was a forum for criticizing the builder. Accordingly, there is no likelihood of confusion and, thus, no Lanham Act violation.

The court also rejects the initial interest confusion claim because the site didn’t sell or promote any products, and no one would be confused by a domain name containing the word “ripoff.”

Despite the significant good news for the defendant, two potentially defamatory statements survived the SJ motion. A reminder to gripers: you own your words, so pick them carefully.

Tying these cases together, it appears that developers are the latest industry to realize the power and danger that online word of mouth poses to their businesses. Coping with this revelation requires some care. Historically, publicity-enhancing lawsuits may not have been the best way to respond to negative reputational information, but in the networked era, they are almost guaranteed to be a poor choice. So developers will need to adapt their practices–and perhaps their expectations–to accommodate the modern information ecosystem.

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