Roommates.com Infects the Tenth Circuit–FTC v. Accusearch

By Eric Goldman

F.T.C. v. Accusearch Inc., 2009 WL 1846344 (10th Cir. June 29, 2009). My blog post on the district court opinion.

Introduction

June has been an active month for 230 jurisprudence. Cases this month include Doe IX v. MySpace (actually a May opinion but I blogged it in June), Gibson v. Craigslist, the Barnes v. Yahoo amendment, and Zango v. Kaspersky–all defense-favorable outcomes. As I mentioned in my post on the Doe IX case, the Ninth Circuit Roommates.com en banc decision has not cast a long shadow on 230 jurisprudence; it has been cited less than 10 times in the past year, and prior to yesterday, only once in favor of the plaintiff. Unfortunately, those good times may be over. The Tenth Circuit has largely adopted the rule and reasoning of Roommates.com in FTC v. Accusearch, effectively making Roommates.com the governing law west of the Rockies.

The FTC’s Enforcement Action Against Accusearch

This is a prime example of bad facts making bad law. Accusearch runs Abika.com, a website that tried to style itself as a matchmaker between customers seeking, and vendors selling, private/personal records about people. The specific records at issue here contain “customer proprietary network information” (CPNI), the metadata about telephone calls. CPNI resales were probably illegal at the relevant time periods; following the Hewlett-Packard pretexting scandals, Congress cleared up any confusion and criminalized the resale of CPNI via the Telephone Records and Privacy Protection Act of 2006, 18 U.S.C. §1039.

If Abika.com was structured as a pure advertising site to facilitate off-site transactions, like Craigslist or eBay, perhaps Abika.com would have a stronger case for qualifying for 47 USC 230 protection for the sale and delivery of CPNI reports from Abika’s vendors to their customers. However, Abika.com apparently was structured as a classic retailer in that it advertised the third party reports, processed customer payments, and delivered the subsequent reports to customers as if the reports were its own (Abika.com even stripped out the third party vendor’s identifying information). So the veneer of Abika.com simply being a passive intermediary between customers and vendors may have been overwhelmed by Abika’s active and overwhelming presence in the transaction.

The FTC went after Accusearch claiming that Abika.com was engaged in “unfair” trade practices under the FTC Act. (Note: the FTC has the power to pursue unfair commercial practices, even when they are not deceptive. However, the standards for “unfair” are amorphous, making such enforcements potentially problematic and controversial. Fortunately, the FTC generally wields this power sparingly). Accusearch’s principal defense was 47 USC 230 on the theory that Accusearch procures the CPNI reports from third party vendors and merely republishes the third party reports to Accusearch’s customers.

It’s really hard to defend CPNI resales, and the court says that Accusearch had the requisite scienter that such resales were illegal/impermissible. With the combination of scienter, illegal transactions, active intermediation and the FTC as a plaintiff, it really seemed to me that Accusearch had no chance of winning this case. But this combination also tempted the judges to use loose reasoning to reach that unavoidable result.

The Opinion’s Discussion of 47 USC 230

A defendant must establish three elements of a successful 230 defense, and the majority opinion muddles the discussion on all of them:

1) “provider or user of an interactive computer service.” Based on the funky definition of ICS, the FTC argued that websites qualify for 230 protection only when they enable user-to-user communications. The majority declines to accept this argument but doesn’t reject it outright either, basing its decision on another prong. Although the statute could be clearer (like, for example, saying that websites qualify for 230 protection), the caselaw is extremely thick that every website qualifies for 230 protection. Unfortunately, with the majority’s pathetic response, I wouldn’t be surprised if plaintiffs unnecessarily put this issue into play in future 10th circuit cases.

2) “publisher or speaker of content” The concurring judge argues for a speech/conduct distinction and argues that the FTC is pursuing Accusearch for its conduct, not its speech. The speech/conduct distinction is almost meaningless in this case given that Accusearch was reselling information, which means that Accusearch was electronically republishing that information. The majority disagrees with the speech/conduct distinction but otherwise doesn’t discuss this prong.

3) “created or developed by another information content provider.” Adopting the arguments from the Roommates.com case, the majority says that Accusearch didn’t “create” the reports but it was “responsible” for “developing” the reports. To reach this conclusion, the majority defines “responsible” and “develop”:

* citing old French, “develop” means to “unwrap.” Huh? Thus, “when confidential telephone information was exposed to public view through Abika.com, that information was ‘developed.’” Does this definition make “develop” a synonym for “publish”?

* the majority initially says when “responsible” doesn’t mean: “to be ‘responsible’ for the development of offensive content, one must be more than a neutral conduit for that content.” This reference to “neutral conduit” parallels the Roommates.com case, which used the term “neutral tools” five times but never defined the term once.

The majority then says “a service provider is ‘responsible’ for the development of offensive content only if it in some way specifically encourages development of what is offensive about the content.” This phrasing allows the court to distinguish the old 10th Circuit Ben Ezra precedent, which absolved AOL of liability for republishing inaccurate stock quotes. There, AOL didn’t ask its vendors to give it false reports; here, the majority says that Accusearch asked its vendors to get information it knew was illegal to obtain:

Accusearch solicited requests for such confidential information and then paid researchers to obtain it. It knowingly sought to transform virtually unknown information into a publicly available commodity. And as the district court found and the record shows, Accusearch knew that its researchers were obtaining the information through fraud or other illegality.

Implications

I doubt the literal holding of this case is all that troubling to most folks. If you’re in the business of reselling illicit phone records and the FTC comes calling, 230 isn’t likely to help you.

However, this opinion could be problematic for any online retailers who thought they could use 230 to insulate themselves. It’s never been clear how much 230 protects online retailers when they are making sales for their own account (as opposed to advertising services like eBay or Craigslist), and this opinion raises the specter that 230 won’t apply even when “retailing” involves republishing third party content. Indeed, the loose language means the case could be a major carveback of 230′s coverage in the Tenth Circuit. As the concurrence points out, the majority’s reading is “an unnecessary extension of the CDA’s terms ‘responsible’ and ‘development,’ thereby widening the scope of what constitutes an ‘information content provider’ with respect to particular information under the Act.”

Then again, between its role as a retailer and the illicit nature of its goods, Accusearch was always at the periphery of 230′s coverage. Today, 230 would be irrelevant if a federal government agency pursued a CPNI reseller under the new criminal provisions in 18 U.S.C. § 1039. So I think a better interpretation of this case is that where an online provider is dabbling too close to third party illegal activity, judges simply will ignore 230 as a bailout. Framed that way, this ruling is akin to Roommates.com, which was a largely a normative judgment by the Ninth Circuit that the Fair Housing Act should trump 230 regardless of 230’s precise statutory contours.

I’ll conclude with a few more thoughts about the concurrence. Although the concurrence’s proposal to distinguish between speech and conduct wasn’t a good one, there was a useful nugget embedded in it. To bypass 230, perhaps the case could have focused on first party content published by Accusearch–namely, copy written by Accusearch advertising the availability of CPNI records, including any express or implied statements that it was reselling legitimate records. I’ve repeatedly blogged on the challenges of first-party/third-party content distinctions in 230 (see, e.g., my recent discussion about 230 and consumer protection), but in this case, I think focusing on Accusearch’s own representations may have led to a cleaner doctrinal result than the one we got.

Finally, in the concurrence’s FN5, Judge Tymkovich says:

If Accusearch had run a traditional business out of a physical location and offered similar services, it would seem the FTC would have the same unfair business practices complaint. Nothing would immunize Accusearch’s conduct had it chosen to deliver the confidential telephone records to requesters through hard copy print-outs either in person or through the mail. Accusearch’s duty to refrain from engaging in the solicitation and distribution of unlawfully-obtained confidential telephone records should not depend on the medium within which it chooses to operate.

Uh, NO. As with some other bright judges dealing with 230 cases, Judge Tymkovich has fallen into the mental trap that smart common law judges applying their powers of reasoning can simply intuit what the law should be. Congress has made it abundantly clear that it did exactly what Judge Tymkovich rejects; via 230, Congress created medium-specific rules that make some activities online permissible even if their offline analogue would not be. As challenging as it may be, judges should resist the temptation to make these kinds of normative assumptions in the face of clear Congressional intent.