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June 22, 2010
Three Gripers Get Disadvantageous Jurisdictional Appellate Rulings in Defamation Cases
By Eric Goldman
Three recent appellate rulings, coming within 8 days of each other, illustrate how hard it is for an online griper to stay out of his/her target's home court. None of these opinions are clearly wrong, but I wish courts could find better ways to ameliorate the terroram effects of litigation--especially remote litigation--on gripers.
Silver v. Brown, 2010 WL 2354123 (10th Cir. June 14, 2010)
David Silver is an investment banker at a small New Mexico investment bank, Santa Fe Capital Group. Brown, based in Florida, is CEO of GTI. GTI retained the investment bank to raise capital for it. The parties had a falling out. Brown then set up a gripe blog/website at DavidSilverSantaFe.com. The site is pretty standard for a gripesite, but allegedly Brown went out of his way to SEO the website and then offered not to launch the site if Silver refunded $6,000 that GTI had previously paid. Silver allegedly replied with legal threats, to which Brown allegedly promised to move the site offshore so it would be harder to take down. (The emails reprinted in the opinion indicate the parties used more colorful language). After the site launched, Silver made good on his threat to sue in New Mexico, but the district court dismissed for lack of jurisdiction.
The 10th Circuit reversed, citing the Calder v. Jones "Effects Test." The court says:
* Brown intended to damage Silver's reputation via the gripesite
* "Mr. Brown also expressly aimed his blog at New Mexico. It was about a New Mexico resident and a New Mexico company. The blog complained of Mr. Silver's and Santa Fe's actions in the failed business deal. Those actions occurred mainly in New Mexico. And the blog was widely available in New Mexico over the internet and all the various ways the internet may be accessed in this day and age."
* Brown knew the brunt of the injury would be felt in New Mexico.
I think this is mostly consistent with the Effects Test, but the court doesn't stop there. Instead, it expresses fear of all-powerful search engines and their effects on jurisdictional considerations:
sophisticated search engines do exist, and with their use it is becoming more and more irrelevant, for the purposes of our analysis, how many worldwide or nationwide internet connections there are, or how many men named David Silver exist in the world, because, with the use of these search engines, the people that are searching for information on this David Silver are the ones who are going to end up viewing Mr. Brown's blog. And Mr. Brown knows this, as evidenced by the concern for increased search engine optimization expressed in his e-mails. Consequently, it is clear that this is not a case of untargeted negligence that just happened to cause damage in New Mexico."
So what exactly did Brown do sealed the litigation's location in the target's home court? I can posit two alternative conclusions. Hypothesis A: he didn't do anything unusual--every griper would run afoul of this court's standard. Hypothesis B (and more likely): Brown crossed some invisible line by SEOing his site and threatening to move the site offshore (a point referenced later in the opinion). Advice to gripers: you might not want to say you're SEOing your site, but you might find ways to achieve the same result less explicitly.
Kauffman Racing Equip., L.L.C., v. Roberts, Slip Opinion No. 2010-Ohio-2551 (Ohio Sup. Ct. June 10, 2010)
This case is similar to the Silver v. Brown case. Kauffman makes high-performance aftermarket engines in its Ohio factory. Roberts, a Virginia resident, bought an aftermarket Pontiac engine. 8 months later, Roberts complained to Kauffman that the engine was defective. Kauffman offered to retrieve the engine and refund Roberts' purchase price if Kauffman had caused the defects. Instead, Kauffman claimed that the defects were due to Roberts' post-purchase modifications. Unsatisfied, starting in 2006, Roberts griped about Kauffman in forum posts at PerformanceYears.com and PontiacStreetPerformance.com and an item description on eBay Motors. From my perspective, the posts have a menacing/taunting attitude; you should check them out if you're curious why the court sided with its hometown employer. Kauffman subsequently sued Roberts in Ohio.
The court expressly bypasses the Zippo test because Roberts engaged in non-commercial activities and instead parses the state's long-arm statute. Kauffman alleged that five Ohioans read Roberts' posts. Thus, the court observes that "[d]espite the fact that Roberts’s publication of his comments did not emanate from Ohio, those comments were received in Ohio." As a backstop explanation, the court articulates a standard similar to the Calder v. Jones Effects Test, concluding that the state long-arm statute is satisfied "[w]hen defamatory statements regarding an Ohio plaintiff are made outside the state yet with the purpose of causing injury to the Ohio resident and there is a reasonable expectation that the purposefully inflicted injury will occur in Ohio," which the court apparently believes happened here.
The court then does a Constitutional due process analysis, notes Calder v. Jones, and says in language very similar to Silver v. Brown that "Roberts is not alleged to have engaged in untargeted negligence. Roberts’s Internet commentary reveals a blatant intent to harm KRE’s reputation" and Roberts knew Kauffman was in Ohio. The court summarizes all of the ways Roberts targeted his activities to Ohio:
The allegedly defamatory communications concerned KRE’s activities in Ohio. We are not dealing with a situation in which jurisdiction is premised on a single, isolated transaction. The posts detailed the transactions between Roberts and KRE. Moreover, the purchase of the engine block and subsequent transfers from Virginia to Ohio and back again served as the foundation from which this dispute arose. Roberts’s allegedly defamatory posts were predicated on his course of dealing with an Ohio resident corporation. At least five Ohio residents other than Kauffman read these postings. Finally, although KRE does business nationwide, its business reputation is centered in Ohio, because Ohio is the location of its sole base of operations. Roberts knew, and in fact intended, that the brunt of the harm caused be felt by KRE in Ohio. Thus, the focal point of the damage was Ohio, and Roberts’s actions therefore fulfill the requirement of causing a consequence in Ohio.
The dissent argues that the majority got the Calder v. Jones analysis wrong: "Roberts posted his comments on three general auto-racing websites and an auction site, none of which have any specific connection to Ohio or are more likely to be viewed by a resident of Ohio than by a resident of any other state. In fact, KRE could identify only five Ohio residents it believes actually viewed Roberts’s comments."
Thus, the dissent is concerned with the general applicability of the majority's rule to gripers: "While it is evident from Roberts’s Internet posts that he sought to discourage others from purchasing KRE’s products, any individual who posts a negative review of a product or service in a public forum arguably seeks the same objective. Subjecting all individuals to suit in Ohio who post Internet reviews — no matter how scathing — of purchases made from Ohio companies does not comport with the due process notions of 'fair play and substantial justice.'"
While I sympathize with the dissent's inclinations, I think the majority is closer to the current state of the law. Roberts appears to differ from an average online consumer who posts a negative product review in at least three ways. First, Roberts posted across multiple online fora, expanding the different audiences who would see the message. Second, Roberts appears to have sought out the focused community of folks interested in high-performance aftermarket Pontiac engines, and I suspect everyone knows everyone in that community--in which case, one high-profile community member calling out a key vendor is undoubtedly going to affect the entire community. Third, the specific wording of Roberts' posts suggested that he was on a vendetta/crusade.
Even so, the most remarkable thing about this case is that after four years of litigation and three court rulings, the litigation is still only in the preliminary stages. We now know where the case can be heard, but we have learned nothing about its substantive merits. Presumably, it will take more years of litigation to reach a final disposition. Given the associated financial expense and diversion of managerial attention, I can't believe that Kauffman's suit against Roberts is a rational profit-maximizing move.
Marshall, a Washington resident, operates tabathamarshall.com, a blog on consumer issues. In 2007, she made a critical post about VeriResume, an ISC operation. ISC sued her for defamation in its home court of Florida. The federal district court dismissed for lack of jurisdiction. On appeal, the Eleventh Circuit certified a question to the Florida Supreme Court. The Supreme Court restated the certified question to be:
DOES A NONRESIDENT COMMIT A TORTIOUS ACT WITHIN FLORIDA FOR PURPOSES OF SECTION 48.193(1)(b) WHEN HE OR SHE MAKES ALLEGEDLY DEFAMATORY STATEMENTS ABOUT A COMPANY WITH ITS PRINCIPAL PLACE OF BUSINESS IN FLORIDA BY POSTING THOSE STATEMENTS ON A WEBSITE, WHERE THE WEBSITE POSTS CONTAINING THE STATEMENTS ARE ACCESSIBLE AND ACCESSED IN FLORIDA?
As rephrased, the court answers the question "yes," saying "posting defamatory material on a website alone does not constitute the commission of a tortious act within Florida for purposes of section 48.193(1)(b), Florida Statutes. Rather, the material posted on the website about a Florida resident must not only be accessible in Florida, but also be accessed in Florida in order to constitute the commission of the tortious act of defamation within Florida under section 48.193(1)(b)."
Superficially, this answer makes sense. It's hard to say any legally significant activity occurred in Florida if no one in Florida read the content. But the court's answer only articulates a very low minimum baseline—one that will be satisfied in almost every case. Even relatively obscure web content is likely to be read by people in every state. It may be tricky for the plaintiff to make this showing, at least without evidentiary discovery, but the Florida Supreme Court's standard otherwise supports very few jurisdictional challenges.
Furthermore, the answer is incomplete. The Florida Supreme Court only interpreted the state long-arm statute, not the Constitutional due process overlay--which the court didn't address because that wasn't part of the certified question from the 11th Circuit. So effectively the court said that the state long-arm statute will be easily satisfied in online defamation cases and pushed all of the gatekeeping inquiry onto the Constitutional analysis.
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