Loses 47 USC 230 Motion to Dismiss–Hy Cite v.

By Eric Goldman

Hy Cite Corp. v., 2005 U.S. Dist. LEXIS 38082 (D. Ariz. Dec. 27, 2005)

This is the third 47 USC 230 ruling involving The first two were:

* MCW, Inc. v., L.L.C., 2004 WL 833595 (N.D.Tex. Apr 19, 2004).

* Whitney Information Network, Inc. v. Xcentric Ventures, LLC, 2005 WL 1677256 (MD Fla. Jul 14, 2005).

(In 2004, there was also an earlier Wisconsin district court ruling in this Hy Cite litigation involving Hy Cite’s lack of jurisdiction–note the case has moved to Arizona).

The prior two 47 USC 230 rulings were a split. The defendants lost the 47 USC 230 claim in the MCW case and won it in the Whitney case. Completing the troika, this case resembles the MCW case in its reasoning–making these defendants a rare two-time loser of a 47 USC 230 defense.

Here’s my understanding of the business. The websites ask users to submit complaints about various businesses. The website operators then post the complaints, but the operators add their own headline to the posting. The operators also write various editorials/other content they originate themselves. Once a company has been targeted by website users, the operators then approach the company and offer various recourses to the targeted company for not-insubstantial fees. (The plaintiffs allege that this latter step is extortionate).

In this case, the targeted company was Hy Cite for its “Royal Prestige” dinnerware/cookware. There were 35 user-submitted reports complaining about this brand. After Hy Cite unsuccessfully demanded redress against these postings under defamation and trademark law, Hy Cite sued. The defendants claim the 230 defense.

In rejecting the 230 defense, the court points to the following allegations:

Plaintiffs alleg[e] that wrongful content appears on the Rip-off Report website in editorial comments created by Defendants and titles to Rip-off Reports, which Defendants allegedly provide. Moreover, Plaintiffs allege that Defendants “produce original content contained in the Rip-off Reports.” Plaintiffs further allege that Defendants “solicit individuals to submit reports with the promise that individuals may ultimately be compensated for their reports.

On that basis, the court concludes that the defendants cannot claim that the information came from another information content provider.

There are 2 obvious flaws in the court’s thin analysis. First, the last allegation–that the defendants solicit content for potential compensation–should be completely irrelevant to the 230 defense. The 230 defense should apply even if the ICS pays for the content (see Blumenthal v. Drudge) and even if the ICS owns the content (see Schneider v.

Second, the court misconstrues the statutory language. An ICS isn’t liable if the content is provided by another ICP. Someone is an ICP if they are responsible, even in part, for the content. Therefore, even if the ICS could be deemed an ICP with respect to a particular content item, that item could still provided by another ICP so long as any third party was partially responsible for its development.

The court reverses this reading, treating the ICS as responsible for the content if the ICS was even partially responsible for this content. (This mistake was also made by the MCW court). Not only does this court’s reading contradict the express statutory language, but it contradicts a slew of precedent where the ICS was partially responsible for the content but still was eligible for the 230 defense (cases that come immediately to mind: Drudge, Schneider, Ramey v. Darkside Productions and the controlling 9th circuit Carafano v. Metrosplah ruling).

Despite this, I think the court got the ruling right. If the plaintiffs allege that they are suing based on content solely authored by the defendants (which apparently the plaintiffs did), then 47 USC 230 doesn’t apply to that content and the motion to dismiss should be denied. Of course, the plaintiff ultimately has to prove its facts, and the predicate condition (solely authored by the defendants) should limit the items that are appropriately within the lawsuit’s scope.

The ruling also addresses trademark/unfair competition claims. The court dismisses the Lanham Act claim because there’s no way a gripe site can divert customers (cite to Bosley). However, the court does not dismiss the common law unfair competition claim because that doctrine covers commercially-detrimental false/misleading statements.

UPDATE: The attorney for tried to post the following comment but the comments function is acting strange. Her comment:

“As the attorney who handled all three cases against Rip-off Report, I would just like to add one comment to Eric’s insightful analysis of these cases. In both cases where the decisions were against us, the court was deciding a motion to dismiss under Rule 12(b)(6). That is important because the standard by which the court considers those motions is accepting all of the allegations of the complaint as true. In those cases, the complaint alleged that Rip-off Report was responsible for or helped create the content, and that was the basis for the ruling. The next step is for us to file a motion for summary judgment, where the court actually considers the evidence instead of just accepting the allegations. In Hy Cite, we are preparing to file a motion for summary judgment and we expect it to be granted. There is no dispute that agents of Rip-off Report did not author the content at issue. The MCW case was dismissed on other grounds and there was no need to file anything further. Thanks for keeping the public posted on these important free speech cases.

Maria Crimi Speth, Esq.”

UPDATE #2: I received the following email, which I am posting without comment (the sender said he also had problems posting a reply via Typekey):


Dear Mr. Goldman:

Thank you for the opportunity to address Maria Speth’s comment here: Loses 47 USC 230 Motion to Dismiss–Hy Cite v.

While I understand that you are primarily concerned with 47 USC 230 immunity, the discussion of the Rip-Off Report misses many important facts and one crucial legal point: Please indulge me. Leave aside the allegations as to whether or not Mr. Magedson, himself authored the defamatory reports. He did, but forget that for a minute. The extortion and/or threatened extortion and/or fraud didn’t occur online. These communications occurred in email and by telephone.

Florida Statutes provide:

F.S.836.05 Threats; extortion.–Whoever, either verbally or by a written or printed communication, maliciously threatens to accuse another of any crime or offense, or by such communication maliciously threatens an injury to the person, property or reputation of another, or maliciously threatens to expose another to disgrace, or to expose any secret affecting another, or to impute any deformity or lack of chastity to another, with intent thereby to extort money or any pecuniary advantage whatsoever, or with intent to compel the person so threatened, or any other person, to do any act or refrain from doing any act against his or her will, shall be guilty of a felony of the second degree….”

This conduct is not immunized in any way shape or form by 47 USC 230. Ms. Speth conflates the two issues and thereby misleads the public into believing that her client can extort with impunity.

We proved that Mr. Magedson “creates content” on his website in order to further his extortion scheme. In fact, the nation is replete with Mr. Magedson’s extortion victims, and the Arizona Court has clearly held that threatened extortion is a predicate act in a well-pled RICO claim. The acts of extortion or threatened extortion, however, were not communicated on the website publication. No matter how factually probative the online material itself may be, CDA immunity has no relevance to the RICO claims in the Hy Cite case. Considering the legislative purposes for the CDA, and for 47 USC 230 immunity, it is clear that holding Magedson and Xcentric liable for threatened extortion will not undermine the legislative intent. I’ll spare you, the expert, a discussion of those purposes, but if you look at these and consider the nature of the extortion in this case, I am certain that you will agree that such crimes should not be protected.

Although I believe Ms. Speth incorrectly claims that authorship isn’t disputed, this misses the point that proof of authorship is not elemental to the extortion claims. There is more than one way to manipulate content to further this extortion, beyond simply authoring one’s own statements, or having third persons submit reports in furtherance of this scheme. Magedson publishes only bad reports about my company: despite the efforts of many who tried to report favorably on our company without success. He freely admits he won’t allow us to publish. Who can reasonably believe that the federal courts will sanction the use of the CDA to bar otherwise valid extortion claims?

Everyone must step back from this for a moment to consider this. Magedson and Xcentric committed the threatened extortion with communications in email and over the telephone. The comments on the website, themselves, are not the only actionable conduct.

Defamation is one act, the act of publishing, itself. Arguably there is immunity from a defamation claim where one can demonstrate a passive website with only third party “content” creation. But I can also make an excellent argument that the circumstances under which rip-off reports were filed in our case, for instance, leave no room for concluding that anyone not conspiring with Magedson could or would have authored the statements in question. To appreciate this, you would need to carefully consider the content and timing of these purported third party posts, as well as those defamatory insults which Mr. Magedson, himself, admitted to personally authoring in our case.

A far better case, however, and one that will certainly get to a jury, is the claim that Speth utterly fails to address, again, in laying her straw man. This unwillingness to address the extortion appears to be a favorite tactic of hers. The CDA website immunity simply isn’t enjoyed for torts like extortion- or murder, for instance- that are based on conduct other than the act of publishing material on a website. This should be obvious. It is intrinsic to an understanding of the law in this case because the rip-off report extortion occurs after the material has been published (and prior to other threatened future publications). The actionable conduct isn’t necessarily the publication, at all, although one should not overlook this type of claim. (In our case, Mr. Magedson was foolish enough to sign his own name to the original defamatory content about us, and in fact he later admitted authorship. I would argue that conduct of the website operator outside of the context of publishing, should also be considered in evaluating the propriety of the application of the CDA immunity, as well, but that is in regards to defamation, not extortion or threatened extortion. The claims are distinct, if not unrelated.)

The damages sought in an extortion and /or RICO claim based thereupon are unrelated to the conduct of publication, itself. Rather, it is the nefarious attempt to obtain compensation to which Rip-Off Report and its operator should and do enjoy no legal right or claim that constitutes threatened extortion. The Arizona Court said so quite clearly. The website operators have participated in a continuing crime, no element of which consists of simple publication.

It’s like someone standing at your front door handing out false stuff about you. If I offer to insert favorable material every day for a hefty fee from you, it hardly matters what media the guy at the door uses. My conduct is illegal if I have a reasonable basis to believe the guy at the door is lying. This is true even if I have no idea on earth who that third party may be. Also, whether he is using a bullhorn, pamphlets, an internet website, or smoke signals really doesn’t matter. No doubt, many coward extortionists throughout history have used “anonymous” third parties to make their threats through a variety of media. Many others have certainly threatened to refused to share a true alibi or to concoct a false one unless they were paid. The victim’s motivation, the extortionist’s mode, or the precise nature of the embarrassment or falsehood threatened- even the necessity of a falsehood- doesn’t define the crime. These are less compelling elements of extortion than the shakedown. It’s still extortion if I later shake you down to collect a fee to which I have no legal claim. There is no question as to who authored the shakedown in the Magedson case. It’s not the false stuff alone that is actionable by Hy Cite. It’s the shakedown. No matter who the “original” author is. Right? It’s the criminal intent to llegally capitalize on the secret or on the embarrassment that defines the crime, the intent to “expose any secret affecting another, or to impute any deformity or lack of chastity to another, with intent thereby to extort money or any pecuniary advantage whatsoever, or with intent to compel the person so threatened, or any other person, to do any act or refrain from doing any act against his or her will….”

Surely, Ms. Speth doesn’t feel as though Mr. Magedson’s testimonial is so precious that his victims willingly pay him. Even they claim that his methods are “extortionate”. Thus, the RICO claims survived in Hy Cite, and no civil immunity will save the Rip-Off Report. If there is still any serious disagreement on this, then perhaps the Arizona Federal Court could have been more clear in its legal analysis, but it certainly got the result right.

Really, it only makes common sense. Neither Magedson nor Xcentric should be permitted to demand fees to ameliorate defamatory content on a supposedly passive website. Think about it: the consideration and quid pro quo for the extortionate payments to Magedson are supposedly …wait… and let this sink in…the website operator’s promise of favorable content creation! Efforts to use the CDA to further this criminal scheme will inevitably fail. Ms. Speth acts like she doesn’t know this, but the fact is that this is precisely why she came to your site making these straw man arguments. She probably knows her case is very weak.

Mr. Magedson’s publications do not come strictly from third parties. He is the source of much of the more absurd material appearing on his website. That he may have conspired with others around the country whose IP addresses are also used for this purpose doesn’t change the underlying factual issue. Even were Ms. Speth and her client to somehow establish third party authorship (highly improbable inasmuch as their own “expert” testified that he has no idea who authored any of the offending material in our case), this won’t excuse or immunize threatened extortion. One may argue, as Speth tries to, that the burden is on the Plaintiff to establish authorship. I reiterate that this is not an element of the extortion claim, and therefore it should not be an element of the RICO claims for which threatened extortion is a sufficient predicate. Any other application of the law should be reversible because the extortion is so obvious and obnoxious here.

The fact finder will inevitably look at the content of the website in the context of the conduct substantiating the extortion claim and NOT after a fashion that assumes that Mr. Magedson ISN’T in the business of making money off lies about innocent individuals and businesses. No one seriously disputes the fact that he makes huge amounts of money to say nice things about those defamed on his website. In fact, our efforts first motivated him to disclose on his website that he is paid for testimonials…if you look for this you’ll now find it on his website since earlier this year. Now he also admits he doesn’t let us publish responses on his website. Consumer advocate that he is, he previously hid the source of his compensation from the public. He still asks for public donations on a web page that doesn’t disclose that he accepts money from businesses maligned on his website. How it can be argued to be a passive website under all of the circumstances is beyond me.

Obviously, one may find that Magedson and Rip-Off Report have threatened extortion without necessarily treating them as the “publisher or speaker of any information provided by another information content provider.” For instance, if I only agree to reveal the source of third party defamation if you pay me, that is extortion. If I refuse to remove the offensive material or to permit you to respond if you pay me, that is extortion. If I agree to not publish future defamation about you, but only if you pay me, that is extortion. If I suggest that I have several posts that are defamatory that I have not yet posted but will if you don’t pay me, that is extortion. The publishing of the information online and the threat to extort are distinct acts, as much as Ms. Speth would like to conflate the two torts. Who authored the extortionate emails was never in dispute. The defendants are “rare, two-time” losers under 47 USC 270 because they are extortionists, and their pathetic claim that they are merely website operators who publish only third party remarks is both factually false and legally insufficient in any event. They just bank on outlasting litigants by making litigation as costly as possible or they settle the cases brought against them, when they can. So far, their strategy has succeeded, but we’ll see how long this lasts.

In the interests of full and fair disclosure, I must add that the Rip-Off Report is still trying to silence me by publishing none-too-veiled threats against my wife, and me, on that website. (Yes, that’s my booking photo from a domestic disturbance that had nothing to do with Rip-Off Report, but they used it to try to intimidate me within days after I testified against them; scroll down to the bottom for their latest, unsuccessful, attempt to intimidate me on 3/19/06, by publishing private personal information about my wife and me and threatening us. They make the weak redaction and, in essence say to the public, “don’t threaten or commit violence to the guy in the above photo! Wink, wink; nudge, nudge.”) They’ve done this because I’ve exercised my right of free speech, first in testifying, and most recently in promoting online the legal opinions that bear directly on their illegal operation. You may recall that I wrote to you about the Hy Cite opinion when it was first published.) Also, this isn’t the first time Ms. Speth and I have knocked heads online. She took the unusual step of personally attacking my credibility online after I gave testimony in a case against Magedson and the Rip-Off Report. (7/17/2005- I attempted to debunk her claims at that time: (7/27/06- They’ll probably sue me for writing this, but rest assured I will be heard from again before all is said and done with this.

Chris McFarland, J.D.

800 527 0476 x311

PS My understanding is that the MCW case was quickly settled by confidential agreement after that opinion came down.”