eBay Denied 230(c)(2) Defense Over Counterfeit Coin Policing

By Eric Goldman

National Numismatic Certification, LLC. v. eBay, Inc., 2008 WL 2704404 (M.D. Fla. July 8, 2008)

This is the fourth time in a week that I’m blogging about an eBay lawsuit (see the Windsor Auctions, Tiffany and StubHub postings). There must be something in the water.

I’m a little confused by the facts in this case (the opinion isn’t a model of clarity), but let me see if I can boil it down. In 2007, eBay decided to clean up its coins category by adopting a policy that sellers could designate their coins as “certified” only if they used one of four approved rating services. (Sellers can still advertise a designation under other rating services under some conditions but can’t use the word “certified”). If a seller violates this rule, then eBay will take down its listing and send an email with the subject line “eBay Listing Removed: Counterfeit Currency and Stamps.” Needless to say, some of the rival coin rating services are miffed because eBay sellers now won’t want to use their services; and the rival services think that sellers will infer from the subject line that using these alternative services mean that their coins are counterfeit, which also isn’t good for repeat business. This prompted the rival services to sue eBay and others for trade libel (and conspiracy thereof) and unfair/deceptive trade practices.

The court dismisses the case with leave to amend, but it refuses to dismiss eBay based on 47 USC 230(c)(2), the comparatively lightly litigated immunization for filtering decisions (most cases interpret 230(c)(1)). Putatively the statute could apply here because eBay adopted its certified coin policy and endorsed specific rating services to hinder the sale of counterfeit coins, so eBay’s policy filters out seller-supplied advertising of unwanted products. However, the court rejects eBay’s 230(c)(2) defense for two reasons:

1) The statute requires eBay to make “good faith” decisions. eBay says it acted in good faith, but the plaintiffs allege otherwise. The court says this can’t be resolved on a motion to dismiss.

2) The statute enumerates a list of appropriate bases for filtering, including a determination that the filtered content is “otherwise objectionable.” eBay says ads for counterfeited coins are objectionable. The court, applying the statutory interpretation principle of “ejusdem generis,” says that the term “objectionable” has to be read in the context of the previous adjectives in the list, which relate to porn and “bad” content. As a result, eBay’s efforts to stretch the word “objectionable” to cover counterfeit coin ads goes too far.

I think the court got it wrong on both fronts. Most frustratingly, the court didn’t cite to the directly relevant precedent that it should have had little trouble finding. In a footnote, it says the only 230 case it found interpreting “objectionable” was the Langdon case, which was also a defense win on a motion to dismiss, but that case didn’t sway this judge because the holding fit well with the statutorily enumerated basis of filtering for “harassing” content. Unfortunately, though, the court overlooked two other directly relevant 230(c)(2) opinions:

* the Zango v. Kaspersky lawsuit, where the court reached opposite conclusions on both the “good faith” and “objectionable” standards and granted a motion to dismiss. The Zango case is on appeal to the Ninth Circuit, and Zango made a big point in its briefs about ejusdem generis. I assume their lawyers will submit this case to the Ninth Circuit for its supplemental consideration.

* the e360Insight v. Comcast case, which agreed with the Zango case that any good faith requirement in the statute was subjective, not objective, and also granted the motion to dismiss on that basis.

Based on these two cases, the court could have (and IMO should have) required the plaintiffs to allege that eBay had no subjective basis to believe that the targeted listings were objectionable, which plaintiffs typically can’t do (at least, not in compliance with Rule 11) without discovery. So this should have been an easy dismissal for eBay.

While I think the court muffed it, I would also note that eBay’s decision to implicitly call a mischaracterized coin auction as violative of its “counterfeit” policy is a little confusing to me. There was probably a better way to word its communication to sellers. As a result, I think this ruling dovetails nicely with the Mazur case, where a different court also found that 230 didn’t protect eBay for the words it selected to describe third party behavior. Once again, this case reminds us that a website may own the words it chooses even if they characterize or describe third party behavior.