Two 47 USC 230 Defense Losses–StubHub and Alvi Armani Medical

By Eric Goldman

Even though both of these cases are a little dated, they both just showed up in Westlaw in the past couple weeks. Their juxtaposition, plus the recent Woodhull case, suggests a mini-trend against 230.

NPS LLC v. StubHub, Inc., 2009 WL 995483 (Mass. Super. Ct. Jan. 26, 2009).

This case involves an interesting cat-and-mouse game between StubHub and the New England Patriots regarding resales of Patriots’ season tickets. The New England Patriots have done a number of things to clamp down on ticket resales, including stating on the ticket that they are revocable licenses, printing unique bar codes on each ticket to make them easily voidable, canceling season tickets holders who impermissibly resell them, and creating a single legitimate channel for ticket resales (operated by TicketMaster). For its part, StubHub allows ticket sellers to obscure the exact location of the seats (making it difficult for the Patriots and others to identify the offending season ticketholders without a court order, which they ultimately got) and offers quasi-insurance against StubHub-purchased tickets being denied at the gates.

Tiring of this cat-and-mouse game, the Patriots sued StubHub for several claims, including interference with contract. This ruling involves StubHub’s summary judgment motion to dismiss that claim, which the court denies.

Among StubHub’s arguments is that it is not breaking anti-scalping laws because if anyone is breaking those laws, it is StubHub’s sellers. The court rejects this argument several ways, including saying that StubHub is inducing the sellers’ illegal behavior (with a conspicuous cite to Grokster). StubHub replies that it is protected by 47 USC 230 for any seller behavior. Because of StubHub’s alleged inducement, the court, citing, says StubHub isn’t protected by 230:

there is evidence in the record that StubHub materially contributed to the illegal “ticket scalping” of its sellers. In effect, the same evidence of knowing participation in illegal “ticket scalping” that is sufficient, if proven, to establish improper means is also sufficient to place StubHub outside the immunity provided by the CDA

The case also mentions that StubHub’s variable commission gives them incentives to see sellers increase their prices and thus break the anti-scalping law (more on Massachusetts’s antiquated anti-scalping law here). In the end, the Patriots may have successfully engineered their anti-resale protections to block both sellers and facilitators like StubHub. If so, expect to see other ticket vendors jump on the bandwagon and deploy similar anti-resale techniques. Of course, the Patriots do have an authorized resale channel; I think if other ticket vendors similarly created one as well, there would be less angst about ticket resales.

Some other thoughts about this ruling:

* This is not the first time StubHub has had problems with a 230 defense. See Hill v. StubHub (but compare the Fehrs case)..

* To my knowledge, this is the first and only case so far to favorably cite the case for the plaintiff. Thus far, I have seen about a half-dozen cases citing for the defense.

* To my knowledge, this is the first case to expressly link the Grokster “inducement” standard with a possible 230 exclusion. While I am troubled by any 230 defense loss, an “inducement” theory does a nice job explaining a possible common theme between, the Woodhull case and this case. At the same time, an “inducement” exclusion to 230 could create significant trouble for future 230 defenses, so I am hoping these cases are the exception rather than an emerging rule.

* The specific facts at issue here (the intentional interference claim) isn’t very likely to arise in many cases. At the same time, it appears that a prima facie case of intentional interference with contract may inevitably satisfy any “inducement” exclusion to 230. As a result, this case opens up a new path for plaintiffs to explore to bypass the 230 brick wall.

Other comments on this case:


* Lee Gesmer

Alvi Armani Medical, Inc. v. Hennessey, 2008 WL 5971233 (S.D. Fla. Dec. 9, 2008). The Justia page. See two blog posts (1, 2), apparently from the defendant.

The publication of online reviews of doctors and medical procedures appears to be a rough-and-tumble world right now. See, e.g., the Lifestyle Lift litigation, Medical Justice’s scheme to silence patients, and this lawsuit.

The plaintiff is a hair restoration/transplant doctor. The defendant operates a website “Hair Restoration Network” that provides “information to the consumer public about the hair restoration and transplant industry.” The plaintiff alleges that the defendant “knowingly posti[ed] disparaging and false statements about Dr. Armani and Armani Medical on the website” and created “the impression that posters on the website are bona fide disgruntled patients of Plaintiffs, when in fact the posters are either fictitious persons or undisclosed affiliates of doctors who are on the website’s recommended list of “pre-screened” doctors.” The plaintiff claimed these activities constituted defamation and deceptive/unfair trade practices under Florida law.

Among other defenses, the defendant claims 47 USC 230. On its face, the plaintiff’s allegations of unfair business practices should (and did) survive a 230 dismissal motion because (among other things) (1) the complaint claimed that the website operator created fake content itself, and (2) the complaint claimed that the website did not adequately disclose its sponsorship relationship with rival doctors.

At the same time, the complaint’s allegations on their face support a 230 dismissal to the extent any claim is based on postings by affiliates of site-recommended doctors. The court seems to miss this subtlety, apparently incorrectly treating those affiliates’ content as if it were from the website operator’s. This runs directly counter to a number of cases from last year, such as the Higher Balance and Furber cases.

The news wasn’t all bad for the defense. The court dismissed with defamation claim with prejudice because the plaintiff failed to comply with the mandatory pre-litigation notification statute. There is some discussion about whether the Internet qualifies as a protected medium under the statute (the court says yes); this brought to mind the old It’s In the Cards v. Fuschetto case from nearly 15 years ago (which reached a different result).

The case settled in February. Terms were not disclosed.