Two Tough Section 230 Rulings From Last Week–General Steel v. Chumley & Xcentric v. Smith

Photo credit: enameled house number two hundred and thirty // ShutterStock

Photo credit: enameled house number two hundred and thirty // ShutterStock

Last week, we saw two Section 230 losses. Initially I was troubled by this confluence, but after digesting these opinions, I’m pretty certain they both involve unusual facts that limit any real damage to Section 230’s immunity. However, as usual in the case involving bad facts, the courts’ opinions are filled with loose and sloppy language that inevitably will be misused by future plaintiffs.

General Steel Domestic Sales, LLC v. Chumley, 2015 WL 4911585 (D. Colo. August 18, 2015)

I previously blogged an interesting keyword advertising ruling in this long-running dispute. The latest ruling involves a page where one competitor posted snippets/summaries about its rival’s legal cases with links to the original sources. Naturally, the snippets/summaries highlighted problems with the rival, so the page’s overall message wasn’t flattering to the rival. Some of the snippets/summaries were direct quotations from third party sources; the court implies that others were paraphrases written by the defendants.

The court says that Section 230 protects some, but not all, of the snippets/summaries. The court starts by correctly noting that Section 230 isn’t limited only to content submitted by third parties (see, e.g., the uncited D’Alonzo case):

General Steel notes that the posts at issue were not submitted to the IRLM Page by third parties. Rather, they were created by Mr. Chumley from information he obtained from the internet. Although many cases addressing § 230 immunity involve posts made on websites by third parties, nothing in § 230 or the relevant case law limits § 230 immunity to information submitted directly to a website by a third party.

The court next says that linking to third party content qualifies for Section 230 (see, e.g., the uncited Vasquez v. Buhl):

the links to third party websites on the IRLM Page are within the purview of § 230 immunity because the information behind those links was created or developed by third party information content providers

The court also says that Section 230 doesn’t apply to keyword ad copy written by the defendants:

On the other hand, the six internet search ads developed by the defendants do not fall within the ken of § 230 immunity. This is true because the defendants created and developed the content of those ads.

OK, so far, these conclusions don’t seem too controversial. Then the court wades into murky waters:

The § 230 immunity question is focused primarily on the posts created by the defendants on the IRLM Page which contain quotations from and summaries of the information provided in the links to third party websites. The defendants argue they did not develop this information within the meaning of § 230, because the 20 posts in question accurately quote and summarize information and link to information developed by third parties and available on the internet. Most of the posts on the IRLM Page contain a heading listing the parties to a lawsuit, sometimes a brief summary of the lawsuit, often a quotation or quotations from a document filed in the lawsuit, and a link to the full text of the document quoted. Most of the documents quoted and summarized on the IRLM Page are court orders in the cases described on the page. In the case of post 1, the document quoted is a class action complaint. Posts 5 and 11 briefly summarize articles written about General Steel, quote those articles, and include a link to the full text of the articles on third-party websites.

…for the purpose of § 230 immunity, the defendants developed certain information shown on the IRLM Page. To the extent the defendants chose certain summaries and quotations describing the referenced court proceedings, failed to accurately describe the proceedings as a whole, and posted those quotations and summaries on the IRLM Page, the defendants developed the information they posted on that page. These editorial choices can be seen as a choice to emphasize unflattering allegations made against General Steel without summarizing or quoting information which reflects the nature and outcome of the court proceeding described. The claims of General Steel are founded on its contention that the defendants created an inaccurate image of General Steel by highlighting on the IRLM Page unflattering allegations against General Steel without also describing the context of those claims or how those claims were resolved. Highlighting the unflattering allegations without providing other relevant information reasonably can be seen as contributing to the allegedly defamatory or otherwise actionable nature of the underlying information. Such actions specifically encourage development of what is allegedly unlawful or legally actionable about the content and, thus, constitutes development of the information for the purpose of § 230 immunity. F.T.C. v. Accusearch Inc., 570 F.3d 1187, 1196 (10th Cir. 2009).

I find that the summaries and quotations used by the defendants in posts 5, 9, and 11 in the IRLM Page are reasonably accurate summaries of the underlying information developed by third parties. As to these three posts, the undisputed facts in the record show the defendants did not develop the relevant information by highlighting unflattering allegations without providing other relevant information. As to these three posts, the defendants are providers of an interactive computer service, the plaintiff seeks to impose liability on the defendants as publishers or speakers of the information on the IRLM Page, and the information in question was provided by other information content providers. By organizing, quoting, and summarizing this information, the defendants did nothing to specifically encourage the development of what General Steel claims is unlawful or legally actionable about the underlying content. As to these three posts, the defendants are entitled to § 230 immunity.

…as to all of the other posts, the second paragraph of post 1 and posts 6, 13, 14, 17, 20, 22, 23, 25, 26, 27, 29, 32, 33, 35, 36, 37, the evidence in the record shows the defendants specifically encouraged development of what is allegedly unlawful or legally actionable about the underlying content. For the purpose of § 230 immunity, this constitutes development of the information. A comparison of the summaries and quotations created by the defendants with the relevant underlying document indicates that the defendants developed this information by highlighting what is allegedly unlawful or legally actionable about the information. As to these posts, the defendants are information content providers under § 230 who are not entitled to § 230 immunity.

Ugh, what a mess. The defendants are pushing Section 230’s boundaries by seeking its immunity for a page of content where they sliced-and-diced the third party content to create their own editorial message (i.e., don’t transact with our competitor). Section 230 is designed to protect an intermediary’s editorial judgment, but I can see why the judge balked at applying Section 230 to the defendants’ efforts to custom-craft their own editorial message in how they selectively wove this third party content together. I see this editorial remixing with an axe to grind as qualitatively different than the way a search engine assembles its search results, even though I strongly believe those search results reflect the search engine’s editorial judgments. However, like the court, I’m having a tough time articulating how to distinguish the editorial axe-grinding underlying the snippets/summaries page at issue here from the algorithmically pseudo-neutral editorial judgments shaping a search results page.

So, out of context of this opinion, this sentence seems particularly pernicious: “Highlighting the unflattering allegations without providing other relevant information reasonably can be seen as contributing to the allegedly defamatory or otherwise actionable nature of the underlying information.” Couldn’t every person unhappy with their vanity search results argue that’s exactly what the search engines did? In other words, the plaintiff can try to argue that the search engines failed to tell that person’s whole story, and therefore the search engine’s editorial judgments only highlighted the unflattering allegations. I know that’s not what the court meant, but the judge’s lack of precision is unfortunate.

More generally, while I can see why the judge reached the conclusion he did, his sloppy overuse of the term “develop” doesn’t do favors to anyone. It’s especially awkward to use the phrase “develop” as a barometer for the snippet/summary’s fidelity to the original source material. I don’t know what “develop” means, but I know it doesn’t mean that. You may recall the Ninth Circuit’s en banc battles in over what “develop” means. This case is a fine illustration that no one really knows for certain.

As an added “bonus,” the judge says that Lanham Act false advertising claims fit into Section 230’s exclusion for “intellectual property” claims:

a false advertising claim under § 1125 implicates trademark law, an ilk of intellectual property law. The § 1125 claim of the plaintiff is an intellectual property claim. Therefore, this claim does not fall within the ambit of § 230 immunity claimed by the defendants.

Yuck. I haven’t collected cases reaching a contrary result, but I think there are several.

Chumley has already appealed this ruling to the 10th Circuit, so this ruling may not stand in its current form. Unfortunately, the 10th Circuit coughed up the Accusearch hairball, a ruling which, in my opinion, has actually done more damage to Section 230 than the opinion that inspired it.

Xcentric Ventures, L.L.C. v. Smith, 2015 WL 4940812 (N.D. Iowa August 19, 2015)

The underlying facts in this case are so messy, I’m not even going to try to recount them (they go on for about 15 pages in the opinion). I’m going to focus on a rural Iowa county prosecutor, Smith, who threatened to prosecute Ripoff Report (a/k/a Xcentric Ventures) and its principal Ed Magedson and allegedly committed various prosecutorial abuses along the way. Ripoff Report and Magedson sued to try to get Smith to leave them alone, similar to the Google v. Hood lawsuit.

To show that Smith overreached in its pursuit of Ripoff Report, Ripoff Report argued that it was categorically immune from prosecution for submissions from a guy named Meade. The court disagrees:

Plaintiffs argue that they are entitled to immunity under the CDA because – despite their financial relationship with Meade – they were not information content providers with regard to any of the allegedly-unlawful posts about the state’s witnesses. At this stage of the case, however, they have failed to demonstrate a likelihood of success on their claim that the CDA protects them from criminal liability for any potential violation of Iowa Code Section 720.4. This is because there is substantial evidence suggesting that the plaintiffs materially contributed to the alleged illegality of the information at issue.

As noted above, there is an undisputed connection between Magedson and Meade concerning the Richter case, as they have participated in a “common cause” to free Richter. Xcentric made substantial payments to Meade during the period of time Meade was gathering information and posting complaints about the case, including complaints with titles that associate certain state’s witnesses with illegal and/or embarrassing conduct. Smith testified that he has gathered evidence of ongoing, systematic communications between Magedson and Meade during this period of time. He also claims that various recorded conversations between Richter and her mother establish that Meade was acting at Magedson’s directions. Smith’s testimony, along with the affidavit he submitted in support of the search warrant application, suggest direct ties between Anna Richter, Meade and Magedson concerning the content of Ripoff Report postings. Magedson acknowledged that he was aware that Meade was posting information about Richter’s case on Ripoff Report but denied having any advance involvement with the content of Meade’s posts. I am not fully convinced of Magedson’s credibility on this issue. Xcentric paid Meade a large amount of money and Magedson has strong feelings about Richter’s case. I simply do not believe that he was blissfully unaware of what Meade was planning to post.

The court doesn’t use terms like principal-agent to describe the Magedson/Meade relationship, but this ruling seems to head in that direction. The allegedly unusually close relationship between website and third party content submitter helps distinguish this from most Section 230 cases we see. It probably also distinguishes it from the more traditional user submissions where Ripoff Report relies upon Section 230.

While the court doesn’t give any breaks to Ripoff Report on the Section 230 question, the court doesn’t show a lot of love towards Smith, either. Instead, the court’s characterizations of Smith’s behavior play towards our stereotyped fears about parochial local prosecutors abusing their prosecutorial powers in a personal vendetta to attack Internet companies. Some of the court’s choicer words:

there is substantial evidence that Smith’s actions have been motivated, in large part, by statements made about him on Ripoff Report. Smith admits that he has worked over a thousand hours and has issued over one hundred subpoenas during his investigation into Ripoff Report. Smith presented no evidence that in his role of Sac County Attorney, he has devoted similar time and resources into other investigations of potential misdemeanor offenses. The finder of fact could easily determine that Smith is treating this investigation differently, and indeed obsessively, because he is angry and embarrassed by Ripoff Report posts that have criticized and ridiculed him.

[In a footnote, the court adds sardonically: “Smith admits that he has been “irritated” by complaints about him posted on Ripoff Report. I find this to be an understatement.”]

The evidence also reveals other ways that Smith has gone above and beyond normal investigatory tactics. He wrote a 119-page, singled-spaced affidavit in support of an application to obtain a search warrant, relying on avowed enemies of Ripoff Report for substantial portions of its contents. He then filed the application as public record, rather than sealing it as is his usual practice. This allowed him, in effect, to publicly air his allegations about the plaintiffs before filing any charges.

More troubling, and what I find to be most persuasive, is what Smith did with privileged and confidential information after obtaining it by his myriad of subpoenas. Upon obtaining communications that clearly appear to be between Xcentric and its own counsel, Smith did nothing to advise Xcentric of this fact. Nor did Smith do anything to preserve their confidentiality. Instead, he put at least one such communication into evidence in a proceeding and provided other presumably-privileged communications to third-parties, including various enemies of Ripoff Report. He also disclosed Xcentric’s financial and banking information to third-parties, thus allowing that information to become public. While disclosing privileged and confidential information to others, Smith did not require those individuals to enter into non-disclosure agreements. He has provided no legal justification for this. At this stage of the case, it is very difficult to consider this over-the-top behavior as being anything other than retaliatory.

When I see the phrase “over-the-top behavior” in a court opinion, usually bad things are about to happen.