Lawsuit Against Ripoff Report Dropped After Discovery–Vision Security v. Xcentric (Guest Blog Post)

By guest bloggers Jeffrey J. Hunt and Rachel Lassig Wertheimer

[Eric’s introduction: this post is written by lawyers who represented Ripoff Report in one of their multitudinous lawsuits. Because the authors were also advocates in this case, you might assume this writeup is just another piece of advocacy. Even so, I’ve decided this post is worthwhile for two reasons. First, it helpfully recaps the complicated denouement to one of the more troubling recent rulings against Ripoff Report. Second, and more importantly to me, the denouement offers valuable insights into the wisdom of suing Ripoff Report. The way I interpret things, Vision Security got a favorable Section 230 ruling that enabled discovery. However, after discovery, Vision Security effectively abandoned its case. So what kind of message might this send to other plaintiffs thinking about suing Ripoff Report? You’re likely to lose on Section 230 grounds; but if you’re lucky enough to overcome that, you’ll spend a fair amount of money on discovery to possibly realize that the case still isn’t worth it. So although the denouement in this case isn’t a citable opinion, I think it’s useful “precedent” nonetheless.]

Last year, a Utah federal court dismissed a defamation case brought against the popular consumer-review website (“Ripoff Report”) after the plaintiff conceded that Ripoff Report was entitled to immunity from suit under the federal Communications Decency Act.

The impetus for the case was a post on Ripoff Report authored by a former sales representative (“sales rep”) of Vision Security, LLC, which marketed home security systems to consumers.  The sales rep claimed that Vision Security did not treat its employees fairly and engaged in deceptive sales practices.  Rather than sue the sales rep, Vision Security sued Xcentric Ventures, LLC (“Xcentric”), the company that operates Ripoff Report, for defamation and related claims, based upon the sales rep’s post.

Xcentric subsequently moved to dismiss the suit, citing Section 230 of the federal Communications Decency Act (“Section 230”), 47 U.S.C. § 230, which provides website providers like Xcentric immunity from suit for material posted on their websites by third-parties.  The United States District Court for the District of Utah, however, denied Xcentric’s motion.  The court noted that, under Tenth Circuit law, website providers may be held liable for content posted by a third-party if the provider “in some way specifically encourages development of what is offensive about the content.”  F.T.C. v. Accusearch Inc., 570 F.3d 1199 (10th Cir. 2009).  (The court’s ruling on the motion to dismiss was the subject of a previous article published on this blog: Eric Goldman, Another Tough Section 230 Ruling for Ripoff Report – Vision Security v. Xcentric, Tech. and Marketing L. Blog (Sep. 20, 2015).)

The court then determined that, assuming the truth of Vision Security’s allegations — as required at the motion to dismiss stage — there was a reasonable inference that Ripoff Report encouraged negative content, and therefore, Xcentric may not be entitled to Section 230 immunity.

First, the court pointed to some of the taglines on Ripoff Report, including “By Consumers, for consumers,” “Don’t let them get away with it.  Let the truth be known,” and “Complaints Reviews Scams Lawsuits Frauds Reported, File your review.  Consumers educating consumers.”  Second, Vision Security had alleged that the sales rep told Xcentric that the statements in his post were false and asked that the post be removed.  Third, Vision Security had alleged that Xcentric’s webmaster told Vision Security that positive posts about a company are not allowed and that under no circumstances will postings be removed from Ripoff Report.  Finally, the court pointed to allegations regarding Xcentric’s Corporate Advocacy Program where, allegedly for “a large fee,” a company with negative postings like Vision Security could “find a satisfactory solution” to offensive content posted about them on Ripoff Report.  In the court’s view, these allegations supported a reasonable inference that Xcentric “had an interest in, and encouraged, negative content” in order to promote its Corporate Advocacy Program.

After the court’s ruling, however, the parties engaged in discovery and Xcentric filed a Motion for Summary Judgment, asserting that there were no genuine issues of material fact that prevented the application of Section 230 Immunity.  The crux of Xcentric’s argument was that under Accusearch, a website provider only loses its Section 230 immunity for content posted by third-parties if the provider “in some way specifically encourages development of what is offensive about the content,” 570 F.3d at 1199 (emphasis added), what Vision Security alleged was offensive about the content of the sales rep’s post was that it was false and defamatory, and there was no evidence that Xcentric in any way encouraged the sales rep (or other third-party users) to post false and defamatory statements on Ripoff Report.

In Accusearch, the offending content at issue was the confidential personal information of several individuals, including their telephone records, obtained from third parties and posted by Accusearch on its website.  See id. at 1199.  The court held that Accusearch was liable —stripped of its Section 230 immunity — because it “solicited requests for confidential information protected by law, paid researchers to find it, knew that the researchers were likely to use improper methods [to obtain the confidential information], and charged customers who wished the information to be disclosed.”  Id. at 1199, 1201.

In contrast, in its previous decision in Ben Ezra, Weinstein, & Co., Inc. v. Am. Online Inc., 206 F.3d 980, 983 (10th Cir. 2000), the court upheld America Online’s Section 230 immunity after it was sued for posting incorrect information regarding the plaintiff’s stock price and share volume purchased from a third-party vendor.  The “offending content” at issue in Ben Ezra was the inaccuracies in the stock price and share volume quotations, and, unlike in Accusearch, “America Online did not solicit the errors; indeed it sent the vendor emails requesting that it ‘correct the allegedly inaccurate information.’”  Accusearch, 570 F.3d at 1199 (quoting Ben Ezra, 206 F.3d at 985)).  In other words, “America Online had done nothing to encourage what made the content offensive—its alleged inaccuracy…[and] was therefore not responsible for the offensive content.”  Accusearch, 570 F.3d at 1199-1200.

Xcentric’s summary judgment motion argued that, as in Ben Ezra and unlike in Accusearch, there was no evidence that Xcentric in any way encouraged the sales rep to post false or defamatory statements on Ripoff Report and, therefore, Xcentric was not responsible for the “offending content” at issue.  Instead, the uncontroverted evidence showed the opposite—that Xcentric makes every effort to ensure that third-party content posted on Ripoff Report is not false and defamatory.  Among other things, Xcentric requires users to agree — two separate times before posting a report — to post only information that is truthful and accurate.

Further, Vision Security’s allegations that Xcentric’s webmaster told Vision Security that positive posts about a company are not allowed and that Vision Security’s only option for addressing a negative report like the sales rep’s post was to pay a “large fee” to join the Corporate Advocacy Program were not true.  Email exchanges between Xcentric and Vision Security, uncovered during discovery, showed that Xcentric made it clear to Vision Security on multiple occasions, and prior to the filing of the complaint in this case, that positive posts about or from a business are not only allowed, but encouraged and free of charge.  And Xcentric’s owner specifically encouraged Vision Security to post a free rebuttal to the sale rep’s post, but Vision Security chose not to do so.

Likewise, Vision Security’s allegation that its only option for addressing a negative report like the sales rep’s post is to pay a “large fee” to join Xcentric’s Corporate Advocacy Program was also untrue.  The uncontroverted evidence submitted on summary judgment demonstrated that businesses have several options for addressing negative reports, including posting a positive (and free) rebuttal, suing the author of the report, and using Xcentric’s VIP Arbitration program.  If a company sues the author directly, they may attach any court findings or judgment as a rebuttal to a negative report (again, at no charge).  And where a court makes considered findings based on evidence, Xcentric may redact false statements from the report.

Under Xcentric’s VIP Arbitration program, for a minimal fee used largely to pay for expenses, an arbitrator reviews evidence provided by both parties and, if the arbitrator determines the report contains false statements of fact, Xcentric will redact those portions of the report.  Finally, Xcentric’s Corporate Advocacy Program (“CAP”) is also available for businesses who need and wish to fully rehabilitate their online reputation.  With Xcentric’s help, CAP members commit to resolve each and every complaint on Ripoff Report to the customer’s satisfaction, undergo an investigative review of their business operations to help them detect the potential source of complaints, and provide an explanation to Xcentric of the changes the business has made to its operations to avoid future complaints.

As for Ripoff Report’s taglines, Xcentric argued that, contrary to Vision Security’s allegations, they do not encourage third-party users to post false and defamatory content on Ripoff Report.  Instead, they discourage it. One of Ripoff Report’s taglines states “Don’t let them get away with it. Let the truth be known” — an obvious invitation to post truthful content — and another states “Consumers educating consumers,” indicating that only statements that will serve to educate other consumers, i.e., true and accurate statements, are welcome.

Finally, Xcentric’s summary judgment motion argued that its refusal to remove negative reports is not evidence it encouraged the sales rep (or any other third-party user) to post false and defamatory content on Ripoff Report.  As an initial matter, Vision Security failed to adduce any evidence supporting its claim that the sales rep contacted Xcentric and requested that his post be removed from Ripoff Report.  More importantly, however, Xcentric’s policy of refusing to remove negative reports — which also applies to CAP members — ensures that consumers are not bullied, threatened, coerced, or bribed into recanting and also ensures that consumers reviewing reports on Ripoff Report are able to review both negative reports and positive rebuttals and make their own determinations as to a business’s conduct and commitment to customer service.  (Additionally, the clear weight of authority, including Tenth Circuit law, holds that a website provider’s failure or refusal to remove content, even at the request of the author and even if the content is potentially defamatory, is the exercise of a traditional editorial function and does not strip the provider of is immunity under Section 230.  See, e.g., Shrader v. Beann, 503 F. Appx. 650 (10th Cir. 2012).)

In conclusion, Xcentric argued that not only were several of Vision Security’s allegations demonstrably false — as demonstrated by the uncontroverted evidence submitted on summary judgment — there was no evidence that Xcentric in any way encouraged the sales rep to post false or defamatory statements on Ripoff Report and, therefore, Xcentric was entitled to Section 230 immunity.

After Xcentric filed its summary judgment motion, Vision Security conceded in a stipulation filed by the parties that it “is not aware of any genuine issues of material fact that would prevent the application of Section 230 Immunity to Vision Security’s claims, thus requiring dismissal of such claims” and that “Xcentric is entitled to judgment as a matter of law.”

Subsequently, the Utah District Court entered an Order Granting Stipulated Motion for Summary Judgment, in which it stated:

Defendant filed a separate motion for summary judgment . . . which argued for dismissal of all Plaintiffs’ claims because they were barred by the immunity granted to providers of interactive computer services under 47 U.S.C. § 230.  Upon review of the motion, Plaintiffs concluded that there existed no genuine disputes of material fact pertaining to the application of this immunity, and therefore determined to stipulate to the entry of summary judgment.  (Docket No. 89 at 2).  Thus, Defendant is entitled to summary judgment under Fed. R. Civ. P. 56(a).

Accordingly, the court granted summary judgment for Xcentric on all of Vision Security’s claims and dismissed the case with prejudice.

At the end of the day, Ripoff Report and websites like it fulfill an important societal function by allowing individual consumers with few resources to have a voice and cast light on questionable business practices.  As previous courts have observed, that is precisely why Congress enacted Section 230 to provide such website operators immunity from suit.

Jeffrey J. Hunt and Rachel Lassig Wertheimer are shareholders at Parr Brown Gee & Loveless, Salt Lake City, Utah, and, along with Maria Crimi Speth at Jaburg Wilk, Phoenix, Arizona, represented Xcentric Ventures, LLC.