To his client’s relief, online trade libel attorney Dan Warner convinced an Arizona appeals court to vacate a trial court’s ruling in a Facebook defamation case. By successfully arguing that the presiding judge failed to properly apply the appropriate legal tests established in Mobilisa, Inc. v. Doe, Warner was able to slip his client from the defamation liability noose.
About the Case: Business Criticism On Facebook Leads To Online Trade Libel Lawsuit
An online trade libel lawsuit, the Plaintiff (whom we’ll call “Acme”) sued an anonymous user (“John Doe”) for allegedly posting false and defamatory statements about Acme’s product on Facebook.
Since the user posted under an alias, Acme filed a John Doe claim to uncover the real name of the anonymous defendant. After initiating the lawsuit, Acme sent subpoenas to Facebook and Domains by Proxy, in search of information (like an IP address) that would help reveal the identity of the product-critiquing user.
Upon receiving the subpoena, Facebook notified John Doe; Doe then retained online trade libel attorney Dan Warner who filed a motion to quash the subpoenas.
Online Trade Libel Catch-22: Preserving Privacy v. Accountability
Online service providers avoid passing out user data like Gremlins avoid bright lights. Why? Because online privacy is a legal quagmire, and if they’re not careful, ISPs can unwittingly find themselves dragged into users’ legal battles. Thus, to avoid unnecessary, resource draining, litigation entanglements, most websites adopt a hands-off approach when faced with civil information requests.
In some cases, however, ISPs are legally compelled to release user data, by force of a court order. However, in Arizona, to secure a subpoena that forces websites to hand over identifying information on anonymous Internet speakers, plaintiffs must show that:
- The speaker has been given adequate and a reasonable opportunity to respond to the discovery request;
- The plaintiff’s action could survive a summary judgment on elements, irrespective of the speaker’s identity; and
- The balance of the parties competing interests favors disclosure.
Unfortunately, in Acme’s case, the trial court judge denied the motion without making any findings of fact — or conclusions of law — regarding the required three-part Mobilisa test.
Warner’s appeal included several points on which the appellate court could have hung a reversal, but it chose to focus on the trial judge’s failure to adequately apply the “balancing” test, as outlined in Mobilisa.
The appeals court, in Warner’s client’s case, expressly held:
Because of the conclusory nature of the order below, we are unable to tell if the trial court correctly used the 3-part test outlined in Mobilisa v. Doe, 217 Ariz. 103, 170 P.3d 712 (App. 2007) (using a summary judgment standard) or the lower prima facie standard urged by Dream Steam below with their citation to Best W. Int’l Inc., v. Doe, WL 2091695 (D. Ariz. July 2007). See Chaparral DIVISION ONE FILED: RUTH A. WILLINGHAM, CLERKBY: 6/27/2016 RB Dev. v. RMED Int’l, Inc., 170 Ariz. 309, 311, n.3, 823 P.2d 1317, 1319 (App. 1991) (citation omitted) (conclusory rulings impair effective appellate review). We are likewise unable to discern whether the trial court engaged in Mobilisa’s third-prong balancing test when considering whether the disclosure of Doe’s name outweighed the community’s protected interest in supporting anonymous speech on the internet.
In other words, the court of appeals ruled that it was unclear if the trial court judge considered whether the plaintiff’s business interests outweighed the defendant’s right to anonymously express opinions on the Internet.
Consult With An Experienced Online Trade Libel Lawyer
In today’s digital, viral marketplace, a pristine reputation is crucial to maintaining a competitive edge; protecting your business’ good name is arguably as important as securing seed money.
If you’re fighting a product or business disparagement headache, get in touch with our team of online defamation fixers. We can help.
To learn more about online trade libel lawyer Dan Warner, head here.
Accusations of lie-spreading and client-poaching was at the heart of an online trade libel lawsuit between two marketing companies.
Broadspring Inc and Congoo LLC are “competitors in the online marketing” business. Apparently fierce competitors, because the former sued the latter for defamation, unfair competition, and tortious interference.
Did Broadspring operate outside legal lines or did Congoo bend the truth? The answers to these questions are the main screws on which Broadspring v. Congoo turns.
Timeline and Facts of this Online Trade Libel Case
Let’s first look at the cold-hard facts of the case.
- On March 2, 2013, a user named “Recruiterman” created an online marketing “lens” (i.e., webpage) on Squidoo featuring reviews of Internet advertising companies, including Congoo subsidiaries Adblade and Adiant, in addition to Broadspring. Though the lens complimented Adblade and Adiant, it blasted Broadspring, reading: “most of [Broadspring’s] distribution seems to come through media buys at DSPs and other exchanges. All of their display units take users to howlifeworks.com where they embed links to advertise pages for offers like ‘make your computer faster.’” The review also said Broadspring made it “tough to cancel credit card subscriptions.”
- Sometime between March 2 and 7, 2013, someone updated the Squidoo lens in question to read: “Downside: A simple Google search shows that Broadspring was formerly Mindset Interactive, a notorious spyware company. Mindset was eventually shut down by the FTC in 2005 and Sanford Wallace, their founder, known as “Spamford Wallace” was banned from online activity for 5 years. In Nov 2006, Broadspring’s shareholders then launched a notorious ringtones company, New Motion dba Atrinsic. Atrinsic has $17mm in financing (from various unknown investors), became public through a shady reverse-merger. They settled 3 years ago with 6 million users scammed: http://www. ftc. gov/o s/ caselist/04 2314 2/wallacefinal judgment. Pdf”
- On March 7, 2013, a representative from one of Broadspring’s clients, Geology.com, called and canceled. When asked why, the Geology.com rep referenced an email painting Broadspring in a negative light. The rep went on to explain: “I really like the looks of your ads, the controls of your website, and the pay was very good…but I am hesitant to run the ads after seeing the above.”
- On March 11, 2013, Squidoo “locked” the online marketing lens in question, but according to Broadspring, the damage was already done.
- On March 12, 2013, Broadspring lawyers contacted Congoo for a reaction about the allegedly defamatory statements. Broadspring’s attorneys requested that Congoo preserve and “ESI” (electronically stored information) connected with the situation. According to Broadspring, at this point, Congoo asked for a few days to review the situation. Broadspring also asked, again, about ESI, but didn’t get a response.
- On March 18, 2013, another Broadspring client, Tech Media Network, sent an email regarding “concerning information” and referenced the FTC judgment against Wallace. It was also on this day that Broadspring lawyers expected a formal response from the Congoo attorneys about the ESI material. Much to the former’s chagrin, Congoo brass allegedly sent back a vague, 10-word email, which didn’t address any of the aforementioned concerns.
- It’s important to note that Broadspring says it has evidence linking the “defamatory” Squidoo updates to an IP address “very close” to Broadspring’s New Jersey office.
Broadspring’s Side of the Story
Broadspring said Congoo’s accusations are reliable as Herodotus. With the likes of Yahoo!, MSN and CNBC on their client roster, Broadspring questioned Congoo’s characterization that Broadspring mainly deals in subscription offers. Moreover, Broadspring insisted it followed all applicable FTC regulations and doesn’t engage in any business “shadiness.” The plaintiff also highlighted its toll-free number, displayed online, as proof that people could call anytime and cancel.
- The company swore that Sanford Wallace had nothing to do with Broadspring. Specifically, “Sanford Wallace was not a ‘founder’ of either Broadspring or Mindset. In fact, he has never held any equity in either of these entities nor has he ever served as an officer, director, or employee of either entity.”
- Broadspring argued that Atrinsic was not a “notorious ringtones company” and that the merger was done on the up-and-up, with full disclosure to the SEC.
In addition to defending their own position, Broadspring used the protective umbrella of the lawsuit to throw some punches, describing the Squidoo lens praising Adblade as “misleadingly laudatory.” Broadspring also alleged that a “substantial portion” of Adblade’s revenue comes from “continuity credit card offers” and that the defendant “falsely asserts that Adblade is very selective about the publishers with which it works.”
Cited Civil Charges
Broadspring’s lawyers cited Lanham Act violations, defamation per se, and tortious interference. In recompense, Broadspring suggests damages, injunctive relief and attorney’s fees.
The 1946 Lanham Act is the backbone of United States intellectual property law and guards against false advertising. In this case, the plaintiffs argued that Congoo’s statements about Wallace’s constitute false advertising.
Defamation Per Se
Defamation per se is loosely defined as ‘defamation in it of itself,’ meaning the plaintiff doesn’t have to prove actual material loss. For example, calling someone a criminal is considered defamation per se because the reputational damage is evident.
Tortious interference is when one business interferes with another business’ contract(s). In this instance, Broadspring claims that Congoo’s solicitation of geology.com qualifies as tortious interference.
Precise Language Matters In This Online Trade Libel Lawsuit
Broadspring v. Congoo is worthy of examination because it explores what can happen when entrepreneurs, who thrive on boundary pushing, crash into each other. Moreover, it’s a case that relies on verbal exactitude and creating legal loopholes.
What do we mean by that?
Well, consider Wallace Sampson. Part of Broadspring’s argument turns on whether or not Sampson is materially connected to the business. If he is, it could be reasoned that no false statement of fact exists, thereby rendering the defamation claim moot. If Sampson is not materially tied to Broadspring, however, the plaintiff has a much stronger case.
So now let’s look at how the lawsuit is worded. Sampson is described as never having been a director, officer, or employee of Broadspring. But is he a consultant? And if Sampson is somehow profiting from Broadspring, just not as a director, officer or employee, does Congoo have the legal right to highlight this fact? Furthermore, if Wallace works with Broadspring in a freelance capacity, is he violating an FTC edict by acting as a consultant to an advertising company?
The Path To Victory?
Broadspring brought the case, so it bared the burden of proof. Congoo simply had to present counter arguments that satisfied the “balance of probabilities” standard.
Fundamental Elements of Defamation Under United States Law
While exact standards vary between jurisdictions, slander and libel law is built on three basic elements:
- A false statement of fact;
- Material harm inflicted on the plaintiff; and
- Intent to harm or “reckless disregard for the truth.”
So, for Broadspring to win, the company must prove that:
- Congoo’s accusations are false;
- Broadspring lost clients and money as a result of the widely distributed false statement; and
- Congoo purposefully lied with the goal of harming Broadspring’s business.
We’ll be keeping an eye on this case. The outcome could profoundly effect online trade libel law.