Month: December 2007

Implode-O-Meter litigation settles

Michael Erdman Online applications, Real Estate/Fair Housing, Section 230, SLAPP

You may recall over the summer I posted a short blurb (see item 3) about state court litigation pending in California against a website – The Mortgage Lender Implode-O-Meter – that showcases mortgage lenders that are supposedly in “implode” mode. 

Today the Implode-O-Meter reports that the litigation commenced by the Loan Center of California earlier this year has settled.  The online press release notes that “[b]y the terms of the settlement, LCC has dismissed its claims against ML-Implode, without any admission of liability or any monetary payments.”

While it would have been interesting to see whether an appellate court would have affirmed the trial court on its Section 230 and SLAPP rulings, I’m pleased to see that the Implode-O-Meter will live to post another day.

Opponents of pending Internet gambling legislation speak out

Michael Erdman Internet-specific laws, Online applications, Proposed legislation

Earlier this week on the Senate floor, Senator Jon Kyl (R-Ariz.), apparently wary of legalized online gambling, gave the following statement on HR 2046:

Mr. President, I would like my colleagues to be aware of an important letter signed by 45 State attorneys general expressing “grave concerns” about Representative Barney Frank’s Internet Gambling Regulation and Enforcement Act, H.R. 2046.
The State attorneys general note that the recently enacted Unlawful Internet Gambling Enforcement Act of 2006 has “effectively driven many illicit gambling operators from the American marketplace.” The Frank bill “proposes to do the opposite, by replacing state regulations with a federal licensing program that would permit Internet gambling companies to do business with U.S. customers.” The letter continues:
A federal license would supersede any state enforcement action, because s 5387 in H.R. 2046 would grant an affirmative defense against any prosecution or enforcement action under any Federal or State law to any person who possesses a valid license and complies with the requirements of H.R. 2046. This divestment of state gambling enforcement power is sweeping and unprecedented.
One final but very important point from the letter is the impact of the so-called “opt-out” provisions. Specifically, the letter reads:
[T]he opt-outs may prove illusory. They will likely be challenged before the World Trade Organization. The World Trade Organization has already shown itself to be hostile to U.S. restrictions on Internet gambling. If it strikes down state opt-outs as unduly restrictive of trade, the way will be open to the greatest expansion of legalized gambling in American history and near total preemption of State laws restricting Internet gambling.
The Frank bill is unacceptable to the State attorneys general and it ought to be unacceptable to Members of Congress as well. I urge my colleagues to oppose the Frank bill or any similar proposals that would create a permissive Federal licensing scheme for Internet gambling.

The blogosphere is boiling over with posts on last year’s UIGEA legislation, which clamped down on online wagering, and where things may be headed in Congress.  For a sampling, check out “Online Poker,” “Live Action Poker,” and “USAPokerLife.com.”

Court dismisses Avvo.com class action lawsuit

Michael Erdman Class Actions, Consumer Protection law, First Amendment, Online applications

Yesterday District Judge Lasnik of the Western District of Washington granted Avvo.com’s motion to dismiss the class action complaint filed against the site earlier this year, ruling that the plaintiffs’ claims were barred by the First Amendment and Washington’s Consumer Protection Act (“CPA”). If you aren’t familiar with the case,

Plaintiffs’ primary challenge is to the accuracy and validity of the numerical rating system used by Avvo to compare attorneys. Defendants assert that the opinions expressed through the rating system, (i.e., that attorney X is a 3.5 and/or that an attorney with a higher rating is better able to handle a particular case than an attorney with a lower rating), are absolutely protected by the First Amendment and cannot serve as the basis for liability under state law.

Directing that “the key issue is whether the challenged statement could ‘reasonably have been interpreted as stating actual facts’ about plaintiff,” the court found in favor of Avvo. Among its findings-

  • Avvo’s website contains numerous reminders that the Avvo rating system is subjective. The ratings are described as an “assessment” or “judgment,” two words that imply some sort of evaluative process.
  • Neither the nature of the information provided nor the language used on the website would lead a reasonable person to believe that the ratings are a statement of actual fact.
  • [T]he Avvo rating system is an abstraction. (“No reasonable consumer would believe that Avvo is asserting that plaintiff Browne is a ‘5.5.’”)
  • [D]efendants’ rating is . . . virtually impossible to prove wrong.
  • Defendants fairly describe the nature of the information on which Avvo’s ratings are based and make it clear that (a) there may be other relevant data that the rating does not consider and (b) the conversion of the available information into a number involves judgment, interpretation, and assessment.
  • Consumers and the attorneys profiled have access to the underlying information and, while they may disagree with a particular rating and/or the implied comparisons drawn therefrom, “[t]here is no objective standard by which one can measure an advocate’s abilities with any certitude or determine conclusively the truth or falsity of [Avvo’s] statements . . . .”

Thus “[t]o the extent that [plaintiffs] seek to prevent the dissemination of opinions regarding attorneys and judges . . . the First Amendment precludes their cause of action.”

The opinion also includes an analysis and rejection of related claims under the CPA (plaintiffs also argued that (i) Avvo mischaracterized its rating systems, (ii) some of the data included in profiles is inaccurate, and (iii) Avvo’s overall business model is coercive). The court declined to address Avvo’s Section 230 defense, noting that “[p]laintiffs have disavowed any claim based on content that Avvo obtained from a third-party.”

Interestingly, the court seemed to leave the door open to claims against Avvo by individuals who rely on Avvo ratings to their detriment (“Consumers who were misled by the information and ratings provided by Avvo are the direct victims of the alleged wrongdoing.”) However, the remark was made while observing the remoteness of plaintiffs’ asserted damages, and may more properly be construed to mean that consumers directly harmed by an Avvo-rated attorney’s conduct would have a stronger position under the CPA than the plaintiffs do here, and that such a consumer claim would be made against the subject attorney.

Plaintiffs’ request for leave to amend their complaint was denied, so perhaps the Ninth Circuit will be the next stop for their claims.

Kudos to Avvo, which has responded to the decision on its blog. And thank you to Venkat Balasubramani for notifying me last night of Judge Lasnik’s ruling.

Guest Post: Lawsuit challenges online gambling ban in Washington state

Michael Erdman Criminal law, Guest Posts, Internet-specific laws, Online applications, Pending litigation

In addition to being a skilled chess player, my partner John Leonard is also no stranger to the inside of a casino. While I don’t think he’s ever made a virtual wager, I thought he’d enjoy summarizing the following case, which challenges Washington’s Internet gambling prohibition. Thank you to Mr. Rousso for sharing the discovery request linked to below. -MHE

On the first day of the 2007 World Series of Poker Main Event, Lee Rousso, a resident of King County, State of Washington, filed a lawsuit in the King County Circuit Court asking that that State’s law barring internet gambling be declared unconstitutional. The law was passed in 2006, and became effective in June of that year.

According to the complaint filed in the suit, Rousso, from June, 2003 to June, 2007, regularly logged on to pokerstars.com, described as the “world’s leading internet poker site,” and played poker against other Pokerstar customers. Although most of Rousso’s internet poker playing involved “play money,” some of the games were allegedly played for virtual chips that represented real money.

Noting, among other things, that internet poker is not illegal under federal law, and that gambling, including poker, are legal in the State of Washington, Rousso charged in his suit that the Washington law outlawing internet poker was unconstitutional in that it violated the Commerce Clause of the United States Constitution because it: (1) discriminates against internet poker in favor of legal “brick-and-mortar” casinos in the State of Washington; (2) places an undue burden on interstate commerce; (3) places an undue burden on international commerce; and (4) infringes upon the federal regulation of internet gambling, and violates the General Agreement on Trade & Tariffs (the “GATT Treaty”). Rousso also charged that the law violates the U.S. Constitution’s prohibitions against cruel and unusual punishment, and because of its vagueness, violates the 14th Amendment’s guarantee of due process of law to citizens of the several states.

Unfortunately for Rousso, despite his impressive complaint, the suit has thus far not gone well. In response to his complaint, the State of Washington served upon him a demand for production of information that, according to Rousso, is confidential and protected from disclosure by the Fifth Amendment’s protection against self-incrimination. The lower court then denied Rousso’s request for a protective order with respect to the production of the requested information, a decision that Rousso has appealed to the Division One Court of Appeals.

However, conceding that the State had won the first round of the case, Rousso has stated that he has waiting in the wings a substitute plaintiff who could come in to the case, or perhaps file a new case, pursuing the same constitutional challenges to the Washington law that are at issue in the present lawsuit.

I’ll be watching this one closely, and will update as further information becomes available. Knowing, however, how difficult it is to get a state statute declared violative of the U.S. Constitution, I believe that Mr. Rousso is in for an uphill fight.

One question that comes to mind is why Mr. Rousso did not seek to have the statute declared invalid under the Washington State Constitution. While I readily admit that I am not a Washington lawyer, and know nothing about the Washington Constitution, I am aware of the growing trend of citizens of the states seeking relief from allegedly oppressive statutes under their respective state constitutions, which in many cases offer expanded constitutional protections not available under the Constitution of the United States. Just a thought.

I pressed John for an example, and here’s what he came up with:

It appears to me that the following articles from Article I, Declaration of Rights, of the Washington Constitution apply directly to Mr. Rousso’s case. This is especially true of Article 12. Article 8 may not be directly applicable because it deals with the irrevocable grant of privileges and immunities, which I don’t think is what is involved in the statute that Mr. Rousso is challenging. I don’t understand why he didn’t raise these State Constitutional provisions in his Complaint.

SECTION 12 SPECIAL PRIVILEGES AND IMMUNITIES PROHIBITED.
No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations.

SECTION 8 IRREVOCABLE PRIVILEGE, FRANCHISE OR IMMUNITY PROHIBITED.
No law granting irrevocably any privilege, franchise or immunity, shall be passed by the legislature.

Thanks again, John, for the guest post. For anyone interested, here’s the press release Mr. Rousso issued when the suit was first filed.