Mess with the IRS? Online or offline, First Amendment protections are not unlimited.

An article in today’s New York Times highlights a federal court injunction entered earlier this month, pursuant to the Internal Revenue Code, against entities that operate a website accused of posting apparently self-authored materials advising that federal income and employment taxes are voluntary, instructing how to illegally avoid paying taxes, and providing necessary supplies.

The court rejected defendants’ First Amendment contentions, explaining that while the defendants “are free to give speeches on whether the Sixteenth Amendment was properly ratified,” their conduct here went beyond same and is enjoinable. Whether defendants’ speech at issue is considered commercial (“the government may prohibit false, misleading or deceptive commercial speech, or speech that promotes unlawful conduct”) or political (“[t]he First Amendment does not protect speech that incites imminent lawless action”), the court ruled that the First Amendment did not provide a defense.

I note that the website was not actually ordered “to close.” Instead defendants were directed, among other things, to:

“remove from their websites and all other websites over which they have control, all tax-fraud scheme promotional materials, false commercial speech concerning the internal revenue laws, and speech likely to incite others imminently to violate the internal revenue laws,” and

“remove from its websites all abusive tax shelter promotional materials, false commercial speech, and materials designed to incite others to violate the law (including tax laws), and, for a period of one year from the date of this Memorandum, Decision & Order, display prominently on the first page of the website an attachment of this Memorandum, Decision and Order.”

Thank you to my partner Ron Teeple for bringing this article to my attention.

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Online Innovation attracts Offline Litigation

I am certainly not the first person to observe the current relationship between the launch of an innovative website (be it a VC-funded start-up or a rage-inspired, spare time project) and litigation. For reasons I will perhaps surmise at in a future post, it seems that the former is almost immediately followed by the latter more often now than at any other time in the admittedly youthful Internet age.

With that observation, two old adages come to mind – “all publicity is good publicity” and “no good deed goes unpunished.”

I’m no PR expert, but I do know that more often than not, rules end up having exceptions. So while there may be some PR folks out there appreciative of the media attention various lawsuits have generated, I would guess that the more common reaction is something along the lines of “we didn’t start this business so we could spend ridiculous amounts of time and money defending ourselves in court.”

As for good deeds, while not every new website can necessarily be said to provide a novel and useful service to its prospective users, there are plenty that do – often by disrupting the status quo. Now a number of them are experiencing punishment in the form of a visit from the local process server.

As you could have guessed, these suits typically allege, among other things, defamation, commercial disparagement or some other harm to a personal or business reputation. In some suits plaintiffs allege violations of state or federal statutes.

The purpose of this post is to simply provide a few current examples of these types of websites and subsequent lawsuits. If you are aware of others, I’d be interested in hearing from you.

1. Earlier this summer I remember reading about the launch of Avvo.com, a website intended to provide consumers, small businesses and others with a free and straight-forward way to identify and screen lawyers appropriate for their particular needs. Core components of the site include a proprietary numeric rating system, third-party comments and attorney disciplinary information. Faster than you can say class action, just such a suit was filed against Avvo and its founder by two Seattle attorneys, alleging the site harmed their reputations, etc. The parties are presently briefing the defendants’ motion to dismiss, which mainly relies upon the First Amendment and Section 230, and, mindful of a recent Ninth Circuit decision, attempts to distinguish the website from Roommate.com.

2. Business Week recently reported that a number of disgruntled homebuyers, and, in at least one case, an unhappy real estate broker, have created websites aimed at collecting and showcasing alleged deficient practices by certain homebuilders. One of these sites has been named in several lawsuits filed in South Carolina and Florida by a targeted builder, Lennar Corp. Referring to Lennar, the site’s founder was quoted by Business Week as saying that “[t]hey want me dead, there’s no way around that.”

3. The Wall Street Journal’s Law Blog has previously reported on Mortgage Lender Implode-O-Meter. The site, less than a year old, is an online compilation of mortgage lenders that have allegedly “imploded.” It has already been sued by at least one lender featured on the site, and according to a July 30, 2007 Inman News story (only available to subscribers), the state court has already ruled that Section 230 is inapplicable to plaintiff’s claims, and denied defendant’s anti-SLAPP motion.

A Massachusetts Nader for a Florida Gore? Deal.

Say you liked Gore in 2000 for President, but knew he didn’t need any help to win in your home state of Massachusetts. Instead, as the polls likely indicated at the time, he could have used your help in, say, Florida, where Gore and Bush were neck and neck.

Speaking of Florida, further suppose a complete stranger in Miami also preferred Gore to Bush in 2000, but both were inferior in her eyes to Ralph Nader, whose future federal matching funds, if any, would be computed, in part, based upon his popular vote tally in 2000.

Enter voteswap2000.com and votexchange2000.com, the founders of which had this precise scenario in mind back in the fall of 2000 when they introduced what I believe were the first vote-swapping websites. These sites conceivably could have introduced you to that Nader supporter in Florida via email, and paved the way for the two of you to agree to “swap” votes. Your candidate gets another vote in a close Florida race, and hers gets another vote to add to his popular vote total, apparently unconcerned with where such vote is cast.

But not so fast said the then-California Secretary of State Bill Jones, who accused voteswap2000.com of offering “to broker the exchange of votes” throughout the U.S, and maintained same was an illegal “corruption of the voting process.” He demanded termination, threatening voteswap2000.com that “[i]f you continue, you and anyone knowingly working with you may be criminally prosecuted to the fullest extent of the law.” The websites immediately disabled their vote-swapping mechanism, and apparently started working on their federal complaint.

Earlier this month the Ninth Circuit issued its opinion in Porter v. Bowen, which considered whether California could criminally prosecute the website founders, who alleged that such threat violated their First Amendment rights because same “was not sufficiently tailored to the advancement of the State’s legitimate interests and thus unlawfully burdened constitutionally protected speech and conduct.” Before ruling the panel considered the core components of the websites – the vote-swapping mechanisms, and the communications and actual vote swaps facilitated by the sites.

The panel found that the vote-swapping mechanisms were “entitled to at least some First Amendment protection,” given they conveyed useful information (i.e., voter email addresses), and expressed a reasonably clear message of support for third-party candidates. Also, the panel found that the communications enabled by the sites “likely concerned political preferences and possibly agreements to swap votes on election day . . . [t]his kind of communication is clearly protected by the First Amendment.” Finally, the actual vote swaps “involved people’s opinions on campaigns for political office which are precisely where the First Amendment has its fullest and most urgent application.” The panel concluded that California’s legitimate interests did not support the Secretary’s threatened criminal prosecution of such constitutionally-protected activities.

Commenting on these “novel online applications,” the Ninth Circuit held that

At their core, they amounted to efforts by politically engaged people to support their preferred candidates and to avoid election results that they feared would contravene the preferences of a majority of votes in closely contested states. Whether or not one agrees with these voters’ tactics, such efforts, when conducted honestly and without money changing hands, are at the heart of the liberty safeguarded by the First Amendment.

Here’s my three cents. First, the panel properly viewed the websites as voter tactics, distinguishable from “conventional (and illegal) vote buying.” Apparently the Secretary viewed the sites similarly, given his apparent apathy for vote-swapping agreements “made without the use of a website or other enabling mechanism” (a position the panel described as “problematic”). My advice to public officials considering future challenges to “novel” political websites: if the online activity you intend to challenge is legal in the brick and mortar world, chances are, unless you’ve got a narrowly-tailored statute or other basis in mind, you are going to be in for an uphill battle.

Also, in anticipation of a 2008 electoral climate just as intense as the last two presidential elections, I imagine we’ll see similar, perhaps more elaborate, websites pop up in the next 15 months. That, in turn, will likely cause at least one state or federal election regulator to throw down the gauntlet, perhaps encouraged in part by the Ninth Circuit’s reversal rate before the Supreme Court. I would expect that any court considering such a future challenge would see past any mootness arguments and issue a quick ruling. Whether a more conservative court would substantively rule along the lines of Porter is another issue.

Finally, I am curious whether the plaintiffs weaved Section 230 into any of their arguments that their websites were not criminally liable. Regardless, websites, bloggers and others should consider Porter a reminder that when the government starts ordering what can and cannot be done online, the First Amendment may be the best and only defense you need.

Prior reporting: News Blog and PC World