Facebook agrees to Judgment in Putative Class Action

Eric Goldman and Venkat Balasubramani previously blogged about the filing of a class action suit against Facebook earlier this year in California. My thoughts after reading the complaint several times was that while I agree that Section 230 would likely immunize Facebook for the content of unwelcome text or SMS messages, the statute would not necessarily protect Facebook from potential liability for the mechanism itself and/or related policies. Well, don’t expect answers to these questions any time soon.

While it has apparently not yet been entered by the Court, yesterday Facebook filed a Stipulated Entry of Judgment of Dismissal with Prejudice and General Release. Per the stipulation, Facebook has agreed to implement a “notice system” whereby it will provide text message recipients with a way to stop receiving such messages from Facebook (although the stipulation contains some language suggesting that this notice will only be included in every 15th message transmitted by Facebook), identify Facebook as the sender of such messages, and press mobile carriers to utilize “deactivation logs” to reduce the frequency of undesired text messages transmitted by Facebook. Facebook has also committed to pay plaintiff and her attorneys in amounts to be determined by the Court.

No doubt Section 230 would have found its way into a Facebook motion and/or answer, given Facebook’s assertion in Paragraph 8 of the stipulation that it didn’t do anything wrong, and that “it is immune from any liability under the [CDA].” (emphasis added)

UPDATE:  On January 23, 2008, Judge Fogel entered a dismissal order terminating this case.

Supreme Court denies Perfect 10’s certiorari petition

As I suspected, the Supreme Court of the United States has denied (see page 3) Perfect 10’s petition for a writ of certiorari (request for review) in Perfect 10 v. CCBill, et al. Thus the Ninth Circuit’s (faulty, in my opinion) ruling stands, at least for the time being.

I doubt this is the last time we’ll be hearing about the appropriate scope of 47 USC 230(e)(2).

Perfect 10 files Reply Brief with Supreme Court

I just finished looking over Perfect 10’s reply brief, recently filed in support of its petition for certiorari pending before the U.S. Supreme Court. Thank you to Perfect 10’s counsel, Jeff Mausner, for sharing it with me.

I still think that Perfect 10’s position on the merits is the legally correct one. My opinion is based on the text of the statute, and the apparent absence of any compelling evidence of congressional intent supporting an opposite reading. Whether withholding immunity for state IP claims is a good idea, though, is not something I’m going to address here.

Will the Supreme Court issue a writ on the basis that, simply put, the Ninth Circuit blew it by employing the wrong approach and reaching the wrong decision? I am not convinced that it will. Last week litigant and amicus briefs were distributed for consideration at a November 30, 2007 conference, so perhaps we’ll have an answer before the end of the year.

If you missed them, here are links to my prior posts on the petition itself, and the Respondents’ opposition brief, as well as a summary of the Ninth Circuit’s opinion.

CCBill and CWIE file brief opposing Perfect 10’s Supreme Court Petition

A few months ago I wrote about the Petition for a Writ of Certiorari filed by Perfect 10, Inc. with the U.S. Supreme Court in Perfect 10 v. CCBill, et al. In a nutshell, the Ninth Circuit previously ruled that the intellectual property exception to Section 230 immunity only pertains to federal (not state) intellectual property claims. Perfect 10 wants the Supreme Court to hear its appeal and rule that the exception applies to both federal and state IP claims, meaning Section 230 immunity would not protect a defendant from state (and federal) IP claims. Now it’s the Respondents’ turn to weigh in.

John P. Flynn, a partner in the Phoenix law firm Dioguardi Flynn Jones LLP, represents Respondents CCBill LLC and CWIE LLC. John kindly shared with me the brief filed last Friday opposing Perfect 10’s petition. John’s co-counsel is Jay M. Spillane of the Los Angeles law firm Spillane Shaeffer Aronoff Bandlow LLP.

Zeroing in on a serious potential problem with Perfect 10’s position, Respondents argue in their submission that the Ninth Circuit’s ruling below

is consistent with the findings and intentions of Congress to promote the development of Internet computer services with a clear nationwide immunity. . . . [w]ere the rule otherwise, Internet computer service providers would be faced with uncertainty across all fifty states as to which state claims for relief are, involve, or are akin to ‘intellectual property.’

In other words, adopting Perfect 10’s interpretation of Section 230(e)(2) could/would have a chilling effect upon online publishers across the country, uncertain as to their exposure to liability from one state to another.

That said, I still find Perfect 10’s position on the merits – which if ever adopted would require guidance from the courts on what constitutes a state IP claim – more persuasive. I haven’t researched the relevant legislative history, but it would seem that if Congress meant to limit the exception to federal IP claims, it could (and would) have said so (as it did in 230(e)(1)). If the legislative history clearly supported the opposite conclusion, I would have expected to see a reference to same in the Ninth Circuit’s ruling and/or Respondents’ brief (which instead cites Zeran). And as an aside, Respondents’ use of Potomac Electric Power Co.‘s rule of statutory interpretation (“members of the judiciary must put aside their ‘appraisal of the wisdom or unwisdom of a particular course consciously selected by Congress’”) could come back to haunt them. Some courts may not like Congress’ apparent decision to provide a broad IP exception to Section 230 immunity, but it’s not their (the courts’) job to approve or disapprove. However, it’s probably not fair for me to opine on the merits here, given neither parties’ brief was offered as a merits brief. Which brings me to my next and more important point. Who cares about the merits right now?

Remember, Perfect 10 is trying to persuade the Supreme Court to hear the case, not to rule in its favor, just yet, on the merits (although merits arguments can of course sometimes help get the job done). And on this issue, I think Respondents have the better arguments. For example, Respondents accuse Perfect 10 of trying to manufacture a conflict between the Ninth Circuit’s ruling and UCS v. Lycos, arguing that in UCS the First Circuit

did not analyze the meaning of ‘law pertaining to intellectual property,’ but simply assumed that the state trademark dilution claim at issue came within this exception. Such an unconsidered assumption, without analysis, does not create a conflict worthy of review.

Furthermore, “[i]n light of the [purported Florida trademark law] claim’s failure on independent First Amendment grounds, the First Circuit’s view as to the inapplicability of Section 230 is dictum and does not raise a material conflict with the Ninth Circuit decision.”

Respondents offer up plenty of other reasons why this case does not presently belong before the Supreme Court, such as (i) there is no conflict with Supreme Court precedent, (ii) the case was remanded by the Ninth Circuit to the district court, and precedent apparently directs that a case in this posture is not appropriate for High Court review, (iii) following final judgment, Perfect 10 will presumably have another opportunity to request Supreme Court review (and the Court would benefit from a richer record), and (iv) “[t]he law concerning the scope of the ‘intellectual property’ exception . . . is undeveloped.”

My guess is that Perfect 10’s petition (and the various amicus briefs filed in support thereof) will not muster enough votes to obtain the writ. But I wouldn’t mind being wrong on this one, at least from an academic standpoint.

Website (search engine?) not entitled to Section 230 protection for FTC Act violation

If the title of this post didn’t really grab you, how about the fact that I’m reviewing a recent decision handed down in the District of Wyoming? Yep, Wyoming, which as you may know (I didn’t) sits within the friendly confines of the Tenth Circuit.

Here are the undisputed, relevant facts as I understand them. The opinion is a little thin on the inner workings of the subject website during the relevant time period. If anybody has some additional insights and/or has explored the docket closer than I have, please jump in.

Prior to the January 2006 enactment of the federal Telephone Records and Privacy Protection Act (which criminalized the sale, transfer, purchase and receipt of confidential phone record information), Accusearch, Inc. (“in the business of information brokering”), by means of its Abika.com website, advertised the availability of, and accepted orders for, consumer phone records, which even before the TRPPA was passed were deemed confidential under federal law. So somebody interested in who I called in 2005 from my landline (or cell), how long we talked, etc., and who doesn’t think that I’d voluntarily share that information with a stranger (safe bet), could apparently submit an order at Abika.com and obtain the sought after information via the website (for a fee, of course, paid to Accusearch).

To fill its orders Accusearch paid third parties to procure the requested information. Given the nature of the data, the third parties utilized illegal methods to obtain same. These “wholesale” dealings were apparently via email, and Accusearch paid the third parties for their services.

In May 2006 the Federal Trade Commission filed suit against Accusearch and Jay Patel, its sole officer and director, accusing the defendants of an “unfair business practice” in violation of the Federal Trade Commission Act (here’s the accompanying press release). The FTC did not, however, name any of Accusearch’s third party procurers, or seek to hold defendants liable for their wholesalers’ illegal conduct. Instead the FTC’s beef was that “[e]ach time the Defendants placed an order for phone records, they caused others to use false pretenses and other fraudulent means to obtain confidential consumer phone records.” In other words, “the ‘unfair business practice’ relied upon by the FTC is Defendants’ obtaining and selling of confidential consumer phone records where that practice was necessarily accomplished through illegal means.” (emphasis added).

Late last month Judge William F. Downes granted the FTC’s motion for summary judgment, having found that “Defendants’ practice of selling consumer phone records constitutes an unfair business practice within the meaning of” 15 USC 45(a). But not before Accusearch’s counsel argued that Abika.com functioned as an “interactive person to person search engine,” merely an intermediary between “searchers” and “independent researchers” and thus was entitled to Section 230 protection, given that the FTC’s core allegations, according to the defendants, were that the defendants “disclosed, made available or sold information.” The court’s order covers both FTC Act liability and the applicability of Section 230.

On the Section 230 point, the FTC countered that any “publication” here by Abika.com “is not the type of publication contemplated by Section 230 of the CDA. The FTC . . . seeks to hold Defendants liable not for ‘publishing’ anything, but instead for committing acts in the course of trade or commerce, i.e., buying and selling.”

The court zeroed in on two key issues impacting whether Section 230 immunity would apply. First, did the FTC seek to treat the defendants as publishers? The court quickly concluded that such statutory requirement was “ambiguous.” (understandable in my opinion, particularly in this context). Seeking evidence of congressional intent for guidance, the court looked to Zeran, which pointed to the threat of tort-based lawsuits, and desire to encourage self-regulation of offensive material. With that the court concluded without a great deal of analysis (but after expressing skepticism about defendants’ search engine claim) that the FTC’s claims here do not “seek to treat Defendants as a publisher within the meaning of the CDA.”

The second (now moot?) question was whether Abika.com participated in the creation or development of the subject consumer phone records. On this point the court stated that

[w]hile Defendants made admittedly few changes to the records themselves, the Court finds that by soliciting requests for such phone records and purchasing them for resale Defendants ‘participated in the creation or development of the information, and thus do not qualify for §230 immunity.

Thus the District Court presumably had in mind, but did not cite, the Ninth Circuit’s Roommate.com decision. Several weeks later of course the Ninth Circuit agreed to rehear Roommate.com en banc. Regardless, in light of the more reasoned analysis of the publication issue, I imagine many people will consider the above language dicta.

Concluding that the defendants’ “strained interpretation” would “expand Section 230 immunity well beyond its intended scope,” the court denied the defendants’ Section 230-based motions for summary judgment. An evidentiary hearing will be held to ascertain appropriate injunctive and equitable relief, which may include rescission of contracts, restitution, disgorgement of ill-gotten gains by the defendants, and notifying all consumers whose phone records were distributed by the defendants.

An interesting case and decision which I’m still kicking around in my head.

One preliminary observation is that perhaps the order doesn’t say much about how the website operated because, upon reflection, it really wasn’t relevant. The FTC persuaded the court that it was targeting defendants’ supply-side activities – the purchase for resale of confidential consumer phone records which could only be procured by the defendants’ wholesalers via illicit means. The case thus did not turn on the defendants’ delivery mechanism to their customers – Abika.com, seemingly rendering the content and functionality of the website, and, thus, Section 230, irrelevant here.

As for whether Abika.com was/is a search engine, here’s what the company presently has to say on the issue.