Guest Post: Lawsuit challenges online gambling ban in Washington state

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.

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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.

Guest Post: Sloan v. Truong, et al (S.D.N.Y.)

While he may not be a “Grandmaster,” my law partner John Leonard is our office chess wizard. So naturally I asked him to guest post on the recently filed Sloan v. Truong, et al case, which raises at least one Section 230 issue. Of course one read of the complaint will tell you that this case is about much more than intermediary liability, but I asked John to try to confine his summary to the Section 230 issue.

Please note that the documents linked to in John’s post are not court-filed versions, thus he/I cannot attest to their authenticity. My understanding is that because Mr. Sloan filed pro se, the Clerk will not post certain filings on PACER.

Take it away, John.

For those of you who play chess, or follow the Machiavellian twists and turns in the world of professional chess, and are interested in issues involving online liability, an interesting story is evolving in Federal Court in New York. There, in the United States District Court for the Southern District of New York, former U.S. Chess Federation board member Sam Sloan has filed a multi-million dollar lawsuit against former Women’s World Chess Champion Susan Polgar, her husband Paul Truong, and many others, alleging, among other things, that Ms. Polgar and Mr. Truong falsely posted over the Internet “thousands of obscene messages,” under the name of Sam Sloan. (The author or authors of said postings being referred to by Mr. Sloan as the “Fake Sam Sloan.”) Although Mr. Sloan’s 27-page long pro se complaint is quite a read, and the author of this post expresses no opinion on the merits of his case against Ms. Polgar and Mr. Truong, or any of the other defendants save one, of interest to those who follow this site is the fact that Mr. Sloan also named as a defendant Texas Tech University, where Ms. Polgar and Mr. Truong are presently (according to Sloan’s complaint) employed.

In his complaint, at paragraph 6, Mr. Sloan alleges that Polgar and Truong have posted obscene Fake Sam Sloan messages from the university computers at Texas Tech, and that (at paragraph 41) “Texas Tech University has allowed Polgar and Truong to use [its] computers to impersonate Sam Sloan…and to post Fake Sam Sloan…messages on the Internet.”

Obviously, these allegations raise questions under the “immunity” provisions of the CDA. Significantly, and perhaps fatally to Mr. Sloan’s complaint in its present form, Sloan’s complaint does not allege that Texas Tech knowingly allowed the use of computers to post and transmit the alleged obscene Fake Sam Sloan messages, although perhaps knowledge could be implied from the above-quoted language from the complaint. No doubt such an allegation would be difficult to prove. But perhaps the more fundamental question is whether Texas Tech qualifies for Section 230(c)(1) immunity in the first place.

I believe that it does, following the reasoning of the California Sixth District Court of Appeals decision in Delfino v. Agilent Technologies, 145 Cal. App. 4th 790, 52 Cal. Rptr.3d 376 (Dec. 14, 2006). There, the Court considered whether a corporate employer that makes its computers available to its employees is a “provider of an interactive computer service” within the meaning of the CDA. While acknowledging that there is no case directly on this point, the Court also noted that “several commentators have opined that an employer that provides its employees with Internet access through the company’s internal computer system is among the class of parties potentially immune under the CDA.”

Interestingly, the Court in Delfino also addressed the question of whether the employer who provided the computer access could be liable for misuse of the same under the common law theory of respondeat superior, by which an employer can be held responsible for the misdeeds of its employees. However, as the Court observed, in order for this doctrine to apply, the employer must have ratified the employees’ wrongful conduct; it must have, in effect, treated the employees’ conduct as its own. In the Sloan case, given that the case seems to derive from a long-simmering feud between Mr. Sloan and the individual defendants, it seems to me that it would be an almost impossible burden for Sloan to prove that Texas Tech University adopted the alleged conduct of Polgar and Truong as its own.

Based on the above, I predict that Texas Tech will soon be out of the lawsuit.

Anthony v. Yahoo! – Summary and Update

In 2005 Florida resident Robert Anthony filed a class action lawsuit against Yahoo! in the Northern District of California. Anthony’s complaint, as amended, alleged that Yahoo! created and perpetuated false and/or non-existent profiles on its on-line dating services (Yahoo! Personals, which Yahoo! states has “millions of users”, and Yahoo! Premier), with the intention of fooling people into joining the services and renewing their memberships. Anthony’s causes of action included breach of contract, fraud, negligent misrepresentation and violations of Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”).

In a March 2006 order Judge Ronald M. Whyte granted Yahoo!’s motion to dismiss the contract claim (“Anthony cannot identify any contractual term that requires Yahoo! not to create or forward false profiles.”), but denied the motion as to the fraud, negligent misrepresentation and FDUTPA claims. Yahoo! had argued that such claims were barred by Section 230, but the court noted that Anthony alleged that Yahoo! created the false profiles and sent them to users, rendering Section 230 inapplicable.

Interestingly, the court also withheld Section 230 immunity with respect to Yahoo!’s alleged transmittal of profiles of “actual, legitimate former subscribers whose subscriptions had expired and who were no longer members of the service.” The court reasoned that while such profiles were created by actual, former users of the service (and not Yahoo!), “Anthony posits that Yahoo!’s manner of presenting the profiles – not the underlying profiles themselves – constitute fraud.” (emphasis added). It would have been nice if the court would have elaborated further upon this point.

Anthony next filed a second amended class action complaint which seeks damages in excess of $5 million and replaces the breach of contract claim with a claim for “Breach of the Implied Covenant of Good Faith and Fair Dealing.” Anthony states in this most recent pleading that he “believes even stronger evidence of fraud can be obtained from an examination of Yahoo!’s computer systems.”

The parties have briefed, but the court has not ruled, on the plaintiff’s motion for class certification.

Presumably evolving from two mediation sessions presided over by a former federal magistrate, this past summer the parties entered into a settlement agreement, which provides for the certification of a nationwide settlement class consisting of “all paid subscribers in the United States to Yahoo! Personals (including Yahoo! Personals Premier) between October 1, 2004 and the date of preliminary approval of this Settlement by the Court.” The settlement would, among other things, require Yahoo!, for two years, to maintain a “Report a Complaint” link, render certain inactive profiles unsearchable, and give canceling members the opportunity to delete their profile. Yahoo! also must place $4 million in a common fund for legal fees and distribution to authorized claimants.

In August, Judge Whyte preliminarily approved the settlement and requisite notice to class members. A final approval hearing is scheduled for next Friday, November 30, 2007, and as of this afternoon only one objection appeared on the court’s online docket.

6/16/2010 UPDATE: Here’s a link to the settlement website. The site notes that “The Court held a hearing (the “Final Approval Hearing”) . . . on Friday, November 30, 2007 at 9:00 a.m. The settlement was approved as fair, adequate, and proper. However, appeals were filed. These appeals have now been resolved.”

Class action alleges Hotels.com discriminates against persons with mobility disabilities

Earlier this year Judith Smith, Bonnie Lewkowicz and Axis Dance Company filed a class action complaint in a California state court against the owner of Hotels.com. The plaintiffs allege “ongoing discrimination against persons with mobility disabilities who desire to, but cannot, use hotels.com’s worldwide reservation network to make reservations for hotel rooms.” The putative class includes “all individuals in California who are disabled because of a mobility impairment and therefore require an accessible room when they travel, and who have been and continue to be deterred from using hotels.com to make room reservations for accommodations in California because of hotels.com’s refusal to guarantee reservations for accessible hotel rooms.”

Basically plaintiffs allege that while persons with mobility disabilities can request an accessible room via hotels.com, they cannot search the website for an accessible room or be guaranteed that such a room will be available. Instead plaintiffs would have to wait until they arrive and check-in to learn whether a suitable room is an option. Because the plaintiffs cannot stay in a hotel room lacking certain accessibility features, they allege that they cannot use hotels.com. Plaintiffs claim that the same limitations exist when calling hotels.com’s toll-free telephone number.

The complaint alleges two state law causes of action – violations of California’s Unruh Civil Rights Act and Unfair Competition Law – and only asks for injunctive and declaratory relief (plaintiffs likely were determined to keep this case in state court).

Count I alleges that hotels.com’s “failure to allow Plaintiffs and the Class to guarantee accessible hotel rooms violates the Unruh Act by, among other things, denying Plaintiffs and the Class physical accommodations; preventing Plaintiffs and the Class from taking advantage of the reservation services hotels.com provides; and preventing Plaintiffs and the Class from benefiting from hotels.com’s guaranteed low prices.”

Count II alleges unlawful business practices (refers to Count I and alleged violations of California’s Disabled Persons Act) and unfair and deceptive business practices (claims that hotels.com’s website and other advertising is misleading to consumers). On the second point, plaintiffs’ allege that “[t]he website represents that consumers can find all the information they need and guarantee a stay at a hotel by using hotels.com’s services, but those promises do not hold true for travelers who require accessible accommodations.”

In response, Hotels.com has filed a general denial and stated that it expects to seek summary judgment and/or summary adjudication. It also will oppose the plaintiffs’ anticipated motion for class certification.

I’m curious, if someone were to call one of the hotels listed on hotels.com, could he or she get a guaranteed reservation for a room accessible to a person with a mobility disability? If anybody knows and/or tries, please drop me a line. Regardless, plaintiffs allege that they believe that hotels.com “has the ability to provide Plaintiffs and the Class with the search features and the ability to secure guaranteed reservations that they need.” I guess they hedged for a reason, because, according to plaintiffs, among the questions of law and fact common to all class members is “whether hotels.com has the ability to provide the services Plaintiffs need.” I’d certainly be surprised by a finding of liability here if the underlying hotels are unable/unwilling/not obligated to facilitate the features demanded here by plaintiffs. But I have a feeling it may not come to that. Perhaps with the recent certification of two classes in NFB v. Target in mind, last week the parties agreed to mediate their dispute. The mediation is presently scheduled for February 6, 2008 in San Francisco.

Smith v. Hotels.com L.P., California Superior Court, Alameda County, Case No. RG07327029.

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.