Universal Communication Systems, Inc. v. Lycos, Inc.

DATE: Decided February 23, 2007

COURT: United States Court of Appeals, First Circuit (before Boudin, Chief Judge, Selya and Lynch, Circuit Judges. Opinion by Lynch)

PLAINTIFFS: Universal Communication Systems, Inc. and Michael J. Zwebner

DEFENDANTS: Lycos, Inc., d/b/a Lycos Network; Terra Networks, S.A.; Roberto Villasenor, Jr., a/k/a the-worm06; John Doe # 2, a/k/a no-insiders; Roberto Villasenor, Jr., a/k/a the-worm06A; John Doe # 4, a/k/a 65175R; John Doe # 5, a/k/a Henry-Johnson123; John Doe # 6, a/k/a quondo1; John Doe # 7, a/k/a Tobias95; and John Doe # 8, a/k/a CrawleySmith

THIRD PARTY DEFENDANTS: Robert H. Cooper; Andrew Cunningham; Does 1 Through 8; and Omar Ghaffar

INTERACTIVE COMPUTER SERVICES: Lycos, Inc. and Terra Networks, S.A.

ORIGINAL PUBLISHER/SPEAKER: Individual posters on the Raging Bull web site.

MATERIAL ALLEGATIONS: Plaintiff UCS “at one point provided telecommunications services and currently is developing solar-powered water extraction systems. It is a publicly-traded company that trades under the ticker symbol “UCSY,” a label that the company also uses in its promotional materials. Zwebner is Chairman and CEO of the company. . . . Lycos operates a network of web sites devoted to a wide array of content. At times relevant here, these web sites included Quote.com, which provides stock quotation information and financial data for publicly-traded companies, and RagingBull.com, which hosts financially-oriented message boards, including ones designed to allow users to post comments about publicly-traded companies. The message board for each such company is generally created by a user and is generally identified using the company’s stock ticker symbol-UCSY in this case. In addition, the two web sites are linked to each other, so that a user who retrieves a stock quote from Quote.com is also given a link to the corresponding message board on Raging Bull. Both web sites contain advertisements, and Lycos derives advertising revenue that depends in some measure on the volume of usage of its sites.”

“Individuals must register with Lycos in order to post messages on Raging Bull message boards. As part of the registration process, users are required to agree to a “Subscriber Agreement,” which, inter alia, requires users to comply with federal and state securities laws. Upon registration, a member obtains a “screen name.” Postings on the message board are identified by screen name, but no further identifying information is automatically included with the posting. The registration process does not prevent a single individual from registering under multiple screen names.”

“Starting at least in 2003, a number of postings disparaging the “financial condition, business prospects and management integrity” of [plaintiffs] appeared on Raging Bull’s UCSY message board. [Plaintiffs allege] that these postings were “false, misleading and/or incomplete.” In particular, [plaintiffs] identified postings made under eight different screen names as objectionable. [Plaintiffs allege] that the individuals registered under each of these screen names “are one [and] the same individual, Roberto Villasenor, Jr. and/or are individuals acting in concert with Roberto Villasenor, Jr.”

. . .

“[Defendant] Terra Networks, S.A. [was] Lycos’s corporate parent at the time of the postings in question.”

CAUSES OF ACTION: (1) fraudulent securities transactions under Florida law; (2) cyberstalking under 47 U.S.C. § 223; (3) dilution of trade name under Florida law; and (4) cyberstalking under Florida law. “The Florida securities claim was made against all of the defendants, and the remaining claims were made against Lycos and Terra Networks only.”

PROCEDURAL HISTORY: The U.S. District Court for the District of Massachusetts, Robert E. Keeton, Senior Judge, ruled (from the bench) that Section 230 “immunizes Lycos [and Terra Networks] from all of the four counts in the plaintiffs’ complaint” and it “denied the motion to amend the complaint as to Lycos and Terra Networks, finding that the claims against those defendants, as framed in the proposed second amended complaint, would continue to be barred by Section 230.” UCS appealed.

PROCEDURAL ACTION TAKEN HERE: Affirmed, with costs awarded to appellees. Dismissal of federal cyberstalking claims affirmed exclusively on non-Section 230 grounds.

OUTCOME: “Whatever the limits of [Section 230] immunity, it is clear that Lycos’s activities in this case fall squarely within those that Congress intended to immunize. . . . given the allegations in UCS’s complaint, liability for Lycos under either the Florida securities statute or the Florida cyberstalking statute would involve treating Lycos “as the publisher” of “information provided by another information content provider.” Thus, we affirm the district court’s ruling that both claims are barred by Section 230.”  The panel also held that Section 230 immunity applied to the state dilution claim, but ruled that even in the absence of such immunity, the claim failed on the merits.


Artful pleading. The panel noted that “the facts pleaded simply do not fit [plaintiffs’] theories. On the facts alleged, Congress intended that, within broad limits, message board operators would not be held responsible for the postings made by others on that board. No amount of artful pleading can avoid that result.”

Policy considerations. As in Zeran, the panel noted the “obvious chilling effect” that intermediary tort liability could have and the “congressional purpose of removing the disincentives to self-regulation that would otherwise result if liability were imposed on intermediaries that took an active role in screening content.” It thus concluded that “Section 230 immunity should be broadly construed. In the context of this case, we have no trouble finding that Lycos’s conduct in operating the Raging Bull web site fits comfortably within the immunity intended by Congress.”

Notice. “It is, by now, well established that notice of the unlawful nature of the information provided is not enough to make it the service provider’s own speech. [citations omitted] We confirm that view and join the other courts that have held that Section 230 immunity applies even after notice of the potentially unlawful nature of the third-party content.”

Information Content Provider. The panel notes that the statutory definition of information content provider “is a broad definition, covering even those who are responsible for the development of content only ‘in part.’” Furthermore, “message board postings do not cease to be “information provided by another information content provider” merely because the “construct and operation” of the web site might have some influence on the content of the postings.” “UCS has alleged nothing . . . that suggests that Lycos should be considered to have been “responsible,” even ‘in part,’ ‘for the creation or development’ of the alleged misinformation.” After considering further arguments on this point, addressed below, the court concluded that “Lycos has done nothing in this case that might make the misinformation at issue its own, rather than that of “another information content provider.”

Facilitation? “At best, UCS’s allegations establish that Lycos’s conduct may have made it marginally easier for others to develop and disseminate misinformation. . . . UCS’s theory is that these features of the Raging Bull site make it possible for individuals to spread misinformation more credibly, by doing so under multiple screen names and in a context that is associated with objective content. . . . Here there is not even a colorable argument that any misinformation was prompted by Lycos’s registration process or its link structure. There is no indication that the Lycos features that UCS criticizes are anything but standard for message boards and other web sites. To impose liability here would contravene Congress’s intent and eviscerate Section 230 immunity.”

Culpable assistance/Active Inducement. UCS also “argues that Lycos has provided “culpable assistance” to subscribers wishing to disseminate misinformation, and hence Lycos exceeded the bounds of Section 230 immunity. UCS draws an analogy to the copyright case of MGM Studios, Inc. v. Grokster, Ltd [(active inducement of infringement theory)] . . . However, “[i]t is not at all clear that there is a culpable assistance exception to Section 230 immunity. . . . [regardless, w]e need not decide whether a claim premised on active inducement might be consistent with Section 230 in the absence of a specific exception. Even assuming arguendo that active inducement could negate Section 230 immunity, it is clear that UCS has not alleged any acts by Lycos that come even close to constituting the “clear expression or other affirmative steps taken to foster” unlawful activity that would be necessary to find active inducement. . . . The “unmistakable” evidence of an “unlawful objective” found in Grokster is entirely absent here.”

Intentional misconduct. “UCS also argues that because it bases its claims on Lycos’s alleged “intentional misconduct,” those claims are not subject to Section 230 immunity. It is not clear how UCS is using the phrase “intentional misconduct.” If this refers to Lycos’s acting intentionally with knowledge of the third-party misinformation, then such claims are barred under our holding that notice does not preclude Section 230 immunity. If this refers to Lycos’s acting with intent to harm UCS, then this is a variant on an active inducement theory, which, as we have described, has no basis in UCS’s factual allegations.”

Immunity for construction/operation of website. UCS argues that the prohibition against treating Lycos “as the publisher” only immunizes Lycos’s “exercise of a publisher’s traditional editorial functions-such as deciding whether to publish, withdraw, postpone or alter content,” and not its decisions regarding the “construct and operation” of its web sites. This argument misapprehends the scope of Section 230 immunity.

“[I]mmunity extends beyond publisher liability in defamation law to cover any claim that would treat Lycos “as the publisher.” In other words, “[i]f the cause of action is one that would treat the service provider as the publisher of a particular posting, immunity applies not only for the service provider’s decisions with respect to that posting, but also for its inherent decisions about how to treat postings generally. UCS is ultimately alleging that the construct and operation of Lycos’s web sites contributed to the proliferation of misinformation; Lycos’s decision not to reduce misinformation by changing its web site policies was as much an editorial decision with respect to that misinformation as a decision not to delete a particular posting. Section 230 immunity does not depend on the form that decision takes.”

Accordingly, “Lycos is as entitled to immunity for its decisions about how to construct its web sites as for its decisions with respect to individual message board postings.”