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Posts Tagged ‘writ of certiorari’

Yelp Can’t Be Ordered to Remove Defamatory Reviews by A California Lawyer’s Unhappy Former Clients

Posted on: December 3rd, 2018

By: Frank Olah

On July 2, 2018, in Hassell v. Bird (2018) 5 Cal.5th 522, the California Supreme Court held that Section 230 of the Communications Decency Act of 1996 prohibits courts from ordering Yelp to remove defamatory consumer reviews posted by an attorney’s former client.

Section 230 states that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Moreover, “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.”  (Section 230(e)(3).)

The Hassell court held that Section 230’s broad immunity protects “interactive computer services” such as Yelp from defamation liability even in circumstances where Yelp was not itself sued for defamation. The court reasoned that a defamed plaintiff should not be able to avoid the immunity protections of Section 230 by intentionally not naming Yelp as a defendant. Instead, some defamed plaintiffs tried to circumvent Section 230’s immunity by enforcing a judgment against the defamer defendant, and then using the judgment and injunction to remove the defamatory Yelp posts. Such a strategic end-run around Section 230 is not permitted.

In June 2012, Ava Bird hired attorney Dawn Hassell to prosecute a personal injury lawsuit. After a few months, Hassell concluded Bird was unhappy and withdrew. Bird posted negative reviews on Yelp about Hassell’s lawyering skills. Hassell asked Bird to remove them; Bird declined. Hassell proceeded to sue only Bird for libel.

After a default prove-up hearing, the trial court entered judgment for Hassell for $557,919 in damages, apparently caused by three one-star Yelp reviews. The trial court also ordered both Bird and Yelp to remove the three defamatory reviews. Upon being served with the court’s order, Yelp moved to set aside and vacate the default judgment. The trial court denied the motion. The Court of Appeal affirmed. It found the removal order did not did not impose any “liability” on Yelp, as that term is used in Section 230(e)(3), since the default judgment and damages were against Bird and not Yelp.

The California Supreme Court reversed. It observed that the “immunity provisions within section 230 have been widely and consistently interpreted to confer broad immunity against defamation liability for those who use the Internet to publish information that originated from another source.” (Id. at 535.) It found that “lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone or alter content—are barred.” The Court found that Section 230 confers “blanket immunity from tort liability for online republication of third party content.” The Court reasoned that subjecting companies like Yelp to defamation liability for the republication of online content would tend to chill online speech. This chilling effect could materialize in the high costs for companies like Yelp of having to investigate potentially defamatory postings.

The Court found that Yelp was being held to account for nothing more than its ongoing decision to publish the challenged reviews. The Court concluded that Hassell’s legal remedies lay solely against Bird, and could not extend to Yelp. Notably, the Court ruled that Hassell had powerful remedies available to her, i.e. “the judgment requires Bird to undertake, at a minimum, reasonable efforts to secure the removal of her posts. A failure to comply with a lawful court order is a form of civil contempt… the consequences of which can include imprisonment.”

On October 18, 2018, Hassell filed a petition for writ of certiorari urging the United States Supreme Court to review the decision, which she argue renders California courts powerless to compel companies like Yelp to remove clearly unlawful content. Apparently, Hassell is not convinced that pursuing a contempt order against Bird and demanding that her former client be thrown in jail will improve her Yelp rating.

One criticism of the Hassell Court’s reasoning is its naïve willingness to adopt the fiction that Yelp is just a folksy old-fashioned newspaper publisher exercising a publisher’s traditional editorial functions. The reality is that Yelp applies its own judgment to award star ratings to businesses. In this case, Hassell claimed that the manner in which Yelp utilized Bird’s reviews caused its rating to drop to 4.5 stars. The trial court had observed that Yelp featured one of Bird’s defamatory reviews as a “Recommended Review” and that Yelp had not factored many positive reviews into Hassell’s overall rating. That is to say, Yelp promoted Bird’s negative reviews and gave them greater weight than many more positive reviews causing Hassell’s star-rating to drop.  And the lower Yelp star-rating caused Hassell to lose business.

Perhaps the U.S. Supreme Court will not want to parse the issue so finely. But Congress may wish to consider whether it makes sense to update Section 230 to allow a company like Yelp to be compelled to remove postings that the original poster was ordered to remove.

If you have any questions or would like more information, please contact Frank Olah at [email protected].

Supreme Court to Revisit Liability Under Rule 10b-5 – Will Prospective Justice Kavanaugh Weigh In?

Posted on: July 25th, 2018

By: Ted Peters

Section 10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated under it, makes certain conduct in connection with the purchase or sale of any security unlawful.  Specifically, Rule 10b-5(a) prohibits the use of any “device, scheme, or artifice to defraud.”  10b-5(b) prohibits the use of any “untrue statement of a material fact” or the omission of any “material fact necessary in order to make the statements… not misleading.”  And 10b-5(c) prohibits “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.”

In Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (2011), the United States Supreme Court addressed whether a mutual fund investment adviser could be held liable under Rule 10b-5 for false statements included in its client mutual funds’ prospectuses.  The Court concluded that the adviser could not be held liable under the rule because it did not make the statements in the prospectuses.

In Lorenzo v. Securities and Exchange Commission, 872 F.3d 578 (2017), the D.C. Circuit Court of Appeal considered whether a registered representative of a broker-dealer, who allegedly emailed false and misleading statements prepared by his boss to investors, could be found liable under Rule 10b-5.  Initially, the case was tried before an Administrative Law Judge who concluded that Lorenzo’s boss had drafted the emails in question; Lorenzo did not read the text of the emails; and Lorenzo had “sent the emails without even thinking about the contents.”  The judge also found that the emails were sent “at the request” of Lorenzo’s boss.  Notwithstanding these findings, the judge nevertheless concluded that Lorenzo had willfully violated securities laws (i.e., that Lorenzo had acted with an intent to deceive, manipulate or defraud).  As a sanction, the judge not only fined Lorenzo, but also imposed a lifetime suspension effectively barring him from the securities industry.

Lorenzo appealed the ruling before the Securities Exchange Commission.  The Commission affirmed, concluding that Lorenzo himself was “responsible” for the contents of the emails his boss asked him to send even though it was undisputed that Lorenzo’s boss had prepared the contents of the emails and that Lorenzo had simply “cut and pasted” the contents into the emails at issue.  Notably, the SEC found that Lorenzo’s conduct triggered liability under each of the subparts of Rule 10b-5, including 10b-5(b) which, under Janus, necessarily required an affirmative finding that Lorenzo had actually “made” the statements in question.

Lorenzo next appealed to the D.C. Circuit Court.  On September 29, 2017, a divided court upheld the SEC’s determination.  The court agreed that there was substantial evidence that the statements in Lorenzo’s emails were false or misleading and that Lorenzo possessed the requisite intent to mislead, deceive or defraud. However, the court disagreed with the SEC’s determination that Lorenzo was the “maker” of the statements as required by Rule 10b-5(b).  “We conclude that Lorenzo did not ‘make’ the false statements at issue for purposes of Rule 10b-5(b) because Lorenzo’s boss, and not Lorenzo himself, retained ‘ultimate authority’ over the statements.” [Citing Janus.]  On this basis, the court set aside the sanctions and remanded the case to enable the SEC to reassess appropriate penalties.

Judge Brett Kavanaugh, the current presidential nominee to fill the vacancy left by Justice Kennedy, penned a strongly worded dissent.  Kavanaugh criticized the conclusion reached by his colleagues that the “scheme liability” provisions of Rule 10b-5(a) and (c) may be used to find liability even where the defendant is not the “maker” of the statements (and thus not liable under 10b-5(b)).

On June 18, 2018, the U.S. Supreme Court granted the petition for writ of certiorari.  The question before the Supreme Court is simple: Can a defendant be held liable under the so-called scheme liability provisions of Rule 10b-5(a) and (c) in connection with using false or misleading statements, even if that defendant is not the “maker” of the statements?  That the Court accepted certiorari certainly suggests that the Court desires to further define the scope and limitations of Rule 10b-5.

Should Kavanaugh be confirmed as the next Supreme Court Justice, it remains to be seen whether he will recuse himself on the grounds that he heard the case below.  If he does, then the Court could well end up with a 4-4 split, which would effectively affirm the lower court’s ruling.  The Court’s four more liberal justices (Breyer, Ginsburg, Sotomayor and Kagan) each dissented from Janus.  On the other hand, if Kavanaugh is confirmed and does not recuse himself, the majority of the Court will likely endorse a more restrictive interpretation of scheme liability under Rule 10b-5.

If you have questions or would like more information, please contact Ted Peters at [email protected].

Eleventh Circuit Again Rejects Claim That Title VII Prohibits Discrimination On The Basis Of Sexual Orientation

Posted on: July 23rd, 2018

By: Bill Buechner

In Bostock v. Clayton Co. Bd of Comm’rs, 723 F. App’x 964 (11th Cir. 2018), the Eleventh Circuit again held that Title VII does not prohibit discrimination on the basis of sexual orientation.   In doing so, the panel relied on prior circuit precedent in Evans v. Ga. Reg’l Hosp., 850 F.3d 1248 (11th Cir.), cert. denied, 138 S.Ct.  557 (2017) and Blum v. Gulf Oil Corp., 597 F.2d 936 (5th Cir. 1979).    Jack Hancock and Bill Buechner are representing the County in the case.

Last week, the Eleventh Circuit issued an order denying a request from a member of the Court for rehearing en banc.  Bostock v. Clayton Co. Bd. of Commissioners, 2018 U.S. App. LEXIS 19835,  2018 WL 3455013 (11th Cir. July 18, 2018).   The order was notable because it was accompanied by a dissent by two circuit judges sharply criticizing their colleagues for not agreeing to rehear the case en banc.

The plaintiff in Bostock had already filed a petition for writ of certiorari with the United States Supreme Court, and the County will be filing a response to that petition in the next few weeks.   The employer in Zarda v. Altitude Express, Inc., 883 F.3d 100 (2d Cir. 2018) (en banc) also has filed a petition for writ of certiorari with the Supreme Court seeking review of the Second Circuit’s ruling that Title VII does prohibit discrimination on the basis of sexual orientation.

We will report on the outcome of these pending petitions for writ of certiorari with the Supreme Court.

If you have any questions or would like more information, please contact Bill Buechner at [email protected].