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Company Must Pay Attorney Fees In Chat Room Speech Case - Global Telemedia International - Company Business and Marketing


A U.S. District Court Thursday ordered Global Telemedia International [OTCBB:GLTIE.OB] to pay more than $55,000 in attorney's fees to two defendants. The company had sued several anonymous individuals for posting comments critical of GTMI in an Internet chat room.

According to court papers, Barry King and Ron Reader posted numerous messages on the Raging Bull message boards from March to October 2000. The defendants posted anonymously by adopting pseudonyms - King used the handle "BDAMAN609" and Reader was known on the boards as "electrick_man."

Raging Bull is described by the court as a financial Web site that organizes individual bulletin boards or chat rooms, each one dedicated to a single, publicly traded company. The judge noted that the majority of posters appear to be investors or prospective investors in a given company, but stock ownership is not required to post.

GTMI last fall filed a lawsuit against King, Reader and other defendants. The company alleged that negative comments by several posters about GTMI and its management constituted trade libel and interfered with contractual relations.

On Feb. 23, U.S. District Judge David O. Carter granted a motion to dismiss the case by defendants. In his decision, the judge noted that unlike many traditional media, there are no controls on the postings in chat rooms. As a result, such writings are almost always opinions, and therefore are protected under the First Amendment.

"In sum, neither Reader's nor King's postings are statements of fact," the court wrote. "Given the general context of the postings, the colorful and figurative language of the individual postings, the inability to prove the statements true or false, and in one case, the posting of documents to support the poster's statements, the postings are opinions."

Because defendants King and Reader were speaking as investors, not as competitors of GTMI, the court found they were protected by a California law written to protect individuals from retaliatory lawsuits from corporations that feel they have been disparaged. These are referred to as "Strategic Litigation Against Public Participation," or SLAPP lawsuits.

The court ruled the anti-SLAPP provisions are applicable to GTMI's lawsuit against King and Reader. The judge Thursday ordered the company to pay the two defendants' attorneys fees.

Megan E. Gray, who defended Reader, today told Newsbytes, "it is nice to get an award like this."

According to Gray, this is the first time a court has applied the mandatory attorney fee provision in the anti-SLAPP statute to a defamation lawsuit involving anonymous Internet message board posters.

"This is especially important, because there are hundreds of these frivolous lawsuits filed across the nation in an attempt to silence people from posting critical opinions on Internet message boards," said Gray.

About 15 states have similar anti-SLAPP laws, according to Gray.

Bruce Braun, an attorney who specializes in Internet legislation and free speech on the Internet said the court's ruling is potentially significant.

"It is likely that this decision will be used as a guidepost in similar cases," he said. "It is a very important decision."

Braun said he had never heard of another case where attorney's fees were awarded to message board posters, but added that there might be an unpublished decision.

Braun, who was not involved in the GTMI lawsuit, praised California's anti-SLAPP statute. He said defendants can force a corporation to show they have a "probability of success" on its claims of defamation.

"This is an unusual provision. It offers defendants extra protection," he said. "It is a defense of free speech. It lets a defendant tee the issue up at the outset of litigation before the attorneys' fees get too high. The plaintiff must come forward with facts that show a probability of success on merits. The plaintiff must have its ducks in a row."

In the GTMI case, the court found that, even if the postings King and Reader made were statements of fact, the company would have to show damages as a result of the allegations the defendants made online.

Because the company's stock price fell significantly before either defendant made a negative post, the judge found no support of GTMI's claim of trade libel or defamation.

"This case might start a trend," said Braun. "The attorney's fee provision is critical. It is a necessary deterrent to stopping corporations from overreaching."

According to Braun, a company can attempt to silence criticism at a minimal cost to itself, while a defendant would have to hire an attorney.

"This ruling sends a shot across the bow of many corporations. Not only do they generate bad publicity if a lawsuit is found to be frivolous, they have to pay attorney's fees as well," he said. "This brings us closer to the English system, where the winning party's attorney's fees are paid. That results in less litigation."

"With this ruling, companies will be forced to do due diligence before trying to silence people by suing them," Braun added.

Attorneys for GTMI did not return phone calls for this story.

Baker &Hostetler is at http://www.bakerlaw.com .

The U.S. District Court for the Central District of California is at http://www.cacd.uscourts.gov .

Reported by Newsbytes.com, http://www.newsbytes.com .

17:24 CST

(20010518/Press Contact: Megan E. Gray, Baker