Protecting Your Client’s Business Reputation: The Challenges of Litigating Anonymous Internet Defamation

Originally published in For the Defense, The Defense Research Institute’s nationwide monthly magazine

Everyone’s a critic, and in the age of Internet anonymity, criticism can often be strident and cross the line into defamatory speech.

In the business world, defamatory speech can take many forms. Perhaps it takes form as a spurious accusation that your client’s company is headed for bankruptcy, as an unfounded claim that your client withheld unfavorable product safety test data, or as false and inflammatory comments posted online by an unhappy customer on a personal mission, hoping to destroy your client’s business reputation. Whatever the form, your client might turn to you to ask what you can do to silence the scoundrel who is spreading the lies.

What legal options does your client have if the client is the target of an online defamatory diatribe? And what if someone anonymously makes an offensive online misrepresentation on an industry message board or a listserv, for instance? Can you obtain a court’s assistance to identify the anonymous poster so that your client can sue that poster?

The answers to these questions may leave your client both incredulous and extremely frustrated. Why? Because the courts uniformly have refused to require hosts of online forums to remove allegedly defamatory Internet postings. Additionally, with anonymous Internet defamation, courts have tended to require a person or business pursuing a defamation claim to meet a high initial standard before they will compel production of information that will identify the person who made an allegedly defamatory statement.

While the courts do not want to foreclose defamation claims simply because defamatory statements have been published on the Internet, the courts must balance the right to sue for defamation against the First Amendment’s free speech protections. And the First Amendment weighs mighty heavily on the scales when the courts weigh it against other interests. Therefore, the courts take care to protect speech-even if such protection means that they allow defamatory statements to linger on the Internet and continue to disseminate across the world.

The contours of defamation law relating to the Internet are still being shaped as the courts deal with ever-changing technology and various and infinite situations, and attorneys must stay up-to-date on the case law in their jurisdiction. However, some recent cases provide at least some form of a road map for the practitioner.

An Illuminating Case Study-“The Mortgage Lender Implode-O-Meter”

One recent case that made its way to the New Hampshire Supreme Court illustrates the issues that arise in Internet defamation cases, particularly if defamatory statements have been posted anonymously. The case is Mortgage Specialist, Inc. v. Implode-Explode Heavy Industries, Inc., 999 A.2d 184 (N.H. 2010). And unsurprisingly, given the recent economic downturn, it dealt with the home-mortgage industry.

In the New Hampshire case, the defendant, Implode-Explode Heavy Industries, Inc., operated an Internet site that ranked various businesses in the mortgage industry using what it called “The Mortgage Lender Implode-O-Meter.” The plaintiff, Mortgage Specialists, Inc., sued Implode after Implode published an article on its website detailing a supposedly confidential administrative action undertaken by the New Hampshire Banking Department against Mortgage Specialists. Additionally, Mortgage Specialists took issue with two allegedly false and defamatory comments posted anonymously on the Implode website responding to the article by someone using a fictitious username. Finally, the article included an internal, Implode link to a loan chart that was purportedly part of the New Hampshire Banking Department’s investigation of Mortgage Specialists. Mortgage Specialists claimed that the loan chart was confidential under state law because it was part of an administrative investigation.

Mortgage Specialists sought an injunction that asked the trial judge to instruct Implode to remove the loan chart and the postings. It further requested that the trial judge require Implode to disclose the identity of the anonymous poster and the source of the loan chart. Mortgage Specialists also requested that Implode turn over to it all documents that Implode had obtained from that same source.

The trial judge granted all of Mortgage Specialists’ requests, but the New Hampshire Supreme Court overturned the decision. It concluded that requiring Implode to remove the loan chart and the posts from the Internet site constituted an illegal prior restraint of free speech in violation of the First Amendment. The New Hampshire Supreme Court remanded and required Mortgage Specialists to meet certain threshold tests before it could obtain the identity of the anonymous poster.

Prior Restraint Not Permitted

The New Hampshire Supreme Court found that the First Amendment’s protections against prior restraint-that is, a judicial order restricting speech, rather than merely punishing actionable speech-were as applicable to anonymous Internet speech as they were to traditional media. It cited seminal cases of the United States Supreme Court discussing restrictions on prior restraint. See Near v. Minnesota, 283 U.S. 697 (1931) (noting that prior restraint may be exercised in “exceptional cases,” such as when necessary to prevent publication of the location of troops during war, to prevent the publication of obscene material, or to prevent the overthrow by force of orderly government); New York Times Co. v. United States, 403 U.S. 713 (1971) (“the Pentagon Papers case”). It further noted that the United States Supreme Court had relatively recently ruled that protections restricting the judiciary from exercising prior restraint extend to “publication” on the Internet. See Reno v. ACLU, 521 U.S. 844 (1997).

The New Hampshire Supreme Court further found that the prior restraint analysis applied even if the contested issue was “republishing” information, in this case, meaning permitting an Internet publisher to keep something on its website rather than requiring the publisher to remove it, as opposed to restraining the information in the first instance. The court also noted that the First Amendment protects speech from prior restraint even if the person who obtained the information did so unlawfully, citing additional United States Supreme Court cases and other precedent to support that position.

Essentially, the New Hampshire Supreme Court, following a long line of First Amendment precedent, determined that the proper response to purportedly defamatory Internet material was to punish defamatory speech through criminal or civil proceedings involving damages, rather than restricting the speech outright.

Protecting the Anonymous Poster

If a defamed plaintiff cannot through the courts have defamatory statements removed, can that plaintiff at least subpoena the Internet service provider or the website host to identify a person who posts anonymously or under a pseudonym? The New Hampshire Supreme Court said “yes,” but it also stated that an author’s decision to remain anonymous is protected by the First Amendment, just as the speech itself is protected. Therefore, the court concluded that courts must balance the right to anonymity against the right of a party to protect its proprietary interest and its reputation through the assertion of defamation claims against an anonymous Internet poster. Rather than create its own balancing test, the New Hampshire Supreme Court relied upon and adopted the standard of one of the leading cases on the issue, Dendrite Int’l., Inc. v. Doe Number 3, 775 A.2d 756 (N.J. Super. Ct. App. Div. 2001).

Using the Dendrite analysis, the court held that when a party seeks to require the disclosure of the identity of an anonymous Internet poster, that party carries a significant procedural and substantive burden. First, a court should require the allegedly defamed party to attempt to notify an anonymous poster of that party’s efforts to obtain information about the poster’s identity. The allegedly defamed party’s notification efforts should include posting a message to the anonymous poster on the pertinent message board. The court should refrain from acting to provide the anonymous poster with a reasonable opportunity to object to the request. See Mortgage Specialists, 999 A.2d at 193 (citing Dendrite, 775 A.2d at 760-61). Second, a court should “require the plaintiff to identify the exact statements purportedly made by each anonymous poster that [the] plaintiff alleges constitutes actionable speech.” Id. Third, a court must circumspectly review all the information provided by a plaintiff to determine whether the plaintiff “has set forth a prima facie cause of action against” an anonymous poster or posters. Id. Here, the plaintiff must meet more than the motion to dismiss, “failure to state a claim upon which relief can be granted” test. Id. Rather, “the plaintiff must produce sufficient evidence supporting each element of its cause of action, on a prima facie basis” before a court should order disclosure of the identity of an anonymous poster. Id.Fourth and finally, if a court concludes that the allegedly defamed party has established a prima facie case, “the court must balance the defendant’s First Amendment right of anonymous free speech against the strength of the prima facie case presented and the necessity for the disclosure of the anonymous defendant’s identity to allow the plaintiff to properly proceed.” Id. According to the Dendrite court, courts must undertake case-by-case analyses in applying these procedures and standards, balancing the equities and rights at issue. Id.

As discussed below, this Dendrite test has been endorsed by many courts, but other courts have followed their own slightly different tests when determining whether a party could obtain information regarding the identity of an anonymous Internet poster.

Disclosure of Confidential Sources

Just as with the anonymity of the poster, the New Hampshire Supreme Court imposed a threshold showing upon Mortgage Specialists before it could obtain the identity of the confidential source who provided the loan chart. The court wrote that the “reporter’s privilege” generally preserves anonymity, even in the case of a website article, although not necessarily if an anonymous source’s identity is “essential to a libel plaintiff’s case.” The court followed decisions of the First Circuit Court of Appeals holding that a defamation plaintiff must establish that the public interest in disclosure is “compelling enough to override the disruption or threat to the continued free flow of information to the media” by showing that (1) the information sought is critical to its claim, and (2) the information is not available from other sources. See Bruno & Stillman, Inc. v. Globe Newspaper, Co., 633 F.2d 583 (1st Cir. 1980); In re: Cusumano, 162 F.3d 708 (1st. Cir. 1998). These First Circuit cases describe a shifting burden: initially a plaintiff has the burden of showing that the need for the information is not frivolous; then the burden shifts to the defendant to show its basis for withholding the information. A court must next balance the two competing interests.

Different Cases, Similar Results

Other courts across the country have reached similar conclusions to those of the New Hampshire Supreme Court in cases involving Internet defamation claims. The Dendrite “make a prima facie case” test has been endorsed by not only the New Hampshire Supreme Court, but also by courts in California and Maryland. See Krinsky. v. Doe 6, 72 Cal. Rptr. 3d 231 (Cal. Ct. App. 2008); Independent Newspapers, Inc. v. Brodie, 966 A.2d 432 (Md. 2009). Apparently courts will not either up-front preclude a party from publishing or enjoin a party from “republishing” purportedly defamatory statements on the Internet. Instead, the courts limit a plaintiff’s remedies to damages or other civil remedies. Interestingly, the courts have reached the same result in cases involving misappropriated trade secrets posted to the Internet. See Proctor & Gamble Co. v. Bankers Trust Co., 78 F.3d 219 (6th Cir. 1996); Ford Motor Co. v. Lane, 67 F. Supp. 2d 745 (E.D. Mich. 1990)). Further, just as the New Hampshire Supreme Court, other courts have seemed inclined to require a defamation plaintiff to meet at least some threshold test before permitting the plaintiff to obtain the identity of an anonymous Internet poster who made allegedly defamatory comments.

At the same time, however, the courts have not spoken with a single voice pinpointing the precise threshold test that a defamation plaintiff must meet to obtain the identity of an anonymous Internet poster. Rather, the courts appear to be struggling to determine the best way to ensure that a plaintiff can identify an anonymous poster if that plaintiff truly has a claim but that a party does not merely file suit to “out” an anonymous poster.

Variations on a Theme-Some Showing Needed to Obtain Anonymous Poster’s Identity

Unlike the New Hampshire, California, and Maryland courts, other courts have taken a multitude of different approaches, accepting only some elements of the Dendrite test and rejecting others, or developing similar tests of their own. For example, in what has been considered the lowest level of scrutiny, a Virginia state court stated that a defamation plaintiff need only show that it had a “legitimate, good faith basis” to contend that it was a victim of actionable speech and that the subpoenaed information was “centrally needed” to advance that claim before the court would require the disclosure of information identifying an Internet poster. See In re Subpoena Duces Tecum to America Online, Inc., 52 Va. Cir. 26 (Va. Cir. Ct. 2000), rev’d on other grounds, 542 S.E.2d 377 (Va. 2001).

Moving slightly further up the scale from little scrutiny to greater scrutiny, a federal district court in California required an allegedly defamed plaintiff to show that the plaintiff’s case could withstand a motion to dismiss, “failure to state a claim” test. This court went on to require the plaintiff to show that it needed the information and all the previous steps that it undertook to locate the anonymous defendant to deliver service of process. See Columbia Ins. Co. v. Seescandy.com, 185 F.R.D. 573 (N.D. Cal.1999).

A federal court in Washington, after reviewing and considering the decisions of the Virginia court in America Online and the California court in Seescandy.com, adopted its own rigorous, four-part test to determine whether it would allow a defamation plaintiff to obtain information about an anonymous Internet poster: (1) whether the subpoena seeking the information was issued in good faith and not for an improper purpose; (2) whether the information sought related to a core claim or defense; (3) whether the identifying information was directly and materially relevant to the claim or defense; and (4) whether the information sufficient to establish the claim or defense was unavailable from any other source. See Doe v. 2TheMart.Com, Inc., 140 F. Supp. 2d 1088 (W.D. Wash. 2001).

A federal district court in Louisiana looked at all the cases above-including the Dendrite case, the Seescandy.com case, the America Online case, and the 2TheMart.Com, Inc. case-and finessed them to come up with yet another test. In re Baxter, No. 01-00026-M, 2001 WL 34806203 (W.D. La. Dec 20, 2001). The Baxter court concluded that imposing a prima facie case standard as required by the Dendrite test is “too burdensome” because a plaintiff may not be able to make out a prima facie case at such an early stage of the proceedings if even the identity of the defendant is unknown and no discovery has taken place. The Baxter court went on to determine that the requirement in Seescandy.com and in2TheMart.Com that a plaintiff have no other source for the sought-after information was “irrelevant” because

[t]he issue is the balancing of a plaintiff’s right to protect his good name versus the defendant’s First Amendment right to free speech. The need to balance those interests and to protect free speech is no less present where plaintiff attempts to learn the identity by some other “available means” or where he attempts to learn it by subpoena.

Baxter, at *12.

Further, the Baxter court characterized requiring that the identifying information relate to a core claim or defense and be directly materially relevant, as set forth in 2TheMart.Com, as a “rote exercise” because in the Baxter case the information was “obviously needed to identify the defendant.” Finally, the Baxter court took issue with any standard that required an inquiry into whether a subpoena was issued or a request was made “in good faith,” as in 2TheMart.Com and America Online, because “a plaintiff may well be in actual subjective good faith in filing the suit believing he has a strong case when, in fact, he may have no case at all.”

So what did the Baxter court choose to do, after having rejected the analyses offered by all those other courts? It first noted that different standards applied in defamation cases involving a “private concern,” on the one hand, and a “public concern,” on the other. Then, it chose to apply a “reasonable probability of recovery” test to statements involving a “private concern” and a “reasonable possibility of recovery” test to statements involving a “public concern.” The court stated that it preferred the higher standard of “reasonable probability of recovery,” but due to the high bar applied to defamation of public figures on the merits, that “reasonable probability of recovery” standard was “unworkable” because determining whether a plaintiff could satisfy the “actual malice” element necessary in a public concern defamation case would require disclosing an anonymous poster’s identity and taking his or her testimony.

The Supreme Court of Delaware had similarly rejected the full Dendrite test and adopted only two of its four elements. See Doe v. Cahill, 884 A.2d 451 (Del. 2005). The Cahill court concluded that the “prima facie case” requirement of the Dendritetest was essentially the same as the “summary judgment” standard. Therefore, it adopted the first and third elements of theDendrite test and required the plaintiff to make reasonable efforts to notify the defendant and satisfy the summary judgment standard before the court would permit disclosure of the anonymous Internet poster’s identity. The Cahill court stated that the second and fourth elements of the Dendrite test were unnecessary. According to the Cahill court, the summary judgment inquiry subsumed the second Dendrite requirement, that the plaintiff present the exact defamatory statements. And, “the fourth Dendrite requirement,” wrote the court, “that the trial court balance the defendant’s First Amendment rights against the strength of the plaintiff’s prima facie case, [was] also unnecessary. The summary judgment test is itself the balance.” Id. at 461. At least some courts have adopted this analysis. See Best Western, International, Inc. v. Doe, No. CV-06-1537-PHX-DSG, 2006 WL 2091695 (D. Ariz. July 25, 2006); Reunion Industries, Inc. v. Doe 1, 80 Pa.D. & C.4th 449, 2007 WL 1453491 (Pa. Com. Pl. 2007).

Another court liked the Delaware Supreme Court’s analysis in Cahill but thought that the Delaware court was remiss when it rejected the last Dendrite test element-balancing the strength of a plaintiff’s defamation case against the rights of someone to speak anonymously. Mobilisa, Inc. v. Doe, 170 P.3d 712 (Ariz. Ct. App. 2007). The Mobilisa court discussed in great detail why it believed that balancing those two interests was a necessary element of the analysis. Additionally, at least one other court seems to have reached the same conclusion, that is, that the last three elements of the Dendrite test are the appropriate ones to apply. See SaleHoo Group, Ltd. v. ABC Co., No. C10-0671JLR, 2010 WL 2773801, at *3 (W.D. Wash. Jul 12, 2010).

Finally, to provide yet one last example of how courts are picking and choosing among the Dendrite test elements, let’s look to another federal district court in California. See Highfields Capital Management, L.P. v. Doe, 385 F. Supp. 2d 969 (N.D. Cal. 2005). The Highfields court staked its own claim and concluded that courts should follow the third and fourth elements of the Dendrite test. The Highfields court required the plaintiff to establish by competent evidence a prima facie case on all elements of the defamation claim. Then, if the plaintiff met that initial hurdle and the trial court concluded that enforcing the subpoena “would cause relatively little harm to the defendant’s First Amendment and privacy rights and that its issuance is necessary to enable plaintiff to protect against or remedy serious wrongs,” the defendant should identify the poster.

The More Inflammatory the Defamation, the Better the Chance of Uncloaking Anonymity?

Given that a defamed client will have virtually no success removing anonymously posted, offending comments from the Internet with court assistance, your best hope is to identify the poster and assert a defamation claim-if such a claim is supportable. In light of the apparent trend in the case law, however, you cannot simply file suit for your client and automatically count on the backing of a court in a fight over whether, after receiving a subpoena requesting a defamer’s identity, the subpoena receiver must honor it. Rather, you will have to meet whatever initial requirements the court in the pertinent jurisdiction puts in place to “test” the case and ensure that the case legitimately and sufficiently offsets First Amendment protections.

The chance that you will obtain the identity of an anonymous online poster might very well increase as the speech’s shrillness and hostility increases. The more inflammatory the language, the more likely a plaintiff can convince a court that that the plaintiff truly has a case and is not merely trying to identify the poster for illegitimate reasons, such as to harass or intimidate that person. Knowing that exceptionally damaging comments may make it easier to identify an anonymous critic will console your client little while a website “broadcasts to the world” horrible and upsetting things. But it is better than not being able to identify the person at all.

Practical Considerations

Because the Internet is a dynamic and ever-changing platform, it is important for you to preserve potentially defamatory statements. Retaining a technology specialist who can “save” the “screen shots” of offending material is imperative. Someone also must review the offending statements online regularly, particularly blogs and message boards, to ensure that you capture follow-up comments and preserve those as well. Additionally, you should ask the consultant to undertake searches for historical posts that you and your client may have missed so that a complete file is protected in the event that the matter proceeds to full-fledged litigation. While as a practical matter the disappearance of defamatory information may actually be a good turn of events for your client, you must, nevertheless, preserve the evidence if your client chooses to pursue litigation for the damage that it already sustained before the information disappeared.

Also, given that success in the legal battle against online defamation is so difficult to achieve, you might also help your client wage a public relations offensive. This is a tricky business. If your client directly responds online to web-based remarks, it could only give the defaming person the attention that he or she seeks, further emboldening the poster to respond in kind. The defamer could add more postings, people could attribute even more notoriety to the comments, your client could receive more online criticism, or the comments could rank more highly than before on search engines. Thus, you can suggest that your client retain a well-respected public relations consultant who specializes in “online reputation protection.” That consultant should put together a comprehensive strategy to respond to defamatory web comments, keeping the risks in mind and discussing them with your client and you.

In summary, defamation on the Internet may travel at lightning speed, but preparing a proper legal response requires a deliberate, thoughtful approach.