Court finds misleading omissions can deprive ISP of 230 protection

General Steel Domestic Sales, LLC v. Chumley, No.
14-cv-01932, 2015 WL 4911585 (D. Colo. Aug. 18, 2015)
General Steel sued Chumley and Atlantic Building, of which
he was CEO, for false advertising, libel, and intentional interference with
prospective business advantage (plus civil conspiracy).  It alleged that defendants used the internet
to harm General Steel and get business by running ads in response to searches
for the words “General Steel,” “General Steel Buildings,” “steel buildings,”
and “metal buildings.” Many of these ads allegedly contain derogatory
information about General Steel and contain links to a portion of the Armstrong
Steel Corporation website which does the same.
There were twenty statements on the Armstrong Steel website
at issue.  One part of the website was
called “Industry Related Legal Matters” (IRLM), created by Chumley; it had 37
posts, 20 of which were alleged to be unlawful. 
Each post contains a “read more” button that links to third-party
website; each post also contains an excerpt from the document which can be seen
in full when the “Read More” button is pushed. 
For example, one post’s heading was “Class Action Complaint – Heinbaugh
et al v. General Steel Domestic Sales, LLC.” Its first paragraph was a quotation
from describing a class action lawsuit filed against General
Steel, with the words “U.S. District Court of Colorado” added before the
quotation, which read: “General Steel Corp. and its CEO Jeffrey Knight ‘infamous’
telemarketers of steel-buildings, systematically defrauded their customers, in
defiance of court orders, by, among other things, taking nonrefundable deposits
and then refusing to deliver buildings for the price advertised, a class-action
complaint claims in Federal Court.”
Other posts included “Attorney General Madrid Warns New
Mexico Churches About Colorado Metal Building Company” and “General Steel
Domestic Sales, LLC v. Chumley,” the latter of which described the claims and
counterclaims in a 2010 case, but didn’t mention the dismissal of certain
counterclaims.  Another post, “Rock Limo
Service v. General Steel Domestic Sales,” included quotations from a court case
describing a contract and ending with this sentence: “Petitioners demanded
return of their deposit, but General Steel refused to pay it.” The “Read More”
link led to the full text, affirming an arbitrator’s award finding that General
Steel properly retained the deposit because Rock Limo breached the relevant
contract.  The IRLM Page contains a
general disclaimer: “These external hyperlinks represent allegations made by
parties (which may or may not ultimately be adopted by a judge/jury) and
findings of fact and law by judges/arbitrators. Some of the cases mentioned
here may be ongoing, dismissed, settled and/or may not be final.”
As for defendants’ search ads, they included:
Don’t Send Them A Deposit – Ad
Until You’ve Seen These Lawsuits. Read This Before It’s Too
Before You Send a Deposit – Do Your Research First Ad (855) 882-6555 Read This Before It’s Too Late!
View Gallery – Virtual Building – Design It Online –
Steel Building *Lawsuits* – +1 800-345-4610 4.8 rating for
Rock Limo Lost $125,383 in Deposits *Beware* Research Before
You Buy! Court Rulings · Lawsuits · Buyer Beware · Complaints
‘General Told Her ‘We Will Keep You In Court Until We Break
You’ ‘
Court Rulings · Lawsuits · Buyer Beware · Complaints
General Steel argued that defendants “collected old
documents from long-resolved General Steel litigation and wholly created a
website conveying facts that are false as to General Steel’s current
operations. In addition, the title of the IRLM Page, “Industry Related Legal
Matters,” was allegedly misleading because it appeared to be an objective site
disclosing industry lawsuits, but actually is a page targeting General Steel. 
Defendants argued that the CDA gave them immunity.  General Steel responded that they wholly or
partially developed the information at issue, and thus didn’t qualify.  To be responsible, a service provider must “in
some way specifically encourage[] development of what is offensive about the
content,” which is to say what is unlawful or legally actionable.  (Interpreting the Accusearch case, which some worried represented an expansion of ISP
liability—as with Roommates, it may
be that the case actually sets a limit that preserves most ISPs’ immunity.)  Merely inviting or encouraging third parties
to post content isn’t development of that content.  Even ratifying or adopting third party content,
including through the posting of commentary, isn’t development.  Nor is minor editing, as long as the changes don’t
contribute to the false, misleading, or otherwise unlawful nature of the
underlying information.
General Steel pointed out that the posts weren’t submitted
by third parties, but rather created by Chumley.  However, “nothing in § 230 or the relevant
case law limits § 230 immunity to information submitted directly to a website
by a third party.”  Here, everything came
from the internet, so cases finding that §230 didn’t cover publication of material
submitted to an ISP that was not intended for public distribution were
irrelevant.  Thus, the links received §
230 immunity, and so did the summaries, because the addition of “U.S. District
Court” was inconsequential.  General
Steel claimed that the excerpts highlighted inflammatory and disparaging parts
of the documents.  (With respect to the
arbitration, a false light-like theory of responsibility for development would
make sense to me—it’s kind of like editing out the “not” in an otherwise
nondefamatory statement.) 
At many points, the defendants created their own summaries
of allegations made by others. 
Defendants also didn’t post a court order finding them liable for willful false advertising targeting General Steel.  Still, General Steel didn’t claim that the
links went to inaccurate versions of the documents, or that the page contained
inaccurate quotations.  Ultimately, the
court found that defendants developed some of the information:
To the extent the defendants chose
certain summaries and quotations describing the referenced court proceedings,
failed to accurately describe the proceedings as a whole, and posted those
quotations and summaries on the IRLM Page, the defendants developed the
information they posted on that page. These editorial choices can be seen as a
choice to emphasize unflattering allegations made against General Steel without
summarizing or quoting information which reflects the nature and outcome of the
court proceeding described…. Highlighting the unflattering allegations without
providing other relevant information reasonably can be seen as contributing to
the allegedly defamatory or otherwise actionable nature of the underlying
information. Such actions specifically encourage development of what is
allegedly unlawful or legally actionable about the content and, thus,
constitutes development of the information for the purpose of § 230 immunity.
However, certain summaries and quotations were “reasonably
accurate” summaries of the underlying information developed by third parties,
and thus covered by §230. “By organizing, quoting, and summarizing this
information, the defendants did nothing to specifically encourage the
development of what General Steel claims is unlawful or legally actionable
about the underlying content.”  By
contrast, other posts highlighted content that was allegedly
The search ads also weren’t subject to §230 immunity, since
the defendants created and developed their content.
General Steel argued that Lanham Act claims were exempt from
§230 immunity because of §230’s IP exclusion.  The court ruled that General Steel’s claim was
brought under §43(a)(1)(A), but then called it a “false advertising claim,”
which it is—and thus mistakenly held that General Steel’s Lanham Act claims
weren’t subject to §230: “Particularly given this [statutory placement of false
advertising language in a trademark law], a false advertising claim under §
1125 implicates trademark law, an ilk of intellectual property law.”  Sigh (though it’s not clear this matters to
the outcome, since the court seemed to focus its analysis on the content it
found defendants to have created).
For similar reasons, the court found the fair report
privilege applicable to some of the posts, not others.
Truth: defendants argued that “Rock Limo Lost $125,383 in
Deposits” was true.  But this created a
material issue of fact about whether the statement clearly implied that the loss
resulted from wrongful behavior by General Steel.  The court found that disputed issues of
material fact about the ads precluded summary judgment on the grounds of truth
for the Lanham Act/tortious interference claims.
Defendants argued that General Steel failed to present
evidence of customer confusion.  Given
General Steel’s theory of intentional deception, no extrinsic evidence of
confusion would be required.  Likewise,
General Steel’s experts provided sufficient evidence of the loss of one or more
contracts to take the tortious interference claim to trial.

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