In 1975, PepsiCo began one of the most successful and well-known head-to-head business competitions of all time, challenging its chief rival Coca-Cola to the “Pepsi Challenge.” The ads had an immediate effect on Pepsi’s sales. A survey in Dallas in 1976 showed a jump in market sales of Pepsi from 8 percent to 12–13 percent. The challenge had the hallmarks of good advertising in that it was open to public scrutiny and could be—and was—easily put to the test by anyone with a can of Coke, a can of Pepsi, and a blindfold. Unfortunately, companies now find themselves in the crosshairs of individuals and groups who feel free to disparage businesses with impunity, often relying on the anonymity of social networking sites. The issue is what businesses can do to protect their reputation from Internet attacks.
Since the first email blasts began, we have all received the “warnings.” In fact, just recently, an attorney-friend of mine re-posted on Facebook this note: “Starbucks refused free product to Marines serving in Iraq, saying it didn’t support the war or anyone taking part in it.” His comment was how disappointed he was “if it is true.” By the time I saw the post, barely an hour had gone by, and 10 people had commented that they would immediately stop buying Starbucks. And, unfortunately, once something is on the Internet, it is there forever. I still occasionally get the email that “Tommy Hilfiger was ‘recently’ on Oprah stating he would not sell to Asians/Jews/Blacks.”
There is no question Internet disparagement of a company not only affects the end users of a product but can also have a disastrous effect on a publicly traded company’s stock. In 1998, Internet rumors began to spread that the chief executive officer of AgriBioTech was about to be indicted. The stock quickly dropped from $29.20 to $9.75 a share.
The first and sometimes most difficult task is to identify who the perpetrators are. Internet users, especially on the larger domains (Yahoo, Facebook), look at themselves, ultimately, as ghosts, capable of espousing anything from anonymous devotion to venomous hatred without fear of reprisal. Courts addressing this problem have recognized that First Amendment speech protections, and the limitations on them, extend to the web. Some courts, however, have compelled Internet providers to identify, to one extent or another, otherwise anonymous users.
There are essentially two basic views. Some courts have found that a service provider can be compelled to turn over user information if the party seeking the information could make a prima facie showing of defamation, but those courts then balance that with the anonymous speaker’s First Amendment rights. See, e.g., DendriteInt’l, Inc. v. Doe No. 3, 342 N.J. Super. 134, 141–42, 775 A.2d 756 (N.J. Super. Ct. App. Div. 2001). Others have determined that the test will be held to a summary judgment standard—evidence sufficient to create a genuine issue of material fact. See, e.g., Doe v. Cahill, 884 A.2d 451, 460–61 (Del. 2005); see also Thomas M. Cooley Law Sch. v. John Doe 1, No. 307426, 2013 WL 1363885 (Mich. Ct. App. 2013) (summarizing the Dendrite and Cahill tests).
Simply identifying the anonymous posters, without taking any follow-up action, can have a chilling effect on others who may want to file suit. In 2009, this author was retained by a Fortune 500 company tired of the slanderous chatter of a dozen people posting on its bulletin board in Yahoo’s finance section. Yahoo was subpoenaed to produce the identities of the posters, and after Yahoo had given the posters the opportunity to respond, the company produced the identity information. The startling result was that the majority of posters were employees (and quickly ex-employees) of the company. And the last posts of most of the offenders were warnings to others, which were apparently well heeded as the problem completely disappeared.
In fighting back, the first question is whether the allegedly defamatory statements are statements of fact or opinion. Any product or service can find a following, good or bad, on the Internet—not just on social media sites but also on the sites of general sellers like Amazon as well as specialty sellers of any product. Most will have a place for links to reviews or a place to post reviews, or both. A 2009 federal court opinion put it well: “[P]ublications of ratings and reviews are ubiquitous, despite the many people, products, and services that are the targets of unfavorable reviews. Absent evidence of false statements, the disappointed target has no recourse in law.” WinePress Publ’g v. Levine, 2009 WL 3765188, at *6 (W.D. Wash. Nov. 9, 2009).
If the statements are defamatory, the next question is whether to take any action at all. There has to be a certain amount of acceptance that not every consumer will always be 100 percent happy with a product or service. To some degree, discourse not only can be expected but may in fact have a positive effect. A very innocuous example, and one we simply accept, is the unsolicited movie review posted on Facebook (many of which are given as “fact”). I recently saw a well-publicized and acclaimed musical, and posted my not-so-supportive review (“if I could only have those three hours of my life back”) on my Facebook page. I provided not only my opinion but also my reasoning. In comments posted to my review, I was lambasted about how incredibly wrong I was and how wonderful the musical was. In essence, my bad review became a bulletin board for how good the musical was.
If an attack is in fact defamatory, the next examination is whether the statements are limited and can be controlled. There is a big difference between a single posting or limited postings that may be defamatory and a Facebook page or Internet site specifically intended to attack a product or service. Examples of the latter include “allstatesucks.com,” “statefarmsucks.com,” and Facebook pages complaining about almost any product. If the disparagement is limited to social networking sites, the cure may be as simple as requesting that the offending pages, and the person posting them, be removed. Facebook, MySpace, and other social media sites are free from liability under the Communications Decency Act of 1996, which provides in part 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.” 47 U.S.C.A. § 230(c)(1). But these social networking sites have community guidelines that, when not followed, will lead to the site and the offender being removed and banned.
If any direct action is to be taken, the best course is simply to ask, before filing suit, that the offending site or post be deleted. An offensive post that appears to be the first shot in a cyber-smear campaign may be no more than an ill-placed letting off of steam that can be addressed by a request, either from the company or its attorney, to cease and desist and remove the post. In addition, companies want to avoid what has become known as the “Streisand effect”—entering into litigation that spreads a contained post. Barbra Streisand sued to have an aerial photograph of her Malibu estate (one of thousands taken of the entire coastline to document erosion) removed from the Internet. Prior to the lawsuit, the photo was downloaded only six times, including twice by her attorney. Within a month after the suit was filed, the photo was viewed over 420,000 times. Again, the initial assessment should be whether anyone is even paying attention and whether going on the attack will help or hurt.
If a suit becomes a necessity, a recent decision by the Superior Court of Massachusetts provides much of the relevant background regarding the rights of companies to protect themselves against Internet attacks. In Clay Corp. v. Colter, 30 Mass. L. Rptr. 429 (Norfolk Cnty. Super. Ct. Dec. 11, 2012), two brothers sought revenge on a car dealership that fired their sister, a cancer patient, by taking to Facebook and Twitter seeking a boycott of the dealership or that their sister be rehired. Even after the dealership had offered to rehire the sister, with back pay, the Internet attack continued. The brothers were sued in an attempt to stop the postings. The brothers argued their speech was protected. The court disagreed, holding that constitutionally protected speech must be in a form addressed to petition the government regarding the speaker’s grievances. The case also addressed whether the dealership should have been allowed to use the courts to stop the brothers’ campaign—a SLAPP suit.
A SLAPP (strategic lawsuit against public participation) suit is intended to stop allegedly defamatory speech by simply burying a defendant in litigation, with the accompanying high costs, such that they simply go away. One of the earliest and most publicized cases was Barbra Streisand’s suit noted above. The case was eventually dismissed, with Streisand being ordered to pay over $150,000 in attorney fees. Cases like Streisand’s led California, as well as 27 other states and the District of Columbia, to pass anti-SLAPP legislation.
It was one of these statutes that was considered and rejected by the Colter court. Massachusetts’s anti-SLAPP statute, with its aim of preventing protected speech from being buried under litigation costs, provides that soon after a lawsuit is filed, the party seeking protection can move the court to dismiss the lawsuit unless the plaintiff can show “(1) the moving party’s exercise of its right to petition was devoid of any reasonable factual support or any arguable basis in law; and (2) the moving party’s acts caused actual injury to the responding party.” Mass. Gen. Laws Ann. ch. 231, § 59H. Of particular importance, and as is true of similar statutes in other jurisdictions, any other actions in the lawsuit—including discovery—are stayed. In effect, this chills the very intent for bringing the lawsuit in the first place.
The Colter court’s decision to reject the defendants’ claim under Massachusetts’s anti-SLAPP statute turned on the language of the statute that limits protection to statements seeking to petition the government. See also Nev. Rev. Stat. § 41.650 (Nevada’s anti-SLAPP statute limiting protection to language seeking to petition the government). Similar statutes in other states provide a broader protection of First Amendment rights. For example, the Texas version of the statute, enacted in 2011, includes protection from suit arising from “a party’s exercise of the right of free speech, right to petition, or right of association.” Tex. Civ. Prac. & Rem. Code § 27.003(a).
The Texas statute, while broader than the Massachusetts statute, excludes the right of one business to seek redress against another for business disparagement. Specifically, the statute excludes legal actions where the challenged statement or conduct arises from the sale or lease of goods or services, and where the intended audience is a consumer of those goods or services. Tex. Civ. Prac. & Rem. Code § 27.010(b). California, which has made anti-SLAPP suits a cottage industry, has a similar exclusion, see Cal. Civ. Proc. Code § 425.17(c), and was the model for the Texas exclusion. Newspaper Holdings, Inc. v. Crazy Hotel Assisted Living, Ltd., 2013 WL 1867104, at *12 (Tex. Ct. App. 1st Dist. (Houston) May 2, 2013).
If the decision is made to file suit, be mindful of the fact that while 27 states have anti-SLAPP statutes in one form or another, 23 states do not, and there is no federal law. The lack of a federal statute has raised the issue of whether anti-SLAPP statutes are substantive or procedural and whether the issue is an invitation to forum shop, either from state to state or by filing in federal court. See La. Crisis Assistance Ctr. v. Marzano-Lesnevich, 827 F. Supp. 2d 668, 680 (E.D. La. 2011) (anti-SLAPP provisions are substantive and therefore apply equally to a federal court); but see 3M Co. v. Boulter, 842 F. Supp. 2d 85, 108–9 (D.C. Cir. Feb. 2, 2012) (federal courts do not have to apply state court ant-SLAPP provisions). Therefore, a well-placed and well-timed lawsuit may force the offending party to back down or risk expensive and time-consuming litigation. Of course, that too can be a door that swings both ways, as a defendant with nothing to lose may simply drag on the litigation, draining attorney fees and costs from the plaintiff-company while, as noted above, possibly obtaining the very forum the defendant really desired.
In the end, just as they have accepted social media as a way to promote products and services, businesses have to accept that the wild west that is still the Internet will invite attacks, both warranted and unwarranted. And that acceptance will lead to new ways to combat those attacks or advantageous uses for them.
Keywords: litigation, business torts, unfair competition, SLAPP, anti-SLAPP, social network, defamation, social media