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This is from another group I belong to and may be of interest to you:
Friday, September 19, 1997 7:00 p.m.
You better watch what you say in online discussion groups, or prepare to
defend yourself.
by Michael Brush
In a move that sent a chill down the backbone of the Internet, Web surfers
used to saying whatever they want -- damn the facts -- were put on notice
this week that at least one company is fed up and not going to take it
anymore.
The company, Presstek, filed a defamation suit against three investment
discussion group posters, in essence alleging they spread lies that cast
the firm in a bad light. And judging by the reaction of other firms to
the action, more lawsuits are just around the corner. Presstek says
publicity about the suit sparked calls from at least a half dozen other
firms interested in filing similar complaints.
"I think it is important for people to understand that there are a lot of
people in American businesses who know exactly what is going on on the
Internet, and that they are not going to tolerate unlawful conduct," says
Robert McDaniel, the general counsel for Presstek.
McDaniel says he does not want to discourage open discussion of his company
on the Net. "That is an appropriate use of the Internet. But you can
influence a lot of people. And if you do so improperly, I think that
is a problem. What bothers me is the destruction of shareholder value using
inaccuracies and innuendo as a tool."
So where exactly does that leave Net-based investors who thrive on the open
exchange of ideas in the freewheeling discussion groups found in the
threads at sites like Silicon Investor and Motley Fool?
Do you have to fact-check every comment, or preface posts with
legal-sounding disclaimers as some participants in the Presstek thread at
Silicon Investor took to doing in the wake of the lawsuit? Or does the
protection of freedom of speech give you carte blanche to say whatever you
please?
The answer lies somewhere in between. Fortunately, chat room participants
do have a long tradition of free speech on their side, which gives them a
lot of latitude when making comments about companies. That, plus a little
common sense, will get participants through most discussions without
getting sued.
Lawyers warn, however, that messages posted on the Web appear virtually
everywhere in the world, so attention to U.S. law may not always be enough.
With that in mind, we put together an overview of what you can say in
investing chat groups, and still keep the lawyers -- the U.S. lawyers, at
least -- off your back.
First, some definitions. Defamation is any comment that holds a person or a
company up to scorn, ridicule or contempt; injures them or their business;
or accuses them of a crime. Libel is the written form of defamation, and
slander is the spoken type.
Here's a guide to what you can say about your favorite investment or short
position while reducing the risk of a defamation suit:
* Truth Truth is the fireproof defense against defamation. You are
permitted to say anything that is true, regardless of how bad it makes a
company look.
* Opinion Here again, the law gives you a lot of latitude to say what's on
your mind. "The Supreme Court has said that there is no such thing as
a false idea," explains Susan Buckley, a First Amendment lawyer with the
New York law firm of Cahill, Gordon & Reindel. "You can only defame someone
by utterance of a false fact." So you can have an opinion, and it does not
have to be correct. But to be protected, your opinion has to be based on
facts, at least loosely.
How loosely? This is where you get into a gray area, but again, you have
some wiggle room. "Generally, you can get off the hook so long as the
facts are correct," says Floyd Abrams, also a First Amendment attorney with
Cahill, Gordon & Reindel. "You have to have some underlying fact
that is related to your opinion. But you get a lot of leeway."
For example, a person who noticed that revenues declined moderately for two
quarters at a company and then said they think it is going to go out
of business soon, would probably be protected, Abrams said. Often, though,
to be protected you need to state the facts at the same time you state the
opinion. And if you know your opinion is wrong at the time you state it,
you will lose in a lawsuit - if the complainant can prove that
you knew this, of course.
* Predictions Likewise, forecasts are usually protected, because it is
impossible to say whether a prediction is true or false at the time it is
made.
* Exaggeration You also enjoy an exemption for tall tales, known as
"rhetorical hyperbole." If you say "this is the worst company in history,"
for example, you are protected, because it is obviously an exaggeration,
and a statement that can not be proven right or wrong.
* Public figures You also get extra protection when you say negative
things about a "public figure." To win a libel suit, a public figure has
the additional burden of proving that a statement was made with malice, in
addition to being defamatory and false. "Malice" means the writer
intended to injure, and either acted with knowledge that the statement was
false, or acted with "reckless disregard" for whether the statement was
true. So you can make defamatory and untrue statements about a public
figure, but if they were not made with malice, you are off the hook. A
non-public figure only has to show that the statement was defamatory and
untrue.
The tricky part here is that not all companies are considered public
figures. "The law looks at the degree to which the business has become
involved in public debate about matters of public interest," says Abrams.
All cigarette companies, for example, are public figures. "But a company
that makes a product that is not inherently controversial may be a private
figure." The more a company tries to attract business by advertising,
however, the more likely it is to be a public figure. "But the law is still
developing," says Abrams. "It is still in a chaotic
state on this question."
* Public forum And don't forget that a website is a public forum -- not to
be confused with more private forms of communication like the telephone.
This matters because it has an impact on the amount of damages you can be
sued for. When asking for money from defendants, a company has
to demonstrate how much damage was done. It is easier to show that
defamation in a public forum, as opposed to a private conversation, harmed
the company.
* Wired world The issue of defamation on the Internet raises the thorny
question of where something is actually published when it appears online.
Courts, though, are quickly lining up on the side that says if a statement
or Website appears somewhere, it appears everywhere.
This means that writing comments on the Internet exposes you to libel laws
around the world. And that's a problem, because many legal systems don't
protect you as much as in the U.S. Take the U.K., for example. "All the
plaintiff must show is that he was defamed," says Ed Mishkin, a
lawyer for Cleary, Gottlieb, Steen & Hamilton in New York. "Then it is up
to the defendant to show the statement was true." In the U.S., the
plaintiff has the challenge of proving the statement false. What's more, in
the U.K. there is no higher test for public figures, like in the U.S.
That explains, of course, why many lawyers chose to sue international
publications for libel in the U.K., rather than in the U.S. And there is no
reason to think it would be any different when it comes to the Internet.
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