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EFF Amicus Curiae Briefin Hollis-Eden v. Wells (Feb. 27, 2002)APPEAL NO. GIC - 759462 San Diego County Superior Court Case No. D038431 IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
ELECTRONIC FRONTIER FOUNDATION
Attorneys for Amicus Curiae Table of Contents
Table of AuthoritiesCases
Paradise Hills v. Procel,
Philadelphia News, Inc. v. Hepps,
Reno v. American Civil Liberties Union,
Rosenaur v. Scherer,
Sipple v. Foundation for National Progress,
Wilcox v. Superior Court, StatutesCalifornia Civil Code § 43
California Civil Procedure Code California Rule of Court 13 3 Miscellaneous
Bartlet, Michael, California Appeals Court Upholds Message Board Speech, November 27, 2001, Dinan, Stephen, Search Warrants Keep AOL Busy, Washington Times (April 27, 1999) at C4 Witkin, B.E., Summary of California Law (9th ed. 1988), Vol. 5 INTRODUCTION"SLAPP suits stifle free speech. They undermine the open expression of ideas, opinions [and] ... bring a disquieting stillness to the sound and fury of legitimate ... debate" Beilenson v. Superior Court (1996) 44 Cal.App.4th 944, 956. This case asks whether and how California's anti-SLAPP statute can be used to deter corporations who bring unfounded litigation in order to silence their critics speaking in a public forum when those critics are also shareholders and the speech occurs on the Internet. STATEMENT OF AMICUS CURIAEThe Electronic Frontier Foundation ("EFF") is a non-profit, member- supported civil liberties organization working to protect rights in the digital world. EFF actively encourages and challenges industry, government and the courts to support free expression, privacy, and openness in the information society. Founded in 1990, EFF is based in San Francisco. EFF has members all over the United States and maintains one of the most-linked-to Web sites (http://www.eff.org/) in the world. The First Amendment Project is a nonprofit, public interest law firm and advocacy organization dedicated to protecting and promoting freedom of information, expression, and petition. FAP provides advice, educational materials, and legal representation to its core constituency of activists, journalists, and artists in service of these fundamental liberties. California First Amendment Coalition (CFAC) is a nonprofit public benefit corporation organized under the laws of California. Its more than 500 members comprise news organizations, journalists, attorneys, citizen activists, public officials, students and teachers, whose common concern is protecting the free flow of information on matters of public significance. AMICI'S INTEREST IN THIS CASEAmici believe that free speech is a fundamental human right and that free expression is vital to society. The vast web of electronic media that now connects us has heralded a new age of communications, a new way to convey speech. New digital networks offer a tremendous potential to empower individuals in an ever over-powering world. While amici are mindful of the serious issues that may arise when information, ideas and opinions flow free, amici are dedicated to addressing such matters constructively while ensuring that fundamental rights are protected. Thus, amici's interest in this case. In the current case, the Superior Court's unnecessarily infringed on freedom of speech by failing to recognize Appellant's postings as statements of opinion in the context of the often free wheeling, unvarnished discussions that exist on the Internet. Given the First Amendment issues at stake here, alleviation of the current uncertainty in this area of the law can give much needed clarity and breathing room to speakers. AUTHORITY TO FILE THIS AMICUS BRIEFEFF has filed a motion for leave to file this brief under California Rule of Court 13. As described in the Motion and Declaration of Christian Pantages filed herewith, prior to filing that motion, EFF was given consent by the Appellants in early January 2002. Calls were placed to Plaintiff and Respondent's counsel on the afternoon of both February 11th and 12th, requesting their consent. On both occasions, the EFF was unable to contact him. Voicemail messages were left on both occasions. Neither message was returned. I. STATEMENT OF FACTS"The Internet is a truly democratic forum for communication. It allows for the free exchange of ideas at an unprecedented speed and scale. For this reason, the constitutional rights of Internet users . . . must be carefully guarded." Doe v. 2themart.com, (W.D. Wash, 2001) 140 F.Supp. 1088, 1097 (protecting nonparty message board speakers from subpoenas seeking their identities). It has been suggested that the Internet may be the "greatest innovation in speech since the invention of the printing press," Id. at 1091 (Citation omitted). As the Supreme Court explained, [f]rom a publisher's standpoint, it constitutes a vast platform from which to address and hear from a world-wide audience of millions or readers, viewers, researchers and buyers.... Through the use of chat rooms, any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox. Through the use of web pages, . . . the same individual can become a pamphleteer." Reno v. American Civil Liberties Union, (1997) 521 U.S. 844, 853, 870. Thus, the Supreme Court held that the Internet is a fully protected medium of expression. Id. A. Yahoo Message BoardsIn line with the Supreme Court's observations about the nature of the Internet, Yahoo has organized public outlets for the expression of opinions about every publicly-traded company in the U.S. These outlets have empowered small and medium shareholders as well as others interested in these large American companies. Once dependent upon the limited, often difficult to read reports issued by the company, shareholders and others now have a forum to talk to each other. They can share information, give and receive opinions and discuss events affecting the corporation. It is no overstatement to say that the Yahoo and the other hosts of corporate-focused message boards have created a mini "marketplace of ideas" for each publicly traded corporation in the United States. Perhaps because message boards allow unfettered discussion, the exchanges on them run the gamut from the polite to the polemical. Personal insults are common, as is poor grammar, improper punctuation and inventive spelling. Yet some of the comments would pass the standards of even the most rigorous high school English teacher. Messages in support of previous comments are as likely as flat out attacks; ideas are bandied about freely and propositions are hashed over for weeks and even years. In short, message boards are the sort of informal mix of public discussion and debate that mirrors our broader society. An important aspect of the message board that distinguishes it from almost any other form of published expression is that, because any member of the public can use a message board to express his point of view, a person who disagrees with something that is said on a message board for any reason Ð including the belief that a statement contains false or misleading statements about himself Ð can respond to those statements immediately at little or no cost, and that response will have the same prominence as the offending message. A message board is thus unlike a newspaper, which cannot be required to print a response to its criticisms. Miami Herald Publ'g. Co. v. Tornilllo (1974) 418 U.S. 241.
Corporations and individuals can reply immediately to criticisms on a
message board, providing facts or opinions to vindicate their positions,
and thus, potentially, persuading the audience that they are right and
their critics wrong. And, because many people regularly revisit the same
message boards, the response is likely to be seen by much the same
audience as the original criticism; hence the response reaches many, if
not all, of the original readers. In this way, the Internet provides the
ideal proving ground for the proposition that the marketplace of ideas,
rather than the courtroom, provides the best forum for resolution of
disagreements about the truth of disputed propositions of fact and
opinion. Although several other companies host financial message boards
as well, the Yahoo! Finance message boards are the most popular financial
message boards on the web. B. The Hollis-Eden Message BoardOne of Yahoo's message boards is specifically devoted to Hollis-Eden Pharmaceuticals, Inc., the Plaintiff in this case. The opening page of Yahoo's Hollis-Eden message board explains the ground rules:
Each and every page of message listings that follows is then accompanied by a similar warning that all messages should be treated as the opinions of the poster, and taken with a grain of salt:
Id. Many members of the public regularly turn to the Yahoo message board as one source of information about Hollis-Eden. To date, over 22,000 messages have been posted on the Hollis-Eden board, covering an enormous variety of topics and posters. The Hollis-Eden message board, like most Yahoo boards, includes discussion about nearly every aspect of the companies business, from its products to its operations to its marketing to its key employees and board members. Messages can be supportive of the company, critical of it or neutral. Appellant Wells is one of the many members of the public who have visited the Yahoo message board for Hollis-Eden and participated in the discussion. At issue in this case are ten short postings by Appellant made in the later half of the year 2000. As far as amici are aware, Respondent Hollis-Eden has never sought to exercise its right to reply to Wells's comments on the message board, either to correct the factual errors he now alleges or present his side of the debate. Instead, they brought this legal action and sought to require Yahoo to prevent Wells from continuing to post to the message board. C. Importance of This Case.
This motion presents the Court with the issue of what standard should be
applied to determine when California's anti-SLAPP statute can be applied
in response to an attempt to silence critical speech by a minor
shareholder of a publicly-traded corporation in a public forum when that
speech occurs on the Internet. Particularly in light of the increasing
number of cases where those who have been criticized on the Internet are
seeking to use court processes to unmask and silence their critics, this
question has become a crucial one. II. ARGUMENTA. California Anti-SLAPP Statute.This case arises out of Defendants' exercise of free speech rights and falls squarely within California's legislative prohibition on so-called strategic lawsuits against public participation, or "SLAPP" suits. California's anti-SLAPP statute provides for prompt dismissal of lawsuits that cast a pall on otherwise protected speech. Matson v. Dvorak (1995) 40 Cal.App.4th 539, 547-48, 46 Cal. Rptr. 2d 880. Code of Civil Procedure § 425.16 provides, inter alia, that:
This statute codifies the Legislature's finding that "it is in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process. To this end, this section shall be construed broadly." Id. at section 425.16 (a) (emphasis supplied). 1. Defendants' BurdenThe moving party need only show it was engaged in free speech activities with respect to an issue of public significance. Section 425.16. The expressive and petition activities that give rise to the action need not be communicated directly to a government body and it is not required that the expression actually be "constitutionally protected under the First Amendment as a matter of law." Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 820. Defendant need only make "a prima facie showing the statute applies to [it]." Id. at 819. Section 425.16 defines an "act in furtherance of a person's right of petition or free speech in connection with a public issue" to include, inter alia:
CCP § 425.16(e)(4). 2. Plaintiffs' BurdenOnce defendants establish that CCP § 425.16 applies, the burden shifts to the plaintiff to establish "that there is a probability that the plaintiff will prevail on the claim." CCP § 425.16(b) Matson at 548. Accord, Wilcox, 27 Cal.App.4th at 823. This requirement is clear. The plaintiff must meet his burden through "competent admissible evidence within the personal knowledge of the declarant, with reference to the familiar standards applied to evidentiary showings on summary judgment motions. . . . An overly lenient standard [of review] would be inappropriate, given that the statute is intended to provide a fast and inexpensive unmasking and dismissal of SLAPP suits." Ludwig v. Superior Court (1995) 37 Cal.App.4th 8,16, [43 Cal.Rptr. 2d 350]. B. Appellant Met His Initial Burden under § 425.16.1. The Yahoo Message Board is A Public Forum under California's Anti-SLAPP Statute.The Yahoo message board is a vehicle for communicating a message about public matters to a large and interested community. As such, it is a "public forum" under §425.16. As the Fourth District held recently:
Damon v. Ocean Hills Journalism Club (2000) 85 Cal. App. 4th 468, 478. In Damon, this included a newsletter distributed to 3,000 members of a residential community, despite the fact that it was not balanced and served as a "mouthpiece for a small group of homeowners who generally would not permit contrary viewpoints." Id. at 476. In contrast to the small, controlled newsletter in Damon, the Yahoo message board is publicly distributed to the entire world and allows any member of the public to post messages on any subject. Yahoo retains control to prevent violations of its Terms of Service, but within those boundaries, the discussion is not hindered or controlled. All opinions are allowed and all have equal footing. 2. Wells's Speech Concerned Issues of Public Interest.As part of his prima facie burden, Wells must show that his remarks concerned an "issue of public interest." §425.16(e)(3). It is well settled that this "public interest" includes not only government matters, but also private conduct when "a large, powerful organization impacts the lives of many individuals." Macias v. Hartwell (1997) 55 Cal.App.4th 669, 674. In Macias, campaign statements made during an election in a union of 10,000 members qualified as a public interest. In Damon the topic concerned the manner of governance for 3,000 members of a private homeowners community. Notably, all of the homeowners in Damon and union members in Macias had a "pecuniary" concern in the issues discussed. See also Sipple v. Foundation for National Progress (1999) 71 Cal.App. 4th 226, 238-240 (statements that a nationally known political consultant had physically and verbally abused his former wives determined to be a matter of public interest); Nicosia v. De Rooy (N.D. Cal. 1999) 72 F.Supp.2d 1093, 1110 (critical statements about biographer of Jack Kerouac deemed to involve a matter of public interest). Here, the speech concerns the activities of a large, publicly traded company, with a significant number of shareholders, both direct and indirect. Hollis-Eden has sought the pubic eye because of its development of drugs to treat HIV/AIDS, a topic of immense public interest and a product with an extremely lucrative potential. Almost 300 news articles have been published about Hollis Eden since its founding in 1994. Appelant's Opening Br. at 8. Hollis-Eden apparently believes its general activities and financial health are a matter of public interest as well, since it regularly issues press releases and courts investors to purchase the companies stock. Appelant's Opening Br. at 8-9. Thus, Hollis-Eden's financial health and activities are an issue of public interest. See also Paradise Hills Associates v. Procel (1991) 235 Cal.App.3d 1528, 1544-45 (the performance and commercial activities of a building company constitutes a "matter of public interest" for First Amendment purposes);Morningstar v. Superior Court, (1994) 23 Cal.App.4th 676. 696 (First Amendment protects financial newsletter where experts in analyzing products and advertising claims titled report: "Lies, Damn Lies and Fund Advertisements"). Wells posted his opinions on the Yahoo message board for Hollis-Eden, commenting on the company's public activities This establishes his prima facie case that he was engaged in free speech activities about an issue of public significance in a public forum. C. Respondent Did Not Meet its Burden of Establishing Probability of Prevailing on Its Claims.
As noted above, once a defendant makes a prima facie showing under §425.16
that the lawsuit arises from speech covered by the statute, the burden
shifts to Plaintiffs to establish a probability of prevailing on their
claims. "The test is similar to the standard applied to evidentiary
showings in summary judgment motions pursuant to Code of Civil Procedure
§437(c) and requires that the showing be made by competent admissible
evidence within the personal knowledge of the declarant." Church of
Scientology v. Wollersheim, supra, 42 Cal.App.4th at 654. First, Plaintiffs must show that the matters complained of were "published," i.e. that the statements were communicated to third persons who understood their defamatory meaning. See Witkin, Summary of California Law (9th ed. 1988), Vol. 5, §476, pp. 560-561. There appears to be no dispute that the publication of messages on a Yahoo message board meets this element. Second, Plaintiffs must affirmatively show that the statements at issue are false. Hejmadi v. AMFAC, Inc. (1988) 202 Cal.App.3d 525, 552-3 (truth is an absolute defense against civil liability for defamation). Moreover, because the statements at issue pertain to a matter of public concern, the burden rests squarely on Plaintiff to prove falsity. Philadelphia News, Inc. v. Hepps (1986) 475 U.S. 767, 787-788; see Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 747. Plaintiff must in addition show that statements contained or implied a "false factual assertion" about them. Moyer v. Amador Valley Joint Union High School District (1990) 225 Cal.App.3d 720, 724-725. Statements that cannot "reasonably [be] interpreted as stating actual facts about an individual" because they are expressed in "loose, figurative or hyperbolic language," and or the context and tenor of the statements "negate the impression that the author seriously is maintaining an assertion of actual fact" about the plaintiff are not provably false, and as such, will not provide a legal basis for defamation. Milkovich v. Lorain Journal (1990) 497 U.S. 1, 21. Third, Plaintiff must show that the statements at issue are defamatory, that is whether they involve "a false and unprivileged publication . . . which exposes [them] to hatred, contempt, ridicule, or obloquy, or which causes [them] to be shunned or avoided, or which has a tendency to injury [them] in [their] occupation." Civil Code §43. Fourth, as shown above, Respondent Hollis-Eden Pharmaceuticals defamation claim regarding Wells' posts on the public Yahoo message board is a matter of public concern regarding a public figure. The United States Supreme Court has held that the First Amendment prohibits a public figure plaintiff from recovering presumed or punitive damages for false and defamatory statements involving a matter or public concern; actual monetary damages resulting from the defamatory statements must be shown. Respondent has not met any of these evidentiary burdens. 1. Wells' Statements Are Protected OpinionStatements of opinion cannot give rise to a valid defamation claim. Baker v. Los Angeles Herald Examiner, 42 Cal. 3d 254, 260-61. Representative examples of the ten statements Respondent complains are defamatory, are Wells' statements that ". . . this whole situation seems to be a big con" and that Hollis-Eden's president and CEO, Richard Hollis has an "ultra ego [and] WHO KNOWS ABSOLUTELY ZERO about wall st., or marketing", Appelant's Opening Br. at 11, and "R.H. [Richard Hollis] would rather drive this company into the ground rather than admit he does not have the expertise to run a company properly . . ." Appelant's Opening Br. at 10. Such subjective statements, full of hyperbole and exaggeration, are typical of most message board posts. When a statement is so generalized that it cannot be proven true or false, it is usually deemed opinion. In the recent case of Rosenaur v. Scherer (2001) 88 Cal.App.4th 260, 278-282, the Court held that claims that an opponent was a "thief and a liar" were held protected by the First Amendment and not defamatory. The Rosenaur court collected the current jurisprudence on the topic, noting that no defamation claim existed for 1) characterizing a developers negotiating position as "blackmail"; 2) describing a fund advertisement as "Lies, Damn Lies and Fund Advertisements"; 3) accusing an opponent of "ripping off" the California taxpayer; and 4) accusing another of "enter[ing] into a corrupt relationship." Id. (citations omitted.). See also Letter Carriers v. Austin, 418 U.S. 264, 284-85 (No defamation for the use of the word "traitor" to define scabs in a union dispute). The lower court correctly analyzed the speech of several of the original co-defendants in this case. With respect to the "gpalcus" defendants it granted the SLAPP motion for statements such as one claiming Hollis-Eden prospects for profit are "simply millennial blue smoke and mirrors; propped up by thrice rejected science" or that Mr. Hollis himself "could [not] find his way around Wall Street with a road map, flashlight, and Yellow Cab." Unlike the "gpalcus" defendants however, the Superior Court held that Wells speech was not protected because "some of [Wells'] posts indicate the statements are to be taken as true and imply that [Wells] has special knowledge to back up [his] statements.... Wells says he has spoken with Peizer [the former CEO of Hollis-Eden]." Unfortunately, the court does not specify to which of Wells' several statements it is referring. In the context of the type of argumentative exchange in most of Wells' statements were made, the parties engaged in discussion are trying to persuade each other to their point of view. Attempts towards achieving that goal, from using correct grammar and sentence structure to noting an acquaintance with the former chairman, do not make Wells' statements any more factual or less opinionated. The lower court takes another stab at disqualifying Wells from the SLAPP protection granted to the "gpalcus" defendants by highlighting that Wells owns some Hollis-Eden stock and is a stockbroker. It asserts that it stated that because "defendant[s'] comments were motivated by [their] pecuniary concerns," his speech was not "made in furtherance of [his] right to petition or free speech under the United States or California Constitution in connection with a public issue" Appellant's Appendix, Exhibit 16, page 2 of 2. This holding is plainly wrong and its larger ramifications are alarming. First, Wells posts were anonymous, and in no messages was his profession ever revealed. Second, and more importantly, there is no judicial precedent that stands for the principle that, merely due to the confluence of personal and public interest, a would-be protected opinion is changed into an unprotectible one. To the contrary, in Paradise Hills v. Procel, supra at 1544-45, a dissatisfied homeowner put up signs in her yard disparaging the builder. The Court held that the homeowner's speech related to the performance of the corporation, a publicly held company, and thereby constituted "a matter of public interest" for First Amendment purposes, despite any co-existing personal interest that the defendant was aiming to serve by her speech. Similarly, as noted above, the homeowners in Damon had pecuniary interests in ensuring that their property values remained high and this interest undoubtedly played a role in their involvement in their homeowner community newsletter. Finally the Macias union members were motivated by a desire to increase their salaries and benefits packages. If it were the rule that statements motivated by "pecuniary" interest could not qualify as being "in connection with a public issue," the defendants in Paradise Hills, Damon and Macias would have been unsuccessful. It simply cannot be the case that the First Amendment or California's SLAPP statute protect only those who speak about issues in which they have no personal financial interest. To the contrary, it is often precisely this interest that motivates citizens to join public debates. The protection of public debates is the heart of the statute's goal of encouraging "continued participation in matters of public significance." C.C.P. §425.16(a). Thus, though Wells' interest in Hollis-Eden was clearly motivated by his ownership of the stock, this fact does not disqualify him from the protection of the California SLAPP statute when voicing an opinion about the company. 2. Respondent Has Not Shown Wells statements to contain any "false factual assertions"Taken in context, none of Wells comments contains provably false assertions of fact. All are expressions of subjective judgment. As Justice Swager observed in Copp v. Paxton (1996) 45 Cal.App.4th 829, 837-38 (citations omitted):
Defendant Wells' statements here are exactly the type of unfocused and subjective commentary the Court in Copp branded as opinion. The conclusion that Wells' statements are protected opinion or rhetoric is also supported by the forum and context in which they were made. That is, in the "general cacophony of an Internet" newsgroup, "part of an on-going free-wheeling and highly animated exchange" about the company, where "the postings are full of hyperbole, invective, short-hand phrases and language not generally found in fact-based documents." Global Telemedia International v. Doe 1 aka BUSTEDAGAIN40 (C.D. Cal. 2001) 132 F.Supp.2d 1261, 1267, 1269-1270 (holding critical comments about plaintiff in Internet chat room, including that it "screwed" investors out of their money and lied to them, to be non-actionable opinion and rhetoric). See also Doe v. 2themart.com, supra, at 1090 (upholding the anonymity of web posters despite the fact that some called the company a "Ponzi scam," and its management "liars and criminals," and "lying, cheating, thieving, stealing, lowlife criminals," and asserted that "they are not building anything, exception extensions on their homes . . . bail out now" ). Furthermore, the message board carries a disclaimer that "these messages are only the opinion of the poster, are no substitute for your own research, and should not be relied upon for trading or other purposes." Such disclaimers have been cited as a basis for denying a cause of action for defamation with respect to alleged harm to the moving company's stock price. Jefferson County School District v. Moody's Investor Services, 988 F.Supp. 1341, 1345 (D. Colo 1997). The notion that any serious investor would use message board postings as reliable statements of fact on which to base major investment decisions is laughable. 3. Even if Wells' Comments Are Found to be Factual Respondent Has Failed to Meet Its Burden to Demonstrate Actual Damages.Finally, Respondent fails to demonstrate actual monetary damage as a result of Wells' postings. While at common law compensatory damages for defamation-related injuries were available without evidence of loss, the United States Supreme Court has held that the First Amendment prohibits an award of presumed or punitive damages for false and defamatory statements involving matters of public concern. See Gertz v. Robert Welch (1974) 418 U.S. 323, 350. Under Gertz, a public figure plaintiff must produce "competent evidence of actual injury" to state a constitutional claim for defamation. Id. Here, Hollis-Eden is a publicly traded corporation in the very controversial and lucrative field of treating the HIV/AIDS virus. Hollis-Eden has been the subject of hundreds of independent news articles since their incorporation in 1994, and their message board has logged over twenty thousand messages from the public. Thus, the company is clearly required to demonstrate that it suffered actual damages as the result of the defendant's statements. Its failure to do so should support granting of a motion under §425.16. CONCLUSIONBased upon the foregoing, Amici respectfully request that the Superior Court decision be overturned. Dated: February 27, 2002 Respectfully submitted, ___________________________________ Dated: February 27, 2002 ENDNOTES
1. Yahoo subjects itself to the same public fray as other corporations --
the message board devoted to Yahoo corporation has over three hundred
thousand comments.
2. <http://messages.yahoo.com/bbs?.mm=FN&action=m&board=7080018&tid=mtlc&sid=7080018&mid=5320>
3. Michael Bartlett, California Appeals Court Upholds Message Board
Speech, Nov 27, 2001, at <http://www.newsbytes.com/news/01/172455.html>
(noting that "There are many cases pending in courtrooms that stem from
Internet message board postings").
4. Though Hollis-Eden raises seven additional causes of action other than
defamation, all of them arise from Wells allegedly injurious statements.
Thus, although Respondent's defamation claims are the only ones addressed
here, if those fail because of the First Amendment, all of the additional
claims should fail as well.. The controlling rule is stated in Blatty v.
New York Times Co. (1986) 42 Cal.3d 1033: "... logic compel[s] the
conclusion that First Amendment limitations are applicable to all claims,
of whatever label, whose gravamen is the alleged injurious falsehood of a
statement..."
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