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EBay defamation suit dismissed, again

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    News Media Update         CALIFORNIA         Libel    

EBay defamation suit dismissed, again

  • An appellate court said Web site publishers can be held liable for defamatory material posted by users, but not when dispute resolution is otherwise covered by a user agreement.

July 28, 2004 — While eBay’s user agreement precludes it from liability for defamatory material posted on its Web site, online publishers in general are guaranteed no such protection, a California appeals court ruled last week.

Section 230 of the federal Communications Decency Act of 1996 had often been invoked by online publishers as a shield from libel suits stemming from comments posted on their Web sites by outside users. But on July 22, a three-judge panel of the California Court of Appeals in Los Angeles ruled that the legislative intent of Section 230 does not protect Web publishers from knowingly distributing defamatory information.

“There is no indication, however, that Congress intended to preclude liability where the provider or user knew or had reason to know that the matter was defamatory,” Justice H. Walter Croskey wrote for the court.

EBay, an online auctioning company, requires users of its Web site to agree to a written release that protects the company from most liability. The release states “[i]n the event that you have a dispute with one or more users, you release eBay . . . from claims, demands and damages . . . arising out of or in any way connected with such disputes.”

Roger Grace, co-publisher and editor of a legal newspaper in California, posted negative comments on the Web site about the business practices of someone he purchased an item from, according to court documents. The seller responded by writing that Grace should be banned from eBay and was “DISHONEST ALL THE WAY!!!!” the documents said.

Grace, who is also a lawyer, notified eBay of the allegedly defamatory comments and asked the company to remove them from its site. When eBay refused, he sued the company for libel.

A district court judge dismissed the suit in June 2003, holding that even if the facts alleged in the complaint were true, Grace would not have a valid cause of action because eBay is protected by its user agreement. The three-judge panel affirmed that ruling, and held Grace could not amend his complaint.

Knowingly allowing defamatory material to be published, regardless of a release, is “not the law for newspapers and shouldn’t be for Web sites,” Grace said. “It seems to me you can’t have absolute immunity for Web sites that don’t take postings down when there is a knowledge of falsity.

“I simply wanted to hold Web sites to the same standard as newspapers,” he added.

Although eBay was cleared of all liability, Grace said he was pleased the appeals court recognized a cause of action against online publishers who have knowledge of defamatory postings on their Web sites.

“I think the decision of the court of appeals will help instill awareness of the need to stop anonymous postings that tarnish reputations on Web sites,” he said. “It will create an incentive to take down that which is based on unproved, false facts.”

Neither eBay nor its counsel could be reached for comment.

(Grace v. eBay; Media Counsel: Michael G. Rhodes and Andrea S. Bitar, Cooley Godward, Los Angeles) CZ

© 2004 The Reporters Committee for Freedom of the Press

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