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Dow Jones asks U.S. court to stop Harrods libel suit in Britain

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From the Winter 2003 issue of The News Media & The Law, page 36.

From the Winter 2003 issue of The News Media & The Law, page 36.

By Wendy Tannenbaum

What started as an April Fools Day joke by a British department store may set important legal precedent on the topic of Internet jurisdiction, if a federal appeals court agrees with a novel legal argument made by attorneys for Dow Jones & Co.

Dow Jones wants a U.S. court to declare that a British company may not sue for libel in Britain over a story that appeared on the Internet. The strategy — asking an American judge to prevent a libel case abroad — brings a new twist to the issue of Internet jurisdiction.

The case began with a mock press release issued by Harrods, the London department store company owned by billionaire Mohamed Al Fayed. Harrods issued a statement on March 31, 2002 announcing: “Al Fayed Reveals Plan to ‘Float’ Harrods.” The bogus bulletin made reference to “a first-come-first-served share option offer” and directed journalists seeking comment to contact “Loof Lirpa” — “April Fool” spelled backward.

Another press release issued April 1 described Al Fayed’s plan to “float” Harrods by building a boat version of the department store and mooring it on the Thames River in London.

The Wall Street Journal, which is owned by Dow Jones, took Harrods’s first press release as a real announcement of the company’s intention to “float shares,” or make a public offering. On April 1, the paper reported that Harrods would reveal plans to publicly list shares.

The following day, upon learning that the press releases were a prank, the Journal printed a correction.

The real trouble began on April 5, when the Journal published a story, in print and online, about the Harrods gag. The item, titled “The Enron of Britain?” was intended to poke fun at the Harrods joke, according to Dow Jones. The Journal admitted in the story that it had been fooled by the hoax press release. It also questioned the propriety of issuing bogus information.

Harrods objected to the story and, in particular, its comparison of Harrods to the scandal-ridden company, Enron. Harrods lawyers claimed the April 5 story damaged the company’s reputation.

Dow Jones refused to publish a correction in response to the April 5 piece, claiming the report was factually accurate and was meant merely as a tongue-in-cheek humor article. Dow Jones offered to publish a letter from Harrods in the Journal, but Harrods declined.

According to court papers, Harrods then threatened to sue for libel. In letters to Dow Jones, Harrods indicated that suit would be brought in Britain, where libel laws are tough on the media.

Rather than wait for the results of a potentially lengthy libel suit in Britain, Dow Jones filed its own lawsuit in federal court in New York in May 2002. The suit asked the court to apply a federal law called the Declaratory Judgment Act to stop Harrods from suing in Britain.

Dow Jones argued that a court order was appropriate and necessary to free the Journal from “vexatious and oppressive” litigation overseas. The media company said a libel suit over the humor item would never stand in the United States and that defending a lawsuit in Britain would be burdensome, expensive and antithetical to the United State’s free-press ideals.

“We’re asking the court to take what we think is the essential next step in the Internet age,” said Jack Weiss, Dow Jones’s attorney, in oral arguments in September 2002. He argued that by granting Dow Jones’s request for declaratory relief, the court could solve “the central worldwide dilemma” facing publishers today: the threat of foreign libel suits.

A federal district court rejected Dow Jones’s request in an opinion issued Oct. 15. The court said the Declaratory Judgment Act can be applied to “facilitate early and effective adjudication of disputes” only where there is an “actual controversy.”

Dow Jones argued that an actual controversy existed because the company’s potential exposure to liability in the United Kingdom — when no such libel case could be brought in the United States — violates the First Amendment.

The district court disagreed, finding that “Dow Jones’ claim of impending harm, and its fears of enforcement of an adverse judgment, are too abstract, remote and hypothetical to constitute an actual controversy” under the federal law. The judge also questioned whether courts in the United Kingdom would recognize and enforce a U.S. court’s order not to bring suit there.

The court took note of the problems posed by the possibility of worldwide jurisdiction in libel cases involving the Internet. Under Dow Jones’ legal theory, the court said, the Declaratory Judgment Act “would confer upon an American court a preemptive style of global jurisdiction branching worldwide and able to strike down offending litigation anywhere on Earth.”

The problem with this theory, the court said, is that it assumes a British court will recognize an American ruling and refrain from exercising jurisdiction once a U.S. court has asked it to do so.

Dow Jones had argued that the ruling it sought was aimed at Harrods — which has enough assets in the United States to be subject to a court order here — and not at British courts.

Dow Jones is appealing to the U.S. Appeals Court in New York (2nd Cir.).

Sandra Baron, head of the Media Law Resource Center in New York, said Dow Jones’ legal theory should be taken seriously by the courts.

“Libel litigation, whether in the U.S. or the U.K., is a very expensive proposition, not only in terms of monetary costs, but in terms of man hours and emotional strain on the editorial staff. It is not to be engaged in lightly,” Baron said. “When one is faced with the proposition of litigating in the U.K. a matter that could result in a judgment that no court in the U.S. would enforce, there should be a mechanism to protect the potential libel defendant from that enormous set of costs.”

Baron said the Declaratory Judgment Act could prove to be the proper mechanism for avoiding foreign suits.

“The costs of litigation are, in their own right, a serious weight to place on speech, which in and of themselves could result in self-censorship,” she said. “When the result of those costs is likely to be an unenforceable judgment — and unenforceable because it goes directly against the protections that the First Amendment offers to speech — then one has to ask why a U.S. court would not want to uphold the First Amendment principles by preventing these costs.”

Baron noted that a decision under the Act is hard to appeal, however, because the law gives judges a great deal of latitude in deciding whether or not to issue a declaration.

A decision from the appeals court in the Harrods case is likely to take several months. (Dow Jones & Co., Inc. v. Harrods, Ltd.)