Stratton Oakmont v. Prodigy Servs. Co. - INDEX No. 31063/94, 1995 N.Y. Misc. LEXIS 229 (Sup. Ct. May 24, 1995)

Rule:

A computerized database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard of liability to an electronic news distributor than that which is applied to a public library, book store, or newsstand would impose an undue burden on the free flow of information.

Facts:

PRODIGY's computer network has at least two million subscribers who communicate with each other and with the general subscriber population on PRODIGY's bulletin boards. "Money Talk" the board on which the aforementioned statements appeared, is allegedly the leading and most widely read financial computer bulletin board in the United States, where members can post statements regarding stocks, investments and other financial matters. PRODIGY contracts with bulletin Board Leaders, who, among other things, participate in board discussions and undertake promotional efforts to encourage usage and increase users. The Board Leader for "Money Talk" at the time the alleged libelous statements were posted was Charles Epstein. On October 23rd and 25th of 1994, statements about Plaintiffs made by an unidentified bulletin board user or "poster" on PRODIGY's "Money Talk" computer bulletin board. These statements include the following: (a) STRATTON, a securities investment banking firm, and DANIEL PORUSH, STRATTON's president, committed criminal and fraudulent acts in connection with the initial public offering of stock of Solomon-Page Ltd.; (b) the Solomon-Page offering was a "major criminal fraud" and "100% criminal fraud"; (c) PORUSH was "soon to be proven criminal"; and, (d) STRATTON was a "cult of brokers who either lie for a living or get fired." Plaintiffs instituted the instant complaint against PRODIGY and the unidentified party who posted the statements, alleging ten causes of action including claims for per se libel. They also moved for partial summary judgment on the issue of whether the online service provider could have been considered a publisher and whether the board leader had acted with actual and apparent authority as the service provider's agent. 

Issue:

Can PRODIGY be considered a publisher?

Answer:

Yes.

Conclusion:

The key distinction between PRODIGY and the defendant in a similar case, Cubby Inc. v. CompuServe, is two fold. First, PRODIGY held itself out to the public and its members as controlling the content of its computer bulletin boards. Second, PRODIGY implemented this control through its automatic software screening program, and the Guidelines which Board Leaders are required to enforce. By actively utilizing technology and manpower to delete notes from its computer bulletin boards on the basis of offensiveness and "bad taste", for example, PRODIGY is clearly making decisions as to content and such decisions constitute editorial control. That such control is not complete and is enforced both as early as the notes arrive and as late as a complaint is made, does not minimize or eviscerate the simple fact that PRODIGY has uniquely arrogated to itself the role of determining what is proper for its members to post and read on its bulletin boards.

Further, PRODIGY has virtually created an editorial staff of Board Leaders who have the ability to continually monitor incoming transmissions and in fact do spend time censoring notes. Indeed, it could be said that PRODIGY's current system of automatic scanning, Guidelines and Board Leaders may have a chilling effect on freedom of communication in Cyberspace, and it appears that this chilling effect is exactly what PRODIGY wants, but for the legal liability that attaches to such censorship. Let it be clear that this Court is in full agreement with Cubby and Auvil. Computer bulletin boards should generally be regarded in the same context as bookstores, libraries and network affiliates. It is PRODIGY's own policies, technology and staffing decisions which have altered the scenario and mandated the finding that it is a publisher. PRODIGY's conscious choice, to gain the benefits of editorial control, has opened it up to a greater liability than CompuServe and other computer networks that make no such choice. For the record, the fear that this Court's finding of publisher status for PRODIGY will compel all computer networks to abdicate control of their bulletin boards, incorrectly presumes that the market will refuse to compensate network for its increased control and the resulting increased exposure. Presumably PRODIGY's decision to regulate the content of its bulletin boards was in part influenced by its desire to attract a mark it perceived to exist consisting of users seeking a "family-oriented" computer service. This decision simply required that to the extent computer networks provide such services, they must also accept the concomitant legal consequences. In addition, the Court also notes that the issues addressed herein may ultimately be preempted by federal law if the Communications Decency Act of 1995, several versions of which a pending in Congress, is enacted.