The Perils of Internet Defamation


The Perils of Internet Defamation: $38.3 Million Jury Verdict

A Nevada jury's verdict in favor of a Robert Mitchell client serves as a cautionary tale for people contemplating internet defamation and invasion of privacy.

Please note that, while this article accurately describes applicable law on the subject covered at the time of its writing, the law continues to develop with the passage of time. Accordingly, before relying upon this article, care should be taken to verify that the law described herein has not changed.
On February 17, 2016, a federal court jury in Nevada delivered a unanimous verdict awarding $38.3 million to a business owner in his successful claim for internet defamation and false light invasion of privacy. The award was one of the largest-ever in a U.S. internet defamation case.

The plaintiff in the case was a successful and prominent real estate professional, Bradley Stephen Cohen, president and CEO of Cohen Asset Management, Inc., a privately held real estate investment firm that acquires, develops and manages industrial properties across the United States.

In 2007, a Cohen affiliate, Auburn Valley Industrial Capital, purchased an industrial property in Auburn, Washington. At the time of purchase, part of the Washington property was leased to Ross B. Hansen and his company, Northwest Territorial Mint, one of the largest private full-service mints in the country.

In 2010, Hansen and his company vacated its leased space. Finding that the tenants had contaminated the property with hazardous substances, Auburn Valley sued them for breach of the lease.

At deposition on January 31, 2012, Hansen, a defendant in the Auburn Valley lawsuit, testified that he was “going to inflict lots of pain” on Cohen, which he said would cause Cohen to “roll over on the lawsuit.”

In April 2012, Hanson and two other defendants (Northwest Territorial Mint and an employee, Steven Earl Firebaugh) targeted Cohen through a four year internet disparagement campaign by first anonymously published a website, www.bradley-cohen.com, on which they:
  • asserted that Cohen is “the next Bernard Madoff” of real estate (Madoff was convicted of operating a $20 billion Ponzi scheme and was sentenced to 150 years in prison);
  • accused Cohen, through Cohen Asset Management, of running a Ponzi scheme (also described as a “scam” and a “shell game”), committing fraud and looting company assets, all at the expense of investors, who, the website alleged, were losing tens of millions of dollars while Cohen lived a life of glamour and luxury;
  • asserted that Cohen was taking millions from tenants and suing tenants based on unfounded accusations and greed (with specific references to the Washington lawsuit);
  • cautioned others not to lease from Cohen or his companies;
  • asserted that Cohen had a history of convictions for serious crimes including fraud and racketeering; and
  • published articles about a convicted Pennsylvania criminal named Brad Scott Cohen (not the Bradley Stephen Cohen whom they were defaming).
A month later, as a result of the Cohen’s investigation and efforts, the website was depublished by its hosting company, which advised Hansen that the website violated its terms and conditions and included defamatory content. Hansen produced another website, researched the fraud policies of other potential hosts, and ultimately decided to use separate overseas companies with more liberal fraud policies for the domain name and hosting services that made Hansen’s new site more difficult to trace and less likely to be taken down again.

Hansen’s second website, www.bradleyscohen.com, featured essentially the same content as the first, except for the criminal conviction information regarding Brad Scott Cohen. The new site also displayed a phony traffic counter to create an illusion that the site was busy and popular and to increase its apparent credibility, legitimacy and return traffic, all in an effort to cause more distress to Cohen.

Cohen spent a significant amount of money engaging assistance while trying to counteract the websites but was unsuccessful. The websites continued to enjoy a high ranking in Google search engine results, due to Hansen’s team of search engine optimization experts as well as link building efforts designed to give the websites greater exposure and increase visitor traffic.

Defamation Lawsuit

Cohen sued Hansen for defamation and other torts. He was represented in his lawsuit by a group of lawyers led by Phoenix attorney Robert D. Mitchell of Tiffany & Bosco, P.A. He was assisted by colleague Sarah K. Deutsch, and by prominent first amendment attorneys Anthony M. Glassman and Rebecca Kaufman of Beverly Hills, California.

Surprisingly, in the defamation lawsuit, Hansen stated in a deposition that there was no truth to his websites’ allegations against Cohen. His admitted purpose in publishing the defamatory websites was to cause Cohen and Auburn Valley Industrial Capital to drop their breach of lease lawsuit against him. That was not a new strategy for Hansen; he had earlier used similar tactics to bully two other companies, both of which dropped their claims against him in exchange for his depublishing the websites that he used to attack them.

(Hansen was not so successful against Cohen, who refused to cave in. Cohen and Auburn Valley ultimately won their lawsuit, and Hansen was ordered to pay approximately $3 million.)

Notwithstanding Hansen’s admission that his smears of Cohen were false, he still refused to take down the second website. Instead, Hansen renewed the second website annually and threatened to expand the second website and put up additional websites. He repeatedly expressed his contempt for Cohen, calling Cohen derogatory names and indicating he did not care whether his websites damaged Cohen.

Damages

Cohen claimed in his lawsuit that, due to the content of Hansen’s websites, Cohen avoided business, professional, social, charitable and personal functions and suffered mental and emotional distress. Further, the websites gave cause for concern among Cohen’s investors, lenders and insurers and others, prompting some of them to investigate Cohen and his companies before continuing to do business with them.

Some potential investors, including a multi-million-dollar fund, cut off communications with Cohen after they did their standard and obligatory due diligence on Cohen before investing. Two identified investors decided not to invest millions of dollars with Cohen, largely to avoid making themselves part of the controversy and having to justify to investors their decision to do business with Cohen.

Cohen will never know how many potential investors, lenders, etc., visited the websites, formed negative conclusions about Cohen and his companies, decided to avoid doing business with Cohen, and passed on to others the false assertions contained in the websites.

Trial

Cohen’s lawsuit against Hansen and his fellow defendants alleged defamation per se, which required proof of:
  • a false and defamatory statement of fact by the defendants concerning the plaintiffs,
  • an unprivileged publication to a third party,
  • fault amounting to negligence, and
  • presumed damages.
Cohen’s lawsuit also alleged false light invasion of privacy, which required Cohen to prove that:
  • Hansen gave publicity to a matter concerning Cohen that placed him before the public in a false light;
  • the false light in which Cohen was placed would be highly offensive to a reasonable person; and
  • Hansen acted with fault amounting to negligence.
Cohen’s case was supported at trial by a number of witnesses, including an expert witness in the Bernie Madoff case, plus experts in real estate, the internet, linguistics and psychiatry.

Hansen’s attorney called one witness – Hansen himself – and argued that the statements on the websites were substantially true or constituted opinions and that Cohen did not suffer any damages.

Outcome

The jury found Cohen’s claim sufficiently compelling that, after a seven-day jury trial, it unanimously found in favor of Cohen and awarded him a total of $35.3 million in compensatory damages and an additional $3 million in punitive damages.

The trial judge barred Hansen and his co-defendants from republishing the false and defamatory statements on the websites, ordered the defendants to take down the remaining website, and assigned the websites’ domain names to Cohen.

Defamation Background

“The right of a man to the protection of his own reputation from unjustified invasion and wrongful hurt reflects no more than our basic concept of the essential dignity and worth of every human being—a concept at the root of any decent system of ordered liberty.” Rosenblatt v. Baer, 383 U.S. 75, 92, 86 S. Ct. 669, 679 (1966) (Stewart, J., concurring).
Defamation over the internet is subject to the same analysis under the laws of defamation as applicable to other types of printed or oral defamation.[1] In order to succeed on a defamation claim, a plaintiff must prove:
  • a false and defamatory statement concerning another;
  • an unprivileged publication to a third party;
  • fault by the defendant; and
  • either actionability of the statement irrespective of special harm or the existence of special harm.[2]
This discussion will focus on the second element, namely, whether, for purposes of being held liable for defamation, a provider of an interactive computer service “publishes” statements that were written by others.

One of the common arguments against defamation is that the allegedly defamatory statement was asserting non-actionable “opinion” rather than actionable “fact.”[3] [4] This does not mean statements of opinion enjoy “blanket protection.”[5] On the contrary, where an expression of opinion implies a false assertion of fact, the opinion can constitute actionable defamation.[6] Moreover, simply stating that a factual assertion is an opinion does not make it so.[7]

Determining whether a particular communication is an actionable statement of fact can be difficult, and “what constitutes a statement of fact in one context may be treated as a statement of opinion in another, in light of the nature and content of the communication taken as a whole.”[8] To that end, courts use a “totality of the circumstances test” and a court will “put itself in the place of an average reader and determine the natural and probable effect of the statement, considering both the language and the context.”[9] The determinative question is not whether a statement is fact or opinion, but “whether a reasonable fact finder could conclude the published statement declares or implies a provably false assertion of fact.”[10]

Under common law principles, one who publishes another’s defamatory statement may be treated as a:
  • primary publisher (such as book or newspaper publishers),
  • conduit (such as a telephone company), or
  • distributor (such as a book store, library, or news dealer).[11]
Primary publishers are generally held to a standard of liability comparable to that of authors because they actively cooperate in publication.[12]

Internet Defamation

In the internet context, however, Congress sought to “remove disincentives for the development and utilization of blocking and filtering technologies” and to encourage the development of technologies that allow users to control the information they receive.[13] Congress, therefore, decided to “override the traditional treatment of publishers, distributors, and speakers under statutory and common law” by enacting the Communications Decency Act of 1996 (CDA).[14]

The provider or user of an interactive computer service, such as an internet website or a web host, is generally not treated as the author of the statement and is immunized from liability under the CDA, 47 U.S.C. § 230.

The CDA immunizes providers of interactive computer services against liability arising from content created by third parties. Specifically, the CDA provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”[15] (emphasis added)

Section 230 immunity was created because “Congress made a policy choice … not to deter harmful online speech through the separate route of imposing tort liability on companies that serve as intermediaries for other parties’ potentially injurious messages.”[16] Immunity under Section 230 is not limited to defamation or speech-based torts, however. As applied, this immunity has proved nearly limitless, protecting providers from defamation (id.), invasion of privacy,[17] misappropriation of right of publicity,[18] general negligence (id.), and intentional infliction of emotional distress,[19] among other claims.

Section 230 does, however, explicitly exempt from its coverage criminal law, communications privacy law, and “intellectual property claims.” In interpreting these exclusions, courts generally hold that Congress meant to exclude federal intellectual property claims, such as copyright and trademark, but they disagree as to whether state law intellectual property claims are also exempted from the broad immunity protection Section 230 provides.

Relief for Defamed Parties

The key to obtaining relief for internet defamation is identifying and pursing legal claims against the author of the statement. The author’s identity, if anonymous, can be obtained through a court order compelling disclosure.

Potential legal claims against the author of the statement include:
  • defamation,
  • false light invasion of privacy,
  • intentional interference with business, and
  • intentional infliction of emotional distress.
Potential relief includes compensatory damages to compensate the plaintiff for the harm caused, and punitive damages to punish and deter the defendant from future acts of defamation.

An injured plaintiff may also be able to obtain relief outside of direct liability by obtaining a court order for a permanent injunction. Although a court cannot order a service provider to remove the complained of postings, an injunction on the anonymous author is often necessary when the author refuses to respond to the injured party’s request for the author’s identity, or refuses to remove defamatory statements.[20] If approved, the court will order the author to remove the defamatory postings and enjoin him from making other defamatory statements in the future. See Id. (issuing a permanent injunction “ordering Defendants to remove the defamatory communications and enjoining Defendants from making further defamatory communications”).

Injunctive relief is rooted in principles of equity. According to these principles, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. The plaintiff must demonstrate that:
  • it has suffered an irreparable injury;
  • remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
  • considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
  • the public interest would not be disserved by a permanent injunction.[21]
In Bradley Cohen’s $38.3 million jury verdict against Ross Hansen, Cohen satisfied all four factors in establishing his claim of defamation and false light invasion of privacy.
[1] See Kraig J. Marton et. al., “Protecting One’s Reputation: How to Clear a Name in a World Where Name Calling Is So Easy,” 4 Phoenix L. Rev. 53, 67 (2010) at 60 (“Generally, courts have, and should, treat internet defamation the same as defamatory statements published in other mediums.”); Alyssa J. Long, “Internet Defamation,” 73 Tex. B.J. 202, 203 (2010) (“[T]he law of Internet defamation is no different from for other types of potentially defamatory communication.”).

[2] Restatement (Second) of Torts § 558 (1977) (Restatement).

[3] See, e.g., Hammer v. Trendl, 2003 WL 21466686, *3 (E.D.N.Y. 2003) (“It is well settled that a statement of pure opinion is not actionable.”).

[4] “Because an allegedly defamatory statement must contain a provable falsehood, courts distinguish between statements of fact and statements of opinion for purposes of defamation liability.” Sanders v. Walsh, 219 Cal. App. 4th 855, 864, 162 Cal. Rptr. 3d 188, 195-96 (Cal. Ct. App. 2013).

[5] Id.

[6] Id.

[7] Milkovich v. Lorain Journal Co., 497 U.S. 1; 19 (1990).

[8] Summit Bank v. Rogers, 206 Cal. App. 4th 669, 698–700, 142 Cal. Rptr. 3d 40, 62–63 (Cal. Ct. App. 2012) (quoting Gregory v. McDonnell Douglas Corp., 131 Cal. Rptr. 641, 552 P.2d 425 (Cal. 1976)).

[9] Sanders, 219 Cal. App. 4th at 862–63, 162 Cal. Rptr. 3d at 195; Summit Bank, 206 Cal. App. 4th at 698–700, 142 Cal. Rptr. 3d at 62–63 (quoting ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1011, 113 Cal. Rptr. 2d 625, 641 (Cal. Ct. App. 2001)); see, e.g., Balzaga v. Fox News Network, LLC, 173 Cal. App. 4th 1325, 1338, 93 Cal. Rptr. 3d 782, 793 (Cal. Ct. App. 2009) (noting that when reviewing an allegedly defamatory meaning, the context in which the statement was made must be considered).

[10] Sanders, 219 Cal. App. 4th at 864, 162 Cal. Rptr. 3d at 195–96.

[11] Austin v. CrystalTech Web Hosting, 211 Ariz. 569, 572, 125 P.3d 389, 392 (Ct. App. 2005).

[12] Id.

[13] 47 U.S.C. § 230(b)(3)–(4).

[14] Batzel v. Smith, 333 F.3d 1018, 1026 (9th Cir. 2003).

[15] 47 U.S.C. § 230(c)(1)

[16] Zeran v. Am. Online, Inc., 129 F.3d 327, 330–31 (4th Cir. 1997).

[17] Parker v. Google, 242 Fed. Appx. 833 (3rd Cir. 2007)

[18] Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9th Cir. 2003)

[19] Doe v. Friendfinder Network, Inc., 540 F. Supp. 2d 288 (D.N.H. 2008)

[20] See Alpha Phx. Indus. LLC v. SCInternational Inc., 2013 WL 5814850, at *6 (D. Ariz. Oct. 29, 2013).

[21] eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (citing Weinberger v. Romero–Barcelo, 456 U.S. 305, 311–13 (1982); Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987)).

If you have questions regarding a possible defamation matter, on or off the internet, or to arrange for a consultation concerning your legal matter, please contact Robert Mitchell at rdm@tblaw.com or at (602) 452-2730.
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