In an opinion that was handed down yesterday in the defamation case of Tener v. Cremer, New York’s Appellate Division, First Department held that the trial court erred by denying outright – without a hearing – a plaintiff’s motion seeking to hold NYU in contempt for failing to protect or produce electronically stored information (ESI) in response to a subpoena.

In response to the motion, NYU claimed that it could not comply with the subpoena because the identities of people who accessed the Internet through a particular portal were stored in a text file that was automatically overwritten every 30 days, and the school did not “possess the technological capability or software, if such exists, to retrieve a text file created more than a year ago and ‘written over’ at least 12 times.”

The unanimous appellate court was unpersuaded by this argument, however.

As the plaintiff’s expert noted, there are several steps NYU could take to obtain the data, including the utilization of forensic software. Indeed, the appellate court cited to the fact that Nassau County Commercial Division has enacted detailed rules to address specifically the issue of forensic data recovery.

Therefore, the court held, “To exempt inaccessible data presumptively from discovery might encourage quick deletion as a matter of corporate policy, well before the spectre of litigation is on the horizon and the duty to preserve it attaches.”

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International Shoppes, Inc., et al.  v. Spencer is a case from a trial court in Nassau County, NY that is scheduled to appear in tomorrow’s edition of The New York Law Journal that is the poster child – at least in my view – for litigation run amok.  And, lest you think that I meant to say “frivolous lawsuit,”  I assure you that I deliberately chose not to use that phrase.

In this case, the plaintiff sued their former employee for, among other things, allegedly defaming them publicly and fraudulent concealment. And, from the Court’s opinion, there seems to be some merit to the company’s contention that the defendant actually did defame them.

But here’s the problem:

Even assuming that someone took this former employee’s negative, defamatory comments seriously (and I’m not sure that the evidence will bear this out), and further, that the plaintiff’s company suffered damages as a result, how exactly would the defendant be expected to satisfy the judgment?

As the plaintiff is all too well aware, they employed him as a low-level sales clerk, who presumably has no assets with which to satisfy a judgment of any significance.

To me, this is just another example of “Why Defamation Lawsuits Are Often a Waste of Time and Money Under NY Law.”

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The facts of this case are rather disturbing. Worse yet, I seriously doubt the plaintiff will be able to collect on this judgment, even though he certainly deserves to recoup something.

In Cantu v. Flanigan, the plaintiff was a Mexican businessman who, over several decades in the oil and other industries, had built a worldwide reputation for integrity. The defendant, frustrated over his inability to collect nearly $800 million he claimed he was owed by a Mexican union, chose to exert pressure to exact “his money” by blackmailing the plaintiff. How did he do this? By publishing fabricated claims (in legal terms, “defamation“) that the plaintiff had made his fortune through illicit means, including money laundering and “rigging bid contracts” in an effort to compel him to either force the union to pay, or for him to pay the money out of his own pocket in exchange for a retraction. In fact, when confronted about these allegations by plaintiff, the defendant responded that he “did not care whether the statements were true or not, and that he just wanted his money.”

The defendant’s fabricated claims were picked up by a Mexican reporter, who then published an article that disseminated the story worldwide. As a result, both the U.S. and Mexican governments investigated the plaintiff; and while both investigations found the allegations against the plaintiff completely unfounded, the cloud of the investigations led several companies to back out of multi-million dollar deals that had been negotiated with the plaintiff (i.e., tortious interference with contract, and tortious interference with prospective advantage).

So why do I think the plaintiff will have trouble collecting on this judgment? Simple: (1) there are very few people who can afford to pay a judgment of this magnitude; and, (2) I noticed that the defendant represented himself at the trial of this case, and, quite frankly, I cannot imagine anyone of significant means wanting to represent themselves, i.e., without an attorney, when the ramifications of a multi-million dollar judgment are looming.

This leaves me with another nagging question: why didn’t the plaintiff sue the magazine that published the story – and did so without verifying any of the facts ? Presumably, they would have some means to satisfy a judgment, and he would therefore be able to recoup some of his losses.

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In Shiamili v. Real Estate Group of NY, Inc., an opinion issued by New York’s Appellate Division, First Department (which covers both New York and Bronx Counties), answered this question with an unequivocal ‘no’ – the internet services provider (or “interactive computer service) cannot be held liable for defamation (or unfair competition) unless the internet services provider acts in some editorial or publishing capacity “such as deciding whether to publish, withdraw, postpone or alter content.”

This rule is derived from the Federal Communications Decency Act of 1996 (CDA), which immunizes internet services immunity from liability for publishing false or defamatory material so long as the information was provided by another party, and thus treats internet publishers differently than it does corresponding authors in print, television and radio (see Batzel v Smith, 333 F3d 1018, 1026-1027 [9th Cir 2003], cert denied 541 US 1085 [2004]).

As noted by the Shiamili court, there is one small caveat to this rule, however: the immunity provided by the CDA applies only where the information that forms the basis of the state law claim has been provided “by another information content provider” (47 USC § 230[c][1], emphasis added). In accordance with this caveat to the general rule, an interactive computer service provider remains liable for its own speech (Universal Communication Sys. v Lycos, 478 F3d 413, 419-420 [1st Cir 2007]), or for its material contribution to the content of a third party’s statement (see Fair Hous. Council of San Fernando Val. v Roommates.com, 521 F3d 1157 [9th Cir 2008]). On the other hand, the ” development of information’ . . . means something more substantial than simply editing portions of an e-mail and selecting material for publication.”

In sum, an internet services provider cannot be held liable for the content published on its site unless it had an active role in determining the specific content that was published.

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In a case that should sound a warning to ill-tempered, egomaniacal bosses everywhere, a jury recently awarded five of former Guess CEO Georges Marciano’s employees a total of $370 million  on their counterclaims for intentional infliction of emotional distress, libel and defamation.

The initial action, which sought monetary damages for these former employees’ alleged breach of fiduciary duty,   embezzlement and fraud was filed by Marciano roughly two years ago. Over the course of the last two years, however, Marciano disregarded numerous court orders directing that he provide certain discovery, such as appearing for his Court-ordered deposition, which ultimately led the presiding judge to “strike his complaint,” which is legalese for dismissing his case. Since he also refused to comply with the Court’s orders directing him to respond to the employees’ discovery demands on their respective counterclaims, the Court also struck his answer to their allegations, which essentially took away his attorneys’  ability to defend against the employees’ claims.

Lest you think that such conduct is regular, standard fare, Marciano apparently went through seventeen (17!!!) attorneys on this case over the past two years. This is simply unheard of.

At the damages portion of the trial (based on Marciano’s misconduct, the judge had already precluded him from contesting liabilty), Marciano made a surprise appearance, and was completely unapologetic: he conceded that he was on a crusade against these former employees.  Given the size of the verdict against him, it certainly seems that his testimony made quite an impression on the jury.

The moral of the story is clear: if you disregard with impunity a court’s orders and carry this arrogance before a jury, you do so at your own peril.

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