Tuesday, January 24, 2006

Law Firm's Defamation Claim Found to Trump Critics' Internet Anonymity

Law Firm's Defamation Claim Found to Trump Critics' Internet Anonymity
Shannon P. Duffy, The Legal Intelligencer

Ruling on one of the most important First Amendment issues of the day, a Philadelphia judge has ruled that a valid defamation claim trumps any right to speak anonymously on the Internet.

In his 19-page opinion in Klehr Harrison Harvey Branzburg & Ellers v. JPA Development Inc., Common Pleas Judge Albert W. Sheppard Jr. ordered the operator of two now-defunct Web sites to turn over the identities of the anonymous authors of comments on the sites that allegedly defamed a Philadelphia law firm.

Sheppard chose not to apply tests developed by New Jersey and Delaware courts, relying instead on Pennsylvania's existing discovery rules for guidance.

In the suit, the Klehr Harrison firm complains that its reputation was severely disparaged by comments on the two sites that falsely accused its lawyers of being "thieves," committing "fraud" and "lying" to a judge.

According to court papers, the Internet sites were operated by Gerasimos "Jerry" Pantelidis and focused on discussions of a real estate dispute involving the Barclay Hotel in which Pantelidis was pitted against a mortgage company.

Pantelidis had purchased the Barclay in a bankruptcy court sale, and a mortgage company owned by Michael Karp had loaned Pantelidis about $8 million.

A dispute later arose when Karp's company threatened to foreclose on the mortgage due to its fears that Pantelidis was not making sufficient progress in his renovation efforts.

Pantelidis, in a suit against Karp, claims he was satisfying all of the mortgage agreement's requirements, but because of the foreclosure threat, he was forced to sell the hotel at a wholesale price to developer Allan Domb.

The litigation between Pantelidis and Karp is ongoing, and a nonjury trial that began last year is set to resume Jan. 30.

But a new lawsuit began when Klehr Harrison, which represents one of Karp's companies, claimed that Pantelidis was defaming the firm on two Internet sites.

Sheppard has ruled that numerous statements on the Internet sites are "defamation per se" because they amount to accusations of criminal conduct.

One of the sites, according to court papers, included a link to a "guest book" that contained numerous anonymous comments, many of which sharply criticized Klehr Harrison.

Pantelidis has testified that he was the administrator of the guest book site and controlled its contents.

But when lawyers for Klehr Harrison demanded to know the identities of the anonymous commentators, lawyers for Pantelidis refused to turn them over, arguing that disclosure of their identities would violate their constitutional right to engage in anonymous speech.

Sheppard sided with Klehr Harrison and ordered that the identities of all comment authors be disclosed.

Pantelidis appealed that ruling, and Sheppard has now handed down an opinion explaining his reasoning.

Sheppard found that courts have adopted a variety of approaches in tackling the issue of anonymous speech on the Internet.

In Dendrite International v. Doe, the New Jersey Superior Court held in 2001 that there is a "well established First Amendment right to speak anonymously."

In Dendrite, a public corporation brought a defamation action against numerous John Doe defendants for messages posted on an Internet bulletin board that accused the company and its president of altering accounting methods to overstate revenue.

The company sought limited discovery for the purposes of ascertaining all of the John Does' identities, but the New Jersey Superior Court denied the request and announced a three-prong test.

Under the test, a defamation plaintiff seeking the identities of anonymous Internet subscribers must show it has taken efforts to notify the anonymous posters that they are the subject of an application for an order of disclosure; identify to the court statements made by the posters; and establish a prima facie cause of action for defamation against the posters.

If the test is met, the Dendrite court said, the trial court must "balance the defendant's First Amendment right of anonymous free speech against the strength of the prima facie case presented and the necessity for the disclosure of the anonymous defendant's identity to allow the plaintiff to proceed."

The Dendrite standard was adopted in a modified form by the Delaware Supreme Court in its 2005 decision in Doe v. Cahill in which the plaintiff, an elected official, complained about anonymous postings on an Internet blog that impugned his leadership abilities.

Expressing more concern for the rights of anonymous Internet speakers, the Cahill court warned that "there is reason to believe that many defamation plaintiffs bring suit merely to unmask the identities of anonymous critics."

The Cahill court retained the notification provision of the Dendrite test, as well as the provision that requires the plaintiff to set forth a prima facie cause of action against the anonymous poster.

But the court made the test significantly more difficult for plaintiffs by holding that the identities of anonymous defendants may not be disclosed unless the plaintiff can "support his defamation claim with facts sufficient to defeat a summary judgment motion."

Now Sheppard has decided to apply neither the Dendrite nor the Cahill test, finding instead that Pennsylvania's existing discovery rules provide adequate guidance.

Sheppard took his cue from a law review article by Professor Michael S. Vogel of the University of Illinois College of Law titled: "Unmasking 'John Doe' Defendants: The Case Against Excessive Hand-Wringing over Legal Standards" published in 2004 in the Oregon Law Review.

In the article, Vogel complained that courts were rushing to apply new standards to discovery issues related to anonymous posters to the Internet.

"The threat to core First Amendment free speech rights from too readily identifying anonymous speakers is real, and should be taken seriously by the courts. At the same time, however, the new standards offer little real protection for anonymous speech beyond what the courts can provide under existing rules," Vogel wrote.

Sheppard agreed, saying, "the implementation of new standards for cases involving plaintiff's efforts to learn the identities of anonymous Internet posters will likely do more harm than good."

Instead, Sheppard said, "this court believes that a balancing of John Does' First Amendment rights against the plaintiff's rights to the information sought is built into our commonwealth's existing civil procedure."

As a result, Sheppard decided that the defense request for a protective order is governed by Pennsylvania Rule of Evidence 4011, which prohibits discovery that is sought "in bad faith" or would "cause unreasonable annoyance, embarrassment, oppression, burden or expense to the deponent or any person or party."

Sheppard found there was "no evidence that [the] plaintiff has sought the identities of the anonymous posters (or poster) in bad faith."

Turning to the question of whether the discovery would cause the defendants unreasonable burden, Sheppard found that he was forced to consider the anonymous posters' First Amendment rights.

Sheppard found that courts "have repeatedly held that the right to speak anonymously is subsumed within the constitutional right to speak freely."

Nonetheless, Sheppard found that free speech "is not absolute," and that "defamatory and libelous speech enjoys no constitutional protection."

Sheppard concluded that since many of the anonymous statements in the "guest book" amounted to defamation per se, they are not entitled to First Amendment protection.

"While the posters are undeniably entitled to First Amendment rights, the defamatory per se statements are not entitled to First Amendment protection," Sheppard wrote.