Calif. Website ‘Distributors’ Not Immune From Defamation Suits

LOS ANGELES — In a case of particular interest to website companies operating in California, the state’s Court of Appeal said that operators who knowingly repeat a defamatory remark are not immune from liability under the Communications Decency Act because the CDA does not immunize distributors.

The appellate court did, however, uphold the dismissal of eBay Inc. from a suit by Roger M. Grace. His claim against eBay is within the scope of a release that is part of the eBay user’s agreement, the court said in its ruling last week.

The libel claim against eBay was initiated after a seller posted on eBay a feedback comment about Grace, who purchased several items from the seller: “Complaint: SHOULD BE BANNED FROM EBAY!!!! DISHONEST ALL THE WAY!!!!”

Grace, publisher of the Los Angeles Bulletin and the Metropolitan News-Enterprise, notified eBay that the seller’s comments were defamatory, but eBay refused to remove them.

Grace sued eBay and the seller, alleging counts against eBay for libel, specific performance of eBay’s user agreement with the seller, and violation of the unfair competition law. Grace withdrew the second count after eBay removed the challenged comments from its website.

The appellate court concluded that eBay could not avail itself of CDA immunity because it was a distributor.

The court said that in granting immunity to a provider or user of an interactive computer service as “the publisher or speaker,” Congress did not intend to grant immunity to such a party when acting as the “distributor” or “transmitter” of information provided by another person.

“Although a distributor can be held liable for libel in certain circumstances, a distributor is subject to a different standard of liability from that of a primary publisher, and liability as a distributor ordinarily requires a greater showing of culpability,” the court said in its ruling.

EBay contested the complaint based on language of 1996’s CDA and a release clause in its user agreement. The lower court held that the CDA’s language immunizes eBay and dismissed the complaint.

Grace, who also is an attorney, was told by the court that he likely blundered in his legal strategy.

“The appropriate place for such a legal argument would have been in Grace’s opposition to the demurrer and in his opening brief on appeal, rather than in an amended complaint,” the court said. “In any event, in light of our conclusion that [a section in the CDA] provides no immunity in these circumstances and that Grace released his claims and demands against eBay, the question of constitutionality does not arise.

The case is Roger M. Grace vs. eBay Inc., No. B168765.