Recent Court Decisions Suggest Increasing Liability for Online Business

April 18, 2008

The explosive growth of the Internet as a vehicle for communications and commerce has been nurtured in the United States, in part, by a 1996 federal law that restricts lawsuits against the operators of online services. Recent court decisions are now making the limits on the scope of that protection much more apparent. Businesses that operate online and the lawyers that support them should take note.

The Communications Decency Act of 1996 (the “CDA”) provides a shield of immunity to online service providers against liability for content posted by third parties. 47 U.S.C. §230. Specifically, the courts have held that Section 230(c)(1) of the CDA affords “provider[s] or user[s] of an interactive computer service” broad immunity from liability for information posted by third parties and if and when such providers/users are sued “as the publisher or speaker” of such information. This immunity, however, does not extend to information that the providers or users post themselves. Since 1996, this shield has remained in place — sometimes dented, but always intact.

Over the last two years, however, the courts have started to chip at the foundations of this once seemingly impregnable wall. In particular, questions have arisen about how extensively a service provider may edit or otherwise solicit content on its site without being considered a content provider. As Section 230 provides, a service provider’s immunity disappears once it becomes an “information content provider.” Section 230 defines an “information content provider” as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet.” CDA at Section 230(f)(3) (emphasis added).

Within this framework, courts have begun to reduce the scope of this immunity by seeking to expand the reach of Section 230(f)(3), thereby indicating that the immunity once taken for granted by service providers might not be available to providers that extensively edit, categorize or solicit content from others. As a result, courts have been focusing on Section 230(f)(3) and the service providers’ actions in creating or developing the content giving rise to these cases.

These cases, as discussed below, suggest that the risk of liability for such service providers is increasing. Leading this development is the Ninth Circuit’s recent decision in Fair Housing Council of San Fernando Valley v., LLC, __ F.3d __ (2008). In this case, the Ninth Circuit reversed en banc by an 8-3 vote a district court’s granting of blanket Section 230 immunity to the defendant service provider. The Court held that the defendant — a site that provided an information clearinghouse for prospective roommates around the United States — did not merit Section 230 immunity for those parts of its site where it had materially edited the information provided by its users, thereby rendering it an “information content provider” rather than a mere “provider or user of an interactive computer service.” Notwithstanding a very robust dissent that favored blanket immunity under Section 230, the Court determined that the defendant was an “information content provider” because it (i) prepared a questionnaire for its members to complete using answer choices also prepared by the defendant, and (ii) designed its site’s search functionality using “non-neutral” terms. The Ninth Circuit then remanded the case back to the trial court to consider the plaintiff’s case on the merits as to the non-immune portions of its site.

Paralleling the approach in, a federal district court in the Southern District of New York ruled in February 2008 in Doe v. City of New York, ___ F.Supp.2d ___ (S.D.N.Y. 2008) that Section 230 likewise did not shield the defendant from a workplace discrimination claim as a “provider or user of an interactive computer service” because he had “added his own allegedly tortious speech to … third-party content he forwarded.” In effect, the court ruled that by adding his own commentary, the defendant had crossed the line from being a “provider or user of an interactive computer service” for which Section 230 provides immunity to being an “information content provider” (and thus outside the statute’s protections). But because the articles that were forwarded with the commentary at issue were in agreement with that commentary, it remains open (but undecided) as to whether the copying and posting of another’s words will render the poster (apart from the actual author) an “information content provider” under the statute. If so, a second issue arises, which is whether the simple act of posting another’s words (without supplementing with additional commentary) will likewise expose the poster to liability as an “information content provider”? As noted above, these cases suggest that the risk of liability is increasing.

The current trend therefore appears to be that courts are moving beyond the general rule of Section 230 immunity for interactive computer service providers to the more narrow exception applicable to information content providers. As noted above, courts are now focusing on the scope of Section 230(f)’s definition of “information content provider” to circumvent the CDA’s general rule of immunity. As the Internet has become more interactive and dynamic over the last few years — leaving behind in its wake the technical landscape of 1996 — this evolution has created a dilemma for site providers once thought to be safely behind the immunity afforded by Section 230. As a result, those hosts of interactive sites that now actively screen or manipulate content should carefully consider the type and range of those efforts.

Given the unsettled state of the law in this area, service providers that wish to limit the risk of liability for online activities should proceed with caution when handling content submitted by third parties — especially where they have edited, encouraged, commented on or contributed to that content. For example, site providers should:

  • adopt robust and up to date site terms and conditions (along with usage policies) and see to it that best practice procedures are employed to bind their users to those terms;
  • make sure that all screening decisions are taken and implemented promptly; and
  • avoid screening submissions on the basis of substantive content — to do so will likely pull the site provider within the ambit of because such screening will probably render it an “information content provider” and destroy Section 230 immunity.

On the other hand, it would appear that the mere screening of submissions with regard to issues of civility and tone only — assuming such considerations would be substance-neutral — would likely be permitted under Section 230 and preserve CDA immunity. Note, however, that this issue has yet to be directly considered by any court and is, at best, unsettled.

Advising companies on best practices in connection with online businesses and electronic communications policies and procedures is one of the areas supported by the McGuireWoods Technology Disputes & Litigation Practice Group. This practice group is part of the firm’s integrated Technology & Business Department, which provides legal services for business transactions and disputes driven by technology.