Many experienced internet publishers are aware of the Communications Decency Act (CDA – see 47 USC § 230) and understand it to provide them immunity from suit for publishing posts that come from third parties. However, many internet publishers may not be aware that CDA immunity has large exceptions. One of these is that a web publisher can still be liable if its publishing of third-party posts violates federal criminal law. (Fn1)

An important area of criminal law to which web publishers are susceptible is extortion. While extortion is generally a violation of state criminal law, multiple acts of extortion can form the predicate for a RICO claim – a violation of federal criminal law.

Under California law, extortion includes the acts of obtaining or attempting to obtain property from someone – with his consent – by threatening to accuse him of a crime or to expose or to impute to him “any deformity, disgrace, or crime” or “any secret affecting him” (Fn2) The threatened disclosure can include anything that would damage a victim’s personal or business reputation or other interests. (Fn3) In contrast to defamation law, it doesn’t matter whether the threatened exposure is true or false. (Fn4)

Under the CDA, a web host is immune from a defamation suit if it publishes material that damages someone’s personal or business reputation – as long as that material comes from a third party. However, according to recent federal court decisions, CDA immunity may not apply and a web publisher might be subject to criminal prosecution, if the web host either threatens to publish negative material from a third party unless the victim pays it money, or if it offers to take down negative material in exchange for payment.

The most recent of these decisions was announced in July 2010 by a Los Angeles federal judge in the case Asia Economic Institute v. XCentric Ventures. The defendant, XCentric, operates the well-known gripe site RipoffReport.com, which publishes complaints from consumers about businesses. XCentric claims that it does not author any of the posts on its site. However, XCentric does edit posts to remove offensive language and private information and uses an automatic program to create meta-tags and titles for each post. XCentric is frequently sued for defamation, but according to my own private survey generally prevails under CDA immunity. (Fn5)

The plaintiff, Asia Economic Institute (AEI) was a free, on-line publication that provided information about current events. AEI never generated any revenues and ultimately ceased operations. In 2009, AEI discovered that six reports about it had been published on the Ripoff Report. These reports claimed that AEI was “laundering money” and “routinely ignores employment laws,” stated that “Asia Economic Institute it’s a SCAM” and in general said that AEI was a bad egg. Standard defamatory stuff.

AEI complained about these posts to the Ripoff Report – which, in turn, invited AEI to join its “Corporate Advisory Program” (CAP). Under this program, in exchange for a substantial fee from the CAP member, Ripoff Report would contact the authors of negative reports and try to facilitate a resolution, and place a positive report about the CAP member at the head of each negative post. However, Ripoff Report repeatedly stated that it would not remove any of the negative posts about the CAP member.

AEI sued the Ripoff Report, claiming that the CAP program constituted extortion under California law, making Ripoff Report liable under Federal RICO statutes. Judge Wilson of the Central District of California disagreed.

On one hand, Judge Wilson found that the negative reports that appeared about AEI on the Ripoff Report did in some instances “accuse Plaintiffs of crimes or impute to them a disgrace.” (Fn6) Judge Wilson also seemed to accept the Plaintiffs’ argument that the Ripoff Report could be found liable for extortion by making a “threat of continued exposure – that is that Defendants would allow the negative information to remain on the website unless Plaintiffs joined the CAP program.” (Fn7)

On the other hand, Judge Wilson found that there was no evidence that a threat of continued exposure had actually been made. According to Judge Wilson, “notably absent” from the communications between the parties “is any statement or suggestion that joining the CAP program will result in negative reports being taken off the website or blocked from publication. In fact, the exact opposite is true.” Ripoff Reports communications to AEI repeatedly stated that “a Rip-off Report cannot be taken off” and “WE DO NOT remove Rip-off reports.” (Fn8)

Judge Wilson added: “As far as the Court can tell, all of the communications directed to Plaintiffs describe the CAP program as a public relations effort – that is, that the fees for the program are for the Defendants’ services in investigating the truth of the reports and acting as a liaison between the CAP member and the complainant to help resolve the dispute. The offer to help Plaintiffs restore their reputation and facilitate resolution with the complainants in exchange for a fee does not constitute a threat under California Penal Code § 519.” (Fn9)

By contrast, in another recent internet extortion case, Monex Deposit Co. v. Gilliam, the operator of a gripe website was found liable for extortion under the same California statutes. In the Monex case, the defendant testified that he had created the website at issue -- www.MonexFRAUD.com - with the intent to “destroy” Monex, a precious metals dealer. (Fn10) The defendant personally traveled to the plaintiff’s headquarters and delivered a letter which explicitly threatened to expose Monex’s alleged crimes if Monex did not pay “north of $20 million.” (Fn11) The letter noted that considerable damage had been done to Monex via the website MonexFRAUD.com and warned that more negative information would be posted in the $20 million demand was not met. (Fn12) At another meeting, the defendants told a Monex employee that they would take down the www.MonexFRAUD website if Monex would pay $20 million. (Fn13)

The message from these cases (at least under California law) is that a web host is more likely to be found liable for extortion if it offers to take down or to halt the publication of damaging material in exchange for payment. On the other hand, a web host who publishes third party critiques of businesses and also offers paid reputation management services may actually reduce its legal exposure if it adopts of policy of refusing to remove allegedly defamatory posts.