Hedge fund Greenlight Capital has filed a petition in New York State Supreme Court seeking the identity of an anonymous blogger at Seeking Alpha, an investor website. In mid-February Bloomberg published a report stating the contributor “allegedly disclosed the fund’s stake in Micron Technology Inc. (MU) before it was made public.” Greenlight plans to sue the blogger if the petition succeeds – making it a potentially groundbreaking legal case.
Key excerpts from the Bloomberg article state:
Greenlight said in a Nov. 25 filing with the U.S. Securities and Exchange Commission that it purchased 23 million shares of Boise, Idaho-based Micron, a maker of memory chips, in the third quarter. Eleven days earlier, Greenlight had disclosed the stake to the SEC and asked that the agency not publicly identify Micron as the investment in question.
A frequent contributor to the site, identified only as “Valuable Insights,” revealed the investment in a post on Nov. 14, before Greenlight disclosed its position to the SEC, the investment manager said in a petition filed yesterday in New York State Supreme Court in Manhattan. The hedge fund said in the petition that the website post drove up its costs.
Greenlight said in the petition it intends to sue “Valuable Insights,” identified on the site as a fund manager with more than 20 years of experience in the securities industry.
Seeking Alpha declined to identify the contributor in a letter dated Nov. 26, saying that submissions are made at the “sole responsibility” of the posting user, according to filings in the case.
Seeking Alpha said in the letter that it doesn’t pre-screen comments on its site and can’t guarantee their accuracy, integrity or quality, and that it’s not in a position to reveal its users’ identities without “clear and substantial grounds,” according to the filings.
Why it is difficult to sue for internet content….but not impossible
Website operators have legal immunity over what is said and posted on their sites. That means they are not held responsible for it in a court of law (except, generally, in cases that constitute defamation). Specifically, according to Section 230 of the Communications Decency Act, “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” That law was passed in 1996.
Online defamation lawsuits constitute a growing area in legal practice. If something posted about a person is deemed by a court to be a false and unprivileged statement of fact harmful to someone’s reputation – or, to cite recent cases, is “injurious,” interferes with one’s livelihood or possesses any number of related characteristics – the website can be required by law to remove the information and reveal the poster’s identity.
Tim Fernholz at Quartz said, “The hedge-fund manager maintains that only someone who was legally obligated to keep the information confidential could have written the Seeking Alpha post, and he wants to know the person’s true identity in order to sue. Since the author of the note isn’t a journalist relaying information from an anonymous source (a classic way big deals are leaked) but an investor, it’s possible the judge won’t follow the usual protections for anonymous speech and instead force Seeking Alpha to divulge the author’s identity,” he writes.
People who have successfully sued in response to online defamation (typically a series of anonymous posts about them) have been awarded millions of dollars in damages. The posters’ identities have become public, often in the news media. It can be very difficult to take such a step and succeed. But a firm like Greenlight Capital has the financial weight to see such a lawsuit through. While it is not a defamation suit, there may be similarities in terms of visibility. Greenlight can also utilize private resources to reveal the anonymous writer should legal channels fail to do so.
Cyber investigators increasingly active in private sector
Private investigators are increasingly active in such cases. Often such experts come out of law enforcement and the legal community. For instance, Kenneth Citarella is the Managing Director for Investigations and Cyber Forensics at Guidepost Solutions, an investigations and compliance firm that was established by Andrew J. O’Connell, a former federal prosecutor and Special Agent with the U.S. Secret Service.
For additional insight
The Electronic Frontier Foundation’s online defamation law guide for bloggers includes general information on this topic.