Grace v. Neeley [1]

In December 2002, Roger Grace was the winning bidder on several auctions of Hollywood memorabilia being sold by Tim Neeley on the popular action site, eBay [2].  After Grace left negative feedback about the transactions, Neeley posted a negative comment about Grace in which he wrote, according to court filings, “Complaint: SHOULD BE BANNED FROM EBAY!!!! DISHONEST ALL THE WAY!!!!” Grace contacted eBay and stated that the seller’s comments were defamatory, but eBay did not remove them.

On January 21, 2003, Grace sued eBay, Inc. and Neeley, alleging counts for libel against both defendant and for violation of unfair competition law against eBay.  Grace withdrew the second count after eBay removed the challenged comments from its website.  Grace appears to have been unable to personally serve Neeley, and the court dismissed the suit against him on July 3, 2003.  

On March 28, 2003, eBay filed a motion to dismiss on the basis that it was immune from liability under section 230 of the Communications Decency Act (CDA 230) and because its Terms of Use released it from any liability for plaintiff's claims.  The Superior Court granted [3] eBay's motion on April 28, 2003, finding that it was immune from liability under CDA 230.

A complicated series of appeals ensued.  In summary, on July 22, 2004, the California Court of Appeals affirmed [4] the dismissal.  The appellate court held, however, the CDA 230 does not protect information distributors who know or have reason to know of defamatory material on their site, but nevertheless, eBay’s contractual release absolved it of liability for Grace's claims. Grace v. eBay, Inc., 16 Cal. Rptr. 3d 192 (Cal. App. Ct. 2004). 

On October 13, 2004, the California Supreme Court granted a hearing on the case and vacated the appeals court opinion, 99 P.3d 2 (Cal. Oct. 13, 2004), but then dismissed the hearing and remanded the case back to the lower court.  101 P.3d 509 (Cal. Dec. 1, 2004).  As a result, the lower court's dismissal stands.