Stratton Oakmont v. Prodigy

NOTE: The information and commentary contained in this database entry are based on court filings and other informational sources that may contain unproven allegations made by the parties. The truthfulness and accuracy of such information is likely to be in dispute. Information contained in this entry is current as of the last event mentioned in the "Description" section below; additional proceedings might have taken place in this matter since this event.

Summary

Threat Type: 

Lawsuit

Date: 

05/24/1995

Status: 

Concluded

Location: 

New York

Disposition: 

Settled (total)

Verdict or Settlement Amount: 

N/A
In October 1994, an unknown user posted statements on Prodigy's "Money Talk" bulletin board indicating that Stratton Oakmont, Inc., a Long Island securities brokerage firm, and its president, Daniel Porush, had committed criminal and fraudulent acts in connection with the initial public... read full description
Parties

Party Issuing Legal Threat: 

Stratton Oakmont, Inc.; Daniel Porush

Party Receiving Legal Threat: 

Prodigy Services Company, a Partnership of Joint Venture of IBM Corp. and Sears Roebuck & Co.; John Doe and Mary Doe

Type of Party: 

Individual
Organization

Type of Party: 

Individual
Large Organization

Location of Party: 

  • New York

Location of Party: 

  • New York

Legal Counsel: 

Martin Garbus
Description

In October 1994, an unknown user posted statements on Prodigy's "Money Talk" bulletin board indicating that Stratton Oakmont, Inc., a Long Island securities brokerage firm, and its president, Daniel Porush, had committed criminal and fraudulent acts in connection with the initial public offering of Solomon-Page, Ltd. As a result, Stratton and Porush sued Prodigy and anonymous defendants in New York state court for defamation.

The plaintiffs argued that Prodigy should be considered a "publisher" of the anonymous poster's statements. Under the common law of defamation, if Prodigy were considered a publisher, it could be held liable for the statements of the unknown user. Conversely, if it were found to be merely a "distributor," it could not be held liable unless it knew or had reason to know about the allegedly defamatory statements.

"Money Talk" was, at the time, a widely read forum covering stocks, investments, and other business matters. Prodigy contracted with Charles Epstein to act as "Board Leader," a position entailing, in part, participation in board discussions, board promotional efforts, and board supervision. In its argument that Prodigy was a publisher of the defamatory statements, the plaintiffs pointed to representations Prodigy had made in various newspaper articles representing itself as an organization that exercised editorial control over the content on its servers.

In making their case, the plaintiffs also pointed to Prodigy's "content guidelines," which stated rules that users were expected to abide by, a software screening program which filtered out offensive language, and the employment of moderators or "Board Leaders" who were responsible for enforcing the content guidelines.

In May 1995, on the plaintiffs' motion for partial summary judgment, the court held that these representations and policies were sufficient to treat Prodigy as a publisher. In so holding, the court distinguished the case from an earlier one involving CompuServe, which was found merely to be an "electronic for-profit library" or repository and thus a passive distributor. In particular, the court pointed to Prodigy's creation of an "editorial staff of Board Leaders who have the ability to continually monitor incoming transmissions." The court noted, however, that bulletin boards should normally be considered distributors when they do not exercise significant editorial control, as Prodigy had done.

Prodigy moved for reconsideration of the May 1995 decision, but the party's settled in October 1995, apparently before the motion was decided.

In passing the Communications Decency Act of 1996, which, among other things, established immunity for internet service providers for publishing "information provided by another information content provider," 47 U.S.C. § 230(c)(1), the House explicitly stated its intent to overturn the result reached in the Prodigy case. See H.R. Conf. Rep. 104-58, at 194.

Details

Content Type: 

  • Text

Publication Medium: 

Forum

Subject Area: 

  • Defamation
  • Third-Party Content
  • Section 230
  • Financial Forums
Court Information & Documents

Jurisdiction: 

  • New York

Source of Law: 

  • New York

Court Name: 

New York State Supreme Court, Nassau County

Court Type: 

State

Case Number: 

31063/94

Relevant Documents: 

CMLP Information (Private)

Threat Source: 

Court Filings

CMLP Notes: 

KM