Universal Communication Systems v. Lycos [1]

Universal Communication Systems ("UCS") and its CEO, Michael Zwebner, sued Lycos, its Spanish parent company Terra Networks, and several anonymous users of Lycos's Raging Bull [2] forum after the anonymous users created a forum about UCS and criticized the company there. UCS sought an injunction requiring Lycos to delete the UCS forum and to prevent it from ever being recreated.

In its original complaint [3], filed in federal court in Florida, UCS invoked claims of consumer fraud under Massachusetts law, dilution of trade name under Florida law, and a federal "cyberstalking" statute. Lycos moved [4] to dismiss UCS's claims or, alternatively, to transfer the case to Massachusetts federal court.  UCS moved for a preliminary injunction [5], which the court denied.  UCS amended [6] and resubmitted its motion for a preliminary injunction.

Before ruling on the motions before it, the court stayed [7] discovery in the case.  UCS, however, initiated a new, second action [8] in Florida federal court, which made largely identical claims. Lycos moved to consolidate [9] the two cases.  The court instead granted [10] Lycos' earlier motion to transfer the venue of the first action to Massachusetts.  The court hearing the second action soon transferred [11] it to Massachusetts as well, and the Massachusetts court consolidated [12] the two cases. 

At this point, UCS's complaint alleged four causes of action: (1) violation of Florida securities laws; (2) violation of a federal criminal statute prohibiting harassing communications (47 U.S.C. § 223 [13]); (3) trademark dilution under Florida law; and (4) violation of a Florida "cyberstalking" statute. In Massachusetts, Lycos moved to dismiss [14] the claims against it, arguing that it was protected from liability for third party content under section 230 of the Communications Decency Act [15] ("CDA 230"). Terra also moved to dismiss [16], claiming that the Massachusetts federal court had no jurisdiction over it, but even if it did, UCS had not shown Terra liable for the acts of its subsidiary.

The Massachusetts district court granted both motions, ruling that CDA 230 barred the Florida securities and cyberstalking claims, that the Florida dilution claim was a defamation claim in disguise and thus also barred by CDA 230, and that 47 U.S.C. § 223 did not create a private cause of action.

UCS moved to file an amended complaint against Lycos and Terra, but the court denied the motion, ruling that the defendants would still be immune from the claims in the proposed amended complaint.  The court, however, did allow UCS to add the anonymous forum users to the lawsuit.  UCS filed its amended complaint [17] with claims of fraud against the users, and moved for entry of separate and final judgment [18], so that it might withdraw its claims against Lycos and Terra while retaining its new claims against the anonymous posters.  One of the anonymous posters, Roberto Villasenor, answered [19] UCS's complaint and filed counterclaims against UCS, as well as crossclaims against the other posters. The Massachusetts court denied [20] UCS's motion for entry of separate and final judgment, finding that it lacked jurisdiction over Villasenor and the other anonymous posters.

UCS appealed these decisions to the Court of Appeals for the First Circuit.  The First Circuit affirmed [21] the lower courts rulings and dismissed the case.  It decided that CDA 230 granted immunity to Lycos and Terra on the Florida securities and cyberstalking claims.  It also affirmed that 47 U.S.C. § 223 did not create and private cause of action and that use of UCS's name in the Raging Bull forum did not create trademark liability. Finally, it agreed that, without the claims against Lycos and Terra, the court lacked jurisdiction to hear UCS's claims against the anonymous users.