Judge Rules in Chat Room Case | Adweek
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Judge Rules in Chat Room Case

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SEATTLE -- Chat room users accused by a bankrupt Internet company of posting critical messages in an effort to drive its stock price down will not be identified, a federal judge has ruled.

The company, 2TheMart.com Inc., said it needed the 23 users' names to defend itself against a shareholder lawsuit that alleges it misled investors. The lawsuit was filed in California after 2TheMart went bankrupt soon after its stock rose more than 2,000 percent, to $50 per share in 1999.

U.S. District Judge Thomas Zilly ruled on Thursday that evidence the company provided was not compelling enough to set aside the First Amendment rights of the chat room users, who used nicknames.

"The First Amendment clearly applies to the Internet," Zilly said. "The law says that a person has a right to speak anonymously."

The Irvine, Calif.-based company that hoped to compete with Internet auction giant eBay, claims the chatters conspired to spread rumors to drive down the company's stock price so they could profit by selling it short.

2TheMart wanted Bellevue-based Infospace to turn over the names of people who chatted on a site it maintained. 2TheMart wanted to prove that some of the chat room users also are members of the class-action suit against the company for alleged securities fraud, the company's attorney Keith Bardellini said.

One of the chat room users nicknamed "No Guano" and identified in court documents as "J. Doe," turned for help to the American Civil Liberties Union and the Electronic Frontier Foundation, an Internet privacy group.

Zilly said Thursday he agreed with 2TheMart attorneys that "rights to speak anonymously are not unlimited." But he said the company's reasons for wanting the names were not sufficient, saying the firm made no direct claim against the users, except for "innuendo" they had manipulated the stock.

Kelsey Joyce Hooke, an attorney for 2TheMart, said the company has not decided if it will appeal.

ACLU attorney Aaron Caplan called the ruling a significant victory for Internet users.

The ruling is important because it gives Internet companies guidance for protecting customers' rights, Infospace attorney Brent Snyder said.