Tuesday, May 27, 2008

Overview of USA v. NAR proposed Final Judgment

Here's a quick overview of the proposed Final Judgment ("PFJ") filed earlier today in USA v. National Association of Realtors. Note that before Judge Kennelly will consider and potentially enter the judgment, one or both parties will need to formally file a motion requesting same with the Court.

For a period of ten years, the settlement would prohibit NAR from adopting, maintaining or enforcing any rule, or entering into or enforcing any agreement or practice, that directly or indirectly:
  • prohibits a Broker from using a VOW or prohibits, restricts, or impedes a Broker who uses a VOW from providing to Customers on its VOW all of the Listing Information that a Broker is permitted to Provide to Customers by hand, mail, facsimile, electronic mail, or any other methods of delivery;

  • unreasonably disadvantages or unreasonably discriminates against a Broker in the use of a VOW to Provide to Customers all of the Listing Information that a Broker is permitted to Provide to Customers by hand, mail, facsimile, electronic mail, or any other methods of delivery;

  • prohibits, restricts, or impedes the referral of Customers whose identities are obtained from a VOW by a Broker who uses a VOW to any other Person, or establishes the price of any such referral;

  • imposes fees or costs upon any Broker who operates a VOW or upon any Person who operates a VOW for any Broker that exceed the reasonably estimated actual costs incurred by a Member Board in providing Listing Information to the Broker or Person operating the VOW or in performing any other activities relating to the VOW, or discriminates in such VOW related fees or costs between those imposed upon a Broker who operates a VOW and those imposed upon a Person who operates a VOW for a Broker, unless the MLS incurs greater costs in providing a service to a Person who operates a VOW for a Broker than it incurs in providing the same service to the Broker; or

  • is inconsistent with the Modified VOW Policy (an exhibit to the PFJ).

Furthermore, NAR must (i) repeal the ILD Policy and direct each Member Board that adopted Rules implementing the ILD Policy to repeal such Rules; (ii) direct Member Boards that adopted Rules implementing the VOW Policy to repeal such Rules; (iii) adopt the Modified VOW Policy; (iv) direct Member Boards to adopt the Modified VOW Policy, and to thereafter maintain, act consistently with, and enforce Rules implementing the Modified VOW Policy; and (v) direct Member Boards not to adopt, maintain, or enforce any Rule or practice that NAR would be prohibited from adopting, maintaining, or enforcing pursuant to the PFJ. In other words, out with the VOW Policy and its successor, the ILD Policy. In with the Modified VOW Policy, a ten pager attached to the PFJ as an exhibit.

I haven't studied it yet, but the Modified VOW Policy appears to be based upon the original 2003 VOW Policy adopted by NAR on May 17, 2003. The 2003 VOW Policy was rescinded on August 31, 2005 in favor of the ILD Policy. If/when the Court enters the PFJ, I will highlight the changes contained in the Modified VOW Policy in a separate post.

The PFJ also gives NAR the green light to effectuate changes to the definition of “Participation” contained in the Statement of MLS Policy and previously adopted by NAR on 8/31/05 . This change impacts the definition of MLS Participant, which will now presumably read, in part, as follows:
[U]nder no circumstances is any individual or firm, regardless of membership status, entitled to MLS ‘Membership’ or ‘Participation’ unless they hold a current, valid real estate broker’s license and offer or accept cooperation and compensation to and from other Participants or are licensed or certified by an appropriate state regulatory agency to engage in the appraisal of real property. (emphasis added).
A "Note" accompanies the revised definition and directs that “[t]he requirement that an individual or firm ‘offers or accepts cooperation and compensation’ means that the Participant actively endeavors during the operation of its real estate business to list real property of the type listed on the MLS and/or to accept offers of cooperation and compensation made by listing brokers or agents in the MLS.” The PFJ prohibits member boards from suspending or expelling any broker on account of the new definition until May 27, 2009.

Here's a link to the DOJ's press release.

Settlement in USA v NAR?

A stipulation signed by attorneys for both parties and a proposed final judgment (not yet entered by Judge Kennelly) just appeared on the Court's online docket.

Perhaps the July 7 trial, which was to last approximately a month, has been averted? Keep in mind that a final judgment and/or other dispositive order has not yet been entered by the Court. In a related filing today, the United States stated that it will be filing a motion for entry of the proposed Final Judgment.

UPDATE: Read a summary of the proposed settlement.

Thursday, April 3, 2008

Ninth Circuit: Roommates.com largely unprotected by Section 230

Earlier today the U.S. Court of Appeals for the Ninth Circuit, in Fair Housing Council of San Fernando Valley, et al v. Roommate.com, LLC, issued an en banc ruling that rejects the majority of the website's assertions of Section 230 immunity. For purposes of this (lengthy) post, I will assume you are familiar with the facts of the case and previous rulings. If that's not the case, check out my May 2007 summary of the three judge panel's decision reversing the District Court's application of Section 230 immunity.

The en banc panel here consisted of eleven Circuit Judges: Alex Kozinski, Stephen Reinhardt, Pamela Ann Rymer, Barry G. Silverman, M. Margaret McKeown, William A. Fletcher, Raymond C. Fisher, Richard A. Paez, Carlos T. Bea, Milan D. Smith, Jr. and N. Randy Smith.

The Court's opinion was authored by Chief Judge Kozinski, and a partial Concurrence/partial Dissent was issued by Judge McKeown, who was joined by Judges Rymer and Bea.

The bottom line you ask? Jump to page 28 of the slip opinion, wherein the Court advises that "[t]he message to website operators is clear: If you don’t encourage illegal content, or design your website to require users to input illegal content, you will be immune." Now for the loooong version, which excludes any consideration of the partial concurrence/dissent (maybe later).

We are of course dealing with a statute here, and the Court appropriately begins by asking what Congress had in mind when it enacted the law.
In passing section 230 . . . Congress sought to immunize the removal of user generated content, not the creation of content: “[S]ection [230] provides ‘Good Samaritan’ protections from civil liability for providers . . . of an interactive computer service for actions to restrict . . . access to objectionable online material." (quoting from a 1996 Conference Report)

I'm not so sure the "Good Samaritan" phrase is properly applied to Section 230(c)(1), but I think the point being made here is valid: In the online context, acting as an editor is generally protected. Acting as an author is not.

The Court proceeds to consider the challenged portions of the Roommates.com website. As to the questions asked of prospective subscribers during registration (disclosure of sex, family status, and sexual orientation), including the choice of answers provided by Roommates.com and offered in pull-down menus, the Court opines that

Roommate created the questions and choice of answers, and designed its website registration process around them. Therefore, Roommate is undoubtedly the “information content provider” as to the questions and can claim no immunity for posting them on its website, or for forcing subscribers to answer them as a condition of using its services. . . . The CDA does not grant immunity for inducing third parties to express illegal preferences. Roommate’s own acts—posting the questionnaire and requiring answers to it—are entirely its doing and thus section 230 of the CDA does not apply to them. Roommate is entitled to no immunity.”

Although it is purportedly just focused on the question of whether immunity applies, the Court further notes that "asking questions certainly can violate the Fair Housing Act and analogous laws in the physical world." More on this apparent divergence from the topic at hand (immunity) later.

The Court treats subscriber profiles the same way:

Although it is the subscriber that has answered the questions that are ultimately displayed in his or her profile, same “does not preclude Roommate from also being an information content provider by helping “develop” at least “in part” the information in the profiles. . . . By any reasonable use of the English language, Roommate is “responsible” at least “in part” for each subscriber’s profile page, because every such page is a collaborative effort between Roommate and the subscriber.

In other words, Roommates.com has again crossed the Section 230 line:

By requiring subscribers to provide the information as a condition of accessing its service, and by providing a limited set of pre-populated answers, Roommate becomes much more than a passive transmitter of information provided by others; it becomes the developer, at least in part, of that information. And section 230 provides immunity only if the interactive computer service does not “creat[e] or develop[]” the information “in whole or in part.”

The Court also declines to extend immunity to Roommate.com’s operation of its search system and email notification system. Observing that “Roommate designed its search system so it would steer users based on the preferences and personal characteristics that Roommate itself forces subscribers to disclose[,]” the Court addresses head-on the question of when does a website create or develop information:

We believe that both the immunity for passive conduits and the exception for co-developers must be given their proper scope and, to that end, we interpret the term “development” as referring not merely to augmenting the content generally, but to materially contributing to its alleged unlawfulness. In other words, a website helps to develop unlawful content, and thus falls within the exception to section 230, if it contributes materially to the alleged illegality of the conduct.” [this holding presumably explains the Court's delving into the underlying legality of some of Roommate.com's alleged actions here].

The preceding paragraph is a significant development in Section 230 jurisprudence, and merits close attention. What it seems to be saying is that for purposes of determining whether Section 230 immunity applies, we don't just look at whether the site created or developed the subject content. We must also examine whether the website "contributed materially to the alleged illegality of the conduct."

Based upon this new standard, the Court rules that Roommate.com "is sufficiently involved with the design and operation of the search and email systems—which are engineered to limit access to housing on the basis of the protected characteristics elicited by the registration process—so as to forfeit any immunity to which it was otherwise entitled under section 230." Rejected again.

However, the Court does rule that Roommate.com is immune to claims based upon third party submissions under the “Additional Comments” section of the site.

The case concludes with what could be construed as both a warning to the plaintiffs' bar and an encouraging word (?) to website operators:

[T]here will always be close cases where a clever lawyer could argue that something the website operator did encouraged the illegality. Such close cases, we believe, must be resolved in favor of immunity, lest we cut the heart out of section 230 by forcing websites to face death by ten thousand duck-bites, fighting off claims that they promoted or encouraged—or at least tacitly assented to—the illegality of third parties . . .. [I]n cases of enhancement by implication or development by inference—such as with respect to the “Additional Comments” here—section 230 must be interpreted to protect websites not merely from ultimate liability, but from having to fight costly and protracted legal battles.

The Court remands the case to the District Court for a consideration of the claims not immunized by Section 230.

I'm still digesting this thing (and may alter some of this post upon further reflection), but will say that I definitely anticipate a certiorari petition in the not too distant future. In the meantime, I recommend you give it a read. Check out the favorable language directed at search engines and sites that, like Roommate.com and the one in Carafano, classify user data. Also look for several generic examples offered by the Court of situations where immunity would and would not apply, and "clarifications" of two prior Ninth Circuit rulings (Carafano and Batzel).

I'm looking forward to getting through Judge McKeown's accompanying opinion and hearing what others have to say about the case.

Tuesday, April 1, 2008

Victory for ZeroBrokerFees.com in New Hampshire

Yesterday Magistrate Judge James Muirhead ruled in favor of ZeroBrokerFees.com in the website's suit challenging the applicability of the New Hampshire Real Estate Practice Act - specifically the licensure requirement - to the operation of ZeroBrokerFees.com. The court ruled that pursuant to a statutory exemption for newspapers, ZeroBrokerFees.com was not obligated to obtain a brokerage license in New Hampshire before advertising real estate online.

For a refresher, see my post from last May.

Here is a copy of ZBF's lawyers' announcement, and a copy of the court's 33 page order.

Friday, March 14, 2008

7th Circuit rules in favor of Craigslist

Here's the decision. It looks like my prediction was pretty much on the mark.

In an opinion by Judge Easterbrook, the 7th Circuit has affirmed Judge St. Eve's grant of Craigslist's motion for judgment on the pleadings. In other words, the Court ruled that Section 230 protects Craigslist from the Fair Housing Act claims contained in plaintiff's complaint.

In emphasizing that Section 230(c)(1) does not grant absolute immunity, though, Judge Easterbrook takes the opportunity to cite some of his dictum in Doe v. GTE. This did not seem necessary, particularly given the fact that today's ruling does not adopt the 'definitional' reading of Section 230(c)(1) that was first presented in Doe.

Instead the Court concedes that "subsection (c)(2) does not deal with the liability of speakers and publishers, the subject of subsection (c)(1). We read each to do exactly what it says." Noting that "'information' is the stock in trade of online service providers," the opinion concludes that "given §230(c)(1) [appellant] cannot sue the messenger just because the message reveals a third party’s plan to engage in unlawful discrimination." In other words, appellant sought to treat Craigslist as a publisher of third party content, and Section 230(c)(1) forbids such treatment.

What I found most interesting was the fact that, in the course of rejecting appellant's argument that Craigslist 'caused' the discriminatory ads (a term that appears in the Fair Housing Act provision at issue in this case), the Court alluded to a scenario where a website may indeed become a 'causer' (not just a publisher) and thus expose itself to liability:

Nothing in the service craigslist offers induces anyone to post any particular listing or express a preference for discrimination; for example, craigslist does not offer a lower price to people who include discriminatory statements in their postings.

While the statement was made in reference to the FHA, this sentence suggests that website inducement combined with certain statutory language could result, in some cases, in website liability. We'll probably here more about this point in the Ninth Circuit's much anticipated en banc Roommate.com decision.

Monday, February 18, 2008

Illinois anti-rebate legislation (HB 4313)

An Illinois broker recently informed me that State Representative Robert Molaro (who himself does not appear to be a licensed broker or salesperson in Illinois) has introduced anti-rebate legislation in Springfield. The bill is scheduled to be heard this Thursday by the Judiciary I - Civil Law Committee.

Here's the synopsis offered on the legislature's website:
Amends the Real Estate License Act of 2000. Provides that no licensee shall give or pay cash rebates, cash gifts, or cash prizes to an unlicensed person who is a party to a contract to buy or sell real estate. Provides that a licensee may offer compensation, including prizes, merchandise, services, rebates, discounts, or other consideration to an unlicensed person who is a party to the lease of real estate, so long as the offer complies with certain provisions of the Act. Effective immediately.
If you have any additional information, please share it here.

Seventh Circuit considers whether Section 230 protects Craigslist from Fair Housing Act claims

Last Friday the U.S. Court of Appeals for the Seventh Circuit, based here in Chicago, heard oral arguments in the plaintiff’s appeal of Chicago Lawyers’ Committee for Civil Rights Under Law, Inc. (“CLC”) v. Craigslist Inc. (“Craigslist”). CLC, as you may recall, is appealing District Judge St. Eve’s ruling that Section 230 protects Craigslist from liability for housing ads placed on the site by third parties that allegedly violated the federal Fair Housing Act ("FHA"). The case, the last one scheduled for the week, was clearly the most popular one of the day, with at least forty people in attendance in the gallery (none of whom left early notwithstanding an ominous, overhead announcement that interrupted the arguments, advising that a fire had been reported in another part of the twenty-seven story building, but that an evacuation was unnecessary). It apparently was a false alarm, but given I arguably risked my life to hear the arguments in their entirety, which took place on the 27th floor mind you, please show me some love and let me know where you think this case is headed (and/or if you think I'm a moron for sticking around to the end).

The three judge panel consisted of Judges Frank H. Easterbrook, Diane P. Wood and Terence T. Evans. You may recall that both Judges Easterbrook and Wood were on the panel that heard Doe v. GTE Corp. in 2003, the only other Section 230 case argued before the Seventh Circuit. Attorney Stephen D. Libowsky argued on behalf of CLC, and Attorney Patrick Carome argued on behalf of Craigslist. Each attorney was allotted fifteen minutes (with appellant CLC going first), and CLC’s counsel was offered an additional one minute for rebuttal. Of course the case was fully briefed before Friday's arguments.

Judge Wood didn’t waste any time. Sure, Congress, when it enacted Section 230, did not want online services to be penalized for filtering objectionable content. But does it follow, she asked, that Congress wanted to make life more difficult for online services that do not employ blocking technologies? She asked CLC’s counsel why is it that a service that takes a neutral position regarding filtering is subject to liability?

CLC's counsel's response seemed to be that, like it or not, this is what the statute provides. In some cases where an online service employs filtering, it may be immune pursuant to 230(c)(2). But if such immunity does not apply, there is no protection for the online service under Section 230. In other words, CLC’s position seems to be that Section 230(c)(1) does not offer any protection for an online service that does not employ any filtering mechanisms. This of course flies in the face of over a dozen federal appellate decisions ruling to the contrary.

Judge Easterbrook - who wrote the court's opinion in Doe v. GTE, which was heavy on dictum and suggested that Section 230(c)(1) indeed may only be definitional and not substantive - followed up, asking whether liability here boils down to whether Craigslist is a publisher (in other words, if liability requires treating Craigslist as a publisher, there can be no liability per Section 230). CLC’s counsel disagreed, asserting that under the FHA all Craigslist has to be is a “causer” of certain prohibited conduct. Judge Easterbrook acknowledged cases where newspapers were found liable (presumably under the FHA), such papers being the publishers of certain materials. But CLC's counsel countered that those courts did not specify the basis for liability, and that in one case the court referred to a newspaper as having “carried” an ad. CLC's counsel acknowledged, however, that such phrase does not appear in the FHA.

Judge Easterbrook noted that Section 230(c)(1) is not, contrary to what other courts have held, an immunity provision (technically it’s hard to argue with him given the paragraph makes no express reference to immunity). Instead (c)(1) is saying that an ISP cannot be treated as a publisher in some cases. This left me with the impression, when factoring in his line of questioning, that Judge Easterbrook may have had a partial change of heart since he wrote Doe v. GTE Corp., wherein he suggested in dictum that (c)(1) may just be definitional and a lead-in to the immunity provision contained in paragraph (2). Now he seems to be saying that (c)(1) can do some real work (not immunization, mind you). If I had to guess, if CLC, to prove a violation of the FHA, must show that Craigslist published a discriminatory ad, Judge Easterbrook would likely conclude that Section 230(c)(1) shields Craigslist from liability. But he probably wouldn't use the word "immunize."

Judge Evans then joined the discussion, asking how could Craigslist, with its 30 million posts per month and 30 employees, possibly be expected to filter each posting. He quickly dismissed CLC’s counsel’s comparison to the responsibility of newspapers, again emphasizing the massive number of postings made on Craigslist. He seemed to disregard CLC’s counsel’s assertions that Craigslist has essentially conceded that filtering is possible, given its purported efforts in this area to date, and that Craigslist could reduce the occurrence of inappropriate ads by employing dropdown menus (for example (mine), one could choose to exclude smokers, but would have no way to indicate a desire to exclude minorities, because that wouldn't be among the dropdown choices).

Judge Easterbrook similarly did not buy the filtering argument. He offered an example of someone looking to rent out an apartment located near a Buddhist church. Should Craigslist prevent that person from using the word “Buddhist” in describing nearby landmarks, because the term could also be used in a discriminatory fashion? Of course such filtering is technically possible, but does the FHA require Craigslist to do so?

CLC’s counsel's response was that (c)(1) is not absolute, and that it must be read in conjunction with (c)(2). By that I think CLC is saying that Craigslist – as a carrier or “causer” – is beyond the scope of (c)(1) protection (if any such protection exists), and that (c)(2) immunity is not available here because Craigslist did not filter, or attempt to filter, the allegedly discriminatory ads. CLC's counsel also referred to Doe v. GTE, seemingly hoping Judge Easterbrook would stand by his suggestions therein that (c)(1) does not in and of itself offer any protection, and that the alternative reading would "gut" (c)(2). From my vantage point I did not get the impression that any of the panelists accepted these arguments.

Next up was Craigslist’s counsel. He directed the panel’s attention to Congressional committee reports prepared in connection with the 2002 Dot Kids statute which expressed approval for the federal courts' interpretation of Section 230 to date, citing the Zeran decision in particular.

Judge Easterbrook again asked whether there was any way that Craigslist could be liable if it could not (per Section 230) be treated as a publisher. Craigslist’s counsel responded, of course, in the negative. Pressing the issue, Judge Easterbrook returned to the newspaper cases, asking whether the website could somehow be held liable as a carrier. Judge Easterbrook offered the hypothetical of a phone bank being employed to put out discriminatory messages. Would the phone company be liable in such a case for FHA violations? To my surprise, Craigslist’s counsel responded “maybe.” Putting aside for the moment whether it's appropriate to compare carrier cases to ISP (or, more properly, Interactive Computer Service) cases, I have a hard time conjuring up a scenario where AT&T would be liable for a third party's use of its phone lines to make calls spewing discriminatory statements.

My overall take? Judge Evans didn’t say much, but what he did volunteer was favorable to Craigslist. Based upon her articulated understanding of the statute, Judge Wood also seems inclined to side with Craigslist. Last, but certainly not least, I’m thinking that Judge Easterbrook was not persuaded by CLC's arguments. However, and to his credit, he did demonstrate a willingness to consider an alternative basis for liability that would not implicate Section 230 protections. But I don't think CLC satisfied its burden in this regard.

I expect a unanimous ruling affirming Judge St. Eve’s decision that will relieve concerns website operators may have about some of the four year old dictum in Doe v. GTE. Your thoughts?

Click here to listen to the oral arguments yourself (QuickTime streaming).

Monday, January 7, 2008

Oral Argument in Craigslist Litigation

The Seventh Circuit will hear oral argument (fifteen minutes per side) in Chicago Lawyers Committee for Civil Rights Under the Law, Inc. v. Craigslist Inc. on February 15, 2008. We won’t know the panel’s composition until the morning of, but I’m crossing my fingers Judge Easterbrook will be selected so we can see how his thinking has evolved, if at all, since the Circuit’s 2003 GTE ruling. The GTE panel also included Circuit Judges Bauer and Wood.

While I don’t expect to be live-blogging the argument, I will certainly be there scratching out some notes. Please tap me (the tie-less guy) on the shoulder if you’re able to make it to Court that day.

For a refresher, check out my 2006 guest post on May It Please The Court. Interested in reading the appellate briefs? Click here, and enter the case number (07-1101).