A split Fourth Circuit affirmed the dismissal yesterday of a defamation claim against a consumer complaint website, in Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc. The Court found the Defendant, Consumeraffairs.com, to be entitled to immunity under the Communications Decency Act, relying on the heightened standard for considering a Motion to Dismiss from the Supreme Court in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). 

Even if you don’t practice in an area that implicates the CDA, the Nemet case is significant for its further development of the Iqbal standard in the Fourth Circuit. It is another indication, after the opinion earlier this month in Francis v. Giacomelli, that the Court is becoming much more exacting on how Motions to Dismiss should be evaluated.

Background on the CDA

The CDA carves out a broad immunity from state law claims (like defamation claims) for providers of "interactive computer services." The Defendant, www.consumeraffairs.com, is such a provider. It runs a website soliciting complaints from consumers about businesses with which they’ve dealt.

The Fourth Circuit emphasized the breadth of the immunity, and the need to resolve its applicability "at the earliest possible stage of the case." In that respect, said the Court, the CDA immunity is much like the qualified immunity to which state officials are entitled.

The issue in Nemet was whether the Plaintiff had presented a complaint with enough plausibility to show that the Defendant fell outside the scope of the immunity because it was an "information content provider." Such a provider, per 47 U.S.C. §230(f)(3), is "any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service."

The Plaintiff, a Chevrolet dealer who had been lambasted in twenty posts on Defendant’s website, offered two arguments why the Defendant wasn’t entitled to immunity. The first was that the Defendant had participated in creating and developing the posts by the way it had structured its website and also through hands-on revision of the comments in question. The second was that some of the comments were fabricated by the Defendant, and it was therefore responsible for their content.

The Fourth Circuit rejected both arguments, though over a partial dissent.

The "Creation And Development" Claim Wasn’t Plausible

On the argument about creation and development, Judge Agee, writing for the majority, distinguished the Ninth Circuit’s decision in Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008), a seminal CDA decision. There, the website operator wasn’t entitled to immunity because it had specifically designed its website to develop unlawful content, which included requesting tthe sex, family status, and sexual orientations of the site users seeking housing as well as those of their desired roommates.

In Nemet, the Plaintiff said that the Defendant had structured its website to be a clearinghouse for class action lawyers seeking plaintiffs, and that it therefore wasn’t entitled to immunity. The Court disagreed, and said "there is nothing unlawful about developing this type of content; it is a legal undertaking: Federal Rule of Civil Procedure 23, for instance, specifically provides for class-action suits."

Relying on Iqbal, the Court said that even assuming all the facts regarding the structure and design of the website were true, that this "does not show, or even intimate" that the Defendant had contributed to the allegedly false nature of the comments. Plaintiff, according to the Court, hadn’t even shown that it was a "likely possibility" that the Defendant was an information content provider, and certainly not that this was "plausible" under Iqbal.

The Fourth Circuit also trashed the Chevy dealer’s argument that the Defendant had been involved in developing or creating the content. It said that the Plaintiff hadn’t pled any facts showing the nature of the claimed revising and redrafting of the comments, or that such rewriting went beyond a "traditional editorial function." It invoked Iqbal’s admonition that "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."

The Fabrication Claim Was "Pure Speculation"

The Court then turned to the Plaintiff’s claim that the Defendant had fabricated the posts and was therefore responsible for their substance and content. It dismissed these allegations as "pure speculation and a conclusory allegation" that the Defendant had created the information. It said, relying on Iqbal, that these were "bare assertions ‘devoid of further factual enhancement,’ which are not entitled to an assumption of truth."

The dismissal of the "fabrication claim" provoked a dissent from Judge James P. Jones of the Western District of Virginia, sitting by designation.

He found some of the allegations made by the Plaintiff to support the fabrication claim rendered it plausible, including Plaintiff’s assertion that it had no record of ever having sold a car to the persons that had supposedly made the complaints.

Judge Jones said that there had to be a distinction between the pleading requirements of Rule 8 and the summary judgment standard of Rule 56. He stated "[i]t cannot be the rule that the existence of any other plausible explanation that points away from liability bars the claim. Otherwise, there would be few cases that could make it past the pleading stage."

He said that the proper application of Iqbal was that "it is only where there are ‘more likely explanations’ for the result that the plausibility of the claim is justifiably suspect."

The impact of a "time is of the essence" provision on a real property transaction delayed by the discovery of environmental contamination was the subject of the Court of Appeals decision yesterday in Phoenix Limited Partnership v. Simpson.

The decision supersedes and replaces a March 2009 decision by the Court, in which it had reversed a grant of summary judgment in favor of the Plaintiff (the buyer). After a rare grant of a Petition for Rehearing, the Court reversed itself and affirmed the trial court’s ruling in full, granting specific performance of the contract.

The property involved was the subject of a "put option" by which Plaintiff was required to purchase the property. After the exercise of the put, but before the date scheduled for closing, the Defendants discovered significant environmental problems on the property.

The Defendants informed the Plaintiff that they intended to clean up the property. Three years after the closing date called for in the contract, the Plaintiff asked about the status of the remediation, and learned the Defendants hadn’t finished the cleanup. Instead, they had contracted to sell the property to another buyer for approximately $400,000 more than the option purchase price.

Plaintiff sued for specific performance notwithstanding the three year delay. The Defendants argued that they were relieved from the obligation to complete the transaction because of the "time is of the essence" provision. They also contended that because the Plaintiff hadn’t sought to close within a reasonable time after the scheduled closing date, the option had terminated.

The Court of Appeals disagreed and said that the time is of the essence provision had been waived, ruling:

defendants’ conduct in pursuing an environmental cleanup — including hiring their own environmental consultant, telling plaintiff that they were conducting an environmental investigation, notifying plaintiff of the results of that investigation, and stating that they wanted to enroll the . . . property in the [North Carolina Dry-Cleaning Solvent Act program] — coupled with the fact that an environmental cleanup could take years to complete, indicated to plaintiff that defendants still intended to perform under the contract despite the passing of the original closing date. 

In the absence of a time is of the essence provision, the law in North Carolina is that the parties are allowed "a reasonable time after the date set for closing to complete performance." In its first opinion, the Court of Appeals had found a question of fact on this issue. It abandoned that ruling in the new opinion, however, finding that it was unnecessary to reach the reasonableness issue.

The Court, relying on the North Carolina Supreme Court’s decision in Fletcher v. Jones, 314 N.C. 389, 333 S.E.2d 731 (1985), held that "in order for the clock to start ticking on the reasonable time frame, defendants were required to notify plaintiff that they had completed their cleanup and were ready and able to perform." Defendants had never done so.

Maybe, when you decided which cellphone provider to sign on with, you took a look at its coverage map showing what excellent coverage you would have throughout the country.

If you relied on that map in picking your carrier, you probably shouldn’t have. That’s the essence of an unpublished decision from the Fourth Circuit Court of Appeals last Friday in Johnson v. Sprint Solutions, Inc.

The claim by Johnson was that Sprint had charged her roaming fees in areas where she said its coverage maps showed she should have been within the carrier’s coverage. Her core allegation was "that various maps provided and displayed by Sprint formed part of [her contract with Sprint], and that these maps outlined where Sprint customers would, and would not, be subject to roaming fees."  She sought class certification on her claims.

The Court agreed that the maps were a part of the contract, but held based on the written agreements signed by Johnson that the maps "were no more than approximate representations of service coverage areas and provided no geographic promises depicting where Johnson could and would not be subject to roaming fees." 

The dismissal of Plaintiff’s claims was affirmed.

Things actually got funny during the Senate Judiciary Committee’s hearing today on the nominations of Judges Albert Diaz and James Wynn of North Carolina to the Fourth Circuit Court of Appeals. You can see that for yourselves in the video at the left.

Funny happened when Senator Al Franken, formerly of Saturday Night Live, expressed concern about the possible lack of diversity of the Fourth Circuit if both nominees are confirmed. Judge Wynn and Judge Diaz will add great diversity to the Fourth Circuit, so the Senator wasn’t asking about diversity in the usual sense.

The "diversity" he asked about involved the similar military backgrounds of Judge Wynn and Judge Diaz, who both served as attorneys in the military and as military judges. The comedian turned Senator also questioned whether Judge Wynn, formerly a Navy captain, and Judge Diaz, formerly a lieutenant-colonel in the Marines Corps Reserves, could be fair to litigants from other branches of the armed forces. Both Judges responded by pledging to treat all members of the military equally, a bit tongue in cheek, to a deadpan Senator Franken.

Up until that point, the hearing was the serious affair that you would expect. The Committee Chairman (Senator Benjamin Cardin of Maryland, sitting in for an absent Senator Patrick Leahy) and the ranking minority member (Senator Jeff Sessions of Alabama) opened the proceedings by observing the rarity of the Committee considering two nominees simultaneously.  Senator Cardin attributed the unusual double hearing to the bipartisan support that North Carolina’s nominees have received from North Carolina Senators Kay Hagan and Richard Burr. 

Senator Burr, who introduced the nominees, asked the Committee to give the Judges an "expedited review and referral" to the full Senate. The process is already moving quickly. This hearing took place less than six weeks after the nominations from President Obama.

After subsequent remarks from Senator Hagan about the need for North Carolina to have greater representation on the Fourth Circuit, Judge Wynn and Judge Diaz each gave a brief opening statement, and introduced the many family members and other persons who had come to support them at the hearing.

There was then a brief period of questioning from the Committee. Both nominees were asked about the role of "empathy," a word which became somewhat of a flashpoint during the hearings on Justice Sonia Sotamayor’s nomination, in judicial decisionmaking. Neither Senator Sessions nor Senator Cardin decided to wade in and ask Judge Diaz about derivative actions, fiduciary duties, or any other corporate matters based on his many Business Court opinions. The only question even approaching a hardball was Senator Sessions asking Judge Wynn about a couple of his Fourth Amendment decisions.

The Judiciary Committee’s website describes the procedure from here out. There is a short period for follow-up written questions by members of the Committee. After those are asked and answered, the nominations can be listed for consideration by the full Committee during an Executive Business Meeting. If the Committee orders the nominations to be reported, they are placed on the Senate’s Executive Calendar for consideration by the full Senate. Let’s hope the process continues to move at a fast pace, though Senator Leahy pointed out in a written statement that nominations are stalling when they reach the Executive Calendar. 

If you want to watch the entire hearing, there’s a full webcast available.