A US District Court last week refused a request to force an ISP to
reveal the identities of individuals who, according allegedly made
anonymous comments in a bulletin board to drive down 2TheMart.com’s
share price for their own profit.
2TheMart.com, which is now bankrupt, wanted the identities of
the individuals to defend itself against a class action brought by
its own investors who allege securities fraud. The company believes
that some of the individuals who posted negative comments to the
bulletin boards are among the individuals now involved in bringing
the class action suit and accordingly wanted their identities
disclosed by the ISP. 2TheMart.com claims that its share price was
driven down by short sellers.
Short sellers profit from a drop in a company’s share price by
borrowing shares from a broker, selling them and then repurchasing
the same number of shares at a lower price. For example, a short
seller, anticipating a drop in a company’s share price, can borrow
100 shares from a broker. He sells them when the price is, say, £5
per share. He then watches the share price fall to, say, £2.50, at
which point he buys back 100 shares to repay the broker. His profit
is £250, less the broker’s commission.
According to Associated Press, Federal judge Thomas Zilly ruled
that the evidence presented by 2TheMart.com was not compelling
enough to set aside the First Amendment freedom of speech rights of
the 23 bulletin board users. He said: “The law says that a person
has a right to speak anonymously,” and, although he conceded that
such rights are “not unlimited,” he saw the comments made as
manipulating the share price by no more than “innuendo.”
There is a growing body of US case law on the circumstances when
victims of negative chatroom or message board comments have the
right to demand that service providers reveal the identities of
those making the comments.
