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COMPANY LACKS STANDING TO ASSERT FIRST AMENDMENT; EMPLOYEE'S EMAIL DELIVERY OF COMPANY INFO MAY VIOLATE FEDERAL LAW
September 12, 2006
COMPANY LACKS STANDING TO ASSERT FIRST AMENDMENT
Can a company whose computer system launched anonymous Internet postings assert the free speech rights of the anonymous posters in an effort to avoid providing discovery in a civil suit filed to identify the posters? Apparently not, according to a California Appellate Court. In a recent decision, that court decided that the company lacked legal "standing" to assert those rights.
The California case arose when a pharmaceutical company called Matrixx Initiatives Inc., found statements on Internet message boards that Matrixx considered false and damaging. The statements were posted near a large volume sell-off of the company's stock on the market. The messages were posted by two posters, using the aliases "veritasconari" and "gunnallenlies." Both posters used software designed to prevent their detection.
Fortunately for Matrixx, gunnallenlies forgot to enable that software for one post, enabling Yahoo! to trace the post to Barbary Coast Capital Management, a hedge fund. Matrixx sought to depose a Barbary Coast principal to discover the identity of gunnallenlies and, if possible, also veritasconari. Barbary Coast, however, refused to comply, on the ground that revealing the identities would violate the First Amendment rights of those persons to post anonymously.
Matrixx filed a motion to compel Barbary Coast to answer the questions, which the lower court granted.
When Barbary Coast appealed on First Amendment grounds, Matrixx argued that Barbary Coast lacked standing to assert that defense. The appellate court agreed.
The court noted that this case differed from the typical scenario, where the anonymous party seeks to block disclosure of its identity. Here, the court noted that Barbary Coast was a third party "in a lawsuit that may have nothing to do with them." The court felt that the closest analogous cases were those involving Internet Service Providers who sought to protect the identity of their subpoaened customers. In those cases, courts found that the ISPs had standing, because there was a sufficiently close relationship between the ISPs and their subscribers, which could be threatened if the ISPs revealed the identities.
According to the court, this was not the case here. It noted, "In the case before us, by contrast, we are presented with no 'close relationship'--or indeed, any relationship--between appellants and the individuals for whom they are seeking First Amendment protection."
Without that relationship, Barbary Coast had no "standing." Accordingly, the appellate court upheld the trial court's grant of the motion to compel.
EMPLOYEE'S EMAIL DELIVERY OF COMPANY INFO MAY VIOLATE FEDERAL LAW
A federal trial court in Arkansas has ruled that an employee may have violated the federal Computer Fraud and Abuse Act ("CFAA") by e-mailing confidential files to his home computer, in order to misappropriate the information.
The case arose when a company called Nilfisk sued its employee, Kevin Mitchell, an engineer whose job included developing new products for the company. As part of his job, Mitchell had access to confidential technical data, design drawings, pictures and other information regarding an orbital scrubber under development at Nilfisk. He was under a duty not to disclose the information, without Nilfisk's authorization, to anyone outside the organization. On his work computer's hard drive, Mitchell had a number of zip files about the orbital scrubber, as well as another project under development.
As so often happens in cases of this sort, Mitchell was apparently dissatisfied with his job. On May 9, 2005, Mitchell submitted a letter to Nilfisk's human resources manager, indicating he was dissatisfied and intended to leave the company.
On May 10, 2005, Mitchell e-mailed "numerous electronic documents and files" relating to the orbital scrubber to his personal e-mail address, the court found. On May 16, 2005, Nilfisk terminated Mitchell.
Nilfisk filed suit under the CFAA. That act prohibits any person from knowingly, and with intent to defraud, accessing a protected computer either without authorization, or in excess of authorization, to obtain something of value.
Mitchell moved to dismiss the complaint, because he contended that he had authority to access the information. The court noted that, while Mitchell may have had authorized access to the information, the allegations in Nilfisk's complaint - that Mitchell exceeded his authority not by accessing the information, but rather by doing so with the intent to transmit the information to Nilfisk's competitor - stated a claim for relief. As a result, the court denied Mitchell's motion to dismiss the complaint.
It's impossible to control everything your employees do with confidential information. But it helps to set forth a written policy that establishes clear do's and don't's.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.