Applying a heightened First Amendment standard set in a prior appeal in the same case, the District of Columbia's highest court denied enforcement of a subpoena seeking the identity of an anonymous Internet whistleblower because the corporate plaintiff failed to present evidence that it had suffered any harm. The court also reinforced the need for any corporate plaintiff to show actual lost business to sustain a defamation claim.
The dispute began in May 2005, when an informant submitted an online report to the Software & Information Industry Association (SIIA), alleging that a Virginia-based defense contractor, Solers, Inc., was pirating software. On behalf of its members, SIIA operates an anti-piracy program that encourages people to report incidents of suspected software piracy. SIIA investigates the reports and decides whether to pursue an enforcement action. SIIA contacted Solers about the informant's allegations, but the company denied the report. After further discussion, SIIA decided that it would not pursue the matter.
Solers then sued the "John Doe" informant for defamation and tortious interference with its business, and issued a subpoena to SIIA seeking the informant's identity. SIIA moved to quash the subpoena on the grounds that the First Amendment protected the informant's anonymous whistleblower report. SIIA initially prevailed when the trial court quashed the subpoena. In a 2009 decision, the D.C. Court of Appeals established the First Amendment test that applies to anonymous Internet communications, and sent the case back to the trial court to allow Solers to present evidence in support of its defamation claim.
Back in the trial court, Solers' CEO submitted an affidavit that attested the company had devoted executive time and incurred legal fees investigating the informant's allegations. Solers alleged $7,144 in these expenses and asserted that it would need discovery to determine whether it had suffered any actual lost business. The trial judge found that the informant had not harmed Solers' reputation, but nevertheless ruled in favor of Solers, and threatened to sanction SIIA unless it disclosed the informant's identity. In a "coda," the court questioned the lawsuit's purpose, noting that in the years of litigation, Solers had never shown harm to its reputation.
SIIA appealed and the D.C. Court of Appeals overturned the decision. The court clarified that a corporate defamation plaintiff must show "damages suffered as a direct consequence of the alleged defamation ? for example, lost profits or customers deterred from dealing with the company." Refusing to presume damages, and finding no evidence that the informant had actually harmed Solers, the court held that Solers could not "bootstrap" its way into a defamation claim through self-imposed costs, such as executive time and attorneys' fees, incurred to investigate the informant's allegations: "[T]o accept Solers' argument (that these costs constitute special damages) would mean that a corporate plaintiff may overcome a speaker's First Amendment right to anonymity with little more than an allegation of defamation and its own decision to expend money in response."
Holland & Knight represented SIIA in this matter.
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