Global Royalties v. Xcentric Ventures [1]

Global Royalties, Ltd., an international firm that brokers investments in gemstones, sued Xcentric Ventures, Inc., Ed Magedson, and Jane Doe Magedson over three allegedly defamatory posts made by a third party, Spencer Sullivan, on Xcentric's website Ripoff Report [2]. According to the amended complaint, Sullivan criticized Global Royalties and individuals associated with it and accused the company of "operating a scam involving the sale of gem stones." Am. Compl. ¶ 15. Sullivan allegedly posted this latter comment under the category "Con Artists," one of a number of categories Ripoff Report users can choose from when posting. Id.¶ 16. After Global Royalties' lawyers contacted him, Sullivan requested that his posts be removed from the website. Ripoff Report did not remove the posts, following its strict policy against removing reports [3].

In July 2006, Global Royalties and its owner, Brandon Hall, sued Sullivan and Xcentric in the Superior Court of Ontario, Canada. When Xcentric did not appear to defend itself, the Canadian court found it in default and issued an order requiring Xcentric to remove the disputed statements. When Xcentric still refused to take down the posts, Global Royalties and Hall sued in federal court in Arizona, seeking to enforce the Canadian court order and bringing a defamation claim under Arizona law.

Xcentric moved to dismiss on the grounds that the Canadian order was unenforceable and that the defamation claim was barred by the statute of limitations, the truth of the statements, and CDA 230 immunity [4]. The court granted Xcentric's motion to dismiss, ruling that the Canadian order was not entitled to enforcement because it was not a final judgment. The court dismissed the defamation claim on grounds that CDA 230 immunized the defendants. It ruled that CDA 230 protected the defendants even though they provided a list of categories including the term "Con Artist" and even though Sullivan himself asked for the post to be removed. The court allowed Global Royalties to file an amended complaint, which it did in December 2007.

The amended complaint dropped the claim for enforcement of the Canadian order and re-pled the defamation claim. Xcentric again moved to dismiss, raising CDA 230 and statute of limitations defenses. In opposing the motion, Global Royalties recycled its previous argument that CDA 230 should not protect website operators when the author of a statement asks for it to be removed. In February 2008, the court granted [5] Xcentric's motion and dismissed the case, noting that "liability based on an author's notice, workable or not, is without statutory support and is contrary to well-settled precedent that the CDA is a complete bar to suit against a website operator for its 'exercise of a publisher's traditional editorial functions -- such as deciding whether or not to publish, withdraw, postpone or alter content.'"