by Paul Alan Levy
I have blogged several times (for example here and here) about the efforts of Hadeed Carpet Cleaning to compel Yelp to comply with a Virginia subpoena to identify seven consumers who posted critical reviews on Yelp. Our principal concern about the subpoenas was Hadeed did not claim that the gist of anything the reviewers had said about it was false — for example, it did not claim that it always honors the low-price coupons that, for this DC resident, are the most common marketing ploy used by Hadeed. Indeed, it would have been difficult for Hadeed to have presented evidence of falsity in that way, because the negative reviews over which it was suing made much the same point as many other reviews not only on Yelp but on such other forums as Angie’s List, and were consistent with the mediocre ratings Hadeed was getting at the Better Business Bureau and Washington Consumer Checkbook. Instead, Hadeed’s theory of the case was that it had reviewed its database of the thirty thousand customers whom its serves each year, but could not identify which of its customers had posted each review. Therefore, Hadeed argued, it had a valid basis for claiming that the seven reviewers were not customers and that, perforce, everything they had said about Hadeed was false because, however shifty Hadeed might be in dealing with other customers who try to redeem its low-price coupons, these individuals had not suffered from the claimed bait-and-switch tactics or poor service.
Our concern was that this argument is tantamount to arguing that, merely because the reviewers have succeeded in hiding their identities, Hadeed was entitled to know who they were. Both the Alexandria trial court and the Virginia Court of Appeals ruled that this sort of argument is enough to overcome the First Amendment right to speak anonymously, and as we argued to the Virginia Supreme Court, if just making that argument is enough, then there really is no right to speak anonymously in Virginia.
Lack of Subpoena Jurisdiction
But we also argued, on Yelp’s behalf, that in addition to the First Amendment objection to the subpoenas there was a jurisdictional objection. Just as, for example, several early anonymity subpoenas had to be litigated in Virginia even though the underlying defamation cases were pending in other states (Indiana and California) because the identifying information was in the hands of America Online, a Virginia company, we argued that Hadeed's subpoena to Yelp had to be pursued in California. Although this argument advanced Yelp’s interest, as a consumer advocate what matters to me more is the protection that it affords to consumers, because the California Court of Appeal for the part of California where most of the commenting platforms are located (Appellate District Six, including Santa Clara County) has already adopted an approach to the First Amendment subpoena that requires the presentation of evidence before consumer reviewers can be outed. When the Virginia Supreme Court issued a request for supplemental briefing on the issue of subpoena jurisdiction, we amplified our jurisdictional objections but also urged the court to reach the First Amendment issues as well, to minimize the possible chilling effect of the Virginia Court of Appeals opinion.
In a decision issued this past week, the Virginia Supreme ruled only on the jurisdictional issue, holding as a matter of state law that neither any statute nor any court rule empowers a a Virginia court to issue a subpoena to an out-of-state, non-party corporation based on the presence in the state of a registered agent, although the court went out of its way to leave open the question whether the presence of an office in the state can be a basis for subpoena jurisdiction, at least under state law. The court did not address the constitutionality of subpoena jurisdiction, except to note that the existence of long-arm jurisdiction to sue a corporation is not tantamount to jurisdiction to subpoena that corporation when it is a third party. The majority opinion also returned time and again to the principle of comity, noting that it furthers principles of comity among states when each state respects limits on its territorial jurisdiction to demand discovery from third parties.
A opinion concurring in the judgment but disagreeing very forcefully with the majority’s reasoning (apparently, that is why the opinion is labeled as “dissenting in part,” mislabeled to my mind), argues that the failure of jurisdiction is based on the lack of sufficient evidence to support jurisdiction consonant with constitutional due process. We had made the constitutional argument at the Court's request, but our best argument, I thought, was based on state law.
As a result, the application of the First Amendment to subpoena controversies remains unresolved in Virginia. We will be looking for cases arising out of a subpoena to America Online or perhaps, in light of the Court’s reservation of subpoena jurisdiction over out-of-state companies with a substantial physical presence in Virginia, to an ISP such as Verizon or Comcast, to press the First Amendment issues.
Will Hadeed Seek Identifying Information in the California Courts?
Because the decision is based entirely on state law, there is no basis for further review in the Supreme Court of the United States, and Hadeed’s counsel has advised me that they are not going to be asking for any reconsideration by the Virginia Supreme Court. Its counsel has not responded to my question whether they intend to pursue the subpoena in California, and what he has been telling the press is that he has not yet decided.
But in light of Hadeed’s previous public statements, it is hard to understand how it could not go forward in California. It took advantage of the pendency of this litigation to mount a public relations offensive portraying itself as an innocent victim of Yelp reviews, making a variety of strong claims about how seriously its business was harmed by negative reviews and speculating about whether Yelp was an “instrument for defamation.” It managed to manipulate a number of reporters at respectable publications into repeating its accusations as truths. And although some of its legal papers were circumspect in admitting that, based on its reviews of its customer database it could do no more than “wonder” whether the Does whom it sued in this case were really customers, in other places it made the affirmative assertion that there was a sufficient basis in its customer database to assert that the reviewers were, in fact, not customers.
Hadeed never put the evidence forward to support these assertions, but its counsel, the firm of Bean, Kinney & Korman, put its own credibility on the line by arguing that the allegations in the complaint should be taken as true simply because they were signed by an officer of the court; indeed, its lead counsel at the time made a point of taking personal responsibility for the veracity of the allegations, saying that he takes responsibility as an officer of the court very seriously and would not have said in court papers that Hadeed did not believe that the Doe defendants were customers unless he had personally reviewed the basis for his client’s belief and concluded that there was a sound basis for those beliefs. Counsel also contended that, if it needed to do so, Hadeed it could present charts showing how severely business had dropped off following the Doe defendants’ critical reviews.
Now Hadeed and its law firm have been informed that, if they want to pursue defamation claims, they will have to seek its critics’ identity in the California courts. They know that, in that state, the case law requires them to put forward evidence and not just allegations. Considering the assertions that Hadeed can prove substantial damages, we can be sure that it will not be expense alone that deters them from pursuing their subpoena in California.
But if they pursue discovery there, we will find out whether there was any basis for their previous public statements about the customer database and about damages. If they do not proceed in California, we can draw the appropriate inferences about the good faith of their arguments.
