Judge clears way for libel suit in cyberspace

Judge clears way for libel suit in cyberspace

05/30/95

NEW YORK–In late May a trial court judge allowed a $200 million libel suit to go forward against the Prodigy Services Company after ruling that the on-line provider was not just a distributor of information, but a publisher.

State Supreme Court Justice Stuart L. Ain of Mineola held that Prodigy may be held liable for statements posted by a user on its on-line service. An unknown Prodigy user posted statements accusing a Long Island securities firm, Stratton Oakmont, Inc., of fraud and criminal activity. Stratton Oakmont has been the subject of an investigation for irregularities by the Securities and Exchange Commission.

In his ruling, the judge explained that Prodigy uses human monitors and automated systems to monitor postings, and does not merely act as a conduit for unfiltered information, reported The Times. Thus, the court distinguished Prodigy from other on-line services, which function like a library or bookstore because they exercise no editorial power over the material offered.

The allegedly libelous statements were posted in October on Prodigy’s “Money Talk” electronic bulletin board forum. The court held that the subcontractor who managed the forum, Charles Epstein, was acting as an agent of Prodigy. The securities firm claims that Prodigy was responsible for Epstein’s failure to remove the statements quickly.

Prodigy is jointly owned by I.B.M. and Sears, Roebuck & Company. (Stratton Oakmont v. Prodigy Services Company)