Stratton Oakmont, Inc. v. Prodigy Services Co.

Stratton Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710 (N.Y. Sup. Ct. 1995),[1] is a 1995 U.S. New York Supreme Court[2] decision which held that online service providers could be held liable for the speech of their users.

Stratton Oakmont, Inc. v. Prodigy Services Co.
CourtNew York Supreme Court
DecidedMay 24, 1995
Citation(s)23 Media L. Rep. 1794; 1995 WL 323710; 1995 N.Y. Misc. LEXIS 229
Case opinions
MajorityStuart L. Ain

The result of the case is central to the rationale behind passage of Section 230 of the Communications Decency Act of 1996, aimed to allow internet service providers to avoid liability for user content on their services while still giving them the means for removing illegal content.

Facts

In October 1994, an unidentified user of Prodigy's Money Talk bulletin board created a post which claimed that Stratton Oakmont, a Long Island securities investment banking firm, and its president Danny Porush, committed criminal and fraudulent acts in connection with the initial public offering of stock of Solomon-Page, Ltd. Stratton Oakmont sued Prodigy and the unidentified poster for defamation.[3]

Court ruling

The plaintiffs argued that Prodigy should be considered a publisher of the defamatory material and were therefore liable for the postings under the common-law definition of defamation. Prodigy asked to be dismissed from the case on the grounds that they could not be held liable for the content of postings created by its users, relying on a 1991 case Cubby, Inc. v. CompuServe Inc., which had found CompuServe, an online service provider, not liable as a publisher for user-generated content.[4]

The Stratton court held that Prodigy was liable as the publisher of the content created by its users because it exercised editorial control over the messages on their bulletin boards in three ways: 1) by posting Content Guidelines for users, 2) by enforcing those guidelines with "Board Leaders", and 3) by utilizing screening software designed to remove offensive language.[1]

The court's general argument for holding Prodigy liable, in the face of the CompuServe case, was that "Prodigy's conscious choice, to gain the benefits of editorial control, has opened it up to a greater liability than CompuServe and other computer networks that make no such choice."[1]

Impact

This case conflicted with the 1991 federal district court decision in Cubby, Inc. v. CompuServe Inc., which had suggested that the courts would not consider online service providers to be publishers. In that case, the court held that CompuServe should be considered to be more like a digital library than a publisher.[4] The important difference between CompuServe and Prodigy for the Stratton court was that Prodigy engaged in content screening and therefore exercised editorial control. The holding in Stratton was overruled in federal legislation when Congress passed Section 230 of the Communications Decency Act in 1996. As a result, Internet service providers in the United States today are generally protected from liability for user-generated content.

In April 1996, less than a year after the ruling, Stratton Oakmont was shut down for fraudulent business conduct. In 1999, its founders pleaded guilty to securities fraud and money laundering.

References
  1. Stratton Oakmont, Inc. v. Prodigy Services Co., 23 Media L. Rep. 1794 (N.Y. Sup. Ct. 1995).
  2. In most states and in the U.S. federal court system, "supreme court" is the name of the highest court in the state. However, the New York Supreme Court is primarily a trial court, roughly equivalent to the "district courts", "superior courts," or "circuit courts" of other states. The highest court in New York State is called the "Court of Appeals." See New York Supreme Court.
  3. Citizen Media Law Project, Stratton Oakmont, Inc. v. Prodigy Services Co. (Retrieved March 26, 2009).
  4. Cubby, Inc. v. CompuServe Inc., 776 F. Supp. 135 (S.D.N.Y. 1991).
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