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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: A-I TECHNOLOGY, INC.,
Index No.: 150033110
-againstED MAGEDSON d/b/a RIP OFF REPORT d/b/a THERIPOFFREPORT.COM and )(CENTRIC VENTURES, LLC d/b/a RIP OFF REPORT d/b/a THERIPOFFREPORT.COM, Defendants. JOAN A. MADDEN, 1.
In an action to recover damages sustained by plaintiff A-Technology ("A-I") as the result
of allegedly defamatory postings by third parties on the defendants' website, defendant Xcentric Ventures, LLC, d/b/a Rip Off Report d/b/a Theripoffreport.com (hereinafter "Xcentric") moves
to dismiss the amended complaint for lack of personal jurisdiction or, in the alternative, for failure to state a cause of action (motion seq. no. 001). Plaintiff opposes the motion and separately moves for leave to serve its proposed Verified Second Amended Complaint pursuant to CPLR 3025(b) (motion seq. no. 002). I Xcentric opposes the motion.
Plaintiff is a Delaware corporation engaged in the business of designing software applications. Xcentric is an Arizona-based LLC, operating the website known as the Rip-Off Report at www.ripoffreport.com.This site allows users to read and post complaints about
negative business experiences that they have had with particular companies or other entities.
Motion seq. nos. 001 and 002 are consolidated for disposition.
In his affidavit, Ed Magedson? states that he manages Xcentric, which operates the RipOff Report at www.ripoffreport.com.This
website's content consists of over 500,000 "reports"
by consumers, and over 1.5 million "rebuttals" created by consumers and companies (Magedson Affidavit, ~ 4). No costis imposed to post or read these reports or rebuttals (Id. ~ 5). He further describes the website as "a free resource available to the public and ... [and that] it has been in operation since 1998 [and] currently receive[ s] a million hits a year" (ld. ~ 6) Magedson states that he is a resident of Arizona, and that Xcentric is organized and does business in the State of Arizona, owns no assets in New York, has no offices or employees in New York, and does not do business with or within the State of New York (Id. ~'s 1, 8-11). He also states that Xcentric has no customers in New York and does not advertise on behalf of New York companies (Id. ~ 12). On October 5, 2006 and August 26,2009, unidentified third parties alleged to be within New York state posted unflattering reviews of plaintiffs services on the defendants' website www.ripoffreport.com. claim for defamation. Based on these postings, plaintiff commenced this action, asserting a Plaintiff previously amended its complaint to include Xcentric as a
defendant and to include specific allegations as to the extent of lost business suffered as a result of the alleged defamation. Xcentric now moves to dismiss, alleging lack of personal jurisdiction or, in the alternative, for failure to state a cause of action. Plaintiff opposes the motion and seeks leave to amend its complaint for a second time. With regard to jurisdiction, the second amended complaint alleges that this court's jurisdiction. extends to defendants since they solicit business in New York. Specifically, the proposed second Although named as a defendant in the action, Mr. Magedson has not been served and has not appeared in the action.
amended complaint alleges that jurisdiction exists in New York as defendants solicit advertising for their website in the state which features New York advertisers; and that the defamatory postings were made from within the state. Plaintiff also alleges other factors which establish jurisdiction are that defendants market, sell and ship copies of their book entitled "How to Get Rip-off Revenge" to New York State residents, and that www.ripoffreport.com receives donations from individuals located within the State of New York. In addition, the proposed second amended complaint alleges new facts regarding both causes of action. Plaintiff alleges that the defendants solicited the allegedly defamatory statements, and that they have editorial control over such postings in that they edit titles of postings, manipulate how search engine results display the postings through HTML3 editing and meta tags", and author the specific URLs5 for the derogatory postings. Plaintiffs also allege that defendants request money from companies in exchange for removing or reducing the vi~ibility of allegedly defamatory content, and that the defendants ask members of the public to post derogatory information about companies without contacting those companies beforehand so that defendants can solicit money from the companies in exchange for the removal of the information from their website. The proposed second amended complaint also asserts a second cause of action for prima facie intentional tort based on allegations that defendants intentionally inflicted harm on the plaintiff without excuse or justification, which resulted in special damages. Xcentric opposes the motion to amend, arguing that the allegations in the proposed second amended complaint are insufficient to satisfy plaintiffs burden of establishing 3HTML stands for Hyper Text Mark-up Language; it is programming language used to format web pages to browsers. 4A meta tag is a special HTML tag that provides information about a website. 5URL stands for Uniform Resource Locator; it is the address to which servers connect. solicits and
jurisdiction over Xcentric, and that, in any event, the amendment would be futile as to the extent the claim is based on an October 6, 2006 posting, it is barred by the one year statute of
limitations for defamation. Furthermore, Xcentric argues that the proposed causes of action for defamation and prima facie tort are barred by the Communications Decency Act ("CDA), 47 USC §230(c), which provides in relevant part that "no provider ... of an interactive computer 'services shall be treated as the publisher ... of any information provided by another information content provider ... " 47 U.S.C. §230(c)(l). DISCUSSION "Leave to amend a pleading should be 'freely given' (CPLR § 3025[b]) as a matter of discretion in the absence of prejudice or surprise." Zaid Theatre Corp. v. Sona Realty Co., 18 AD3d 352, 355-356 (1 st Dept 2005)(internal citations and quotations omitted). That being said, however, "in order to conserve judicial resources, an examination of the underlying merits of the proposed causes of action is warranted." Eighth Ave. Garage Corp. v. H.K.L. Realty Corp., 60 AD3d 404,_405 (1 st Dept.), Iv dismissed, 12 NY3d 880 (2009). At the same time, leave to amend will be granted as long as the proponent submits sufficient support to show that proposed amendment is not "palpably insufficient or clearly devoid of merit." MBIA Ins. Corp. v. Greystone & Co., Inc., 74 AD3d 499 (I" Dept 2010) (citation omitted). In addition, "[o]nce a prima facie basis for the amendment has been established, that should end the inquiry, even in the face of a rebuttal that might provide a subsequent basis for a motion for summary judgment" Pier 59 Studios. L.P. v. Chelsea Piers, L.P., 40 AD3d 363, 365 (pt Dept 2007). As an out-of-state resident, Xcentric cannot be subject to personal jurisdiction in New York unless plaintiff proves that New York's long-arm statute confers jurisdiction over it by
reasons of its contacts within New York state. See Copp v. Ramirez, 62 AD.3d 23, 28 (1 SI Dept), Iv. denied 12 NY3d 711 (2009). The burden rests on plaintiff, as the party asserting jurisdiction. Id .. New York's long-arm jurisdiction is governed by CPLR 302, which provides in relevant part, as follows: (a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator; who in person or through an agent: 1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or 2. commits a tortious act within state, except as to a cause oj action for defamation of character arising from the act; or 3. commits a tortious action without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he (i) regularly does or solicits business, or engages in any other persistent courts of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the states, or (ii) expects or should reasonably expect the act to have consequences in the state, and derives substantial revenue from interstate or international commerce; or 4. owns, uses or posses any real property situated within the state. (emphasis added). Defamation actions are expressly exempted from CPLR 302(a)(2) and (3), so as "to avoid unnecessary inhibitions on freedom of speech or the press." Legros v. Irving, 38 AD2d 53, 55
Dept. 1971), appeal dismissed, 30 NY2d 653 (1972); accord SPCA of Upstate New York,
Inc. v. American Working Collie Association, 74 AD3d 1464, (3rd Dept. 2010), Iv granted, 15 NY3d 716 (2010). The only provision at issue in this case is CPLR 302(a)(1), which requires both that 1) a defendant transact business within the state, and 2) the defamation claim arises from the defendant's transaction of that business. See Ehrenfeld v. Bin Mahfouz, 9 NY3d 501 (2007). "If
either prong of the statute is not met, jurisdiction cannot be conferred under CPLR § 302(a)(1)." Johnson v. Ward, 4 NY3d 516 (2005); accord Copp v. Ramirez, supra at 28. With respect to the first prong, in determining whether a defendant has transacted business within the meaning ofCPLR 302(a)(I), courts look to the totality ofa defendant's activities within the state, to decide if it has transacted business in such a way that it constitutes "purposeful activity," which is defined as "some act by which the defendant purposefully avails [itself] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." McKee Electric Co. Inc. v. Rauland-Borg Corp., 20 NY2d 377, 382 (1967) (quoting Hanson v. Denckla, 357 US 235, 253 (1958) . . However, in defamation cases, the transaction of business test is construed narrowly so that when the "defamatory publication constitutes the alleged 'transact[ion] of business' for the purposes of section 302(a)(l) something more than the distribution of the libelous statement must be made within the state to establish long-arm jurisdiction over the person distributing it" Best Van Lines, Inc. v. Walker, 490 F.3d 239, 248 (2nd Cir. 2007). In applying the transaction of business test to allegedly defamatory po stings on the internet website, the Second Circuit has noted that "[ w]hile no New York appellate court has yet explicitly analyzed a case of website defamation under the transact[ing] business' provision of section 302( a)( I), several federal district courts in New York have ... and concluded that the posting of defamatory material on a website accessible in New York does not, without more, constitute 'transact[ing] business' in New York for the purposes of New York's long-arm statutes." Best Van Lines, Inc. v. Walker, 490 F.3d 239, 250 (2nd Cir. 2007) (internal citations omitted). In Best Van Lines, the New York plaintiff filed suit against an Iowa-based website operator for posting allegedly defamatory comments about the quality of plaintiffs moving
services. The United States District Court for the Southern District of New York found that New York long ~rm jurisdiction did not extend to defendant because the alleged defamatory conduct from which the claim arose was not a "transaction of business" within the forum. The court considered the defendants' "black list" po stings containing statements about New York
residents, responses to users' questions, and solicitation lacceptance of donations, finding that none of these were sufficient to demonstrate that defendants conducted business in New York State. A recent appellate case from the Third Department, SPCA of Upstate New York, Inc. v. American Working Collie Association, supra, which relies on the Second Circuit's reasoning in Best Yan Lines, concluded that defendants were not subject to long-arm jurisdiction in a defamation action based on writings posted on their website. The plaintiff in SPCA filed suit against a Vermont organization that posted critical and allegedly defamatory comments on their website. The court there held that long arm jurisdiction did not exist where the defendants had limited physical contacts with New York, there was no evidence of any reward reaped by virtue of any contact with New York state, the content was posted out of state, and the content was not directed specifically towards any state. Id. at 1466. Here, like the defendants in Best Yan Lines and SPCA, Xcentric's only contacts with New York state consist of access to its website and its use by residents of New York to post critical comments. Moreover, even assuming the alleged defamatory comments were posted from within New York, this fact is insufficient to show that Xcentric transacts business within the state in the absence of evidence that the website was specifically directed at New Yorkers as opposed to a nationwide audience. See Best Van Lines, supra at 254.
Furthermore, plaintiffs argument that jurisdiction is appropriate since Xcentric solicits and features advertisers from New York, that it markets and sells its book to New York state residents, and that the website solicits and receives donations from New York state residents is unavailing. Even if the soliciting and featuring of New York advertisements and the solicitations of donations and offering a book for sale on the website were enough to constitute the transaction of business, plaintiff cannot satisfy the second "arises from" prong of CPLR 302( a)( I), as plaintiff has not shown such solicitation and/or advertising bears a relationship or "articulable nexus" to the defamation alleged in thisaction. Best Van Lines, Inc.v. Walker, supra accord Talbot v. Johnson Newspapers Corp., 71 NY2d 827, 829 (1988); Copp v. Ramirez, supra, Gary Null & Associates v. Phillips, 29 Misc.3d 245 (Sup. Ct., NY Co. 2010). For the same reasons, plaintiffs allegations in the proposed amended complaint regarding Xcentric's
manipulation of user's information and data and the solicitation of companies, and Xcentric's solicitation of the public to submit reports critical of companies in order to solicit money from the targeted companies are insufficient as they have no nexus to the statements made about the plaintiff. Accordingly, the court finds that there is no basis for long arm jurisdiction over Xcentric and the motion should be dismissed for lack of personal jurisdiction. 6 In any event, even if the court were to·find that it had personal jurisdiction over Xcentric, the proposed second amended complaint would fail to state a cause of action, as the claims
6The court acknowledges that in a similar case also involving Xcentric as a defendant, a Justice of this court found that it had long arm jurisdiction over Xcentric based on a posting on its website complaining about a plaintiffs services. See Intellect Art Multimedia, Inc. v. Milewski, 24 Misc.3d 1248(A)(Sup. Ct., N.Y. Co. 2009). However, for the reasons stated above, the court reaches a different conclusion.
asserted are preempted by the Communications
Decency' Act ("CDA").? The CDA provides in"
relevant part that "[ n]o provider or user of an interactive computer service shall be treated as the
publisher or speaker of any information provided by another information content provider" 47
USC §230(c)(l). An "interactive computer service" is defined broadly as " ... any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server ... " 47 USC §230(f)(2). In this way, Congress granted websites immunity from liability for publishing false or defamatory material so long as the information was provided by another party. Plaintiff seems to contend that Xcentric is 110tprotected by the CDA based on assertions that Xcentric asserts editorial control over the content, including managing the titles to optimize search results and drafting meta-tags to make results more easily discoverable in online searches. However, the Court of Appeals has recently interpreted the CDA to bar actions for defamation, even when the website provider exercises traditional editorial control, including reposting of the . comments of third-parties and providing headings, subheadings and illustrations. Real Estate Group of New York, Inc., _ NY3d_, See Shiamili v.
2Ql1 WL 2313818 (2011) ("we read
section 230 to bar 'lawsuits seeking to hold aservice provider liable for its exercise of a publisher's traditional editorial functions-such as deciding whether to publish, withdraw,
postpone or alter content, "'quoting Zeran v. Am. Online, Inc., 129 F.3d at 330); see also Reit v. Yelp Inc. 29 Misc. 3d 713 (Sup. Ct., NY Co. 2010)(holding that the CDA barred dentist's defamation claim arising out of negative reviews by an anonymous consumer on defendant's In addition, insofar as plaintiffs defamation claim is based on the statements in the posting made in October 5, 2006, it is barred by the statute of limitations. The statute of limitations for defamation in New York is one year from the date of publication of the alleged defamatory material. CPLR § 215(3); Firth v. State 98 NY2d 365 (2002). As this action was not commenced until 2010, this aspect of the claim.is untimely.
website). Moreover, that Xcentric allegedly takes compensation in exchange for removing postings, does not constitute an exemption to allow a claim of defamation to proceed under the CDA. See generally, Shiamili v. Real Estate Group of New York, Inc., 2011 WL 2313818; Intellect Art Multimedia, Inc. v. Milewski, 24 Misc.3d 1248(A) at 7 (holding that, even though the court found that personal jurisdiction extended over defendants, including Xcentric, the plaintiffs defamation claims was barred by the CDA, as the statement on which it was based were made by a third party). Accordingly, even if there were jurisdiction, the statements on which the plaintiffs' claims are based would be barred under the CDA. As to the cause of action for prima facie tort, plaintiff has failed to make sufficient allegations to establish such a claim. The elements of a prima facie tort claim are: (1) intentional infliction of harm; (2) resulting in special damages; (3) without excuse or justification; (4) by an act that would otherwise be lawful. Mackinder v. Schawk, Inc., 2005 WL 1832385 (S.D.N.Y. 2005), citing Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 332 (1983). Central to this cause of action is that defendant's intent has been solely to injure plaintiff, or that defendant acted from disinterested malevolence, meaning that the genesis which will make a lawful act unlawful must be a malicious one unmixed with any other and exclusively directed to injury and damage of another. Beardsley v. Kilmer, 236 NY 80, 90 (1923). In other words, a
malicious intention must be defendant's sole motivation in order to recover under prima facie tort. Squire Records. Inc. v. Vanguard Rec. Soc., Inc., 25 AD2d 190 (1st Dept), appeal dismissed, 17 NY2d 870 (1966). Recovery is barred if other motives exist, such as profit, selfinterest, business advantage. Id. In this case, the complaint does not contain allegations from which it could be inferred defendants' sole motivation was to cause harm.
Accordingly, it is hereby ORDERED that plaintiffs motion to amend the complaint is denied, and it is further
ORDERED that the motion to dismiss by Xcentric is granted, and the Clerk is directed to enter judgment dismissing the complaint in its entirety. DATED: JuniJj, 2011
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