Guide Through the Legal Jungle

Online Snarking. Is It Libel or Free Speech? Some Libel Do’s and Don’ts for Online Speech.

With Facebook, Twitter, Yelp, online forums, and so many other digital venues in which to share our thoughts with the world, it is easier than ever to become the target or the perpetrator of libel.

Some Defamation and Libel Basics

Defamation law varies from state to state but there are several general, common principles. You defame someone when you make a false statement about the person and the statement harms the person’s reputation. The defamatory statement is libel if you write it down and share it with other people. When you simply speak the defamatory statement, that’s slander. Defamatory statements posted online are libel.

To be defamatory, the statement must be false. A truthful statement - even if unflattering - is not defamatory. Similarly, a statement of opinion is not defamatory. However, do not take this as carte blanche to make any statement you want hoping to pass it off as an opinion. Merely labeling a statement as opinion does not insulate the statement from being defamatory. “I think Mr. Jones is a dishonest person,” may be a valid non-defamatory statement of opinion. In contrast, “I think Mr. Jones is embezzling money from the company,” is likely defamatory if Mr. Jones is innocent of embezzlement.

Libel Do’s and Don’ts for Online Speech

DO understand that you are accountable for your Internet speech. Just because you present it in 140 characters or place it in a Facebook posting does not mean you are not accountable for your defamatory language.

DO realize that every online, negative comment about you or your business is not libel. The First Amendment protects a customer’s right to cybergripe, that is share online the truth about any bad experiences he has had with your business. In many cases, the disgruntled customer may even use a website name that mimics and parodies the business’ name – JonesConstructionIsAwful.com. The cybergriper steps outside legal boundaries only if his criticism includes false statements and those false statements harm the business.

DO realize there is more leeway when making comments about public figures and issues of public concern. The risk of libel decreases if the real people mentioned are public figures or other people involved in events of public concern.

DO realize the benefits of the Communications Decency Act (CDA). Thanks to this federal law, online forum operators, bloggers, and website owners are not legally re¬sponsible for libelous statements posted by visitors to their sites. This is starkly different from the offline world in which a publication like a newspaper or magazine would be liable for printing a reader’s defamatory comments.

DON’T think you can hide behind anonymity. While you have a First Amendment right to speak anonymously, the First Amendment does not make it okay to violate someone’s rights. A person you libel online may be able to uncover your identity by serving a subpoena upon your internet service provider.

DON’T think eliminating or changing names is sufficient. The person about whom you make untrue statements might still have a libel claim even if you don’t mention him by name. The person might still be identifiable through your mention of a nickname, geographic location, physical description, personality trait, or real-life events in which the person was involved. If readers can identify the person about whom you make a false and harmful statement, there is potential risk for libel.

Libel Versus First Amendment Protected Speech

To place some of these principles and do’s and don’ts into context, here are comparisons of what is libel and what is not libel.

Not Libel. “This architect lacks compassion. He doesn’t care about the needs of his customers or the community.”

Libel (if untrue). “Don’t hire him for your project. He is on illegal drugs and has been hospitalized for mental instability.”

Not Libel. Posting online a photograph or video of someone. (However, depending on the circumstances, the posting might yield copyright, privacy, or other claims.)

Libel. Posting a photograph or video after adding a misleading caption or editing it in a way that negatively misrepresents what actually happened.

Not Libel. “This firm charged $10,000 when other firms charged only $5,000. The quality of their work was not worth the extra money.”

Libel (if untrue). “After demanding full payment upfront, this firm started work two months later than promised and delivered a structure that was not up-to-code.”

An earlier version of this article was published in the American Institute of Architect’s CRAN Chronicle.

Problems with Offering (or Winning) Real Estate as a Contest or Sweepstakes Prize. Part Two.

Part One of this two-part blog posting reviewed the legal challenges of awarding real estate as a prize in a contest or sweepstakes. This Part Two highlights a few of the challenges confronting the winner of the real estate in such a promotion.

Initially, winning a property for an entry fee of approximately $150 might seem like a windfall. It is a windfall with a few potential downsides. If the promotion is well structured, the rules will signal many of those potential downsides.

Method of Transfer. Often, the owner transfers the property to the winner via quitclaim deed. With a quitclaim deed, the owner transfers any interest the owner has in the property; however, the owner does not warrant or guarantee the validity or existence of those property rights. Hence, if any title problems later emerge, the winner might need to resolve those problems without any assistance from the owner.

Liabilities and Taxes. Promotion rules often indicate that the winner takes the property “as is”. While the promotion rules hopefully indicate that there are no liens, back taxes or other liabilities on the property, the transfer documents might not include this statement or, if included, might not guarantee the accuracy of the statement. It might be advantageous for a winner to conduct a judgment and lien search on the property prior to accepting it. Otherwise, as the new proprietor, the winner might be responsible for payment of any back taxes and debts.

Outstanding Business Obligations. When the awarded property is a business property such as an inn or restaurant, the rules often require that the winner honor any advance reservations and outstanding gift certificates. Obviously, the resulting burden on the winner depends on the expense associated with honoring these pre-existing obligations as well as the winner’s intent to continue the business – which leads to the next point.

Property as a Going Concern. If the real estate is a business property that the winner plans to operate, a commitment by the owner to provide the winner with some consultation and/or training on running the business is an attractive promotion feature. The winner may need to obtain and pay for the permits and licenses legally required for operation of the business Existing government-issued permits and licenses do not necessarily automatically transfer along with the transfer of the property or the business. There might also be vendor relationships the winner needs to establish or continue as part of operating the business.

Problems with Offering (or Winning) Real Estate as a Contest or Sweepstakes Prize. Part One.

Owners of real property – ranging from luxury homes to country inns to movie theaters to yoga studios – sometimes offer their property as a promotional prize. The promotion often follows the owner’s unsuccessful attempts to sell the property in the conventional real estate market.

The owner’s hope is that aggregate entry fees will allow the owner to recoup the investment in the property. The winner receives a property at a cost far below the property’s value. While this result may at first glance seem like a win-win for everyone, it can cause legal and other problems for both owners and winners. I’ll briefly review some of the owner’s woes in this blog posting.

Lotteries Not Allowed

Charging an entry fee (known as consideration in promotion law lingo) is where the potential trouble begins. If the winner of the property is selected based on a random drawing or other chance-based method, the real estate promotion combines chance, consideration, and a prize, and is, therefore, a lottery. With few exceptions, private individuals and organizations are legally prohibited from operating lotteries. Inadvertently structuring a promotion as an illegal lottery is number one on my list of top ten legal mistakes for contests and sweepstakes promotions.

Promotion mechanisms that are legal, depending on the state, and that might allow a private individual or organization to charge entry fees include a non-profit raffle and a skill-based contest. There are several obstacles to both approaches.

The Non-Profit Raffle Approach

In most states, non-profit raffles are limited to non-profit organizations. Hence, to structure the real estate promotion as a non-profit raffle, the owner must first enlist a non-profit organization as a sponsor. Other potential obstacles to the real estate owner achieving his financial objectives through the non-profit raffle approach include the facts that

• non-profit raffle revenue is meant to benefit non-profit causes; not private real estate owners

• State real estate regulations might restrict awarding real property as a raffle prize

•   Geographic and internet restrictions on raffle ticket sales might limit potential raffle revenue

The Skill-Based Contest Approach

With this approach, the owner awards the real estate based on the participants’ demonstration of a skill. One challenge to this approach is structuring the contest so it can withstand legal scrutiny. In some actual-world situations, state attorneys general have re-classified poorly structured real estate contests as illegal lotteries. Structural features for a real estate contest which I would label as mistakes and contrary to best practices include the following:

No Rules. Failing to have and publish well-drafted contest rules

Insufficient Judging Criteria. Failing to specify the skills on which the entrants will be judged and the winner will be selected. For example, in an essay contest, it is insufficient to indicate the real estate will be awarded to the writer of the “best essay”. What exactly does it mean to be the best? An attorney general reviewing the contest will be looking for clearly established and stated criteria used for evaluating the essays.

Insufficient Information about Judges. While the sponsor does not necessarily need to identify the judges by name, the better practice is to describe why the selected judges are qualified to judge the contest. Indicating merely that "an independent panel of judges" will review the essays by may be insufficient for a contest structure to withstand legal scrutiny.

No Stated Minimum. Failing to specify the minimum number of entries for the promotion to go forward. Ideally, entry fees should be placed in an escrow or trust account so that the funds can be promptly returned if there is an insufficient number of entries. Delays in returning money can trigger legal scrutiny and accusations of fraud.

Part Two of this blog posting series will briefly discuss why one might not want to be the winner of real estate awarded in a promotion.