United States District Court

Southern District of New York

 

 

THE RALPH NADER CAMPAIGN,

 

v.

 

AMERICA ONLINE, INC.

 

 

Civ. A. No. 00-17112

 

Nov. 28, 2000

 

 

 

Presidential candidate brought action against online company alleging misuse of market power, common law unfair competition, violation of First Amendment rights, intentional interference with political relations and libel. The District Court, Santilli, J., granted defendant’s motion for summary judgment on the claims for misuse of market power, unfair competition and violation of First Amendment rights but denied the motion with respect to the remaining claims.

 

 

MEMORANDUM OPINION

 

Santilli, District Judge.

 

This case presents several issues arising from the actions of America Online (AOL) in blocking e-mails sent by the Ralph Nader Presidential Campaign (the Campaign) to AOL subscribers.

 

The Campaign sought to raise political contributions in support of Ralph Nader solely through individual donations. In an effort to reach individual donors, the campaign operated a website which informed visitors about Ralph Nader’s campaign and allowed them to request additional information about making contributions. When visitors provided their e-mail address, the Campaign would reply via the Internet and supply more detailed information about Ralph Nader’s presidential campaign and donations. The Campaign would also send e-mail through the use of mailing lists provided by activist organizations whose members would likely support Ralph Nader’s bid for the presidency.

 

AOL is an Internet Service Provider (ISP), which provides a range of services to members including e-mail accounts. AOL has implemented a practice, known as its “Unsolicited Bulk E-mail Policy,” whereby it blocks unsolicited “spam” or “junk mail” sent in bulk through its computer network.

 

The Campaign filed suit in response to the blocking of all its e-mail sent to AOL members. The Campaign contends that AOL’s actions are in response to the efforts of the Consumer Project on Technology (CPT), which was founded by Ralph Nader, to block the Time-Warner merger with AOL.

 

 

I.   The Standard of Review

 

Federal Rule of Civil Procedure 56(c) provides that summary judgment should be granted is “no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law.” Turner v. Schering-Plough Corp., 901 F.2d 335, 340-41 (3d. Cir. 1990). A genuine issue of material fact is raised where the non-moving party has demonstrated, based upon the evidence in the record, that there is a genuine dispute such that a reasonable jury could return a verdict for the non-moving party. See Id.

 

 

II. Misuse of Market Power

 

Plaintiff argues that summary judgment should be precluded because a triable issue of fact is raised that AOL has used its monopoly power in the ISP market to “leverage power in another market . . . our democratic system.”[1]  In order to succeed on an antitrust claim under the Sherman Act, the plaintiff must have standing as a competitor injured by the effects of anticompetitive conduct that the antitrust laws were designed to protect. See Hiland Dairy v. Kroger Co., 402 F.2d 968 (8th Cir. 1968). Under this principle, plaintiff’s assertion is flawed in two respects.

 

The conduct of AOL is not the kind of action that the antitrust laws seek to remedy. The antitrust laws provide a remedy for anticompetitive conduct within relevant economic markets, not government. While the determination of the relevant market is generally an issue of fact, under the present circumstances it is a question of law. The antitrust laws were instituted by Congress pursuant to the Commerce Clause of the Constitution. See United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944). The Constitution clearly distinguishes commerce from government and this court finds no reason to depart from this well settled principle. If this court were to entertain such a notion, the antitrust laws would subvert the very foundations of our system of government.

 

The second shortcoming of the argument posed by plaintiff is that AOL and the Campaign are not market competitors for purposes of the antitrust laws. While Ralph Nader and AOL may be ideologically at odds within the controversy surrounding the Time-Warner/AOL merger, they are not engaged in economic competition within a relevant market. A market is defined as a “place of commercial activity in which goods, commodities, securities, services, etc. are bought and sold.” Black’s Law Dictionary 970 (6th Ed. 1990). The court finds no necessity at this time of making a determination as to the relevant market occupied by AOL as the activity of Ralph Nader’s campaign falls outside of any analysis relating to economic markets.[2] The campaign does not operate within a market. The contributions made to the presidential campaign of Ralph Nader are gifts to a nonprofit entity and are therefore outside of the purview of the Commerce Clause, the antitrust laws, or any analysis with regard to relevant markets. See United States v. Brown University, 5 F.3d 658 (3rd Cir. 1993). Standing as a competitor within a relevant market is required for recovery for misuse of market power and plaintiff’s claim fails as a matter of law for lack of such standing.

 

 

III. Common Law Unfair Competition

 

To succeed on a claim for unfair competition, it must be demonstrated that a competitor knowingly employed unfair business practices to injure plaintiff’s business. For reasons previously stated, the plaintiff has failed to meet its burden for the claim of unfair competition, as the Campaign and AOL are not competitors.

 

 

IV. Violation of First Amendment Rights

 

Plaintiff argues that AOL’s market power presents a “unique situation, with a uniquely situated private entity that by virtue of . . . its monopoly position . . . is able to act with the power of the state.” Plaintiff further asserts that AOL “wield[s] the power and influence that our Founding Fathers likely presumed would only be held by the state.”

 

In a claim for a First Amendment violation, the plaintiff must demonstrate that the challenged conduct was the result of state action. An exception to this general rule holds that “private action can be considered state action when ‘there is a sufficiently close nexus between the State and the challenged action of the private entity so that the action of the latter may be fairly treated as that of the State itself.” Cyber Promotions, Inc. v. America Online, 948 F. Supp. 436, 441 (E.D. Pa. 1996). Under the exclusive public function test, a determination must be made as to whether “the private entity has exercised powers that are traditionally the exclusive prerogative of the state.” Cyber Promotions, Inc. v. America Online, 948 F. Supp. 436, 441 (E.D. Pa. 1996).

 

While this court is mindful of the increasing prominence of the Internet, and specifically e-mail as the currently preferred mode of written communication, AOL’s corporate dominance has no bearing upon the First Amendment analysis at the present time. In offering e-mail to its members, AOL has not exercised any powers that have traditionally been within the powers of the state. The increasing use of the Internet may well in the future cause the mail service administered by the state to become obsolete and cast the Internet into a role that is more closely linked to a state action analysis. Such a scenario would impact on the exclusive public function analysis in that there may come a time when there are no other viable alternative avenues of communication. See Cyber Promotions,  948 F. Supp. 436 (E.D. Pa. 1996). For the time being, however, the doctrine set forth in Cyber Promotions holding that e-mail providers do not exercise state power, remains unchanged. See Id.  Accordingly, summary judgment is granted to the defendant as to the First Amendment claim.

 

V. Interference With Political Relations

 

This claim requires the plaintiff to demonstrate that defendant intentionally interfered with plaintiff’s prospective political advantage and caused plaintiff to lose that benefit. Here, it is reasonable to infer that AOL’s blocking of the Campaign’s e-mails caused Ralph Nader to lose the benefit of campaign contributions for his campaign. As to the knowledge requirement, plaintiff has asserted on knowledge and belief that AOL blocked Ralph Nader’s e-mails while allowing those of the other two candidates, Al Gore and George W. Bush, to be received by its members. Although this assertion alone would need to be substantiated at trial through discovery, it is sufficient to raise a triable issue of material fact as to the issue of intent so as to survive a summary judgment motion.

 

AOL asserts that summary judgment should be granted in that there was no affirmative duty owed to the Nader campaign. This court holds that defendant’s argument has no basis at law. A claim for interference with prospective political relations is analogous to a claim for interference with contractual relations. Under these claims, plaintiffs  are not obligated to demonstrate a duty owed to him by defendant.

 

AOL argues that, as a matter of policy, the claim should be denied in the interest of avoiding mass litigation on this issue in the future against ISPs who seek to block bulk e-mail and monitor content, such as pornography for the benefit of its members. This court holds that the “slippery slope” argument has no bearing upon this issue. Plaintiff has asserted a claim existing at law and substantiated that claim with triable issues of fact. This court is not prepared to invalidate existing law based upon speculation regarding potential lawsuits.

 

This court further holds that an ISP’s right to block bulk e-mail and monitor content is distinguishable from the present case. Here, defendant has asserted that the blocking was the implementation of a policy that seeks to shield members from organizations sending bulk e-mail. This argument is not persuasive in light of the fact that the many of the e-mails sent by the Campaign were not bulk e-mails, but rather were sent in response to individual requests.

 

The defendant’s motion for summary judgment as to this claim is thus denied.

 

 

VI. Libel

 

Plaintiff has met its burden in its claim for trade libel. To succeed on a claim for trade libel, plaintiff must allege: (1) the contents of the defamatory statement; (2) the publication of the statement to another individual; (3) that defendant knew the falsity of the statement, and; (4) that the publication of the statement damaged the plaintiff in the course of his business dealings.

AOL’s computer program used to block e-mail sent by the Campaign is commonly referred to by defendant as its “Guard Against Junk E-mail.”  This court holds that such a statement is defamatory. In effect, AOL has grouped Ralph Nader’s informational e-mails with other e-mails that advertise get rich quick schemes, pornography and other matter more commonly referred to as "spam."

With regard to publication, this court holds that plaintiff has met its burden so as to survive a motion for summary judgment. AOL has published these statements as it continues to publicly use its junk mail protection policy as a justification for blocking the e-mail sent by the Nader Campaign.

Based upon the evidence in the record, a triable issue of fact is raised as to whether AOL knew the falsity of the statement. If AOL blocked the e-mail sent by Ralph Nader, but not that of the Gore or Bush campaign, it is reasonable to infer that AOL knew that e-mail sent for the purpose of raising donations for the presidential race was not “junk.” It is similarly reasonable to infer that AOL made these statements to intentionally harm the Campaign based upon the facts alleged regarding the conflict of the CPT with AOL’s merger with Time-Warner. Although further discovery is appropriate before a final determination of these issues, plaintiff has raised triable questions of fact, which preclude a finding of summary judgment.

 

ORDER

The motion of AOL, Inc. for summary judgment is GRANTED as to the claims for misuse of market power, unfair competition and violation of First Amendment rights.

The motion of AOL, Inc. for summary judgment is DENIED as to the claims for interference with political relations and libel.

IT IS SO ORDERED.

 

 

 

 

 

 

 

 

 

 

 

 


[1] This court finds that AOL does have a dominant role as an ISP in light of the fact that it has more subscribers than the next twelve largest ISPs combined. This court, however, declines to rule as to whether AOL is a monopolist. The plaintiff lacks standing on the antitrust claim, which precludes any further determination as to the market power of AOL.

[2] Plaintiff has asserted that AOL’s relevant market is both the Internet and the ISP market. Under either assumption, the Campaign is not found to be a competitor for purposes of the antitrust laws.