2TheMart.com, which is now bankrupt, wanted the identities of the individuals to defend itself against a class action brought by its own investors who allege securities fraud. The company believes that some of the individuals who posted negative comments to the bulletin boards are among the individuals now involved in bringing the class action suit and accordingly wanted their identities disclosed by the ISP. 2TheMart.com claims that its share price was driven down by short sellers.
Short sellers profit from a drop in a company’s share price by borrowing shares from a broker, selling them and then repurchasing the same number of shares at a lower price. For example, a short seller, anticipating a drop in a company’s share price, can borrow 100 shares from a broker. He sells them when the price is, say, £5 per share. He then watches the share price fall to, say, £2.50, at which point he buys back 100 shares to repay the broker. His profit is £250, less the broker’s commission.
According to Associated Press, Federal judge Thomas Zilly ruled that the evidence presented by 2TheMart.com was not compelling enough to set aside the First Amendment freedom of speech rights of the 23 bulletin board users. He said: “The law says that a person has a right to speak anonymously,” and, although he conceded that such rights are “not unlimited,” he saw the comments made as manipulating the share price by no more than “innuendo.”
There is a growing body of US case law on the circumstances when victims of negative chatroom or message board comments have the right to demand that service providers reveal the identities of those making the comments.