The case concerned the purchase of magazines over eBay by publisher Roger Grace. Unimpressed by the state of the magazines, and the way the sale had been handled, Grace expressed his feelings about the seller on eBay's site. In return the seller posted his own comments, accusing Grace of dishonesty.
Grace then sued the seller and eBay, but lost the case when the Superior Court for Los Angeles found that eBay was protected by a provision in the Californian Communications Decency Act of 1996 that immunised the auction house against liability for libel as a publisher of information provided by a third party.
That ruling was upheld by the 2nd District Court of Appeal on Thursday – on the grounds that eBay was protected by a clause in eBay's user agreement. This clause released the company from liability "from claims, demands and damages (actual and consequential) of every kind and nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way connected with" one or more users of the site.
However, the Appeals Court said the lower court was incorrect in its interpretation of the Communications Decency Act.
In the Appeals Court's opinion, eBay was not a publisher of information, but a distributor, and the 1996 Act did not address the question of distributor, rather than publisher, liability. Moreover, under general principles of law, distributors are liable for defamation if they know, or have reason to know that the information they distribute is defamatory.
Accordingly, said the Appeals Court, the Act does not provide "immunity against liability for a distributor of information who knew or had reason to know that the information was defamatory."
Speaking to Law.com, e-Bay's lawyer, Michael Rhodes, welcomed the result, but criticised the interpretation of the Act, which he described as "erroneous and against the weight of the prior cases within and outside California."
According to Law.com, Grace also claimed victory in the case, expressing delight that the Court of Appeals had agreed that liability could fall on web owners for "scurrilous" postings.