Treading into an important new area of Internet law, Nash Finch Co. has filed a lawsuit alleging that some people - possibly employees - have posted confidential information about the company on a Yahoo message board.
Courts, companies and often their current and former employees are working out what legally can be said about businesses on the Internet. The lawsuit by Nash Finch, a food wholesaler and retailer based in Edina, Minn., is an example of how companies are changing their legal strategies to go after people they believe have said harmful things about them on the Internet.
Normally, companies had slapped people with lawsuits that alleged libel, and individuals had defended themselves by saying their speech was protected by the First Amendment. But the companies that go after them have begun trying to get around that by alleging that such individuals did other things wrong, too.
The Nash Finch lawsuit, for example, claims breach of contract and misappropriation of trade secrets. If the defendants turn out to be Nash Finch employees, they have violated the company's Code of Ethics and Business Conduct and Associate Handbook, the suit alleges.
Filed late last month in Santa Clara County, Calif., the suit did not name defendants specifically, but called them (John) "Does" 1 through 50. The company said it will amend its lawsuit once it learns the identities of those involved. To do that, Nash Finch lawyers are seeking to subpoena from Yahoo the real identities of the people who wrote the postings under made-up screen names.
A Nash Finch spokeswoman confirmed the company has filed the lawsuit, but declined further comment. The company has hired Allison Chock of the California-based law firm of Latham & Watkins, who also declined to comment.
Details and dates of the specific Yahoo postings are unknown, but recent postings by someone alleging to be a former board member are highly critical of Nash Finch CEO Ron Marshall, who joined the firm in 1998. One of the postings questioned Marshall's integrity while another casts doubt on the validity of the company's financial reports. Neither specified any particular wrongdoing.
The information placed on the Nash Finch message board has caused "irreparable injury" to its business, the suit alleges.
So what can you say about a company on the Internet?
Message-board participants have the right under the First Amendment to voice their opinions. That freedom is troublesome for companies and their legal and public-relations staffs, which wince about the complaints and scramble to correct inaccurate information that could be posted by consumers, investors, employees or competitors.
If a company sues, alleging simple business disparagement or perhaps defamation, its goal isn't necessarily to win, said Marshall Tanick, a First Amendment expert at Mansfield & Tanick in Minneapolis. The strategy is "to force the other person to incur huge legal expenses that will deter them and others" from making such statements, he said.
Companies typically shy from suing customers because it creates bad publicity. Thus, much of the legal activity involves employees or former workers. "I'm seeing it happen with increasing frequency ... yet very few (cases) go all the way" to trial and verdict, Tanick said.
A company's strategy typically includes filing in a state that might be inconvenient and costly for defendants. Lawyers will seek ways to avoid First Amendment issues because they are difficult to win. One option is to allege breach of contract or violation of trade secrets rather than defamation, he said.
Yet that's not foolproof.
For example, Ford Motor Co. unsuccessfully sought to stop a man from putting Ford's internal documents on his Internet site. Ford said the postings included blueprints for new engines and schedules for new vehicles, violating trade secret laws. A federal judge ruled against Ford, citing the First Amendment.
Many critical Web sites have been started by those with an ax to grind against a company, but some have been established by those hoping to make a buck selling the domain name back to the company.
(Distributed by Scripps Howard News Service, http://www.shns.com.)