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Pastimes : Investment Chat Board Lawsuits

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To: Arcane Lore who wrote (135)3/1/2000 12:10:00 AM
From: Jeffrey S. Mitchell  Read Replies (2) of 12435
 
Re: ZiaSun Cyber-Libel Lawsuit Is Dismissed on a Technicality

Overheard: ZiaSun Cyber-Libel Lawsuit Is Dismissed on a Technicality

By AARON ELSTEIN and CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION

A closely watched cyber-libel lawsuit came to an anticlimactic end when a judge dismissed the case on a technicality, voiding an unusual injunction that had restricted online postings by a vocal critic of a small Internet company.

The decision by U.S. District Judge Marsha J. Pechman in Seattle is a setback for the Solana Beach, Calif., company, ZiaSun Technologies, which had brought the defamation case last summer to halt needling by eight online critics on a Silicon Investor message board.

But it was a relief for message-board participants and for Floyd Schneider, a Saddle River, N.J., mortgage banker and one of the defendants, who was barred by Ms. Pechman from posting "false statements" about ZiaSun on the Web while the case was pending. The ruling makes that injunction moot.

One of ZiaSun's most vocal critics, Mr. Schneider had posted thousands of messages on the Internet about the company and others under the aliases "The Truthseeker" and "Flodyie." The Jan. 21 injunction against him had brought the lawsuit some notoriety.

Ms. Pechman's curbs on Mr. Schneider's postings struck a nerve in the freewheeling world of Internet stock chatter. It also surprised many legal experts, who said it was unusual for such restraints to be granted in cases where freedom of speech was an issue.

In another unusual development, ZiaSun also had persuaded Silicon Investor to delete some postings by Mr. Schneider from the message board, citing the injunction. The Web site ordinarily doesn't delete postings without the writer's consent unless legally ordered to do so.

In dismissing the case, Ms. Pechman didn't rule on the merits of ZiaSun's claims, which alleged a conspiracy by the posters to hurt the company. Her ruling was based on arguments by another defendant, Stephen Worthington, of San Francisco, that Seattle was the wrong venue.

The company had reasoned that the case belonged in Seattle because that's where the computers for Silicon Investor (www.siliconinvestor.com), the stock-chat site on which Mr. Worthington and others allegedly blasted ZiaSun are located. But Ms. Pechman rejected that reasoning.

"A substantial part of the events giving rise to [ZiaSun's] claims did not occur in this district," Ms. Pechman, said in her decision Monday.

ZiaSun had alleged Mr. Worthington, who was identified as a poster called "Auric Goldfinger," Mr. Schneider and the other six defendants wrongly accused the company and its executives of a scheme to mislead and defraud investors.

The company alleged they were involved in a conspiracy to drive down its stock price by posting negative messages on the Internet.

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Mark Harris, a spokesman for ZiaSun, called the judge's ruling "a minor setback." "It's frustrating, but we will continue to move ahead legally and immediately file a motion to reconsider," he said.

Mr. Schneider, who used aliases "The Truthseeker" and "Flodyie" to post his messages, said he was relieved but was worried that the company may resurrect the case in another jurisdiction.

Mr. Worthington, an independent stock trader, couldn't be reached at his office Tuesday. Auric Goldfinger, his alleged online alias, declined to comment in a response to an e-mail message.

Mr. Wortington had asked Judge Pechman to dismiss the case, arguing among other things that Seattle was the wrong jurisdiction because he doesn't live in Washington state and none of the relevant action took place there.

Mr. Harris said the suit was filed in Washington state because Silicon Investor's computers are located there, providing a center of activity for the message board posters, who live in New Jersey, Florida, Arkansas, and Greece, among other places.

But Ms. Pechman said that ZiaSun's decision to file the case in Seattle because Silicon Investor's computers are there was insufficient.

If the court denies its request for a reconsideration of the ruling, Mr. Harris said ZiaSun would consider filing lawsuits individually in separate jurisdictions against the people it believes are defaming the company.

Ms. Pechman's decision has triggered heated reactions on Silicon Investor and other message boards.

"Case dismissed! Auric wins! ZSUN 8 wins!" wrote Auric Goldfinger on Silicon Investor. To which a critic quickly responded: "You're still a defendant and a liar."

Indeed, a similar case filed by former ZiaSun president Bryant Cragun against Mr. Schneider and the others continue in a California state court in San Diego.

In that case, Superior Court Judge Janis Sammartino issued a temporary restraining order preventing Mr. Schneider from posting any statements that suggest Mr. Cragun had engaged in criminal behavior. He was also ordered by the California court to retract a press release criticizing ZiaSun which he had posted on his Web site, TheTruthseeker.com.

Mr. Cragun's attorney, Daniel Pascucci, said the federal judge's ruling "doesn't affect anything we're doing in California. We're going to go forward with our case and give it everything we've got," he said.

Write to Aaron Elstein at aaron.elstein@wsj.com and Carrie Lee at carrie.lee@wsj.com

Copyright ¸ 2000 Dow Jones & Company, Inc. All Rights Reserved.
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