Investor Advocate Says "Mere Threat" Kills Web Site

TORONTO (Dow Jones)--Last Friday, United Online Inc. (UNTD) closed a Web site on securities regulation after an individual complained he was being defamed by content on the site, according to Robert Kyle.

Kyle, who the runs the site, "Self-Regulatory Organizations in the Canadian Securities Industry," said it consists almost entirely of publicly available documents and that United Online's actions curtail his right to free speech.

"This isn't about defamation," Kyle said. "This is about suppressing fair comments and public documents and freedom of speech."

United Online officials declined to comment.

Kyle, a consultant on securities issues, said the site "highlights how Canadian securities regulators fail to protect the investing public and brokers." He said the site receives 20,000-30,000 visitors a month. United Online, a Woodland Hills, Calif. Internet service provider, had hosted the site for about six years, he said.

Among other things, the site includes links to case law involving investors and brokers. The case that resulted in the Web site being taken down is Kent Shirley versus Brian Mallard and Assante Financial Management Ltd. Shirley sued the defendants in March 2004, alleging that they constructively dismissed him from his job as a financial adviser at an Assante branch in Saskatoon, Sask. in January 2004. The defendants denied the allegation, saying Shirley resigned.

The site includes excerpts from the statement of claim, the statement of defense and counterclaim, as well as links to both documents. It also includes links to publicly available affidavits, as well as letters sent by Kyle to politicians and the Ontario Securities Commission, and the replies.

The case, filed in the Court of Queen's Bench for Saskatchewan, Judicial Center of Saskatoon, remains active, though the last document filed with the court was in November 2004, according to the court's registrar's office. The case garnered media attention because Shirley, who died suddenly in December at age 31, alleged that the defendants engaged in, and required him to engage in, unethical and/or illegal conduct, such as providing insider information to clients. The defendants denied breaching ethical codes, laws, rules and regulations or requiring Shirley to do so as a condition of his employment.

None of the allegations have been proven in court.

Securities regulators in Saskatchewan were alerted to the case and referred it to the Ontario Securities Commission. The OSC indicated in May that it had completed a review and closed the file, with no enforcement action taken.

Mallard was branch manager at the Assante office where Shirley worked. He is also a former chairman of Advocis, which represents Canadian financial advisers and insurance salespeople.

In November 2004, Kyle received an email message from Mallard saying, among other things, that Kyle's Web site didn't fairly represent his case. "Your posting maligns my reputation and is a basis for defamation," he said.

Kyle posted Mallard's email on the site, as well as Kyle's response. "I would ask your assistance in addressing the concerns you raise and can assure you of my cooperation in letting the facts be known," Kyle said in his reply.

Kyle said United Online informed him last week that Mallard's lawyers had threatened legal action if United Online didn't remove the link to the case. Kyle complied but indicated on the site that the link was available on another Web site he had set up using a different Internet service provider.

Mallard Made Formal Complaint To United Online
On Friday, United Online removed the entire Web site. According to its service agreement, it may terminate an account and delete files at any time, without notice, for conduct that violates its guidelines "or for any other reason."

Colleen Wiegers, lawyer for Mallard, made the following statement: "We reviewed the regulators.itgo.com site (the Web address of Kyle's site) and believed that the information being posted on that Web site about Brian Mallard and his businesses was defamatory. So we made a formal complaint to United Online pursuant to their acceptable-use policy."

Wiegers said Mallard didn't obtain a court order forcing United Online to pull the site. Through his lawyer, Mallard declined to be interviewed for this story.

Michael Geist, a law professor at the University of Ottawa who specializes in Internet law, said he couldn't comment on Kyle's dispute with Mallard. In general, he said the chance of a successful defamation suit stemming from the display of publicly available documents on a Web site is "challenging at best."

That's because the documents don't involve personal opinion and are readily available to anyone who wants them, he said. People who post personal correspondence on a Web site could be on shakier ground, depending on the contents of the correspondence, he added.

Geist said he finds it "worrying" that an Internet service provider would remove a Web site because of a "mere allegation that something is unlawful." Most providers would only take content down when required to do so by court order, he said. "And that's sensible, of course, because you run the risk of curtailing all sorts of legitimate speech merely on the basis of allegations," he said.

Peter Ruby, lawyer at Toronto-based Goodmans LLP and an adjunct professor at the University of Toronto teaching Internet law, said the standard for proving Internet defamation isn't that different from proving "normal" defamation. "It's still not defamation if you tell the truth," he said.

While he couldn't comment on United Online's actions, Ruby said there is no rulebook telling Internet service providers how to respond to defamation complaints. "You need to look at every situation and decide what to do and in my experience that's the way most ISPs behave," he said.

Les Seagraves, chief privacy officer at EarthLink Inc. (ELNK), an Atlanta-based Internet service provider, said EarthLink has an acceptable-use policy, which helps it determine how to respond to complaints. If something obviously illegal is occurring, or there is an obvious threat to someone's safety, the company will take action, which could include removing the Web site, he said.

If the situation is ambiguous, the firm usually recommends that the complainant try to resolve the problem with the Web-site operator directly, or contact law enforcement, Seagraves said.

Seagraves acknowledged that the threat of legal action can't be ignored. "Any time there is the threat of litigation to a business, we certainly take that into consideration as well," he said.

Still, EarthLink doesn't monitor content and wouldn't pull a Web site - even when faced with the threat of litigation - unless there was something obviously illegal, fraudulent or threatening going on, Seagraves said.

-Stuart Weinberg, Dow Jones Newswires; 416-306-2026; stuart.weinberg@dowjones.com

(END) Dow Jones Newswires

07-22-05 1019ET

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