A New York state trial court last week rejected a publicly traded company’s request to obtain the identity of an individual who anonymously wrote negative comments about the company on an online financial bulletin board.

In February 2014, an individual with the pseudonym “Pump Terminator” posted an article about Nanoviricides, Inc. on www.seekingalpha.com, a financial website.  The article was titled “NanoViricides: House of Cards with -80% Downside, ‘Strong Sell’ Recommendation,” and directly below the article, the author wrote “Disclosure: I am short NNVC.  I wrote this article myself, and it expresses my own opinions.  I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article.” 

The article provides a lengthy critique of the company’s business practices, calling it “the worst US reverse merger we have ever seen” and comparing it to the China RTO frauds.”  The article links to a shareholder complaint filed against the company’s CEO and president.

Nanoviricides filed a pre-action discovery proceeding, seeking the disclosure of the identity of “Pump Terminator” so that it could bring a libel claim against the author.  Among the statements that the company alleged are defamatory:

• With multiple questionable stock promoters NNVC has pumped the stock +330% while heavily diluting shareholders and stealing NNVC out from under public investors as insiders siphoned off millions of dollars.

• Anil hires his wife as CFO while Auditor and Internal Financial Controls are failing.

On June 26, Judge Cynthia S. Kern of the Supreme Court of New York denied the discovery request, concluding that the company failed to demonstrate that it has a meritorious cause of action for defamation.  Federal and New York courts have long held that statements of pure opinion — rather than factual assertions — cannot be the basis for a defamation claim.  Judge Kern concluded that, when considered as a whole, the article conveys the author’s opinion. 

Important to her conclusion were both the disclaimer that the article is the author’s opinion, and phrases such as “we believe” or “it seems to us” that appear in the article more than 15 times.  Moreover, Judge Kern concluded, the financial news website’s tagline, “Read. Decide. Invest” clearly gives the impression “that the website is designed to give people a place to express their opinions and for the reader to then form his or her own assumptions based on the posted articles.”  

Particularly noteworthy is Judge Kern’s finding that New York courts should protect against the use of subpoenas that stifle the free exchange of ideas online.  “Clearly the article herein at issue does not cast the petitioner in a positive light and the court can sympathize with the filing of the instant petition,” Judge Kern wrote.  “However, it is paramount in an open and free society that we protect the anonymity of those whose ‘publication is prompted by the desire to question, challenge and criticize the practices of those in power without incurring adverse consequences.”

Discovery requests for the identities of anonymous Internet commenters often arise in defamation cases that involve negative comments that were posted on websites and online bulletin boards.  Judge Kern’s decision is noteworthy for its fairly broad interpretation of what constitutes “opinions” that are protected from defamation claims and discovery.