It is no secret that RipOff Report has been widely and universally accused of promulgating defamatory content and then extorting money from the victims of the very libel it publishes. This business model has made RipOff Report the subject of many lawsuits. In fact, we have a whole section dedicated to it which can be found here.
 
Despite the ubiquitous outcry against RipOff Report, it appears to have survived most of the legal challenges unscathed, leaving it free to carry on business as usual. RipOff Report claims never to have lost a lawsuit.

Is it true that RipOff Report has never lost a lawsuit? Is this a failure of the legal system? Are the allegations unfounded? If there is truth in the allegations, then how is the system going wrong? Why can’t RipOff Report be held responsible for its conduct?

As promised, I want to spend Legal Monday digging into these issues. In order to accomplish this, we must take a trip together through RipOff Report’s sordid legal history. In doing so, we will gain a basic understanding of the following:

•    Defamation
•    The Communications Decency Act (42 USC Section 230)
•    The Racketeer Influenced and Corrupt Organization’s Act (“RICO Act”)
•    Extortion

  Let’s get started!

I.    Is It True That RipOff Report Has Never Lost a Lawsuit?

Yes and no. It’s true that none of the cases against RipOff Report has gone to trial. I have created an appendix of cases at the end of this post that indicates the status of each case. There are many of reasons why RipOff Report has "never lost a case."

First, RipOff Report has had pretty good success in getting cases alleging mere defamation dismissed immediately. We’ll see why this is so below.

Second, RipOff Report sometimes has failed to appear to defend a lawsuit against them. When this happens, a default judgment is entered against RipOff Report. For example, RipOff Report failed to respond to a lawsuit in Canada and another one in the Caribbean. Thus, it ‘lost’ those cases, but it doesn’t really count because RipOff Report just gave up and no one ever had to hold a trial.

Third, RipOff Report, like most civil defendants, has settled many cases. When a case settles, the terms of the settlement are not public and it never goes to trial. Thus, it’s very difficult to determine who “won” when the parties settled.

Finally, there are several cases still pending. It is too early to tell how these cases will come out.

II.    Why Does RipOff Report Continually “Get Off the Hook” for Spreading Lies?

First, we do not know if RipOff Report has ”gotten off the hook.” Many cases have settled and the terms of those settlement agreements are unknown. It’s entirely possible that significant amounts of cash changed hands and we will never know about it.

For example, Hy Cite Corporation settled its lawsuit with RipOff Report and its negative reports are now out of the title tag and below the fold. (I won’t link to the page, but you know where to find it.) Thus, RipOff Report clearly compromised on that issue.

⇒ Isn't It Illegal to Spread Lies About Someone? What Exactly is Defamation?

In its most general form, defamation is a false statement of fact that is harmful to a person’s reputation. Defamation is defined by each state individually, so your local jurisdiction will have slight variations. However, this is a pretty good general definition. For more information about defamation, check out the Electronic Frontier Foundation.

Many, many plaintiffs in the cases against RipOff Report below made the mistake of accusing RipOff Report of posting defamatory content.

⇒ How is Bringing a Defamation Case a Mistake? Isn’t That Exactly What RipOff Report is Accused of Doing?

Well, yes. But thanks to a law known as The Communications Decency Act (“CDA,” 47 USC 230), RipOff Report cannot be sued for posting defamatory content written solely by its users. It's a different story for content that it creates.

⇒ Is RipOff Report Exploiting Some Kind of Loop Hole?

Nope. Most of us benefit from the Communications Decency Act. It makes the Search Engines and Web 2.0 function. We want users to interact with our sites without having to worry about being sued over something a user did. Sooner or later, some crazy person is going to write something on your site and you are going to be so happy for the Communications Decency Act because you’re not responsible for the crazy person’s conduct.

⇒ Why I Love the Communications Decency Act: Don’t Blame the CDA for RipOff Report’s Success

I’m going to be honest here. As someone who is in charge of handling the legal issues for a website with vibrant conversations driven by user contributions, I am relieved that the CDA exists. Without the CDA, SEOmoz would either have to independently review and investigate the accuracy of every comment posted to the site, or simply refuse to have any third party content altogether. Goodbye comments! Goodbye member profiles! See you later, YOUmoz! SEOmoz as we know it would not exist if it weren’t for the CDA.

⇒ Website Owners Are 100% Responsible for Content That They Have Created

I am an employee and I am posting this content. Thus, SEOmoz is responsible for everything contained in this post. However, SEOmoz is not responsible for your comments. (phew!) 

⇒ Website Owners Risk Losing Immunity When They Alter, Develop, Collaborate, or Change User-Generated Content

It makes intuitive sense that when a website owner starts to change user-generated content, he should no longer be allowed to throw up his hands and claim no responsibility for the content.

The unresolved question for courts is where the line is between creating and editing. A certain amount of editing (for spelling, grammar) would not cause a website owner to lose immunity. However, substantial edits that affect the meaning of the user-generated content may cause the website owner to lose immunity. Thus, SEOmoz could lose immunity from suit by soliciting, creating, developing, and over-zealously editing your comments.

Similarly, RipOff Report cannot be held liable for content created by its users. Strangers can write just about whatever they want on RipOff Report and so long as Magedson (the manager and alleged controller/operator of RipOff Report)3 does not interfere, he cannot be liable. However, what if he substantially alters user-generated complaints? Is he responsible for titles containing defamatory language?

⇒ How Much Does a Website Owner Have to Change a Third Party’s Content Before He Can Be Held Liable?

No one knows right now. The statute creates very broad protection for website owners. However, if a website owner does enough editing to change the meaning of user-generated content, then immunity may be lost. There are several big cases in the pipeline that may help define this boundary in the next year or two. In the meantime, if you want to know more, you can check out the CDA immunity provisions here.

⇒ If RipOff Report Writes the Negative, Defamatory Titles and Stuffs Them With Keywords, Is That Enough to Make Them Liable for Defamation?

Arguably, yes. There is no agreement on this right now. Several courts have stated that if the plaintiffs can get evidence that RipOff Report is drafting defamatory titles, then there is a viable defamation claim and no immunity. Thus, if you’re going to sue RipOff Report, it is very important to allege that the website created and/or substantially altered the meaning of the content.1 You need to allege facts that get you around the CDA immunity provisions in order to avoid being thrown out of Court.

There is more than just speculation that Magedson was involved in altering reports. The Declaration of Dickson Earl Woodard Deposition contains the sworn testimony of the Plaintiff's former employee2 and states repeatedly that Magedson drafted fake complaints and manipulated search engines:

Attorney: So what I've gathered from all of your testimony, Dickson,
is that Ed Magedson has indirectly told you that he is responsible for
making posts about companies. He will make these posts.
Mr. Woodard: Yes.
Attorney: And then he will manipulate the search engines; is that
true?
Mr. Woodard: No question about the search engines. That's where the money is made.

In his Response to Woodard's testimony, Magedson  blames Woodard for making the fake complaints.

Magedson’s deposition also throws his credibility into doubt. Read excerpts of his testimony and determine for yourself whether he’s telling the truth when he states that he did not write the email asking a disgruntled employee to write an inflammatory post about his employer.

Because the CDA bars RipOff Report from liability for many civil suits, attorneys are shifting their focus. In addition to defamation, attorneys are suing RipOff Report for violations of the RICO Act. These next generation plaintiffs allege that RipOff Report’s conduct is extortion and amounts to racketeering.

⇒ What is the RICO Act?

The Racketeer Influenced and Corrupt Organizations Act was designed to bust up organized crime like the mob. The Godfather, as everybody knows, never did his own dirty work. He had people to take care of his unlawful business. Thus, it was not easy for law enforcement to pin him with money laundering and murder because he wasn’t doing it himself. After years of mafia domination, the legislature wised up and finally made a law that made it illegal to be the head of an organization that conducts a pattern of unlawful activity. It didn’t matter anymore if the Godfather didn’t pull the trigger. Because he was in charge of the organization that made the murder happen, he could be found liable for a RICO Act violation.

Plaintiffs are now applying this same strategy to RipOff Report litigation.

 ⇒ The RICO Act is a Favorite with Plaintiffs Because it Allows for Punitive Damages

There is another brilliant thing about RICO Act claims that make them a very attractive avenue to plaintiffs’ attorneys: Punitive or treble damages. If you are found liable of a RICO Act claim and you extorted $50,000.00, the Judge can order you to pay three times that amount! Most civil lawsuits (like defamation, for example) only allow plaintiffs to recover the amount that they were actually damaged. The ability to recover punitive damages is what makes RICO so suave, my friend.

⇒ What Does a Plaintiff Have to Prove to Hold RipOff Report Liable for a RICO Act Violation?

The most common RICO claim makes it unlawful for a person to manipulate an enterprise for purposes of engaging in, concealing, or benefiting from a pattern of racketeering activity. In order to prove a “racketeering activity,” you must essentially prove a crime within a crime. Extortion can serve as a “racketeering activity” under the statute.

In the case of RipOff Report, a plaintiff must demonstrate that Magedson manipulated an enterprise (RipOffReport.com) for the purpose of engaging in a pattern of extortion.

Note: If you want to learn more about the RICO Act, I commend to your attention to Mr. Jeffrey Ernest Grell’s RICO Act in at Nutshell. It’s a thorough review and will tell you everything you want to know and more about RICO.

⇒ What is Extortion: When is it Wrong to Ask Someone for Money?

RipOff Report expressly states on its site that it is not engaging in extortionate conduct. This begs the question: What is extortion? Is paying someone tens of thousands of dollars in addition to a monthly fee to help you communicate with your angry clients the price of good PR or extortion?

Generally, the term "extortion" means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right. In other words, you are committing extortion if you are wrongfully threatening someone to give you money or property. But it’s not always easy to determine whether the use of force is “wrongful.”

The good news is that the courts have already determined that taking money from a person in order to prevent him from being defamed is extortion. As an example, here's a kooky and highly entertaining case involving the criminal underbelly of the Church of Scientology that's surprisingly on point.

Further, several courts have ruled that the facts alleged against RipOff Report could amount to extortion. The courts in Hy Cite and Cambridge Who’s Who ruled that the allegations in the plaintiffs’ complaints could result in a finding of extortion against RipOff Report.
 
⇒ Does the CDA Grant Immunity from a RICO Act Claim as Well as a Defamation Claim?

The CDA grants immunity against more claims than just defamation. For example, the CDA has granted immunity from suits involving negligent misrepresentation, interference with business expectancy, breach of contract, intentional nuisance, violations of federal civil rights, and emotional distress. However, the CDA does not grant immunity for federal criminal law, intellectual property law, and electronic communications privacy law.

The issue over whether the CDA grants immunity from RICO Act claims has not been addressed by a court yet. So far, none of the RipOff Report rulings state that the CDA grants immunity from RICO charges. However, none of the courts have found that the CDA does not grant immunity, either.

The Hy Cite Court ruled, “Here, Defendants operate a website. Plaintiff alleges that Defendants create and solicit false and defamatory complaints against businesses, but will cease this conduct for a $50,000 fee and a $1,500 monthly retainer. Remedying the publication of false and defamatory complaints, which Defendants allegedly created and solicited, does not give Defendants the right to collect fees. Plaintiff has properly alleged threatened extortion.”

Thus, so far, courts are not bothered by the implications of the CDA on the RICO Act. I, for one, hope it stays this way.

IV.    Where RipOff Report Litigation Should Go from Here

The steady stream of lawsuits against RipOff Report have not slowed down and there is no indication that they will. Plaintiffs have become more sophisticated in order to avoid being kicked out of Court by the Communication Decency Act’s broad immunity provisions. Plaintiffs are being sure to plead that RipOff report was directly responsible for creating defamatory content, not just publishing it.

Because a lot of us have much to gain from a strong CDA, I hope that plaintiffs will continue to press the RICO/Extortion combo. This will direct the conversation away from the CDA and focus it on the extortion elements of the case. This is appropriate because this is what makes RipOff Report’s alleged conduct so reprehensible. If RipOff report were just providing a neutral and organic platform to publish good and bad comments about businesses, no one would be complaining.

What transforms this site from a consumer advocacy site to a menace (allegedly) is its aggressive violations of Google’s terms of service to increase its rankings, and concomitant demands for exorbitant fees to write a few rebuttal posts. It is not the defamatory nature of the posts that are the problem. After all, those are all over the web and probably always will be. The problem here is the apparent intent to damage a person or business’s reputation without regard to the truth of the matter, only to re-victimize the person or business by charging them exorbitant fees.
The legal theories have come a long way. A lot of cases are in aggressive investigation phases right now. I’m hoping that some plaintiff out there will take this case “all the way” so that the public can finally have full access to the evidence and testimony necessary to make a fair decision. If the allegations against RipOff Report are true, I believe the RICO Act is the best method for holding RipOff Report accountable.