United States District Court, Southern District of New York
May 22, 2001
NICOLE TZOUGRAKIS D/B/A OFFTHERUNWAY.COM, PLAINTIFF
CYVEILLANCE, INC., PR NEWSWIRE ASSOCIATION, INC., ZIFF-DAVIS TV, INC., HOME AUTOMATION SYSTEMS, INC., CMPMEDIA, INC., V-NETWORKS, INC., ZIFF-DAVIS, INC. AND ALLBRITTON COMMUNICATIONS COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Constance Baker Motley, United States District Judge:
OPINION GRANTING SUMMARY JUDGMENT
Plaintiff is Nicole Tzougrakis doing business as offtherunway.com.
Plaintiff is suing based on New York state law claims of defamation
damaging plaintiffs reputation and business. Plaintiff is claiming
damages of $10,000,000 as well as costs and fees. The case is raised
under the court's diversity jurisdiction as the parties are citizens of
different states and the amount in controversy exceeds $75,000. Plaintiff
also raises a federal question jurisdiction trademark claim against one
The original named defendants are Cyveillance, Inc., PR Newswire
Association, Inc. (Newswire), Home Automation Systems, Inc., CMP Media
Inc., V-Networks, Inc., Ziff-Davis, Inc. and Allbritton Communications
Co. By stipulation this case was previously dismissed as to defendants
V-Networks, Inc. and ZDTV, LLC which was sued as Ziff-Davis TV Inc. By
order of June 29, 2000, the court also dismissed the claims against Home
Automation, CMP Media and Allbritton. The remaining three defendants
are: Cyveillance, Newswire and Ziff-Davis.
Trial was originally scheduled for November 20, 2000. Defendants
submitted motions for summary judgment and appeared on the trial date
ready to argue the motions or proceed with trial. On May 3, 2001, the
court heard argument on defendant's motions to grant summary judgment on
plaintiffs federal and state claims. For the reasons set forth below,
defendants' motions for summary judgment are hereby GRANTED.
Plaintiff markets designer goods on the internet to retail customers.
Plaintiff claims that all of her goods are legitimate, properly licensed
designer products. Defendant Cyveillance is a service that conducts
investigations of internet businesses searching for counterfeit goods or
goods being sold without permission from the producer.
During the 1998 holiday season, as a publicity effort designed at
attracting new customers, defendant Cyveillance conducted an
investigation of internet sites selling designer goods to identify sites
that were selling counterfeit or unlicensed goods. Cyveillance
investigated these sites by using software which uses keywords and search
logic to detect sites which might offer counterfeit goods. Cyveillance
then used human staff to review the sites targeted by the software,
using, inter alia, the following criteria: (1) was the site an unknown
retailer; (2) were the goods offered at an implausibly low price; (3) did
the designer in question license its goods to be sold on the internet at
that time; (4) was there any indication on the web page that the site was
an authorized retailer of the goods; (5) what was the quality of the
site's text and graphics; and (6) was any individual identified as owning
or operating the site. Cyveillance did not attempt to contact any of the
sites it identified. Cyveillance also did not order any goods from the
sites to examine them.
After identifying a number of internet sites using the methods
described above, Cyveillance issued a press release listing the sites,
including plaintiffs site, offtherunway.com, that it claimed were selling
counterfeit goods. Cyveillance transmitted its press release to defendant
Newswire, a distributor of press releases. Cyveillance is a client of
Newswire, which distributes press releases for more than 40,000 members
to media outlets such as The New York Times, The Washington Post, The Los
Angeles Times, Reuters and the Wall Street Journal. Newswire does not
review the press releases but does format them prior to distribution to
the media. Newswire had previously sent out two press releases for
Cyveillance prior to the press release in question in this case. Newswire
was aware that Cyveillance was a business that specialized in discovering
the on-line sellers of counterfeit goods.
Defendant Ziff-Davis, a publisher which targets business and technology
professionals, publishes Inter@ctive Week, a newsweekly magazine. In early
December of 1998, Inter@ctive Week received Cyveillance's press release
listing offtherunway.com as a marketer of counterfeit goods. Concetta
Guglielmo, who had been a reporter for 15 years, was assigned the story
and took the following steps to confirm the allegations in the press
release: (1) Guglielmo questioned a Cyveillance spokesperson and
Cyveillance's CEO about the report; (2) she investigated Cyveillance's
client list to determine whether Cyveillance was a reputable company; (3)
she visited the listed sites and confirmed the veracity of statements
made by Cyveillance regarding the critera it applied; (4) she noted that
offtherunway.com had no contact information listed anywhere in its
website; and (5) she ran several searches on the internet in an attempt
to obtain identifying or contact information as to the operator of the
In addition, Ziff-Davis claims that Guglielmo clicked on an email link
attached to the offtherunway.com site. Guglielmo claims she sent the site
an email stating that the site had been identified as a purveyor of
counterfeit goods and asking for comment. Ziff-Davis claims that
offtherunway.com never responded to the email and Guglielmo concluded
that the owner was declining to comment. Plaintiff claims she never
received the email. However, at the hearing on May 3, 2001, plaintiffs
counsel did not dispute that the email was sent. In addition, it is
undisputed that a later email sent on December 23, 1998 by Guglielmo as a
test via the same email link also did not reach plaintiff.
Inter@ctive Week published the article in print on December 21, 1998
and posted the online version on December 22, 1998. On December 23,
1998, plaintiff sent an email to Guglielmo stating that she had seen the
article on-line and that it was not true. Plaintiffs father also phoned
Guglielmo's editor and furnished a phone number at which offtherunway.com
could be reached. Ms. Guglielmo used this number to contact plaintiff.
Guglielmo then contacted Cyveillance and informed Cyveillance that
plaintiff was denying the allegations. Cyveillance instructed Inter@ctive
Week to print a retraction. On December 23, 1998, Inter@ctive Week
printed the retraction.
As set forth below, plaintiff has not established a genuine issue of
material fact as to whether Cyveillance was a competitor of plaintiff as
required by federal trademark law. Plaintiff also has not established a
genuine issue of material fact as to whether defendants were grossly
irresponsible in their publication of the press release as required by
New York state libel law. Therefore, the court grants defendants' motions
for summary judgment.
A. Standard of Review and Choice of Law
The standard for summary judgment is that "[u]ncertainty as to the true
state of any material fact defeats the motion." Gibson v. Am. Broad
Corp., 892 F.2d 1128, 1132 (2d Cir. 1989). The movant must demonstrate
the absence of a genuine issue of material fact. An issue of fact is
genuine if "the evidence is such that a reasonable jury could return a
verdict for the nonmoving party." Anderson v. Liberty Lobby Inc.,
477 U.S. 242, 248 (1986). If the movant carries this burden, it then
shifts to the non-moving party to produce concrete evidence sufficient to
establish a genuine unresolved issue of material fact. See Celotex Corp.
v. Catrett, 477 U.S. 317, 322-24 (1986); Dister v. Continental Group
Inc., 859 F.2d 1108, 1114 (2d Cir. 1988). The court then must view the
facts in the light most favorable to the non-movant and give that party
the benefit of all reasonable inferences from the evidence that can be
drawn in that party's favor. See Weinstock v. Columbia Univ., 224 F.3d 33,
41 (2d Cir. 2000). "However, neither `conclusory statements, conjecture,
[n]or speculation' suffice to defeat summary judgment." Johnson v. Delphi
Energy & Engine Management Systems, 181 F.3d 82, 82 (2d Cir. 1999). The
court neither weighs evidence nor resolves material factual issues but
only determines whether, after adequate discovery, any such issues remain
unresolved because a reasonable fact finder could decide for either
party. See Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249 (1986);
Gibson, 892 F.2d at 1132.
It is undisputed that New York law applies to the state law libel
claims. In addition, plaintiff brings a claim under federal trademark
law. The court will address the federal claim first and then the
liability of each of the defendants under New York libel law.
B. The Lanham Act Claim
Plaintiff claims defendant Cyveillance violated 15 U.S.C. § 1125(a)
(the Lanham Act) which states that misleading representations about a
copyrighted product are subject to civil action in the federal courts.
The Lanham Act, however, does not apply in this case. The Second Circuit
has held that federal copyright law applies only to misrepresentations
about a company by competitors of that company. See, e.g., New Era
Publications Int. v. Carol Publ'g Group, 904 F.2d 152, 159-60 (2d Cir.
1990); Consumers Union of U.S. v. General Signal, 724 F.2d 1044, 1051 (2d
Cir. 1983); Wojnarowicz v. Am. Family Ass'n, 745 F. Supp. 130, 141
The Lanham Act "has never been applied to stifle criticism of the goods
or services of another by one, such as a consumer advocate, who is not
engaged in marketing or promoting a competitive product or service."
Wojnarowicz, 745 F. Supp. at 141. In this case, Cyveillance is a company
whose business consists of investigating internet sites which offer the
goods produced by Cyveillance's clients in order to ferret out those
companies selling products without the producer's permission or selling
counterfeit products. Plaintiffs company, offtherunway.com, sells
designer clothing and other products. Plaintiff has not contested the
fact that the two companies are engaged in very different businesses and
do not offer any of the same products or services.
Therefore, the court grants summary judgment to defendant Cyveillance
on Plaintiffs first claim under the Lanham Act.
C. Libel Standard in New York
In addition to her federal claim, plaintiff claims that all three
defendants defamed her pursuant to New York State libel law.
Under New York law, a private plaintiff alleging libel regarding a
matter of public concern must prove that the publisher of the allegedly
defamatory statements acted "in a grossly irresponsible manner without
due consideration for the standards of information gathering and
dissemination ordinarily followed by responsible parties." Chaiken v. VV
Publishing Corp., 119 F.3d 1018, 1031 (2d Cir. 1997) (citing Chapadeau
v. Utica Observer-Dispatch Inc., 341 N.E.2d 569, 571 (1975)). Although
this standard was originally developed by the New York Court of Appeals
in Chapadeau to protect the first amendment rights of newspaper
publishers, the New York courts as well as the Second Circuit have
extended the standard to uniformly cover non-media defendants "where the
communication at issue admits of measurement by the Chapadeau standard."
Konikoff v. Prudential Ins. Co. of America, 234 F.3d 92, 101 (2d Cir.
2000) (applying Chapadeau to charges of libel against an insurance
company which published the full text of an allegedly defamatory
independent report the company had commissioned).
In this case, it is undisputed that the plaintiff is a private person
and that the subject matter of the alleged defamation, allegations of
sale of counterfeit goods, is of public concern. Therefore, to recover
for libel against either the media defendants, Newswire and Ziff-Davis,
or the non-media defendant, Cyveillance, plaintiff must prove gross
irresponsibility on the part of that defendant.
As shown below, under the Chapadeau standard, plaintiff has established
no genuine issues of material fact regarding industry standards as to the
gathering of information for producing the kind of press release at issue
here. Plaintiff has also failed to produce evidence of a genuine issue of
material fact regarding defendants' adherence to those standards.
1. Cyveillance's Liability
In determining whether a publisher acted in a grossly irresponsible
manner, the court should consider whether the defendant: (1) followed
sound journalistic practices in preparing the allegedly defamatory
article; (2) followed "normal procedures," including editorial review of
the copy; (3) had any reason to doubt the accuracy of the source relied
upon and thus a duty to make further inquiry to verify the information;
and (4) could easily verify the truth. See Chaiken, 119 F.3d at 1031. The
New York Court of Appeals has held that sound journalistic practices
under the "standard of `gross irresponsibility' [require] no more than
that a publisher utilize methods of verification that are reasonably
calculated to produce accurate copy." Karaduman v. Newsday, Inc.,
416 N.E.2d 557, 561-62 (1980).
Plaintiff has not raised a genuine issue of material fact as to whether
Cyveillance used sound journalistic practices, followed normal
procedures, or had any reason to doubt the accuracy of its methods.
Plaintiff argues that sound journalistic practices require a publisher to
contact all sides of the story and, therefore, Cyveillance was grossly
irresponsible. However, plaintiff fails to provide proof of this claim.
Cyveillance has presented evidence in the form of a declaration of John
Bliss, the former president of the International Anti-Counterfeiting
Coalition, that the methods uses by Cyveillance are standard in the
industry for conducting an investigation of this kind. Moreover,
Cyveillance notes that consumer advocates make a practice of not
contacting the internet sites they target, as contacting them could drive
the sites underground. Plaintiff has produced no evidence to contradict
this contention, other than the declaration of Edward Smith, a purported
expert on libel and counsel to plaintiff. Smith has no personal knowledge
of the issues in the case. Smith's declaration consisted of unsupported
allegations and conclusions of law.*fn1 Such statements do not suffice
to defeat summary judgment. See Johnson, 181 F.3d at 82.
Plaintiff has produced no evidence other than unsupported allegations
to show that Cyveillance's methods of information gathering do not meet
acceptable standards of information gathering. Cyveillance screened the
websites using criteria that had worked in the past, first using computer
programs, then using human staff to verify that the sites were
illegitimate. Plaintiff argues in her motion for an extension of time for
discovery that counsel was unable to ascertain what criteria were used by
Cyveillance's computer program or how the program works. Therefore,
plaintiff claims that Cyveillance cannot assert that the criteria or
program operation were reasonably designed to produce an accurate result.
However, Cyveillance used human staff to filter the sites after the
computer program had identified them. Plaintiff has had access since the
close of discovery to the critera used by the human staff. As discussed
above, the court finds that the criteria and methods used by the human
staff were reasonably designed to produce an accurate result. Therefore,
the computer program itself is irrelevant, other than the fact that the
same or similar programs had been used successfully by Cyveilllance in
the past. The methods used by Cyveillance to identify counterfeit
websites were reasonably designed to produce an accurate result.
Plaintiff has produced no evidence that journalistic standards require
more. Therefore, the court grants summary judgment to Cyveillance.
2. Liability of Republishers
This court will now consider the standard that applies to defendants
Newswire and Ziff-Davis.
A "company or concern which simply republishes a work is entitled to
place its reliance upon the research of the original publisher, absent a
showing that the republisher `had or should have had, substantial reasons
to question the accuracy of the articles.'" Karaduman v. Newsday, Inc.,
416 N.E.2d 557, 56 1-62 (1980) (granting summary judgment where there was
no evidence in the record that a republisher had cause to doubt the
veracity of the statements in question or the integrity of the reporters
who gathered the underlying facts). In Karaduman, the New York Court of
Appeals held that a republisher cannot be held grossly irresponsible in
the absence of facts that "would arouse the suspicions of a careful
publisher or that would give cause for further inquiry." Id. The
Karaduman court went on to say that a republisher has no realistic choice
but to assume that carefully designed internal procedures for ensuring
accuracy have been effective. Those internal procedures need be "no more
than that a publisher utilize methods of verification that are reasonably
calculated to produce accurate copy." Id.
The Second Circuit reiterated the Karaduman standard in Chaiken,
stating that "[a] publisher will not be liable for an article later shown
to be false if it relies upon the integrity of a reputable author and has
no serious reason to question the accuracy of the information provided by
that author." Chaiken, 119 F.3d at 1032 (where original author of
allegedly defamatory article had previously written articles for
publisher and for other major publications and the contents of the article
and external circumstances themselves were not of the nature to suggest
falsity). "Absent" obvious reasons' to doubt the truth of an article, a
[publisher] does not have the "intolerable burden of rechecking every
reporter's assertions and retracing every source before' publication."
Chaiken, 119 F.3d at 1032; see also Gaeta v. New York News Inc., et al.,
465 N.E.2d 802, 806-07 (1984) (holding no gross irresponsibility where
source had previously furnished accurate information, facts had inherent
plausibility and publisher had no reason to suspect any animus toward the
Defendant Newswire claims that its role in the publication of the
allegedly defamatory press release was closer to that of a distributor,
such as a telegraph company or a printer, than that of a publisher of the
information. Therefore, Newswire argues it cannot be held responsible for
libel absent a showing of knowledge that the release was defamatory. See
Lerman v. Flynt Distributing Co. Inc., 745 F.2d 123, 139 (2d Cir. 1984).
However, it appears from the facts submitted to the court that Newswire
had some editorial control over the press release. Newswire itself states
that it "formatted" the press release before distributing it to the
media. Nevertheless, as described below, plaintiff cannot establish that
Newswire's conduct reaches even the lesser standard of gross
irresponsibility applied to publishers. Therefore, the court need not
determine at this time whether Newswire was a publisher or a distributor
in order to grant summary judgment to defendant Newswire.
Newswire received the press release from its member, Cyveillance. It
had previously published releases from Cyveillance and had never before
had any allegations of libel against one of Cyveillance's releases.
Newswire was aware of Cyveillance's reputation as a reputable company
that investigated counterfeiters purveying goods on the internet. The
press release addressed issues that were the basis of Cyveillance's
business. In this case, the source of the story had previously provided
accurate information and there were no facts which should have aroused
the suspicions of Newswire or that would give cause for further inquiry.
Therefore, Newswire was not grossly irresponsible in republishing the
press release. Consequently, the court grants summary judgment to
b. Ziff Davis
Plaintiff also has not produced evidence that defendant Ziff-Davis'
actions were grossly irresponsible. Ziff-Davis' reporter, Guglielmo,
conducted an adequate investigation of the facts received from
Cyveillance. Although she did not actually speak with offtherunway.com,
the site had no direct contact information posted. Guglielmo also was
unable to discover any contact information after performing a
sufficiently diligent search. It is undisputed that Guglielmo attempted
to use the email link provided by offtherunway.com but that the link did
not work. Furthermore, absent obvious reasons to doubt the truth of the
article, Ziff-Davis was entitled to rely on Guglielmo's, a trusted
reporter's, representations without rechecking her assertions or
retracing her sources. See Chaiken, 119 F.3d at 1032. Therefore, because
plaintiff has not shown that Ziff-Davis was grossly irresponsible, this
court grants Ziff-Davis' motion for summary judgment.
For the reasons set forth above, the court hereby GRANTS defendants'
motions for summary judgment on all claims.