Wake Forest Law Review
3Oct

Musk’s Attempt to Undo Twitter’s Payment of Wachtell’s Fee

Categories: Current Issues Blog
Comments Off on Musk’s Attempt to Undo Twitter’s Payment of Wachtell’s Fee

J. Stillman Hanson, Jr. 

Last year was dramatic for Elon Musk (“Musk”), even by his standards, largely due to his highly publicized acquisition of Twitter, Inc. (“Twitter”).[1]  In April 2022, Twitter’s board of directors accepted Musk’s offer to buy Twitter at a price of $54.20 per share, and the parties entered into a binding merger agreement.[2]  Musk attempted to back out of the deal which culminated in Twitter suing Musk in July 2022, for material breach of the merger agreement.[3]  Twitter sought to compel Musk to specifically perform his obligations under the merger agreement by closing the deal on its terms.[4]  With a deal volume of $44 billion at stake, Twitter engaged Wachtell, Lipton, Rosen & Katz (“Wachtell”) to enforce its contract with Musk.[5]

Wachtell’s litigation team moved quickly to expedite the trial to October 2022, and performed a considerable amount of legal work for Twitter in a condensed timeline of 3 months.[6]  Engaging Wachtell ultimately paid off for Twitter’s shareholders; in early October 2022, Musk informed the court he would complete the transaction under the merger agreement’s terms.[7]  The $44 billion deal closed on October 27 2022, the same date Twitter paid Wachtell’s total legal fee of $90 million.[8]  A Bloomberg columnist evaluated Wachtell’s successful result as “worth about $25 billion to Twitter’s shareholders,” and he additionally opined that “[p]aying Wachtell 0.3% of the value recovered as a success fee seems pretty reasonable.”[9]  Musk, however, does not share this opinion, as illustrated by the complaint filed by X Corp., Twitter’s successor-in-interest, against Wachtell on July 5, 2023.[10]

X Corp. alleges that Twitter engaged Wachtell’s representation on a strictly hourly fee arrangement and that at the last minute before the deal closed, Wachtell acted improperly by seeking and receiving the final legal fee approved by Twitter’s board of directors.[11]  X Corp. seeks equitable relief from Wachtell for the claims of restitution, breaches of fiduciary duty, and charging an unconscionable fee in violation of state laws.[12]  X Corp. faces an uphill legal battle against Wachtell which it should ultimately lose.

         I. X Corp. v. Wachtell should be arbitrated.

The initial challenge for X Corp. is that this lawsuit is likely headed for arbitration, where Twitter and Wachtell already agreed that it should go.  Wachtell responded to X Corp.’s complaint by filing a Motion to Compel Arbitration and a supporting memorandum on September 8, 2023.[13]  Wachtell’s memorandum contends that by filing this lawsuit, Musk and X Corp. breached the Arbitration Clause of Twitter’s Master Retention Agreement with Wachtell.[14]  X Corp.’s own complaint affirms that the Master Retention Agreement is a binding contract,[15] so Wachtell reasons that neither its validity nor enforceability are contested.[16]  Instead, Wachtell speculates that X Corp.’s claims for relief are styled as equitable or injunctive to exempt them from the Arbitration Clause.[17]

Wachtell has two strong arguments for compelling arbitration.  First, when the scope of arbitration is disputed, the parties contracted to have the arbitrator decide this threshold issue by both express delegation and incorporated JAMS[18] rules.[19]  Second, X Corp.’s claims seeking restitution of Wachtell’s fee are not automatically considered equitable if there is an adequate remedy at law.[20]  Despite X Corp.’s characterization as restitution in equity, Wachtell solidly argues X Corp. is actually claiming for restitution at law because it seeks money damages: repayment of Wachtell’s purportedly excessive fee.[21]  For these reasons, the judge should stay this proceeding pending arbitration that will resolve the scope issues and potentially the entire case.

         II. Wachtell’s fee was reasonable.

X Corp.’s case against Wachtell is also weak because Wachtell’s legal fee was fair and reasonable.  X Corp. advances that the Master Retention Agreement executed by Wachtell on June 21, 2022, and by Twitter on July 28, 2022, dictated only paying Wachtell by the billable hour, lacked a provision for a potential success fee, and contained a merger clause superseding all prior agreements.[22]  Twitter’s former head of litigation, Karen Colangelo, sent an email prior to the execution of the Master Retention Agreement mentioning a potential success fee, and X Corp. has a valid point that this provision did not make it into the executed Master Retention Agreement.[23]  However, the Master Retention Agreement was not the final understanding of the parties prior to the deal closing.

Wachtell handled the merger litigation under the hourly Master Retention Agreement and billed Twitter for a total of $17,943,567.49 between August and September 2022, and Wachtell estimated an additional accrual of $11 million in October, 2022.[24]  In the complaint, X Corp. posits that Wachtell’s $90 million legal fee is unconscionable because it is well beyond the total amount of Wachtell’s hourly invoices.[25]  Wachtell’s memorandum addresses this allegation by stating its lawyers invested over $40 million into the case in time and expenses, which decreases the gap between the total hourly fees and final legal fee.[26]  Furthermore, Wachtell references multiple news outlets reporting that the $90 million fee was a tiny fraction of the total $44 billion transaction volume, and that Twitter got “its money’s worth” and a “fantastic deal” given that the deal would have collapsed without forcing Musk to comply with the merger agreement.[27]

X Corp. alleges that although Wachtell’s litigation work had successfully concluded, Wachtell pressured Twitter in the two weeks preceding the closing to amend the Master Retention Agreement to pay a success fee.[28]  X Corp. laments that the final legal fee paid to Wachtell “provided no value to Twitter or its shareholders” and “amounted to a huge cash gift.”[29]  X Corp.’s proffered gift violations, under Cal. Rule of Pro. Conduct 1.8.3 and N.Y. Rule of Pro. Conduct 1.8(c), fail to see the value of Wachtell’s hard work.

While X Corp. feels Wachtell and Twitter’s former officers and directors acted improperly, Twitter chose to recognize the $44 billion value Wachtell provided to the company’s shareholders.  In fact, Colangelo’s email[30] indicates Twitter and Wachtell may have had an understanding of the success fee all along, weakening X Corp.’s claim that the success fee was hurriedly paid by Twitter’s board of directors lacking factual information and authority for the decision.

         III. Twitter’s board of directors had authority to pay Wachtell.

Twitter’s board of directors acted independently in good faith to compensate Wachtell for high-quality legal services, a far cry from unlawful business practices under Cal. Bus & Prof. Code § 17200.  Although Cal. Bus & Prof. Code § 6147 gives requirements for contingent fees, as X Corp. repeatedly points out, the details of the success fee were agreed upon after the deal had already become a success; this rendered the fee no longer contingent on anything.  Under Cal. Rule of Pro. Conduct 1.5, Twitter gave informed consent to the fee, and considering the labor required under the time limitations and the results obtained, Wachtell’s fee was fair.  Despite X Corp.’s interpretation that Section 6.1(e) of the merger agreement[31] limited Twitter’s discretion to increase Wachtell’s fee prior to closing,[32] Twitter agreed to pay Wachtell’s legal fee in the ordinary course of business considering Twitter had never faced this extraordinary merger litigation in the past.

Investment banks regularly receive success fees on large transactions,[33] but Wachtell’s fee is not covered by Section 4.21 of the merger agreement[34] limiting investment banking and similar fees because it is a fee for legal rather than brokerage services.  On October 20, 2022, Wachtell disclosed to Twitter similar legal fee arrangements from mergers or acquisitions in the past three years where Wachtell had received fees ranging from 67% to 100% of the investment banking fees on those deals.[35]  Wachtell was transparent about these past arrangements, and Twitter’s board of directors felt comfortable following a similar compensation route.  Just before the closing, Wachtell and Twitter effectively amended their fee arrangement and memorialized their final contract in the Closing Day Letter Agreement approved by Twitter’s independently advised board of directors at the last board meeting.[36]

X Corp. pleads that Twitter’s board of directors were lame ducks when they approved Wachtell’s fee,[37] yet when Twitter authorized the wire to Wachtell at 12:07 p.m. on the closing date, and when the wire processed and posted at 3:50 p.m., 10 minutes before the deal closed,[38] Twitter was still under the full control of its board of directors who had every right to pay Wachtell’s legal fee.[39]  Twitter knew what it was doing: paying a legal fee that it is doubtful Musk ever would have honored considering that under his leadership, X Corp. has followed a consistent pattern of refusing to pay Twitter’s former employees, landlords, and vendors.[40]  Contrary to Musk’s belief, honoring to pay a legal vendor for services rendered does not amount to a breach of fiduciary duty.

Twitter’s board of directors acted with authority in paying Wachtell’s legal fee.  Clients and attorneys regularly agree to fee arrangements.  If the amount of work performed exceeds a previously agreed upon fee, the parties are free to amend the final fee to accurately reflect the value of the services.  Here, Twitter paid Wachtell according to its reasonable appraisal of Wachtell’s legal services, and the court should not question Twitter’s judgment.

 

 

[1] See Isaac Hopkin, How Twitter’s Whistleblower Helps Musk, Wake Forest L. Rev. Current Issues Blog (Oct. 5, 2022), https://www.wakeforestlawreview.com/2022/10/how-twitters-whistleblower-helps-musk%ef%bf%bc/.

[2] Press Release, Twitter, Inc., Elon Musk to Acquire Twitter (Apr. 25, 2022).

[3] See Verified Complaint at 5, Twitter, Inc. v. Musk, C.A. No. 2022-0613-KSJM (Del. Ch. Jul. 12, 2022).

[4] See id.

[5] See Memorandum of Points and Authorities in Support of Defendant Wachtell, Lipton, Rosen & Katz’s Motion to Compel Arbitration and for a Stay of Proceedings Pending Disposition of this Motion and Arbitration at 6, X Corp. v. Wachtell, Case No. CGC-23-607461 (Cal. Super. Ct. Sept. 9, 2023) [hereinafter Wachtell’s Memorandum].

[6] See id. at 8.

[7] See id.

[8] See Complaint for (1) Restitution (Unjust Enrichment) (2) Breach of Fiduciary Duty (3) Aiding and Abetting Breach of Fiduciary Duty (4) Violation of Cal. Bus. & Prof. Code § 17200 at 1, X Corp. v. Wachtell, Case No. CGC-23-607461 (Cal. Super. Ct. Jul. 5, 2023) [hereinafter Complaint].

[9] Wachtell’s Memorandum, supra note 5, at 9 (quoting Matt Levine, Elon Musk Blames the Lawyers, Bloomberg (Jul. 11, 2023), https://www.bloomberg.com/opinion/articles/2023-07-11/matt-levine-s-money-stuff-elon-musk-blames-the-lawyers#xj4y7vzkg).

[10] See Complaint, supra note 8, at 1–2.

[11] See id.

[12] See id. at 24–31.

[13] See Wachtell’s Memorandum, supra note 5, at 5.

[14] See id. at 9.

[15] See Complaint, supra note 8, at 2.

[16] See Wachtell’s Memorandum, supra note 5, at 10.

[17] See id.

[18] See, e.g., The JAMS Name, JAMS, https://www.jamsadr.com/about-the-jams-name/ (last visited Oct. 3, 2023) (stating that JAMS is a leading provider of alternative dispute resolution services, and the name JAMS was previously an acronym for Judicial Arbitration and Mediation Services, Inc.).

[19] See Wachtell’s Memorandum, supra note 5, at 13.

[20] See id. at 17 (citing Martin v. Cnty. of Los Angeles, 51 Cal. App. 4th 688, 695–98 (1996)).

[21] See id. (citing Jogani v. Super. Ct. 165 Cal. App. 4th 901, 910 (2008); Lectrodryer v. Seoulbank 77 Cal. App. 4th 723, 728 (2000)).

[22] See Complaint, supra note 8, at 8–9.

[23] See id.

[24] See id. at 9–10.

[25] See id. at 1–2.

[26] See Wachtell’s Memorandum, supra note 5, at 8.

[27] Id.

[28] See Complaint, supra note 8, at 26–27.

[29] Id. at 27.

[30] See id. at 8.

[31] See Twitter, Inc., Annual Report (Form 8-K) Ex. 2.1 (Apr. 25, 2022).

[32] See Complaint, supra note 8, at 6.

[33] See Success Fee, Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/valuation/success-fee/ (last visited Oct. 3, 2023).

[34] See Annual Report (Form 8-K) Ex. 2.1, supra note 31.

[35] See Complaint, supra note 8, at Ex. 7.

[36] See Wachtell’s Memorandum, supra note 5, at 8–9.

[37] See Complaint, supra note 8, at 4.

[38] See id. at 19.

[39] See Wachtell’s Memorandum, supra note 5, at 8–9.

[40] See id. at 9; see also Jennifer Kay, Musk’s Twitter, Tesla Fights Ramp Up in Delaware: Explained, Bloomberg Law (Sept. 27, 2023), https://news.bloomberglaw.com/litigation/musks-twitter-tesla-fights-ramp-up-in-delaware-explained.

Tags:
18Mar

Elon Musk’s Firing Fiasco: Should We Provide Better Protection for Those Affected?

Categories: Current Issues Blog
Comments Off on Elon Musk’s Firing Fiasco: Should We Provide Better Protection for Those Affected?

By Matthew Goldstein

In the five months since Elon Musk purchased a 44 billion dollar 100% ownership stake in Twitter,[1] he has committed a series of firings that have had significant negative impacts on the lives of thousands of people.[2] Specifically, Musk has terminated around 5500 of Twitter’s 7500 employees since he became the owner and CEO of the company.[3] While periodic hirings and firings, or even mass layoffs in response to unexpected or novel market conditions, are an expected part of any corporation, what is particularly problematic about Twitter is how the company has gone about handling its scores of terminations.

For many employees, an expected layoff experience might entail some notice that they were being terminated as well as some time for them to prepare for the end of their job and reentrance into the employee marketplace. In order to ensure these basic expectations for employees, the federal government has enacted the Worker Adjustment and Retraining Notification Act (WARN).[4] The act requires all employers with over 100 employees to give at least 60 days of notice for any mass layoff which it defines as a termination of the smaller of 33% of employees or 50 employees.[5] WARN also requires the notice to be specific and to be given to each individual employee ahead of the 60 day notice window.[6] Additionally, California has its own version of WARN called the California Worker Adjustment and Retraining Notification Act (CalWARN).[7]  In addition to the 60 day notice requirement of WARN, CalWARN also includes provisions giving employers specific civil liability and remedies for failing to give notice including back pay, civil penalties, and attorney’s fees.[8]

Twitter’s approach seems to stray quite far away from these statutory requirements. Twitter employees might hear a vague declaration from Musk that layoffs will happen only to discover that hours later they are completely locked out of all company laptops and email accounts and are then left to conclude that they must have been fired.[9]

Employees who were locked out of their systems and effectively terminated on the spot without any real notice quickly discovered the degree to which Twitter was likely in violation of WARN and CalWARN and decided to file a class action lawsuit citing violations of these statutes as well as breach of contract and other California employment law claims.[10] While these claims may have been merited, a court order in January compelled each of the individuals bringing claims in the suit to arbitration as it was mandated by their contracts.[11] While the court compelled arbitration on these seemingly valid claims, it declined to comment on the validity of the class at issue and chose to table the issue as the case develops.[12] For the time being, it seems like Twitter will be facing relatively minimal consequences for these probable violations.[13]

To protect the rights of employees in the state from similar violations in the future, one California Legislature representative has proposed a bill to amend CalWARN.[14] The bill would employ a number of protections including expanding the definition of employee to include independent contractors, giving similar civil remedies to independent contractors as employees, expanding the notice period to 90 days, and, most importantly, curb the power of employers to easily and quietly settle disputes with employees.[15] Specifically, the bill would seek to ban any general release, waiver of claims, or nondisparagement or nondisclosure agreement either as a condition of employment or as a post-termination form of settlement unless in the form of extra consideration on top of the remedies guaranteed by the bill.[16] While the bill likely would not have prevented the terminated Twitter employees from being compelled to arbitration, it would give them a significant bargaining advantage during that arbitration process and compel companies like Twitter to pursue more equitable outcomes.

Furthermore, the most recent development in Musk’s erratic termination behavior demonstrates the pressing need for this kind of behavior to be curbed to protect both employees and investors. On March 6, 2023, a Twitter employee named Halli Thorleifsson reached out to Musk on Twitter claiming that he and 200 other Twitter employees were locked out of their systems and could not confirm with human resources whether or not they had been fired.[17] After tweets back and forth between Halli and Musk in which Musk publicly disclosed and mocked Halli’s disability and work ethic in front of Musk’s massive Twitter following, Halli eventually received notice that he had been terminated and asked Musk if he would pay him what he was owed.[18] Halli was referring to the fact that his employment at Twitter resulted from the sale of his own technology company to Twitter and his subsequent election to be paid with a salary rather than a lump sum for his company in order to pay more taxes to his home country of Iceland.[19] If Twitter were to fire him, they would owe him the full lump sum of the value of his company which could have put Twitter on the hook for a hefty and unnecessary bill.[20]

Beyond the likely WARN and CalWARN violations and other various possible legal and ethical violations towards employees that this kind of action provides, there is also the consideration of how Musk’s actions negatively financially impact others. For example, most CEOs are constrained by a fiduciary duty of care to their shareholders to “discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.”[21] However, Musk has no such duty to the shareholders of Twitter because he fully owns the company and therefore does not face the same limitations that many other CEOs do.

Even though there are no shareholders to hold him accountable for responsibly managing Twitter, that doesn’t stop his actions from potentially harming his employees, business partners, and other businesses. For example, the stock price of Tesla, another corporation of which Musk is the CEO, has decreased about 20% in the months since Musk’s Twitter acquisition.[22] While this decrease certainly cannot be solely blamed on Musk’s actions, the spontaneous and widely criticized actions of Tesla’s publicly notorious CEO certainly did not increase investors’ confidence.

Ultimately, it seems that the current state of the law is unable to reasonably constrain the behavior of Musk. In times where a single individual fully wields the power of a 44-billion-dollar corporation at a whim and can significantly impact the lives of thousands if not millions of people, the legal landscape must be updated to ensure those people reasonable protections. While propositions to amend California’s labor code to better protect the state’s employees is a good start, more must be done at both the state and federal level to ensure reasonable protections for the employment and financial interests of all who could be affected.

[1] Kate Conger & Lauren Hirsch, Elon Musk Completes $44 Billion Deal to Own Twitter, N.Y. Times (Oct. 27, 2022), https://www.nytimes.com/2022/10/27/technology/elon-musk-twitter-deal-complete.html.

[2] Kate Conger et al., In Latest Round of Job Cuts, Twitter Is Said to Lay Off at Least 200 Employees, N.Y. Times (Feb. 26, 2023), https://www.nytimes.com/2023/02/26/technology/twitter-layoffs.html.

[3] Id.

[4] 20 C.F.R. § 639 (1989).

[5] 20 C.F.R. § 639.3 (1989).

[6] 20 C.F.R. § 639.7 (1989).

[7] Cal. Lab. Code § 1402 (2003).

[8] Id.

[9] Charissa Cheong, A Twitter employee has been flooded with support after saying he was locked out of his emails and laptop at 3am: ‘This isn’t looking promising’, Insider (Nov. 4, 2022), https://www.insider.com/twitter-employee-chris-younie-locked-out-emails-laptop-3am-2022-11.

[10] Cornet v. Twitter, Inc., No. 3:22-cv-06857-JD, 2022 WL 18396334, at *1 (N.D. Cal. Dec. 14, 2022).

[11] Cornet v. Twitter, Inc., No. 3:22-cv-06857-JD, 2022 WL 187498, at *3 (N.D. Cal. Jan 13, 2023).

[12] Id.

[13] Id.

[14] A.B. 1356, 2023-2024 Leg., Reg. Sess. (Cal. 2023).

[15] Id.

[16] Id.

[17] Anisha Kohli, Why Elon Musk’s Very Public Dismissal of a Disabled Employee Could Be Costly, Time (Mar. 8, 2023), https://time.com/6261117/musk-twitter-halli-layoff-payout.

[18] Id.

[19] Id.

[20] Id.

[21] Model Bus. Code § 8.30(b) (A.B.A. 2016).

[22] Yahoo Finance, Tesla, Inc., https://finance.yahoo.com/quote/TSLA/ (Last visited Mar. 14, 2023).

Tags:
6Sep

Of Subtweets and Bedbugs: Libel in the Age of Social Media

Categories: Current Issues Blog
Comments Off on Of Subtweets and Bedbugs: Libel in the Age of Social Media

By Greg Berman

Controversy erupted last week after a George Washington University professor, Dave Karpf, tweeted a joke at New York Times columnist Bret Stephens’s expense.  Quoting an 8-word post about a bedbug infestation in the Times’ newsroom, Karpf joked that “[t]he bedbugs are a metaphor.  The bedbugs are Bret Stephens.”[1]  Although this tweet did not initially gain much traction, it later went viral when Stephens personally emailed Karpf, as well as the George Washington University provost, demanding an apology for the insult.[2]  After several more tweets and an off-scheduled column post by Stephens with visible references to the controversy, both sides of the feud seem to be slowing down.[3]  Although this back and forth is just one isolated incident between two individuals, it highlights a growing trend in our discourse.  With the growing usage of social media in our society, these sorts of ideological clashes have seemingly become more prevalent than ever.[4]  And even though these virtual arguments tend to be more of an annoyance than a liability, reputation-damaging attacks (even those made on the internet) still can run the risk of triggering a costly libel lawsuit.[5] 

The tort of libel is defined by Black’s Law Dictionary as “[a] defamatory statement expressed in a fixed medium, esp[ecially] writing but also a picture, sign, or electronic broadcast.”[6]  The enforcement of libel laws in the United States dates predates the ratification of the Constitution, most notably with the trial of John Peter Zenger, whose 1735 jury acquittal established the idea that someone cannot be charged with libel if the remark is true.[7]  Even today, the accuracy of the allegedly libelous statements continues to be one of key factors for courts to consider in libel cases, with each state setting their own standards for liability.[8]  Another key consideration for courts comes from New York Times v. Sullivan, where the Supreme Court differentiated defamation claims involving public figures and private individuals, holding that any libel suit against a public figure requires the inaccurate statement to be made with “actual malice.”[9]  Actual malice has been defined by the Court as “knowledge that (the statement) was false or with reckless disregard of whether it was false or not.”[10]  Additional protections against libel claims were enacted nine years later, when the Supreme Court limited libel laws to apply only to intentionally false statements of fact, even if a trial court is presented with baseless opinions that are similarly incorrect.[11]

Our ever-increasing move toward a digitalized world raises the question of how these libel laws can be applied to internet publications.  To start, no claim for libel can be made against any social media site, such as Facebook or Twitter, for content posted by a user of that social media site.[12]  This is primarily due to the expansive legal protections given to these “interactive computer services” by Section 230 of the Communications Decency Act of 1996.[13]  That being said, individuals may still be held liable for content that they post on the internet, with each state continuing to apply its own standards for libelous conduct even as information crosses state lines.[14]  When it comes to the question of jurisdiction, the Supreme Court clarified in Keeton v. Hustler Magazine, Inc. that a state can claim jurisdiction over a non-resident when injurious information is intentionally disseminated to its citizens.[15]  Specifically, the Court cited each state’s interest in protecting its citizens from intentional falsehoods as a key consideration in its decision.[16] While online information is disseminated in a different manner than the magazines from Keeton, courts have begun allow jurisdiction for internet libel cases when the online post directly targets one or more residents of the state.[17]

When applying libel laws to online statements, courts have used similar substantive principles to those used for print publications.  In 2009, former musician Courtney Love was sued by her former attorney after tweeting allegedly libelous remarks.[18]  As this was the first reported case to go to a jury decision for remarks made over Twitter, the trial court was left with a case of first impression.[19]  In a landmark decision, the court opted to apply traditional libel laws.  A jury found that Love did not know that the statements were false at the time they were made; she therefore lacked the actual malice required to be considered libel.[20]  

There have also been other cases involving libelous comments made over Twitter.[21]  For example, one such case took place after a tenant complained on her personal Twitter account about her “moldy apartment.”[22]  After seeing the post, the landlord sued the tenant under Illinois libel laws; the case was later dismissed with prejudice because the tweet was too vague to meet the requisite legal standards for libel.[23]  Another lawsuit took place after a mid-game conversation between an NBA coach and a referee was overheard and tweeted out by an AP reporter.[24]  The referee insisted that the reported conversation never took place, and the subsequent lawsuit ultimately resulted in a $20,000 settlement.[25]  Each of these cases present factually unique scenarios, but all together indicate a growing trend: even as the medium for public discourse has been rapidly shifting towards the digital sphere, traditional libel laws still continue to apply.

In addition to substantive treatment, there also remain unresolved legal questions stemming from courts’ application of the single publication rule.  The single publication rule provides that “any one edition of a book or newspaper, or any one radio or television broadcast, exhibition of a motion picture or similar aggregate communication is a single publication” and therefore “only one action for damages can be maintained.”[26]  The justification behind this rule is simple: by aggregating all damages allegedly caused by a publication to a single action, a party would not be perpetually bombarded with litigation long after their active role in publication has ended.[27]  This rule has already been adopted in “the great majority of states” and was implemented within the 4th Circuit in Morrissey v. William Morrow & Co.[28]  However, some academics have proposed that the single publication rule should not always be applied to social media posts, citing the possibility that a publisher could personally solicit shares or retweets and thereby maintain an active role in republishing libelous information.[29]  The issue of continual dissemination by means of retweeting seems primed to be raised in later litigation, but thus far has not been brought before any court.[30]  Still, many circuits have already begun the process of implementing the single publication rule to online posts in general (so far these cases have been litigated over personal blogs rather than Facebook or Twitter posts), so it will be interesting to see how courts handle the issue if eventually raised by litigants down the road.[31]

As the social media presence in our society grows stronger each day, only time will tell if courts will craft separate libel principles for online publications.  There are arguments to be made on both sides, especially now that online mediums are increasingly taking over many of the informational functions previously held by their print counterparts.[32]  For now, at least, courts are continuing to use the same traditional libel laws that have been evolving and changing since John Peter Zenger’s 1735 acquittal. [33]  And while the jury is still out on whether Dave Karpf actually thinks Bret Stephens is a metaphorical bedbug, he can likely rest easy knowing that current libel laws will protect his joke from any future legal trouble.

1. Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 5:07 PM), https://twitter.com/davekarpf/status/1166094950024515584.

[2] See Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 9:22 PM), https://twitter.com/davekarpf/status/1166159027589570566; Dave Korpf (@davekorpf), Twitter (Aug. 26, 2019, 10:13 PM) https://twitter.com/davekarpf/status/1166171837082079232; see also Tim Efrink & Morgan Krakow, A Professor Called Bret Stephens a ‘Bedbug.’ The New York Times Columnist Complained to the Professor’s Boss, Wash. Post (Aug. 27, 2019), https://www.washingtonpost.com/nation/2019/08/27/bret-stephens-bedbug-david-karpf-twitter/ (summarizing the context of Korpf’s tweet and the resulting controversy).

[3] See Dave Korpf (@davekorpf), Twitter (Aug. 30, 2019, 7:58 PM), https://twitter.com/davekarpf/status/1167587392292892672; Bret Stephens, Opinion, World War II and the Ingredients of Slaughter, N.Y. Times (Aug. 30, 2019), https://www.nytimes.com/2019/08/30/opinion/world-war-ii-anniversary.html.

[4] Jasmine Garsd, In An Increasingly Polarized America, Is It Possible To Be Civil On Social Media?, NPR (Mar. 31, 2019) https://www.npr.org/2019/03/31/708039892/in-an-increasingly-polarized-america-is-it-possible-to-be-civil-on-social-media.

[5] See id.; Adeline A. Allen, Twibel Retweeted: Twitter Libel and the Single Publication Rule,15 J. High Tech. L. 63, 81 n.99 (2014).

[6]  Libel, Black’s Law Dictionary (11th ed. 2019).

[7] Michael Kent Curtis, J. Wilson Parker, William G. Ross, Davison M. Douglas & Paul Finkelman, Constitutional Law in Context 1038 (4th ed. 2018).

[8] James L. Pielemeier, Constitutional Limitations on Choice of Law: The Special Case of Multistate Defamation, 133 U. Pa. L. Rev. 381, 384 (1985).

[9] 376 U.S. 254, 279–80 (1964); see also Gertz v. Robert Welch, Inc., 418 U.S. 323, 351 (1974) (defining a public figure as either “an individual achiev[ing] such pervasive fame or notoriety” or an individual who “voluntarily injects himself or is drawn into a particular public controversy”).

[10] Sullivan, 376 U.S. at 280.

[11] See Gertz, 418 U.S. at 339 (“[u]nder the First Amendment, there is no such thing as a false idea.”).

[12] See Allen, supra note 5, at 82.  Of course, Facebook and Twitter are not immunized against suits for content that they post on their own platforms.  Cf. Force v. Facebook, Inc., ___ F.3d ___, No. 18-397, 2019 WL 3432818, slip op. at 41 (2d Cir. July 31, 2019), http://www.ca2.uscourts.gov/decisions/isysquery/a9011811-1969-4f97-bef7-7eb025d7d66c/1/doc/18-397_complete_opn.pdf (“If Facebook was a creator or developer, even ‘in part,’ of the terrorism-related content upon which plaintiffs’ claims rely, then Facebook is an ‘information content provider’ of that content and is not protected by Section 230(c)(1) immunity.”).

[13] 47 U.S.C. §230(c)(1) (2017) (“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”).  “Interactive computer service” is defined by the act as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server”). Id. at §230(f)(2); see also Allen, supra note 5, at 82 n.100 (describing additional protections provided by the Communications Decency Act, including how Twitter falls under its definition of “interactive computer service”).

[14] See Allen, supra note 5, at 84; Pielemeier, supra note 8, at 384.

[15] 465 U.S. 770, 777 (1984); see also Calder v. Jones, 465 U.S. 783, 791 (1984) (holding that personal jurisdiction is proper over defendants who purposefully directed libelous information at the plaintiff’s home state with the intent of causing harm).

[16] Keeton, 465 U.S. at 777.

[17] See, e.g.,Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997); Young v. New Haven Advocate, 315 F.3d 256, 263 (4th Cir. 2002); Tamburo v. Dworkin, 601 F.3d 693, 707 (7th Cir. 2010) (each applying traditional libel tests for personal jurisdiction to online publications, requiring the publication to be intentionally targeted towards citizens of the state). 

[18] Gordon v. Love, No. B256367, 2016 WL 374950, at *2 (Cal. Ct. App. Feb. 1, 2016). The exact language of the tweet in question was “I was fucking devastated when Rhonda J. Holmes, Esquire, of San Diego was bought off @FairNewsSpears perhaps you can get a quote.”  Id.  The tweet was deleted five to seven minutes after it was posted.  Id. at *3.  This was Love’s second time being sued for defamation over comments made on her Twitter account, although the first lawsuit resulted in a $430,000 settlement before trial. Matthew Belloni, Courtney Love to Pay $430,000 in Twitter Case, Reuters (Mar. 3, 2011), https://www.reuters.com/article/us-courtneylove/courtney-love-to-pay-430000-in-twitter-case-idUSTRE7230F820110304.

[19] See Allen, supra note 5, at 81 n.99.

[20] Love, 2016 WL 374950, at *3.  The reason actual malice was required in the case is because Love’s attorney had gained public figure status, which was not disputed at trial. Id.

[21] See Joe Trevino, From Tweets to Twibel*: Why the Current Defamation Law Does Not Provide for Jay Cutler’s Feelings, 19 Sports Law J. 49, 61–63 (2012) (describing a series of libel lawsuits stemming from social media posts).

[22] Id. at 61.

[23] Andrew L. Wang, Twitter Apartment Mold Libel Suit Dismissed, Chi. Trib. (Jan. 22, 2010), https://www.chicagotribune.com/news/ct-xpm-2010-01-22-1001210830-story.html.

[24] Trevino, supra note 21, at 63. 

[25] Lauren Dugan, The AP Settles Over NBA Twitter Lawsuit, Pays $20,000 Fine, Adweek (Dec. 8, 2011), https://www.adweek.com/digital/the-ap-settles-over-nba-twitter-lawsuit-pays-20000-fine/.

[26] Restatement (Second) of Torts § 577A(3–4) (Am. Law Inst. 1977).

[27] Id. at § 577A cmt. b.

[28] 739 F.2d 962, 967 (4th Cir. 1984) (quoting Keeton, 465 U.S. at 777 n.8).

[29] Allen, supra note 5, at 87–88.

[30] See Lori A. Wood, Cyber-Defamation and the Single Publication Rule, 81 B.U. L. Rev. 895, 915 (2001) (calling for courts to define “republication” in the context of internet publications).

[31] See, e.g., Firth v. State, 775 N.E.2d 463, 466 (N.Y. 2002); Van Buskirk v. N.Y. Times Co., 325 F.3d 87, 90 (2d Cir. 2003); Oja v. U.S. Army Corps of Eng’rs, 440 F.3d 1122, 1130–31 (9th Cir. 2006); Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., 512 F.3d 137, 144 (5th Cir. 2007).  But see Swafford v. Memphis Individual Prac. Ass’n, 1998 Tenn. App. LEXIS 361, at *38 (Tenn. App. 1998).

[32] See Allen, supra note 5, at 91 n.157.

[33] See Trevino, supra note 19, at 69.

Tags: