America Online, Inc. v. Nam Tai Electronics, Inc.

• Decision Date: 01 November 2002
• Docket Number: Record No. 012761.
• Citation: 264 Va. 583,571 S.E.2d 128
• Parties: AMERICA ONLINE, INC., v. NAM TAI ELECTRONICS, INC.
• Court: Virginia Supreme Court

571 S.E.2d 128

264 Va. 583

AMERICA ONLINE, INC., v. NAM TAI ELECTRONICS, INC.

Record No. 012761.

Supreme Court of Virginia.

November 1, 2002.

Laura A. Heymann, for appellant.

Jon M. Talotta (Michael J. Quinn; Kirkpatrick & Lockhart, on brief), for appellee.

Present: CARRICO, C.J., LACY, HASSELL, KOONTZ, KINSER, and LEMONS, JJ., and STEPHENSON, S.J.

Opinion by Justice LAWRENCE L. KOONTZ, JR.

In this appeal and in the context of the Uniform Foreign Depositions Act, Code § 8.01-411 through -412.1 (UFDA), we consider whether a Virginia trial court properly applied principles of comity in refusing to quash a subpoena duces tecum obtained under a commission for out-of-state discovery issued by a California trial court.

BACKGROUND

On January 26, 2001, Nam Tai Electronics, Inc. (Nam Tai) filed a complaint in the Superior Court of the State of California for the County of Los Angeles (the California court) against fifty-one unknown individuals alleging libel, trade libel, and violations of California Business and Professions Code Section 17000 et seq. (California's unfair business practices statutes). In summary, Nam Tai alleged that the unknown individuals had posted "false, defamatory, and otherwise unlawful messages" on an Internet message board devoted to discussion of Nam Tai's publicly traded stock,

The message board was maintained by Yahoo! Inc. (Yahoo), an Internet services company located in California. The message board was available to be viewed by any Internet user. However, in order to post a message an Internet user must first establish a Yahoo account, for which the company does not charge a fee, and create a "login name," which is subsequently used to identify the user when posting messages on the service. In its complaint, Nam Tai identified one of the unknown defendants by the Yahoo login name "scovey2." Attached to the complaint was a printout of a single message posted by "scovey2" to the message board devoted to Nam Tai's stock. Dated as having been posted on January 8, 2001 at 10:03 p.m. Eastern Standard Time, the message was titled "sinking again," and read as follows:

Sinking is not a province in China but an observation of this company's stock market performance. This low tech crap that they produce is in an extremely competitive and low profitability industry. I see see-sawing of the stock with no real direction. (See-sawing is also not a province.)

Nam Tai alleged that this message "among others" posted by "scovey2" was part of a concerted effort by the unknown defendants to defame Nam Tai in order to discourage investors from purchasing or holding stock in Nam Tai. Nam Tai further alleged, in part, that the defendants' intent was to "interfere with [Nam Tarsi relationship with its shareholders and the general public and to manipulate the price of Nam Tai stock to their advantage." It further alleged that the acts of the defendants "constitute unlawful, unfair, and deceptive business practices against [Nam Tai] . . . in violation of" California's unfair business practices statutes. Nam Tai sought both compensatory and punitive monetary damages and injunctive relief.¹

Following the filing of the complaint, Nam Tai obtained a subpoena duces tecum in California directing Yahoo to disclose its subscriber data on "scovey2."² Based on the information subsequently disclosed by Yahoo, Nam Tai was able to determine that "scovey2" obtained his Internet access through America Online, Inc. (AOL), an online services company that also serves as a portal site to the Internet. Specifically, Yahoo disclosed the Internet protocol (IP) address³ used by "scovey2" to access Yahoo's Nam Tai message board on January 8, 2001 and the "alternate email address" given by "scovey2" when registering for a Yahoo login name. The Internet protocol address recorded when "scovey2" posted the January 8, 2001 message was "152.163.194.186," which is registered to AOL. The alternate email address "scovey2" supplied to Yahoo was "scovey@aol.com."

Nam Tai obtained a commission for out-of-state discovery from the California court to depose AOL's custodian of records. AOL's principal corporate offices are located in Loudoun County and, accordingly, the commission was directed to a registered court reporting service authorized to take depositions within Virginia. On March 19, 2001, Virginia counsel for Nam Tai filed a praecipe in the Circuit Court of Loudoun County (the trial court) for a foreign subpoena duces tecum. On the same date, the clerk of the trial court issued the subpoena directing AOL's custodian of records to produce, among other things, records related to the opening of the account assigned the email address "scovey@aol.com" and "[d]ocuments sufficient to identify the AOL customer or subscriber . . . assigned the AOL Internet Protocol Address 152.163.194.186 . . . on January 8, 2001, at 10:03 PM EST."

On April 17, 2001, AOL filed a motion to quash Nam Tai's subpoena duces tecum. In that pleading, AOL acknowledged that counsel for Nam Tai had provided it with a copy of a second message, posted by "scovey2" on June 3, 1999, which criticized the company's stock trading practices and accused Nam Tai's president of "manipulat[ing] the stock [of] this and other smaller companies."⁴ AOL contended that it should not be required to reveal subscriber information because this would "infringe on the well-established First Amendment right to speak anonymously," and that Nam Tai could not meet the heightened scrutiny required to overcome that right. AOL further contended that the First Amendment protection applied to all claims made in Nam Tai's California complaint, including the statutory unfair business practices claim.

On April 27, 2001, Nam Tai filed a brief opposing AOL's motion to quash. Nam Tai contended that AOL was seeking a review of both the procedural process already approved by the California court and a substantive review of the merits of the underlying cause of action stated in the California complaint. Nam Tai asserted that principles of comity required the trial court to give deference to the procedures used in obtaining the commission from the California court. Nam Tai further asserted that "scovey2" had been notified by AOL of the subpoena, but had not joined in the motion to quash. Thus, Nam Tai contended that AOL did not have standing to challenge the merits of the underlying claim.

On May 1, 2001, AOL filed a reply to Nam Tai's brief opposing AOL's motion to quash. AOL contended that Nam Tai had not met the criteria for applying principles of comity because Nam Tai could not show that its California complaint stated a viable cause of action. AOL further contended that the absence of the real party in interest did not deprive AOL of standing to challenge the underlying merits of the case because the notice to "scovey2" was informal and that "scovey2" might have elected not to join the motion for strategic or economic reasons.⁵

Following a hearing on May 4, 2001, the trial court, relying on America Online, Inc. v. Anonymous Publicly Traded Co., 261 Va. 350, 542 S.E.2d 377 (2001) (hereinafter AOL v. APTC), determined that before enforcing Nam Tai's subpoena it was required to "determine whether comity should be granted to the California court's Order and, if not, whether the subpoena should nevertheless be enforced in light of the merits of Nam Tai's underlying California law-based claims." Having determined that it could not address either issue "without further guidance from the California court," the trial court entered a protective order barring the discovery until it had received and reviewed "guidance from the California court . . . with respect to the procedural and substantive law applicable to the California court's Order."

Responding to the trial court's request for guidance, the California court made the following findings in an order dated June 22, 2001 clarifying the commission for out-of-state discovery:

1. That Nam Tai has alleged sufficient facts in its complaint, under California law, for libel, trade libel and for injunctive relief under California Business and Professions Code Section 17200, such that Nam Tai is entitled under California law to conduct discovery to identify the anonymous defendant in this matter notwithstanding the First Amendment privacy concerns raised in AOL's motion to quash.

2. That, under the facts and circumstances of this case, the First Amendment privacy concerns of the anonymous defendant are outweighed by the State of California's interest in the ability of its litigants to conduct out-of-state discovery.

3. This Court reaffirms its March 15, 2001, Order for the issuance of a commission for out-of-state discovery notwithstanding the concerns raised in AOL's motion to quash related to the First Amendment privacy rights of the anonymous defendant and the sufficiency of the allegations in Nam Tai's complaint.

In making these findings, the California court apparently reviewed the briefs and arguments made in the trial court as previously recited herein. Accordingly, the California court was aware of, and may have considered, the content of the June 3, 1999 message, although the content of that message and allegations related to it had not been included in Nam Tai's complaint.

Following a subsequent teleconference, during which the parties stated arguments that essentially parallel the positions asserted in this appeal, the trial court issued an opinion letter dated August 7, 2001. Applying the standards enunciated in AOL v. APTC, the trial court first concluded that "[n]either of the defamation claims would withstand demurrer if filed in Virginia." Thus, the trial court concluded that comity did not require enforcement of the subpoena as to those claims because "it would facilitate process not otherwise available to litigants in the Commonwealth." In reaching this conclusion, the trial court focused solely on the January 8, 2001 message and did...