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UKIAH, Calif. – The online publisher of Unhappy Franchisee, Sean Kelly, won a major court victory over Mark Golob, ex-CEO of franchisor Butterfly Fitness. Golob sued Kelly because he felt the blogger wrote "negligent misrepresentations about me."
Kelly had written that Mark Golob had a "checkered" past and a history of litigation. Although Mr. Golob may not have thought of himself that way, Judge Richard J. Henderson of the Superior Court of California, County of Mendocino, stated the obvious for Americans outside the franchisor bubble: "The characterization on Golob's past as 'checkered' is clearly an opinion; statements of opinion are constitutionally protected," reminded the judge. It was also a matter of record that Golob had a history of litigation. Mr. Golob himself listed six cases in his defense.
In fairness to Mr. Golob, it must be puzzling to see Kelly, a well-known blogger in the franchise world, and Golob's alleged former franchisees anonymously criticize both him and his franchising company. Franchisors have a great degree of control over other people's businesses. Franchisees are often outright forbidden from making disparaging remarks about the brand. A franchise can be terminated for criticizing something as trivial as the smell of the cologne that the franchising company's CEO uses. In the case of CertaPro v. Rossi, the franchisor required a former franchise to not only refrain from disparaging the brand, but to "say favorable things to the [CertaPro] franchise prospects [potential buyers of franchises]."
There are other ways to quash speech for owners of franchised establishments. That was exhibited just recently when 7-Eleven franchisee Hashim Syed dared criticize being a franchisee on Chicago radio. "We are nothing more than a glorified manager," said Hashim on WBEZ. That doesn't sound that harsh of a criticism but within days two 7-Eleven vice presidents converged on his Illinois store. 7-Eleven is headquartered in Texas. Hashim received a warning letter of franchise termination because some products were out of stock and the hot dog grills weren't quite right.
"In franchising you have leaders who think it is perfectly natural to demand absolute obedience and that franchisees should never say anything bad about their franchisor," says franchisee attorney Paul Steinberg. He argues that the muzzling of speech is taken for granted in franchising.
In contrast, media resides in a legal framework that is deeply valued and protected. Since before the First Amendment of the Constitution was ratified as part of the Bill of Rights in 1791, America stood out for its high tolerance of free speech and legal protection of the press. "Our liberty depends on the freedom of the press, and that cannot be limited without being lost," wrote Thomas Jefferson to Dr. James Currie in 1786. Liberty was to be more valued than the dangers of defamation, a lesson that President Jefferson would learn for himself when mud began to be slung his way.
That freedom and its supporting structures have become the air we breathe, ingrained institutionally and psychologically with the public and legally within our country's basic body of law.
Bloggers and website hosts can be thankful for their extensive protection from defamation lawsuits, like the attempts by former franchisor Mark Golob and personal injury attorney Nikolaus Reed, to two seismic events that have moved America farther down the road and further away from other countries in what it means to have a free press—New York Times Co. v. Sullivan and Section 230 of the Communications Decency Act of 1996.
Newspapers had been weighed down by libel lawsuits from southern states that had a chilling effect on journalists reporting about civil rights violators. They acted as a news deterrent because the press feared that they would incur a defamation lawsuit by those cast in an unflattering light. The 1964 U.S. Supreme Court ruling changed all that. According to Justice William Brennan in the landmark U.S. Supreme Court ruling of New York Times Co. v. Sullivan, the First Amendment to the U.S. Constitution was to provide that "debate on public issues ... [should be] … uninhibited, robust, and wide-open." It created a "malice standard." It didn't matter if a journalist made errors in reporting. What mattered was if a report was reckless in its disregard of truth because of malice, which is difficult to prove.
The Civil Rights movement, Vietnam and then Watergate all eroded the public's faith in government and eventually corporate institutions. Enron, Arthur Anderson, AIG and Lehman Brothers only accelerated that distrust. For the sake of more open discussion and transparency, the public and the laws have greatly increased in toleration of attacks on reputations.
Then came Section 230 of the Communications Decency Act. Online host intermediaries like social media's Blue MauMau, Twitter, Facebook, Blogspot, UnhappyFranchisee or Yelp are not held liable for the writings and speech posted by others on their sites.
"I think Section 230 is the Internet equivalent of New York Times v Sullivan," says attorney Paul Steinberg. In essence, host providers of public forums are not liable for what people post on their site. "That fundamentally changed the game." Steinberg argues that social media couldn't exist without the legal protections of Section 230.
The win in the Superior Court of Mendocino County, California, by Sean Kelly comes just a few months after a major federal victory by another blogger. Crystal Cox ran into trouble when she blogged that attorney Kevin Padrick of Obsidian Finance Group had committed tax fraud in his responsibilities as a bankruptcy trustee by failing to pay $174,000. Padrick sued for defamation. But in January the U.S. Court of Appeals for the Ninth Circuit ruled in Obsidian Finance Group, LLC vs Cox (pdf) that bloggers were actually entitled to the same free speech protection from libel suits as traditional journalists. The ruling now sets the bar even higher in suing a blogger or an online journalist for defamation unless it can be shown that the blogger knowingly had malice in writing and posting publicly. Courts note that they are supportive of bloggers, even when they are unpaid and untrained amateurs, particularly in matters of public, business and consumer interests.
A few months later, those blogger and online reporter protections have now been articulated for the franchise industry by a California court on behalf of a professional franchise news blogger, Sean Kelly.
Franchisee attorney Peter Lagarias, who represented Kelly, thinks blogging has come to play an important role for franchisees. "It is important that blogs are allowed to flourish and put forth what is happening in the industry to particular individuals that might not make it to the mainstream press," says Lagarias. The California and national attorney thinks this ruling will help protect blog sites.