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Federal Trade Commission v. Accusearch Inc.: Tenth Circuit Affirms Liability for Seller of Private Telephone Records

Privacy Telecommunications

Federal Trade Commission v. Accusearch Inc., June 29, 2009, No. 08-8003, Slip Opinion

On June 29, 2009, the Tenth Circuit affirmed the Wyoming District Court, holding that Accursearch's sale of private telephone records on its website constituted an unfair practice in violation of the Federal Trade Commission Act (FTCA) and granted summary judgment for the Federal Trade Commission (FTC).

Dan Gooden of The Register provides an overview of the opinion. Eric Goldman criticizes the court's opinion on his Technology & Marketing Law blog. Although Goldman doubts that "the literal holding of this case is all that troubling to most folks" he believes that the court "muddles the discussion" of each of the CDA immunity prongs.  In particular, Goldman believes that the court erred when it decided that "develop" was essentially synonymous with "publish" for the purposes of analyzing CDA immunity. Goldman describes the opinion as a "major carveback of [the CDA]'s coverage" and predicts problems for online retailers that republish third-party content.

The United States Court of Appeals for the Tenth Circuit held that Accusearch's business could be considered "unfair" under § 5(a) of the FTCA, even if its behavior was not otherwise unlawful or contemplated by a specific law.  The court also held that Accusearch's claimed defense under § 230(c)(1) of the Communications Decency Act (CDA) is not valid because Accusearch acted as an "information content provider" in selling the telephone records and is therefore not entitled to immunity under the CDA.

The Court ordered Accusearch to immediately cease selling telephone records and to disgorge nearly $200,000 in profits that it had gained by selling the records.  In holding that Accusearch's CDA defense was invalid, the Court analyzed three limitations of CDA immunity: the immunized party must be (1) "a provider or user of an interactive computer service"; (2) acting as a "publisher or speaker"; and (3) providing information from "another information content provider."  The court chose not to resolve the immunity question on either of the first two prongs, but instead employed a broad definition of the word "develop" to dissolve immunity using the third prong, holding that Accusearch was an "information content provider" because "confidential telephone information was exposed to public view through"

Accusearch ran the website, which advertised that it could acquire "details of incoming or outgoing calls from any phone number, prepaid calling card or Internet Phone ... for every country of the world."  Accusearch stressed that its website merely provided "neutral tools" and that the data it sold was primarily provided by third-party researchers that were required by Accusearch to provide assurances that they would perform their work in accordance with applicable law.  In holding that Accusearch's reliance on third-parties to acquire the data that it sold did not serve to limit its liability, the court found Accusearch's "good faith" reliance on their supplier's commitment to following the law remarkable.

Judge Tymkovich wrote a concurrence that disagreed with the majority's "unnecessary extension of the CDA's terms ‘responsible' and ‘development.'"  The concurrence agreed that Accusearch should indeed have been held liable for violations of the FTCA, but argued that this liability should be based on Accusearch's "unfair" conduct, rather the content that it published.  The concurrence sought to avoid the majority's "amorphous" analysis of the three CDA immunity prongs altogether because liability could be found on grounds that did not involve the CDA.

This case develops new and broad interpretations of the factors that limit CDA immunity, potentially imposing liability on Internet publishers who may have previously believed that they were immune from FTCA liability by virtue of the CDA.  The holding calls into question whether providers of online bulletin boards, which the Court admits are the "prototypical service qualifying for this statutory immunity," will continue to receive CDA immunity.