California Supreme court, in a 34-page ruling,overturned a lower court decision and unanimously upheld that federal law is clear on insulating Internet providers and Web sites against lawsuits for the inflammatory statements of others.
“We acknowledge that recognizing broad immunity for defamatory republications on the Internet has some troubling consequences,” Justice Carol Corrigan wrote for the court. “Until Congress chooses to revise the settled law in this area, however, plaintiffs who contend they were defamed in an Internet posting may only seek recovery from the original source of the statement.”

From http://www.mercurynews.com/mld/mercurynews/news/16065186.htm

The legal battle stems from a lawsuit originally filed in Alameda County Superior Court by two doctors who accused a San Diego woman of defaming them by posting critical remarks about their organization. The case started out as a nasty feud between Terry Polevoy, a Canadian doctor, and Stephen Barrett, a Pennsylvania doctor, against Ilena Rosenthal, the operator of an Internet message group.

The doctors operated Web sites devoted to exposing health care fraud. Rosenthal, a woman’s health advocate, posted another person’s e-mail that included harsh remarks about the doctors, calling them “quacks” and “dishonest,” among other things. The doctors sued for defamation, arguing that Rosenthal should be held responsible for posting the allegedly libelous material, along with the author of the e-mail.

The case mushroomed from a battle about defamation liability for Web site operators and Web users to whether some of the Internet’s powerhouse companies could also be sued for material posted by others.

Media organizations, free speech groups and a host of companies, from Google and Yahoo to eBay, weighed in with arguments in the case, warning that allowing libel lawsuits against an Internet service provider or Web user would inhibit the freewheeling Web and undermine the intent of a 1996 federal law. That law distinguished Internet providers from print publications such as newspapers and magazines, which can be sued for what they publish in print or their original work online.

Lawyers for media groups and Internet companies said Monday that the Supreme Court ruling simply preserved the status quo. The decision “reaffirms the critical rule that the soapbox is not liable for what the speaker has said,” said Kurt Opsahl, a lawyer for the Electronic Frontier Foundation.

“It would have been a bigger news story if the decision came out the other way,” added Pat Carome, a Washington, D.C., lawyer for Google, Microsoft and a raft of other companies that filed briefs with the Supreme Court. “The California Supreme Court recognized that the congressional goal of fostering a robust Internet is furthered by this broad reading of the immunity statute.”

Deirdre Mulligan, director of Boalt Hall School of Law’s technology and public policy clinic, stressed that the ruling doesn’t insulate the authors of defamatory material from lawsuits.

“Nothing about this is about the person who engaged in the bad act,” she said.

Christopher Grell, the lawyer for the two doctors, said the decision opened the door for the “Wild West of the Internet to remain the Wild West.”

“It’ll be a free-for-all for everyone out there,” Grell said. “It basically allows anybody to republish or post libelous stuff.”

An Alameda County judge dismissed the doctors’ lawsuit in 2001, but a state appeals court restored the complaint two years ago, triggering the Supreme Court’s intervention. The appeals court ruling had split from other decisions on the issue in state and federal courts around the country.

The Supreme Court concluded that the appeals court was wrong, finding that federal immunity against lawsuits “serves to protect online freedom of expression and to encourage self-regulation.” But in various points in the ruling, the justices appeared to invite Congress to take another look at the law.

“The prospect of blanket immunity for those who intentionally redistribute defamatory statements on the Internet has disturbing implications,” the court wrote.