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$200 Million Libel Suit vs. Prodigy Is Dropped

Magazine article Editor & Publisher

$200 Million Libel Suit vs. Prodigy Is Dropped

Article excerpt

STRATTON OAKMONT INC., a Long Island investment firm, has dropped its $200 million libel lawsuit against the Prodigy Services Company in exchange for a letter of apology.

The investment firm, based in Lake Success, L.I., had held Prodigy responsible for an unknown subscriber who posted potentially libelous messages to the service's "Money Talk" bulletin board. The messages had accused Stratton Oakmont of "major criminal fraud" and of being a "cult of brokers who either lie for a living or get fired," among other things. Daniel Porush, president of Stratton, was "soon to be proven criminal," one message alleged.

Justice Stuart L. Ain's decision in May of this year held that, because Prodigy censored messages containing swear words and racial epithets, the company acted substantially as a publisher of information and could be found legally responsible for comments made electronically in its discussion forums.

That decision rocked the online industry. Speaking for the Newspaper Association of America,, legal affairs representative Ren P. Milam had stated: "The court's decision is troublesome since it indicates a basic misunderstanding of how online service providers operate their bulletin boards."

And competitors CompuServe and America Online joined with other online services in contributing money toward Prodigy's legal defense.

Now, in a surprise ending, Stratton Oakmont has said it will not contest a Prodigy motion asking justice Ain of the State Supreme Court for Nassau County to dismiss the case. The investment firm cited the "best interests of the parties as well as the online and interactive services industry."

Prodigy, jointly owned by Sears, Roebuck and IBM and based in White Plains, N.Y., would not speculate on what caused the sudden reversal.

The company did confirm it had sought documents from the Securities and Exchange Commission related to earlier investigations of Stratton Oakmont.

The legal discovery process could have made public a confidential SEC report that investigated "boiler room" brokerage activities and "fraudulent and deceptive sales practices."

Without admitting any wrongdoing, Stratton agreed in February 1994 to pay a $500,000 fine, plus an additional $2 million in restitution to its customers.

"We got what we wanted, which was an apology," said Jacob Zamansky, a lawyer representing Stratton.

Prodigy's statement read: "Prodigy is sorry if the offensive statements concerning Stratton and Mr. Porush, which were posted on Prodigy's Money Talk bulletin board by an unauthorized and unidentified individual, in any way caused injury to their reputation. …

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