Would Twitter get online publisher immunity in fake 'blue check' suits?

Illustration shows Twitter app logo
Twitter app logo is seen in this illustration taken, August 22, 2022. REUTERS/Dado Ruvic

(Reuters) - Twitter Inc’s introduction last week of a new subscription system to dole out blue-check verification badges was a flop by any standard. Even Twitter tacitly admitted as much, abruptly aborting the program after imposters posing as verified corporate accounts began posting fake tweets that led to a steep stock drop for at least one huge company.

But whether anyone can win a private lawsuit accusing Twitter of spreading false information is not at all clear. Anyone who sues will be testing novel theories. And to prevail, plaintiffs will have to show why Twitter is not entitled to immunity under a law that grants it broadly to online publishers for content posted by their users.

That challenge will not stop plaintiffs' lawyers from taking a shot. Jay Edelson of the eponymous class action firm told me on Monday that his team is already deep into research of potential fraud claims, under common law or state consumer protection statutes.

Edelson's preliminary theory: By awarding verification badges to the fake corporate tweeters, Twitter enabled the imposters to trick consumers and even shareholders. (Eli Lilly and Co experienced a sharp, if temporary, stock drop after tweets from a corporate account that carried the blue-check verification.)

“Twitter built up years of trust in the blue check mark,” Edelson said. “That’s why the stocks tanked.”

Corporations blindsided by tweets from falsely verified accounts could conceivably also sue Twitter for hurting their brands, perhaps by asserting trademark infringement, although that seems less likely than consumer litigation. Lilly declined to comment.

Twitter also did not respond to my email query about potential private lawsuits arising from last week’s fake tweets.

I want to say up front that both kinds of prospective plaintiffs would have to get past significant obstacles.

Let's look first at companies that might sue for trademark infringement. The law that shields online publishers from most claims arising from content posted by users, Section 230 of the Communications Decency Act, does not bar lawsuits based on alleged intellectual property violations, including trademark claims.

But law professor Alexandra Roberts of Northeastern University School of Law, an expert on social media and intellectual property, told me via email that companies would still have to show that the fake tweets were not fair-use criticism or parody and that Twitter knowingly contributed to the alleged infringement. “Big picture, I think the answers are not totally clear-cut,” Roberts said.

What about shareholders or consumers who claim to have been duped by tweets from fake corporate accounts? They would also have to show that Twitter bears responsibility for the conduct of its users.

Federal securities laws, as you know, require evidence of fraudulent intent, which seems like an insurmountable hurdle for Lilly shareholders trying to blame Twitter for their losses.

But even under state anti-fraud laws, said securities law expert John Coffee of Columbia Law School, negligence is not enough to establish liability. Coffee said by email that he does not believe Twitter check marks will be deemed “statements” under state securities laws, so even if Twitter was negligent in granting verification badges to corporate imposters, plaintiffs’ fraud claims will likely fail.

Let’s assume, though, that Edelson or some other plaintiffs' firm comes up with a viable fraud theory based on fake tweets from an imposter account with a verified badge. It is a sure thing that Twitter will invoke the online publishers’ shield law, Section 230.

That’s where things could get really interesting: According to three law professors I talked to on Monday, there’s a good argument to be made that Twitter is not entitled to Section 230 protection because those all-important verification badges – the reason imposter tweets from fake accounts seemed so convincing -- were not user-created content but were Twitter’s own communications.

“Twitter will argue, ‘The underlying harm isn’t from what we created but from what the user created,’” said Section 230 expert Jeff Kosseff of the U.S. Naval Academy’s Center for Cyber Security Studies. “If I were a Twitter lawyer,” Kosseff added, “I would not want to rely on that argument.”

The scope of protection conferred by Section 230 has been a matter of hot political debate for years. It’s also at issue in two pending cases at the U.S. Supreme Court, which will hear arguments next year about whether Twitter and Alphabet Inc can be sued for allegedly promoting content from terrorists via computer algorithms. Lower courts have already ruled that the provision does not shield online publishers if their own actions have contributed to users' wrongful posts.

Under that reasoning, said Alejandra Caraballo of the Harvard Law School Cyberlaw Clinic, the key question for Twitter is whether tweets from fake corporate accounts would have wreaked as much havoc if they had not been accompanied by Twitter’s own verification badges, which have long been considered a sign that Twitter employees had determined the legitimacy of the account.

“The badge has always counted as speech,” added Blake Reid, a technology law expert at the University of Colorado Law School. “That’s why Twitter was so sparing in giving them out.”

Plaintiffs' lawyer Edelson said the chaotic launch of Twitter’s new (and now-suspended) alternative verifications system boosts his argument that the site is responsible for misleading users. There was no formal announcement last week that verification badges could no longer be viewed as an assurance that Twitter was vouching for an account’s authenticity, Edelson said.

“The way Twitter has been speaking to people is just through Elon Musk tweets,” he said. That’s not how companies usually communicate big changes, Edelson said. Musk’s messaging was also muddled, he said, by seemingly contradictory descriptions of the new subscription plan.

Exposure to private litigation probably isn’t at the top of Elon Musk’s list of problems at Twitter, which is facing all kinds of financial, regulatory and employment issues. But suing Twitter is a chance for some enterprising plaintiffs' lawyers to make new law against a high-profile target. Don’t bet against it.

(NOTE: A previous version of this column incorrectly attributed Lockheed Martin’s stock drop on Nov. 11 to an imposter tweet. That reference has been removed from the column.)

Read more:

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Supreme Court to scrutinize U.S. protections for social media

U.S. senators propose limiting liability shield for social media platforms

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.