A confidential out of court settlement with hedge fund executive David Einhorn over protecting the identity of an anonymous contributor to the Seeking Alpha web site in February always left open the question of the legality of forcing a news publication to reveal its sources and tone down its content critical of the powerful. This question may have been answered as Seeking Alpha, in a separate matter, just won a victory in New York Supreme Court over a firm seeking the identity of one of its anonymous contributors who had aggressively attacked the firm.
NanoViricides hammered with fraud allegations over Seeking Alpha’s article
In February Seeking Alpha anonymous contributor “Pump Terminator” wrote an article critical of a medical company. In the article, titled NanoViricides: House Of Cards With -80% Downside, ‘Strong Sell’ Recommendation, the company was hammered with fraud allegations.
“Aside from sounding like the name of another terrible Keanu Reeves movie, NanoViricides Inc (NYSEMKT:NNVC) is the worst US reverse merger we have ever seen,” the article began, and only got more aggressive. “NNVC is so obviously a vehicle designed specifically to enrich insiders we find it offensively similar to the China RTO frauds.”
NanoViricides Inc (NYSEMKT:NNVC) management was none too thrilled that an anonymous blogger had established a price target of zero for the stock and called out the past failures of the CEO and CFO at the firm. NanoViricides took Seeking Alpha to court, saying “This is a shameless attack from someone who neither understands the science nor the development work that has gone into nanoviricides…”
Unlike the case with hedge fund titan Einhorn, Seeking Alpha pushed for public vindication for a free press and protection of its contributors.
Justice Cynthia Kern on Seeking Alpha’s case
Justice Cynthia Kern, in dismissing the case and handing Seeking Alpha a victory, said “the alleged defamatory statements identified in the petition constitute protected opinion and are not actionable as a matter of law.” Not only does the author have a right to express an opinion, which the ruling said was clear, but the article in questioned linked to source material to help readers decide for themselves.
“It is paramount in an open and free society that we protect the anonymity of those whose ‘publication is prompted by the desire to question, challenge and criticize the practices of those in power without incurring adverse consequences,’” Kern wrote in her opinion.
“The court has maintained a very high bar for future plaintiffs, who will have to be able to present a clear case of defamation to support such petitions,” Eli Hoffmann, Seeking Alpha’s editor and chief wrote. “The ruling also affirms that Seeking Alpha articles and comments are seen by the courts as ‘protected opinion’ and not verifiable fact. And, significantly, the court throws its support behind Seeking Alpha contributors and their anonymity as a manifestation of free speech and the ability to openly question and criticize the practices of those in power.”
Colin Lokey, director of contributor success at Seeking Alpha, said the issue defined not only Seeking Alpha’s commitment to its contributors anonymity but also the rights of a free press. The court ruling is a win for aggressive journalism, not just Seeking Alpha.