Are Punitive Damages Available in Publishers' Lawsuit Over Harassment Campaign by eBay Employees?

If you’re in law school, take a Choice of Laws class (often called Conflicts of Laws); these issues come up in a huge range of cases, both involving state law and involving the law of foreign countries, and if you don’t know the basics of choice of laws, you often won’t even be able to know enough to do the necessary research. Here’s how it plays out in a particularly lurid case, Steiner v. Ebay, Inc. (D. Mass.); an excerpt from today’s decision by Judge Patti Saris (for more, see this post about the civil case and this one about the criminal prosecution):

In this extraordinary and troubling case, eBay, an e-commerce company, conducted a campaign to silence Ina and David Steiner, a married couple living in Natick, Massachusetts, through harassment, stalking, and threats. The Steiners own and operate a trade publication [EcommerceBytes] that published critical coverage of eBay. In response, as alleged, eBay’s top executives and employees made online threats, signed the Steiners up for over fifty unwanted email subscriptions, and sent disturbing packages to their home, including fly larvae, spiders, a bloody pig mask, and a funeral wreath.

The planning for this illegal campaign originated in California, where much of the online activity also took place, but other actions, like the surveillance and vandalism of the Steiners’ home, occurred in Massachusetts. As a result of the harassment campaign, seven individuals involved in the conspiracy were criminally charged and have since pleaded guilty. The Steiners filed this civil suit against multiple defendants, including eBay. Now, both eBay and the Steiners have moved for partial summary judgment on the issue of whether Massachusetts or California law will govern the question of punitive damages….

The parties agree that Massachusetts law governs questions of liability and compensatory damages but disagree on whether this Court should apply Massachusetts or California law to the issue of punitive damages for six of the Steiners’ remaining claims against eBay. The parties and the Court also agree that California and Massachusetts law conflict: punitive damages are available under California law but not under Massachusetts law for the relevant causes of action. Compare Pine v. Rust (Mass. 1989) (“Punitive damages are not favored in Massachusetts, and we have long followed the principle that, absent statutory authorization, punitive damages may not be awarded.”), with Haigler v. Donnelly (Cal. 1941) (“If … the action is one in tort, exemplary damages may be recovered upon a proper  showing  of  malice,  fraud  or  oppression ….”)….

In an action based on diversity jurisdiction, this Court must apply the conflict of law rules of the forum state [here, Massachusetts]. Massachusetts courts employ a “functional choice of law approach.” “Under the functional approach, the forum applies the substantive law of the state which has the more significant relationship to the transaction in litigation.” To determine which state has the more significant relationship to the transaction, Massachusetts courts rely primarily on the Restatement (Second) of Conflict of Laws. For a tort claim, the Restatement provides the following factors: (1) where the injury occurred, (2) where the conduct causing the injury occurred, (3) where the parties are domiciled, reside, incorporated, or maintain their place of business, and (4) where the relationship, if any, between the parties is centered. “[T]here is no reason why all issues arising out of a tort claim must be resolved by reference to the law of the same jurisdiction… . [T]he  disposition  of … issues  must turn … on the law of the jurisdiction which has the strongest interest in the resolution of the particular issue presented.” …

In the context of punitive damages, “[m]any courts have held that the state of the injury and of the alleged wrongful conduct has a more significant relationship to the issue of punitive damages than does the state of plaintiff’s domicile.” This is because, as the Restatement suggests, if the purpose of the law “is to punish the tortfeasor and thus to deter others from following his example, there is better reason to say that the state where the conduct occurred is the state of dominant interest.”

It is necessary to identify the state where the relevant events and conduct took place tort-by-tort. The significant contacts and conduct took place either in California or Massachusetts. The Steiners argue that all the wrongful conduct emanated from California, where eBay maintains its principal place of business and the defendants made key decisions regarding the harassment. Conversely, eBay asserts that a substantial amount of the conduct that caused injury occurred in Massachusetts—where the surveillance, stalking, and physical activities were carried out—making Massachusetts the more appropriate jurisdiction for punitive damages….

The Steiners’ claims of trespass, false imprisonment, and Massachusetts Civil Rights Act violations are rooted in actions taken in Massachusetts, chiefly the physical surveillance and vandalism that exacerbated their fear for personal safety. The defendants traveled to Natick, Massachusetts, to vandalize the Steiners’ fence, install a GPS tracker on their car, and “predatorily stalk and surveil” them. In addition to these actions, the Steiners claim the “incessant packages” that arrived at their home in Massachusetts forced them to remain confined to their home and threatened to silence their blog. In short, the most distressing conduct underlying the claims of trespass, false imprisonment, and Massachusetts Civil Rights Act violations occurred in Massachusetts.

The torts of intentional infliction of emotional distress and civil conspiracy present a closer question. The Steiners’ distress stems not only from the conduct described above—being followed, surveilled, stalked, and tailed—but also from a broader range of concerted, online conduct. The defendants bombarded the Steiners with online threats, menacing deliveries, doxing, and unwanted email subscriptions. The defendants’ online activity, including the online threats and ordering of threatening packages, originated from eBay’s place of business in California. California is also the state where the defendants originally formed their plans to “intimidate, threaten to kill, torture, terrorize, stalk and silence” the Steiners. eBay’s California campus allegedly served as the “security nerve center” where Baugh and his co-conspirators orchestrated their harassment campaign. From there, the defendants made plans to travel from California to Massachusetts, ordered threatening packages, subscribed the Steiners to unwanted emails, sent online threats, and, once law enforcement became involved, undertook efforts to cover up the investigation.

As a result, with respect to the claims for trespass, false imprisonment, and Massachusetts Civil Rights Act violations, Massachusetts contacts “predominate, as that state is the place of injury, the place of much of the relevant conduct, and the place where the relationship between [eBay] and the [Steiners] … is centered.” However, with respect to the intentional infliction of emotional distress and civil conspiracy claims, California’s countervailing interest in deterring such malicious and extreme conduct by its corporate domiciles prevails since the most significant of the unlawful conduct took place within its borders. Consequently, for these claims, the Steiners in this case rebut the general presumption that the law of the state where the injury occurs governs….

[As to the defamation claim,] Massachusetts law applies. Under § 150, “[w]hen a natural person claims that he has been defamed by an aggregate communication, the state of most significant relationship will usually be the state where the person was domiciled at the time, if the matter complained of was published in that state.” …

Rules of defamation are designed to protect a person’s interest in his reputation. When there has been publication in two or more states of an aggregate communication claimed to be defamatory, at least most issues involving the tort should be determined … by the local law of the state where the plaintiff has suffered the greatest injury by reason of his loss of reputation. This will usually be the state of the plaintiff’s domicil if the matter complained of has there been published.

Here, the Steiners allege that the defendants defamed them by sending sexually charged pornography to their neighbors, making defamatory comments to third parties, posting ads on Craigslist that the Steiners were sexual swingers and inviting potential partners to their home, tweeting false statements, and creating fake “Persons of Interest” files on the Steiners.

Statements posted online have “a greater potential to spread,” and here, the postings meant to solicit strangers to the Steiners’ home were directed at Massachusetts. Further, defamatory mail was sent to the Steiners’ neighbors, also in Massachusetts. Because the mail was sent to persons in Massachusetts and not to persons in California, the pornographic magazines in David Steiner’s name were published only in Massachusetts.

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