A Houston area woman has sued Facebook asking for $123 million because Facebook was slow to take down a fake a profile created by her ex-boyfriend with pornographic images.

You can see the story here

http://www.youtube.com/watch?v=GvJzYGu548o

 

The plaintiff sued Facebook and the ex-boyfriend for negligence, breach of contract, gross negligence, intentional infliction of emotional distress, invasion of privacy and defamation.  The request for $123 million is based on $.10 for every Facebook user.  You can read the amended petition here–Ali v. Facebook petition.

My guess is this case will likely be removed to federal court (both defendants are out of state) and then summarily dismissed as to Facebook.  As regular readers should know by now, website operators like Facebook are not liable for the content created by others under the Section 230 of the Communications Decency Act.  It provides that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” This federal law preempts any state laws to the contrary: “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.”

Although sympathetic to the plight of the plaintiff, Section 230 unquestionably (and may result in sanctions against the plaintiff) immunizes Facebook from the negligence, invasion of privacy, intentional infliction of emotional distress and defamation claims.

It appears the plaintiff is heavily relying upon the fact it took Facebook a long time to take the fake profile down.  Facebook’s community guidelines do prohibit fake profiles. Facebook says it will take down posts and profiles in violation of the guidelines, but it never contractually commits to the users it will quickly police the site.  In fact, Facebook expressly says it will not guarantee an expedient removal stating:

If you see something on Facebook that you believe violates our terms, you should report it to us. Please keep in mind that reporting a piece of content does not guarantee that it will be removed from the site.

It is therefore questionable whether there is any contractual obligation on Facebook to take down offensive or fake profiles.  Regardless, most courts do not allow plaintiffs to artfully plead around the Communications Decency Act and have poured out similar breach of contract claims.

We will keep an eye on this case.  You can listen to my interview with KRLD Radio in Dallas about the case here. facebook lawsuit with Mitch Carr – KRLD

 

 

This weekend The Houston Chronicle reported Facebook did not turn over information requested by local authorities in response to death threats.  People have been criticizing social media companies for turning over data to government entities.  This time Facebook demanded a court order and now people are upset.  It shows how it is a difficult situation for online companies and sometimes they are damned if they do and damned if they don’t.

According to the article, a Facebook message said a user was “Going to kill everyone in Splendora on July 13th.”  Local officials asked Facebook for information, but the site told them to come back with a court order.  According to Facebook, the government officials never did.

A Facebook spokesperson is quoted as saying:

We promptly review and respond to all emergency requests. In this case, we reviewed the matter and asked to police to send us legal process or a court order for the requested information. The police have yet to send us any formal request.

 According to Facebook, on their Facebook and Law Enforcement page:

 We take the privacy of your information very seriously. If Facebook receives an official request for account records, we first establish the legitimacy of the request. When responding, we apply strict legal and privacy requirements. . . .

We work with law enforcement to help people on Facebook stay safe. This sometimes means providing information to law enforcement officials that will help them respond to emergencies, including those that involve the immediate risk of harm, suicide prevention and the recovery of missing children. We may also supply law enforcement with information to help prevent or respond to fraud and other illegal activity, as well as violations of the Facebook Terms.

This appears to be a Not In My Backyard situation online.  We all want Internet privacy, but when we perceive the threat is against our community, our principles get challenged.

I don’t believe the demand for a court order was out of line.  I am sure the law enforcement officials would have preferred just to be handed the information.  I stand to be corrected by those more familiar with criminal law procedure, but getting an appropriate order from a judge should not have been too onerous.  Although Facebook did not apparently turn over the information right away, I suspect this is not over and the investigation will continue.

UPDATE

A suspect has been taken into custody according to KHOU-TV11 after some unspecified cooperation from Facebook.  A 13-year-old girl is surely regretting her actions.

 

A frequent question we get is what can we do about the online posting about me?  Often times, the answer is not much.  Lawyers can only help when the online conduct crosses the line into a cognizable cause of action.  Figuring that out is the hard part.

The Threatening or Harassing Post

Is there an ex spewing hate against you on Facebook?  Is a disgruntled fan or customer telling the world what they would like to do you?  Many times, the First Amendment will protect their conduct.  Sometimes, however, the law can help.

Take for example, a “fan” of the New York Knicks who suggested the owner of the team needed to die with posts that included naked pictures of the poster with a gun.  The police arrested him.

Sports often bring out the worst.  I’ve seen some of it with my own sports teams with the Michael Sam story and the question of whether the Houston Texans will use the first pick on Johnny Football.

Most fan rants are protected by the First Amendment, but threats of immenint harm or immediate calls to illegal actions are not.   Jack Greiner of the Graydon Head Out of the Box Blog blog breaks down the law on threats versus free speech in this case here.  The oversimplification is that if a reasonable person would believe the speaker has an intent to cause actual harm, then it can become a threat and not mere protected speech.   Moreover, when the target of the threat is a sport figure or politician, it may not be realistic to think the person would actually act it out, but there are enough crazy people out there for law enforcement to take a close look at some of these cases.

In addition to threats, may states, like Texas, have online harassment laws.  Perhaps, your ex knows better than to make a physical threat, but continuously harasses you. In Texas, a person commits an offense if the person “uses the name or persona of another person to create a web page on or to post one or more messages on a commercial social networking site: (1) without obtaining the other person’s consent; and (2) with the intent to harm, defraud, intimidate, or threaten any person.”

It is also crime to: “send[] an electronic mail, instant message, text message, or similar communication that references a name, domain address, phone number, or other item of identifying information belonging to any person: (1) without obtaining the other person’s consent; (2) with the intent to cause a recipient of the communication to reasonably believe that the other person authorized or transmitted the communication; and (3) with the intent to harm or defraud any person.”

Revenge Porn

The American Bar Association recently wrote an excellent article on revenge porn you can read here. For the uninitiated, revenge porn is when the ex publishes what were supposed to be private nude pictures for the world to see often including full names, addresses, phone numbers and links to social media profiles. There is a whole cottage industry bubbling up of websites who encourage posters to provide this information.

As a victim, you can bring civil claims like invasion of privacy, intentional infliction of emotional distress and copyright claims if you took a selfie because the copyright usually belongs to the photographer and not the subject. But, these claims are expensive to bring and there are no guaranties because a lot of people blame the victim for having nude pictures in the first place.

Meanwhile, it is hard to sue the websites where these pictures are downloaded because Section 230 of the Communications Decency Act gives immunity to websites based on claims related to user generated content.

California passed a law last month that seeks to punish “Any person who photographs or records by any means the image of the intimate body part or parts of another identifiable person, under circumstances where the parties agree or understand that the image shall remain private, and the person subsequently distributes the image taken, with the intent to cause serious emotional distress, and the depicted person suffers serious emotional distress.”

Professor Goldman on his Technology and Marketing Law Blog points out the faults of the law which include: (i) it does not apply to selfies; (ii) it does not apply to redistribution or websites which could have Section 230 issues; and (iii) the difficulty in proving beyond a reasonable doubt the parties’ expectations of privacy or the intent of the accused.

While there are some class action lawsuits against some of the sites that encourage this behavior that we will keep an eye on, one of the best weapons may be to shine the light on the scum who engage in revenge porn using the same social media tools and the let the markets take care of the websites.

Civil Claims

Most of the examples so far deal with criminal complaints.  To do that, you need to get the D.A.’s attention.  What about a civil lawsuit?  What can you do if the police or the D.A. won’t act?

You can follow the lead of a woman who is suing Sprint for invasion of privacy, infliction of emotional distress and identity theft after a Sprint employee posted explicit pictures of the customer who turned in a phone for an upgrade.  You can read more about the case here.

Intentional infliction of emotional distress can be a tough case to prove and the invasion of privacy of laws differ in each state.

Parents are also taking to the civil courts to address cyberbullying.

Related Posts

For tips on handling consumer reviews, go here and here.

With the short Thanksgiving week, I thought we would touch on a few interesting stories developing over the last couple of weeks.

Photographer gets $1 million+ verdict from AFP and Getty for copied Twitpics

In my three part series on using images from the web for your news stories, we talked about the Morel v. Agence France-Press case.  Agence France-Press, the Washington Post and Getty used images of the Haitian earthquake put on Twitter by photographer Daniel Morel.  The Washington Post settled, but the case went to trial last week against AFP and Getty.  AFP thought they had permission from the photographer to use the images, but they did not get permission from the right person.

Previously, a judge rejected AFP’s argument that it could use the images because they were put up on Twitter. The Twitter terms of service did not provide that the photographer gave his rights in the images away or grant anyone else the right to use the images outside of Twitter.  In the trial, it turns out AFP did not follow their internal guidelines on the use of images or take immediate corrective action.  The jury awarded the upper end of the statutory damages.

If you have policies, follow them.  If you make a mistake, you fix it as quick as you can. You can read about the case here and here.

Engineering gift for girls’ video spreads on Facebook – lawsuit follows.

I have a daughter.  I liked this commercial.

http://www.youtube.com/watch?v=UFpe3Up9T_g

I assumed they had the Beastie Boys’ permission.  Apparently, they did not and the Beastie Boys sent a copyright cease and desist letter.  The people at Goldiebox fought back and filed a suit asking the court to declare the parties’ rights.   Is it a parody or do the Beastie Boys have to do this to make sure more people don’t use their songs in commercials?  You can read more about the case here with some legal analysis from the EFF here.  At least Goldiebox will get some more attention with the lawsuit at the beginning of the holiday shopping season.

Want to criticize me, it will cost you!

KlearGear’s terms of service state:

“In an effort to ensure fair and honest public feedback, and to prevent the publishing of libelous content in any form, your acceptance of this sales contract prohibits you from taking any action that negatively impacts KlearGear.com, its reputation, products, services, management or employees.

Should you violate this clause, as determined by KlearGear.com in its sole discretion, you will be provided a seventy-two (72) hour opportunity to retract the content in question. If the content remains, in whole or in part, you will immediately be billed $3,500.00 USD for legal fees and court costs until such complete costs are determined in litigation. Should these charges remain unpaid for 30 calendar days from the billing date, your unpaid invoice will be forwarded to our third party collection firm and will be reported to consumer credit reporting agencies until paid.”

A Utah couple criticized KlearGear on RipOff Report.  Soon thereafter, KlearGear sent the couple a bill for $3,500.  KlearGear never sued, but did report the couple as delinquent to the credit reporting agencies.  We have talked about being proactive, but not too proactive, when it comes to online complaints.  Since the news of this broke, KlearGear has shut down its Facebook page and its Twitter feed to hide from the blow back.  You can read more here, here and here.  This is not the kind of press you want before the shopping season.

Update 11/27/13 –  a lawyer is now representing the couple and has sent a demand to KlearGear to remove the notation with the credit agencies or face a Fair Credit Reporting Act lawsuit.  Read about it here.

Reputable companies line up to support TheDirty.com

Finally, we update you on the Jones v. TheDirty case we have talked about before.  This is the suit by a former Cincinnati Bengals cheerleader against the website TheDirty.   A Kentucky judge allowed the case to proceed against the rumor and trash site despite Section 230 of the Communications Decency Act which normally provides immunity for website operators based on user generated content.  The jury awarded $380,000 and TheDirty.com appealed.

While some may believe the ends justified the means against this particular defendant, the refusal to dismiss this case flies in the face of almost every other Section 230 case.  In this case, the court wrote “the very name of the site, the manner in which it is managed, and the personal comments of defendant Richie” shows that the site “specifically encouraged development of what is offensive about the content.”  TheDirty.com asks people to “submit dirt.” Their submission form has entries for the “dirt,” and provides a link to upload photographs. The court seized on the fact that in response to the post about Jones, the site operator wrote “I love how the Dirty Army has a war mentality.”  Thus, no dismissal by the judge.

Section 230 has its place.  Imagine if Facebook, Google, or YouTube could be sued or had to police all of the user generated content.  I don’t think those services would exist.  That’s why many of them have filed amicus briefs with the Sixth Court of Appeals urging the court to reverse the ruling and dismiss the claims.  You can read more here about how and why the likes of Amazon, Google, LinkedIn, Google and Microsoft are asking for the reversal.

 

I don’t often make predictions on legal outcomes, so when I do and I get it right, it’s worth sharing.  In May, we talked about whether “liking” a candidate would constitute protected speech under the First Amendment.  A district judge in Virginia ruled it was not.  The Fourth Circuit Court of Appeals recently reversed in Bland v. Roberts.

In that case, a jailer in Virginia liked his boss’s opposition during a campaign for sheriff. The incumbent won and the plaintiff was fired. The sheriff said it was for competency issues, but the plaintiff said retaliation was the motivating factor for the termination.

I wrote back then that “it seems like a slam dunk case for our fired jailer,” before describing the district court’s dismissal based on the judge’s opinion that “liking” something on Facebook did not amount to a “substantive statement” worthy of protection.  Both the lunacy of the idea of liking a candidate on Facebook not being considered “substantive” enough to warrant protection and the questions asked during the appeal according to this Bloomberg report, I wrote, “I would put my money on a reversal.”

Winner, Winner Chicken Dinner! 

Reversing, the Fourth Circuit compared liking on Facebook to putting a campaign sign in your yard.  “On the most basic level, clicking on the ‘like’ button literally causes to be published the statement that the User ‘likes’ something, which is itself a substantive statement.”

It is not likely your “like” will get you fired and set up a Supreme Court case. The lesson, however, is to be careful of making employment decisions based on what you see on Facebook.  The issue is more problematic for public employers, but as we have discussed before even non-union private employers need to make sure their social media policies and employment decisions do not upset the NLRB. ”Liking” a complaint from a co-worker about working conditions cannot be the basis of a termination.  In some states, it is illegal to fire someone for engaging in protected speech.  ”Liking” Coke when you work at Pepsi in an at will state, like Texas, can still probably get you fired.

What happens when the employee who set up the company’s LinkedIn account leaves? Or, what happens when your outside marketing firm set up your Facebook page but refuses to give it to you because of a fee dispute?

Be Proactive

Before we talk about what to do in these situations, let’s talk briefly about how to avoid these situations.  Most social media sites allow you to have more than one administrator. You should have, at all times, at least two trusted employees designated as such.  When one of them leaves, or is about to be fired, the remaining administrator changes the passwords to lock out the departing administrator and finds another suitable back up.  The same thing works with your outside marketer — make sure someone (preferably two of you) are co-administrators so you can always have access to the social media account.

You can also contractually determine who controls and owns the social media account and its followers.

Thanks, you’re an hour late and I need to access my account.

If you are too late to implement some safeguard, the first advice is the same we give our children – ask nicely.  This applies to the departed employee and the social media platforms.  Obviously, if you can’t locate the employee or they refuse to give up access, you have to approach the social media networks.  The problem is, historically, they are not nearly as concerned about your page as you are and are not quick to act.

For example, Facebook tells you what to do here.  The problem is Facebook is notoriously slow to react taking about two weeks to respond.  If it is a LinkedIn Group (say company alumni) as opposed to a company profile, you may not be able to take control.  With regard to groups, LinkedIn takes the position groups are created by individual members and therefore they will not transfer ownership or control of a group.  LinkedIn may help you reach out to the group owner or help you protect copyrights or trademarks, but taking control of a Group can be difficult.

The step of last resort – the lawsuit

The law is not settled in this area and there have only been a couple of high profile cases involving LinkedIn and Twitter which had more to do with who owns the followers and connections.

In the LinkedIn case, Eagle v. Edcomm, the court threw out the Computer Fraud and Abuse Act and Lanham Act claims, but allowed the common law claims of misappropriation, conversion and invasion of privacy claims to continue which are still pending.  In the Twitter case, the claims for misappropriation of trade secrets, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage and conversion are proceeding to trial which is expected to take place this week.

It is clear you can sue, but exactly what causes of action apply and the likely result is not yet clear.  As a lawyer, we love to blaze new ground.  As a client, blazing new legal ground is expensive and dangerous.   You should try to avoid it if you can, but know that you can use the courts to seek control of your accounts if you have to.

Special thanks to friends Michelle Price and the MMI Agency for helping me help others with some of these issues recently.

Is liking something expressive activity protected by the First Amendment?  Does being a Facebook “friend” create the appearance of impropriety requiring the judge to recuse himself from the case?  Leave it to Facebook to make us answer these questions.

You don’t like me, you just want my coupon . . .

The Fourth Circuit Court of Appeals is wrestling with the question of whether liking something on Facebook is protected First Amendment activity in the case of Bland v. Roberts.  A jailer in Virginia liked his boss’s opposition during a campaign for sheriff.  The incumbent won and the plaintiff was fired.  The sheriff said it was for competency issues, but the plaintiff said retaliation was the motivating factor for the termination.

Public employers, and some private employers in some states, cannot retaliate against an employee for taking part in Constitutionally protected activity that does not interfere with work.  In other words, you can’t fire a public employee just because they spoke out on a issue or supported a candidate.

So, it seems like a slam dunk case for our fired jailer.  The district court dismissed his case because the court ruled “liking” something on Facebook did not amount to a “substantive statement” worthy of protection.  The court determined that without more, the simple act of making one-click on Facebook does not reveal that someone is engaging in protected speech.  While it is true half of the people on Facebook would like Osama bin Laden to get a 15% discount at Target, “liking” a candidate or a cause is political speech.

It’s dangerous to predict the outcome of an appeal based on oral argument, but according to this report from Bloomberg, I would put my money on a reversal.

“Carter clicked the Like because he liked something,” U.S. Circuit Judge Stephanie Thacker said to a lawyer for Hampton Sheriff B.J. Roberts during the 40 minute hearing. “How is that any different than perhaps putting a sign in the yard saying ‘I Like Ike’?” she asked.

Facebook, which got a few minutes at the hearing to argue for a reversal, made similar arguments.

The opinion should be issued in a few months and will tell us whether the over 3 billion “likes” a day on Facebook are entitled to First Amendment protection.

It is not likely your “like” will make its way to the Supreme Court.  The lesson is to be careful of making employment decisions based on what you see on Facebook.  The issue is more problematic for public employers, but as we have discussed before even non-union private employers need to make sure their social media policies and employment decisions do not upset the NLRB.  “Liking” a complaint from a co-worker about working conditions cannot be the basis of a termination.  “Liking” Coke when you work at Pepsi in an at will state probably can be.

MAKING “FRIENDS” WITH THE JUDGE

Meanwhile, the court of appeals here in Texas held that being “friends” with a judge on Facebook should not be the basis of a criminal conviction reversal.

In Youkers v . Texas, the criminal defendant was accused of violating the terms of his parole supervision which sent him to jail for eight years.  On appeal, Youkers argued the father of the victim in the underlying crime was Facebook friends with the judge and sent the judge a Facebook message.  Therefore, the defendant argued, there was an improper bias and the conviction should be overturned.

The Facebook message

When you only hear part of the story, things look bad.  Yes, there was an ex parte Facebook message from the victim’s father to the judge.  The message, however, sought leniency for the defendant.  The judge also disclosed the message to everyone without any objection and warned the father not to do it again.

The Facebook “friendship”

The more interesting question is whether merely being friends with a judge on Facebook provides even an appearance of impropriety.  I’ve had interesting discussions about this topic at various ethics CLE’s with judges and private practitioners.  And, yes, I am Facebook friends with several judges.

The court of appeals ruled judges are not prohibited from using social media.  In Texas, unfortunately, we elect our judges.  The court realized the judges need to be on social media.

As pointed out in Professor Goldman’s Technology and Marketing Law Blog:

Merely designating someone as a “friend” on Facebook “does not show the degree or intensity of a judge’s relationship with a person.” ABA Op. 462. One cannot say, based on this designation alone, whether the judge and the “friend” have met; are acquaintances that have met only once; are former business acquaintances; or have some deeper, more meaningful relationship. Thus, the designation, standing alone, provides no insight into the nature of the relationship.

Without more, the defendant could not prove there was an improper evidence.

The ABA cautions judges to use social media within the existing ethical rules (endorsing political candidates is a tough one) and this case should give lawyers here in Texas a little more comfort about friending judges.  The practicing bar has a little more freedom.  Yet, the existing ethical rules still apply to our social media use.  For instance, we cannot imply we hold any sway with a particular jurist and a simple Facebook friendship does not do that – particularly when the elected judge is friends with hundreds of lawyers.

A lot of the judges are our friends.  Before they got on the bench, they were our colleagues.  Once on the bench, they are still our neighbors, our kids’ coaches and friends.  We socialize with them outside the courthouse.  With Facebook, there is just a record.

No one likes to be sued.  It may make you mad enough that you want to scream and holler on the Internet.  There is a reason, however, a lot of lawyers recommend not commenting on personnel issues and pending litigation.

Take a lesson from Coyote Ugly that does not involve dancing on the bar.  The lesson is — don’t go to the Internet to rail on your former employees when they file a Fair Labor Standards Act minimum wage case against you.

About a month after a group of employees filed suit against the Coyote Ugly Saloons, the president of the chain of Coyote Ugly Saloons went to her “Lil Spill” blog and wrote:

This particular case will end up pissing me off[,] cause it is coming from someone we terminated for theft. I have to believe in my heart that[,] somewhere down the road, bad people end up facing bad circumstances!

I have been reading the basics of Buddhism[,] and am going to a class on Monday. The Buddhist way would be to find beauty in the situation and release anger knowing that peace will come. Obviously, I am still a very new Buddhist[,] cause my thoughts are “[f***k] that [b**ch.]” Let me do my breathing exercises and see if any of my thoughts change. Lol .

A slightly different take then, say, Warren Buffet may have taken.  The subject of the post had already been reinstated by the time the blog post was published.

To add to the fire, a supervisor allegedly posted on Facebook when drunk about another plaintiff who was still employed but had joined the suit:  “Dear God, please don’t let me kill the girl that is suing me . . . . that is all . . . .”

The result of these diatribes was a retaliation claim in addition the underlying minimum wage claims.  The federal district court in Tennessee recently allowed both claims to continue.  You can read the opinion here.

I am not an employment lawyer, but I know enough to warn clients you can almost get into more trouble for retaliating against an employee for making an overtime, workers’ compensation, minimum wage, harassment or discrimination complaint than you can for the underlying complaint.  My colleague Michael Kelsheimer has written on retaliation on his Employer’s Handbook blog.

The emedia law lessons seem almost too obvious.  I’ve never thought to add “don’t let your supervisors post to about your employees while drunk” to my social media policies.  The real lesson is to train your employees and have policies.  Considering the founder was the first to take to the Internet, I’m not sure there was much respect for policies or compliance.  Your business, I am guessing, is probably different.  You should have policies and plans in place regarding who can say what about pending claims and what is and is not appropriate to do on the Internet.

In July, Netflix CEO Reed Hastings posted on Facebook that viewing on his company’s site “exceeded 1 billion hours” of videos in June.   The stock rose 6.2% on the day of the post.  Last week, the SEC sent Netflix notice it may investigate.  You can read the Washington Post story here

Reg FD, or Fair Disclosure, is the issue.  In a nutshell, companies must make public disclosures of material information to the general public and cannot selectively provide information to favored shareholders or investors.  That’s loaded for two reasons – “public disclosure” and “material.”

Public Disclosure

Usually companies provide press releases to recognized wires or news services and then make public filings with the SEC to make public disclosures.  The reg also allows for “any other non-exclusionary method.”  

This time, the CEO sent the information to 200,000 of his fans on Facebook–many of whom were part of the business media who would have received the press release.  The CEO also posted on his blog earlier in June that Netflix was almost at 1 billion hours per month.  Neither were followed with press releases or SEC filings.

Reg FD was passed in 2000 — before Facebook and Twitter.  It wasn’t until 2008 that the SEC formally approved making public disclosures via company websites under certain circumstances.  Will this force the SEC to accept other more popular ways and current ways of disseminating information?  Perhaps every CEO of publicly traded company should be required to follow an official SEC account so all of their posts or tweets are re-issued and available in one spot. 

Material

Even if the post was not considered a public disclosure, there is still a question as to whether it was material.   As you can probably guess, “material” is not expressly defined, but the SEC has provided some guidelines.  It may be material if there is a “substantial likelihood that a reasonable shareholder would consider it important” such as earnings, M&A issues, new products, changes in management or serious defaults. 

Although Netflix says the information was not material, the stock did have its biggest one day rise in six weeks. 

So do we ban posts and tweets from the corner office?

The Wall Street Journal ran a story in September about the risk of CEOs being on Twitter. If you can’t stop the CEO, here are some tips to minimize risks for upper level management involved in social media.

 1.   Have a plan.  Review your current process you use to disseminate information to investors analysts and other in light of Reg FD.  After you spot the risks, prepare a policy outlining the consequences and share it with executives, investor relations and anyone else who is responsible for talking to investors.  Use the policy to do periodic Reg FD planning and designate a primary compliance person to review statements before they go out if there is a question.

2.   Have a specific plan regarding earnings or other major announcements and collect all public statements not including social media such as SEC filings, press conferences and and conference call transcripts. 

3.   Track the social media accounts of your major executives.  Unless you want to pre-approve the CEO’s message about the company softball game in advance, at least allow your primary compliance person to track all of the various social media accounts to take swift action.

4.  Plan for the unintentional selective disclosure.  That is a term of art under the Regs and requires corrective action beyond the scope of this post.  Assume it is going to happen and be prepared for it with IR, management and your legal team.

5.  When in doubt, bring a witness.  If you are hosting a conference or call and you are concerned, bring someone along whose sole job is to recognize and note any unintentional disclosures.

6.   Get insurance for your executives and the company.

Will the SEC come around and allow for Twitter and Facebook to be used for public disclosures?  If the speed of their implementation of crowd funding is any indication, it may be some time before there is some brightline guidance.  Until then, we have to watch what happens to others.  Tesla could be next — on December 4, the CEO tweeted “Am happy to report that Tesla was narrowly cash flow positive last week” to his almost 113,000 followers.

The Houston Chronicle reported today the CFO of Francesca’s was canned because he posted information about the company on Twitter and Facebook.

Francesca's CollectionsWe have discussed the legality of firing employees for their social media conduct in detail (part one and part two).  In short, in at will state like Texas, you can fire someone for a good reason, a bad reason or no reason at all except generally in three circumstances: (1) in violation of a contract; (2) in a discriminatory fashion against a protected class; or (3) in retaliation of an employee discussing their work activities with other employees. 

It was not clear in the article if the CFO had a contract.  It does appear, however, he was not engaging in protected activity.  Instead the company claimed in a release the CFO was terminated because he “improperly communicated company information through social media.”

The article sites the following:

On March 7, six days before Francesca’s announced its quarterly earnings, he wrote: “Board meeting. Good numbers=Happy Board.”

. . .

Before an earnings call last December, Morphis posted on Facebook: “Cramming for earnings call like a final. I thought I had outgrown that.” In January, he boasted to his friends: “Roadshow completed. Sold $275 million of secondary shares. Earned my pay this week.”

Francesca’s, a women’s clothing and accessory retailer, is a publicly-traded company which means the CFO does not have free reign to say whatever he wants. 

“The rules generally in regards to sharing of material, nonpublic information have not changed even in the age of social media,” Looper Reed & McGraw, P.C. securities lawyer Jeff Hopkins said.  “If a public company hasn’t filed information with the Securities and Exchange Commission to make it generally available, its management and employees should recognize that any disclosure to a select audience (even if that audience is a large Twitter following) is in violation of the rules.”

You can read more from the Wall Street Journal here.