Stratton Oakmont v. Prodigy Services: The Case that Spawned Section 230

By: Mark Stepanyuk

The United States led the world in internet usage throughout the 1990s and “[a]t the time of the Dot-com-crash less than 7% of the world was online.” Traversing this previously uncharted territory en masse necessitated a promulgation of rules that would govern the new frontier. Naturally, those rules emerged to conform with existing legal standards. Wrapped up in this context is a story about how the firm started by “The Wolf of Wall Street”, also known as Jordan Belfort, would have a hand in bringing about the existence of arguably the most influential legal rule shaping the internet to this day. 

Enter Stratton Oakmont v. Prodigy Services

Jordan Belfort founded Stratton Oakmont in 1986 as a brokerage firm specializing in trading “over-the-counter” securities. The world became familiar with this story when Leonardo DiCaprio portrayed a lecherous and drug-addled Belfort in the 2013 academy-award nominated film The Wolf of Wall Street

Prodigy Services was an early online service network that provided its subscribers access to various information services such as bulletin boards where third parties exchanged information. In the early-to-mid-1990s, Prodigy was considered one of the major players in the  information services space providers alongside CompuServe

Prodigy, unlike CompuServe, had “held itself out” as exercising editorial control over the content of its computer bulletin boards. One of Prodigy’s bulletin boards was called Money Talk, a popular forum where members would post and discuss financial matters. Prodigy contracted with Board Leaders (or moderators or mods in today’s parlance) to, among other things, oversee and participate in board discussions.

On October 23rd and 25th in 1994, an unidentified individual posted to the Money Talk bulletin board claiming that Stratton Oakmont committed criminal and fraudulent acts in connection with an IPO that it was involved in. The anonymous poster made statements claiming that the offering was “major criminal fraud” and “100% criminal fraud.” The individual also posted that Stratton Oakmont was a “cult of brokers who either lie for a living or get fired.” 

Stratton Oakmont and Daniel Porush—the individual that Jonah Hill’s character in The Wolf of Wall Street film was loosely based on—filed suit against Prodigy in the New York Supreme Court, the state trial court, alleging libel, among other things.

On a partial summary judgment motion brought by Stratton, the court considered Prodigy’s own statements and went through the classical libel analysis to determine whether Prodigy was a “publisher” or “distributor,” where if Prodigy was deemed a ‘publisher,’ then it would be as if they themselves had posted the allegedly libelous statements. By the way, those statements later turned out to be true

The court concluded that Prodigy was indeed a “publisher.” Reasoning that Prodigy “held itself out to the public and its members as controlling the content of [Money Talk] …,” and, by contracting with the mods, “actively utilize[ed] technology and manpower to delete notes from its computer bulletin boards on the basis of offensiveness and ‘bad taste[.]’” 

The court distinguished this holding from a 1991 case involving CompuServe four years earlier. There, the United States District Court for the Southern District of New York dismissed a libel case on the basis that CompuServe was a “distributor” (where they would only be liable if they knew or had reason to know of the libel) Unlike Prodigy, CompuServe did not review any content before it was posted to its bulletin boards. The court reasoned that, without knowledge of the libel, CompuServe would not be liable. 

Legislative Reaction to the Stratton Oakmont Case

Some legislators thought the results in Stratton Oakmont and the CompuServe case were backwards. Chris Cox (R-CA) stated that the “[t]he perverse incentive this case created was clear: any provider of interactive computer services should avoid even modest efforts to moderate the content on its site.” After seeing a Wall Street Journal article about the case, Cox reached out to Ron Wyden (D-OR) to work on the bill that would later become Section 230 in an effort to address these “perverse incentives.” This effort initially culminated in the Internet Freedom and Family Empowerment Act. The bill was enacted as part of the “Communications Decency Act,” (CDA) but when the rest of the CDA was struck down on first amendment grounds, section 230 survived. It can be found here

What does Stratton Oakmont Teach Us About Section 230 today?

Section 230 was passed largely to address those “perverse incentives” regarding moderation by online service providers. In 1990, Prodigy’s Director of Market Programs and Communications stated that “[Prodigy] make[s] no apology for pursuing a value system that reflects the culture of millions of American families we aspire to serve.” In the same NYT article, “social responsibility” was given as a reason to exercise editorial discretion—does that sound familiar? These seemingly recurring themes lead experts to opine that the current discourse about Section 230 is a bit phony—that it’s really a proxy for a conversation about the first amendment. The legal differences between a publisher and distributor are First Amendment distinctions, and since the enactment of Section 230, “that’s not really been an issue for the internet.” So functionally, those underlying First Amendment issues haven’t mattered as much in light of Section 230.

In the United States, we are still figuring out the rules of this relatively new frontier. Some folks argue that Section 230 helped make the digital economy what it is in the United States. Globally, the United States comes third in the total number of internet users with around 250 million, behind China (over 750 million) and India (over 390 million). Though here in the U.S., we will continue to arbitrate what speech should and should not be protected in light of the first amendment, it’s likely that the reasonability of how we approach an equilibrium will be a function of global influence and time. The internet rules of the future are certain to be impacted by technology (even more new frontiers) and the continued influence of globalization (i.e., different value systems, standards, and interpretations). 

Settlements Are No Longer an Option: Utilizing Cameras to Pierce the Shield of Qualified Immunity

Photo by Karolina Grabowska on

By: Marcena Day

Have you seen the video of the Black child killed by the police? You know, the one where the police threw a flashbang into a house?  She was asleep in the living room with her grandmother when her blanket caught fire from the flash bang. The police appear frightened (but courageous enough) to enter the unknown domain—her home. Lifeless, Black flesh lays on the floor. Have you seen it? 

Aiyana Stanley-Jones was seven years old when she was killed by Detroit Police Officer Joseph Weekly during an arrest warrant execution. In May 2010, a TV camera crew was filming the operation for an upcoming episode for a police reality show. Once again, Black Americans and other racial justice allies instinctively demanded justice. The marches and rallies had similar messages following Breonna Taylor’s death in 2020. These demands highlight how Black Americans are historically conditioned, by both the justice system and the political-social sphere, to be subjected to state-sanctioned acts of anti-Black violence. Today, Black Americans have a crucial tool at their disposal: video recordings of their interactions with the police. 

Video recording of police interactions have the power to both  implicate and exonerate officers. But what purpose do these recordings have in an anti-racist criminal justice system? Social scientist James C. Scott, in his book Domination and the Arts of Resistance, contends a significant aspect to maintain relations of domination “consists of the symbolization of domination by demonstrations and enactments of power.” Saidiya Hartman , in her book Scenes of Subjection: Terror, Slavery, and Self-making in Nineteenth-Century,supplements, “[t]hese demonstrations of power consisted of forcing the enslaved to witness the beating, torture, and execution of slaves…such performances confirmed the slaveholder’s dominion and made the captive body the vehicle of the master’s power and truth.” Perhaps viral video recordings of Black Americans being beaten, tortured, and executed only reinforce white supremacy in the United States? 

This article grapples with this question. Part I discusses the public’s right to record the police and how video recordings help plaintiffs navigate 42 U.S.C. § 1983 suits (lawsuits that allow people to sue state actors such as the police for civil rights violations). Part II explores the legal stalemate § 1983 suits face due to qualified immunity. Part III recommends § 1983 claimants to refrain from settling and instead use video recordings to help pierce the shield of qualified immunity. 

Using video recordings of police interactions to prove § 1983 suits

The facts and circumstances are crucial in § 1983 suits, thus video recordings may offer the “truth objectively” that can implicate or exonerate officers when the facts are unclear. 

The Ninth Circuit, in Fordyce v. City of Seattle,  recognized a First Amendment right for individuals to record police and other public officials performing their public functions in public spaces. Armed with this knowledge, Black America frequently records their interactions with the police. Philando Castile’s girlfriend, Diamond Reynolds, recorded his execution on a Facebook live. Dreasjon “Sean” Reed similarly captured his final moments on his Facebook live. Police body cameras and helicopter footage recorded Stephon Clark’s killing in his backyard. Most infamously, police body camera video recorded the 8 minutes and 46 seconds of an American being tortured and killed on the street. In each case, their descendants filed suits alleging excessive force.  

Individuals may sue the police for excessive force under 42 U.S.C. § 1983. In § 1983 suits the officer’s actions are judged by a reasonableness standard “not capable of precise definition or mechanical application.” The application of the reasonableness standard “requires careful attention to the facts and circumstances of each particular case.” Relevant factors to evaluate include “the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight.”

Criminal Procedure Professor Mary Fan argues, “[f]actual details make all the difference in civil rights suits, and it is these details that are intensely disputed and hard to reconstruct.” Accordingly, video recordings can “offer an important source of evidence to courts and juries wrestling to apply fact-intensive standards.” She suggests there is hope that recordings will present the “truth objectively.” Fan contends, “the power of video is to take the case directly to the people, generating pressure to settle cases outside the formal confines of the courtroom and doctrines such as qualified immunity.” This argument is notable and highly persuasive, but choosing this route comes at a high price in an anti-racist criminal justice system. 

Qualified immunity sets a high bar for justice

Qualified immunity shields police officers “from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” The plaintiff must allege facts showing a violation of “a statutory or constitutional right that was ‘clearly established’ at the time of the challenged conduct.” To be clearly established, “existing precedentmust have placed the statutory or constitutional [violations] beyond debate.” (emphasis added). To have “existing precedent,” a previous court must enter a final order on the merits. Essentially, plaintiffs go to trial for a court to enter a final order. This creates stare decisis—which governs how courts apply rules to future cases. Yet, even if plaintiffs go to trial, § 1983 suits may be dismissed based on qualified immunity by the judge without her determining whether the conduct alleged violated a statutory or constitutional right.

This poses a unique (and deadly) legal stalemate: there may never be an existing precedent that places the injuries alleged in a § 1983 suit “beyond debate” because of (1) judicial discretion or (2) the plaintiff settled prior to trial. Which begs the question, what is the purpose of video recordings of the police beating, torturing, and executing Black Americans if the court never enters a final order to hold the police accountable? 

Plaintiffs should refrain from accepting settlements to overcome qualified immunity

It is highly unlikely to curb judicial discretion, but plaintiffs can utilize video recordings to demonstrate similar and recurring violations of “a statutory or constitutional right that was ‘clearly established’ at the time of the challenged conduct.” 

Recall Detroit Police Officer Joseph Weekly. He and his team executed a no-knock warrant—a warrant that allows police to enter property without prior notification—in the killing of Aiyana Stanley-Jones. All charges against Weekly were dismissed and the Supreme Court denied hearing an appeal. On April 2, 2019, Weekly returned to active duty on a “restricted” basis. The family of Stanley-Jones agreed to an $8.25 million settlement with the city of Detroit. The story of Stanley-Jones is similar to other Black women killed by the police during a no-knock warrant. Simply put, the fact pattern and underlying statutory or constitutional right violations of Stanley-Jones’ § 1983 suit may transcend beyond her own experience

The shield of qualified immunity can be pierced if litigators collect video recordings of similar fact patterns that suggest the same statutory or constitutional violation thereby creating a “clearly established” constitutional right. Thus, plaintiffs should redirect the power of video recordings away from exacting settlements and toward demonstrating the same statutory or constitutional violation that can be ‘clearly established’. 

For no-knock warrants, litigators can compile video recordings with similar fact patterns and argue the police use of force violates the same searches and seizures rights protected by the Fourth Amendment. But plaintiffs must first reject settlement to weaken the legal stalemate § 1983 poses to help build stare decisis. As Black Americans continue to record their interactions with the police, this application could be broader than no-knock warrants, e.g., Terry stops and frisks as seen in the cases of George Floyd, Philando Castile, Dreasjon “Sean” Reed, and Stephon Clark. Otherwise, the video recordings are merely another video of an American citizen being beaten, tortured, and executed by officers sworn to protect them. 

Twitter Fights Back in the ‘Trump Era’ to Protect ‘Rogue’ Government Accounts


By Jeff Bess

During the early days of Donald Trump’s presidency, Twitter accounts purporting to represent unofficial “resistance” factions of federal agencies emerged and proliferated alternative perspectives on the inner workings of the Trump administration and its policies. These accounts claim to represent holdover factions from the Obama administration and career officials in agencies and government organizations such as the National Parks Service and the Federal Bureau of Investigation. The accounts issued frequent tweets critiquing the Trump administration’s policies across a variety of issues. Agencies “represented” by “alternative” Twitter accounts run the gamut from the Department of Justice to NASA to the National Weather Service.

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New California Anti-Age Discrimination Act Likely Unconstitutional, But Challenges May Be More Trouble Than Worth

age-discriminationBy Jacob Knutson

Age discrimination, particularly for actresses, is hardly a secret issue in Hollywood. Indeed, workers at all levels of the entertainment industry are affected. As a recent example, consider the casting of Naomi Bellfort in The Wolf of Wallstreet. Olivia Wilde was reportedly passed over for the part for being “too old” (age 28), despite being one year younger at the time of casting than Naomi’s actual age during the filming of the movie (age 29).

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SCOTUS to Weigh in On Constitutionality of Offensive Trademarks


Another Controversial Trademark: The Washington Redskins

By Adam Roberts

Simon Shao Tam named his band ‘The Slants,’ to make a statement.  He wanted to address cultural issues and discussions regarding race in society.  This type of free speech is generally considered foundational to the protections of the First Amendment.  But, Tam was denied this right.

In In Re Tam, the U.S. Patent and Trademark Office (USPTO) denied Tam’s registration for ‘The Slants,’ finding that a “substantial composite of persons of Asian descent would find the term offensive.”  Tam appealed his case to the Federal Circuit Court of Appeals who overturned the decision.  In her opinion, Judge Kimberly Moore expressed that the statute on which the Government relied – Section 2(a) of the Lanham Act – was unconstitutional under the First Amendment.  The court held that discrimination against content-based private speech is subject to strict scrutiny, which means the Government must present a compelling interest to restrict this kind of speech.  The Government’s interest in excluding speech they determined offensive was considered illegitimate to the court, and a judgment was entered in favor of Tam.

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