Yahoo Loses Lawsuit Over Nazi Memorabilia Sale

Yahoo yesterday lost its bid to avoid liability for "hate speech" as defined in France in a decision that reveals lack of unanimity about how the Internet should be regulated.

A divided U.S. 9th Circuit Court of Appeals on Thursday reversed and dismissed a 2002 district court ruling that said Yahoo was not liable for a fine levied by a French court for Yahoo's failure to keep Nazi memorabilia off its Web pages.

Despite the ruling against it, Yahoo cast the decision as a victory for free speech. "We are pleased that the court affirmed that U.S. courts have jurisdiction when foreign plaintiffs try to impose censorship on U.S. websites," the company said in a statement. "The majority of the court could not agree as to whether the case was ready to be decided on the First Amendment issue. However, as to this particular matter, based on today's ruling, Yahoo believes that free speech rights would prevail if the French court orders were attempted to be enforced in the U.S."

Despite the dismissal of its suit, Yahoo is unlikely to have to pay the fine imposed by a French court of approximately $15 million. In 2001, following the French judgment, Yahoo changed its policy to prohibit use of Yahoo auctions or classifieds to offer items associated with hate groups.

That policy isn't 100% effective. As described in the ruling, the district court found that Yahoo continued to allow online sales of Mein Kampf and Nazi postage and coinage even after the new policy was in place. And on Yahoo.com in the U.S., Mein Kampf is currently available -- it is, after all, legal here.

But the French organization that sued Yahoo in 2000 doesn't intend to press for payment unless Yahoo abandons its efforts to comply with French concerns, according to E. Randol Schoenberg, the Los Angeles attorney representing the plaintiffs.

"The big question for Yahoo, actually for both parties, is whether we’re going to take this to the Supreme Court," Schoenberg said in a phone interview, noting that decision may be made in coming months.

Fordham University law professor Joel Reidenberg said the ruling was significant for a number of reasons beyond Yahoo's failure to obtain immunity from the French judgment against it. "The court's convoluted plurality opinion shows that U.S. law continues to have deep divisions over the regulation of activities on the Internet," he said in an E-mail.

He also noted that the issue of whether the First Amendment protects Yahoo from enforcement the French judgment remains unresolved.

Finally, he said, "The 9th Circuit dramatically lowered the bar for suing foreigners in U.S. courts when they win decisions in their home countries."

He elaborated on this point in a post to computer science professor David Farber's Interesting People mailing list. "This is a radical and troubling expansion of U.S. jurisdiction that may put U.S. companies at risk abroad," he said. "In essence, the majority would allow any U.S. company that loses a law suit abroad to bring the suit back to the U.S. for a second bite at the apple."

One consequence of this is that foreign courts might respond by accepting cases brought by local companies that seek to avoid U.S. court judgments.

Schoenberg also sees ambiguities in the ruling, and suggests that the jurisdictional issues raised could have an impact on U.S. citizens as well. As he interprets the decision, a woman in California who won a restraining order in a California court against an out-of-state ex-spouse might face a legal challenge in the ex's state disputing the jurisdiction of the California court.