SHORT FORM ORDERSUPREME COURT - STATE OF NEW YORKPRESENT:HON. STUART L. AININDEX No. 31063/94MOTION DATE: 3/10/95STRATTON OAKMONT, INC.and DANIEL PORUSH,          Plaintiff(s),-against-PRODIGY SERVICES COMPANY, aPartnership of Joint Venture withIBM CORPORATION and SEARS ROEBUCK &COMPANY, "JOHN DOE" and "MARY DOE,"          Defendant(s).The following papers read on this motion:Plaintiff's Notice of Motion & Exhibits.......1Plaintiff's Supporting Exhibits P & O (filed separately under seal pursuant to a confidentiality agreement)....1APlaintiff's Memo of Law in Support......2Appendix to Plaintiff's memo of Law......3Defendant's Opposing Affidavit and Exhibits.....4Defendant's Memo of Law in Opposition......5Reply Affidavit......6Reply Memo of Law......7Upon the foregoing papers, it is ordered that this motion byPlaintiffs for partial summary judgment against Defendant PRODIGYSERVICES COMPANY ("PRODIGY") is granted and this Courtdetermines, as a matter of law, the following two disputedissues as follows:(i) the PRODIGY was a "publisher" of statements concerningPlaintiffs on its "Money Talk" computer bulletin board for thepurposes of Plaintiffs' libel claims; and,(ii) that Charles Epstien, the Board Leader of PRODIGY's "moneyTalk" computer bulletin board, acted as PRODIGY's agent for thepurposes of the acts and omissions alleged in the complaint.At issue in this case are statements about Plaintiffs made by anunidentified bulletin board user or "poster" on PRODIGY's "MoneyTalk" computer bulletin board on October 23rd and 25th of 1994.These statements included the following:(a) STRATTON OAKMONT, INC. ("STRATTON"), a securities investmentbanking firm, and DANIEL PORUSH, STRATTON'S president, committedcriminal and fraudulent acts in connection with the initialpublic offering of stock of Solomon-Page Ltd.;(b) the Solomon-Page offering was a "major criminal fraud" and"100% criminal fraud";(c) PORUSH was "soon to be proven criminal", and,(d) STRATTON was a "cult of brokers who either lie for aliving or get fired."Plaintiffs commenced this action against PRODIGY, the owner andoperator of the network on which the statements appeared, andthe unidentified party who posted the aforementioned statements.The second amended complaint alleges ten (10) causes of action,including claims for per se libel. On this motion, "in order tomaterially advance the outcome of this litigation" (Zamanskyaffidavit, par. 4), Plaintiffs seek partial judgment on twoissues, namely:(1) whether PRODIGY may be considered a "publisher: of theaforementioned statements; and,(2) whether Epstien, the Board leader for the computer bulletinboard on which the statements were posted, acted with actual andapparent authority as PRODIGY's "agent: for the purposes of theclaims in this action.By way of background, it is undisputed that PRODIGY's computernetwork has at least two million subscribers who communicatewith each other and with the general publisher population onPRODIGY's bulletin boards. "Money Talk" the board on which theaforementioned statement appeared, is allegedly the leading andmost widely read financial computer bulletin board in the UnitedStates, whose members can post statements regarding stocks,investments and other financial matters. PRODIGY contracts withBulletin Board Leaders, who, among other things, participate inboard discussions and undertake promotional efforts to encourageusage and increase users. The Board Leader for "Money Talk" atthe time the alleged libelous statements were posted was CharlesEpstien.PRODIGY commenced operations in 1990. Plaintiffs base theirclaim that PRODIGY is a publisher in large measure on PRODIGY'sstated policy, starting in 1990, that it was a family orientatedcomputer network. In various national newspaper articleswritten by Geoffrey Moore, PRODIGY's Director of Market Programsand Communications, PRODIGY held itself out as an onlineservice that exercised editorial control over the content ofmessages posted on its computer bulletin boards, therebyexpressly differentiating itself from the competition andexpressly likening itself to a newspaper. (see, Exhibits I andJ to Plaintiffs' moving papers.) In one article PRODIGY stated:"We make no apology for pursuing a value system that reflectsthe culture of the millions of American families we aspire toserve. Certainly no responsible newspaper does less when itchooses the type of advertising it publishes, the letters itprints, the degree of nudity and unsupported gossip its editorstolerate."(Exhibit J.)Plaintiffs characterize the aforementioned articles by PRODIGYas admissions (see, Battner v Pokoik, 81 AD2d 572, app. dsmd. 54NY2d 750) and argue that, together with certain documentationand deposition testimony, these articles establish Plaintiffs'prima facie case. In opposition, PRODIGY insists that itspolicies have changed and evolved since 1990 and that the latestarticle on the subject, dated February, 1993, did not reflectPRODIGY's policies in October, 1994, when the allegedly libelousstatements were posted. Although the eighteen month lapse oftime between the last article and the aforementioned statementsis not significant, and the Court is wary of interpretingstatements and admissions out of context, these considerationsgo solely to the weight of this evidence.Plaintiffs further rely upon the following additional evidencein support of their claim that PRODIGY is a publisher:(A)promulgation of "content guidelines" (the "Guidelines" found atPlaintiffs' Exhibit F) in which, inter alia, users are requestedto refrain from posting notes that are "insulting" and areadvised that "notes that harass other members or are deemed tobe in bad taste or grossly repugnant to community standards, orare deemed harmful to maintaining a harmonious online community,will be removed when brought to PRODIGY's attention"; theGuidelines all expressly state that although "Prodigy iscommitted to open debate and discussion on the bulletin boards,(B) use of a software screening program which automaticallyprescreens all bulletin board postings for offensive language;(C) the use of Board Leaders such as Epstien whose dutiesinclude enforcement of the Guidelines, according to JenniferAmbrozek, the Manager of Prodigy's bulletin boards and theperson at PRODIGY responsible for supervising the Board Leaders(see Plaintiffs' Exhibit R, Ambrozek deposition transcript, atp. 191); and(D) testimony by Epstien as to a tool for Board \Leaders knownas an "emergency delete function" pursuant to which a BoardLeader could remove a note and send a previously preparedmessage of explanation "ranging from solicitation, bad advice,insulting, wrong topic, off topic, bad taste, etcetera."(Epstien deposition Transcript, p. 52).A finding that PRODIGY is a publisher is the first hurdle forPlaintiffs to overcome in pursuit of their defamation claims,because one who repeats or otherwise republishes a libel issubject to liability as if he had originally published it.[Cianci v New York Times Pub. Co., 639 F2d. 54, 61; Restatement,Second Torts Section 578 (1977).] In contrast, distributorssuch as book stores and libraries may be libel for defamatorystatements of others only if they knew or had reason to know ofthe defamatory statement at issue. [Cubby Inc. v. CompuServeInc., 776 F. Supp. 135, 139; see also Auvil v CBS 60 Minutes,800 F. Supp. 928, 932.] A distributor, or deliverer of adefamatory material is considered a passive conduit and will notbe found liable in the absence of fault. [Auvil supra, see alsoMisu v. Mooney, 124 Misc2d 95 (claims against printer of weeklynewspaper containing allegedly libelous articles dismissed inabsence of any evidence that printer knew or had reason to knowof the allegedly libelous nature of the articles). However, anewspaper, for example, is more than a passive receptacle orconduit for news, comment and advertising. [Miami HeraldPublishing Co. v Tornillo, 418 US 241, 258.] The choicematerial to go into a newspaper and the decisions made as to thecontent of the paper constitute the exercise of editorialcontrol and judgment (Id.), and with this editorial controlcomes increased liability. (See Cubby, supra.) In short, thecritical issue to be determined by this Court is whether theforegoing evidence establishes a prima facie case that PRODIGYexercised sufficient editorial control over its computerbulletin boards to render it a publisher with the sameresponsibilities of a newspaper.Again, PRODIGY insists that its former policy of manuallyreviewing all messages prior to the posting was changed "longbefore the messages complained of by the Plaintiffs wereposted." (Schneck affidavit, par. 4.) However, nodocumentation or detailed explanation of such a change, and thedissemination of news of such a change, has been submitted. Inaddition, PRODIGY argues that in terms of sheer volume - -currently 60,000 messages a day are posted on PRODIGY bulletinboards - - manual review of messages is not feasible. WhilePRODIGY admits that Board Leaders do not function as "editors".Furthermore, PRODIGY argues generally that this Court should notdecide issues that can directly impact this developingcommunications medium without the benefit of a full record,although it fails to describe what further facts remain to bedeveloped on this issue of whether it is a publisher.As for legal authority, PRODIGY relies on the Cubby case, supra.There the defendant CompuServe was a computer network providingsubscribers with computer related services or forums includingan online general information service or "electronic Library".One of the publications available on the Journalism Forumcarried defamatory statements about the Plaintiff, andelectronic newsletter. Interestingly, an independent entitynamed Cameron Communications, Inc. ("CCI") had "contracted tomanage, review, create, delete, edit, and otherwise control thecontents for the Journalism Forum in accordance with editorialand technical standards and conventions of style as establishedby CompuServe". The Court noted that CompuServe had noopportunity to review the contents of the publication as issuebefore it was uploaded into CompuServe's computer banks.Consequently, the Court found that CompuServe's product was, "inessence, an electronic for-profit library" that carried a vastnumber of publications, and that CompuServe had "little or noeditorial control" over the contents of those publications. Ingranting CompuServe's motion for summery judgment, the Cubbycourt held:A computerized database it is functional equivalent of a moretraditional news vendor, and the inconsistent application of alower standard of liability to an electronic news distributorsuch as CompuServe than that which is applied to a publiclibrary, bookstore, or newsstand would impose an undue burden onthe freeflow of information.(776 F. Supp. 135, 140.)The key distinction between CompuServe and PRODIGY is twofold.First, PRODIGY held itself out to the public and its members ascontrolling the content of its computer built an boards.Second, PRODIGY implemented this control through its automaticsoftware screening program, and the Guidelines which BoardLeaders are required to enforce. By actively utilizingtechnology and the man power to delete notes from its computerbuilt an boards on the basis of offensiveness and "bad taste",for example, PRODIGY is clearly making decisions as to content(see, Miami Herald Publishing Co. v. Tornillo, supra), and suchdecisions constitutes editorial control. (Id.) that suchcontrol is not complete and in enforced both as early as thenotes arrive and as late as a complaint is made, does notminimize or eviscerate the simple fact that PRODIGY has uniquelyarrogated to itself the role of determining what is proper forits members to post and read on its built an boards. Based onthe forgoing, this Court is compelled to conclude that for thepurposes of plaintiffs' claims in this action, PRODIGY is apublisher rather than a distributor.An interesting comparison may be found in Auvil v CBS 60 Minutes(supra), where apple growers sued a television network and localaffiliates because of an alleged defamatory investigative reportgenerated by the network and broadcast by its affiliates. Therecord established that the affiliates exercised no editorialcontrol over the broadcast although they had the power to do soby virtue of their contract with CBS, they had the opportunityto do so by virtue of a three hour hiatus for the west coasttime differential, that had the technical capability to do so,and they in fact had occasionally censored network programmingin the past, albeit never in connection with "60 Minutes". TheAuvil court found:It is argued that these features, coupled with the power tocensor, triggered the duty to censor. That is a leap which theCourt is not prepared to join in.* * *time editorial boards at local stations throughout the countrywhich possess sufficient knowledge, legal acumen and access toexperts to continually monitor incoming transmissions andexercise on-the-spot discretionary calls or face &75 millionlawsuits at every turn. That is not realistic.* * *More than merely unrealistic in economic terms, it is difficultto imagine a scenario more chilling on the media's right ofexpression and the public's right to know.(800 F. Supp. at 931-932.) Consequently, the court dismissedall claims against the affiliates on the basis of "conduitliability", which could not be established therein absent fault,which was not shown.In contrast, here PRODIGY has virtually created an editorialstaff of Board Leaders who have the ability to continuallymonitor incoming transmissions and in fact do spend timecensoring notes. Indeed, it could be said that PRODIGY'scurrent system of automatic scanning, Guidelines and BoardLeaders may have a chilling effect on freedom of communicationin Cyberspace, and it appears that this chilling effect isexactly what PRODIGY wants, but for the legal liability thatattaches to the censorship.Let it be clear that this Court is in full agreement with Cubbyand Auvil, Computer bulletin boards should generally be regardedin the same context as bookstores, libraries and networkaffiliates. [See Edward v. DiLello, Functional Equivalency andIts application to Freedom of Speech on Computer BulletinBoards, 26 Colum. J. Law & Eoc. Probs. 199, 210-211(1993).] It is PRODIGY's new policies, technology and staffingdecisions which have altered the scenario and mandated thefinding that it is a publisher. PRODIGY's conscious choice, togain the benefits of editorial control, has opened it up to agreater liability to CompuServe and other computer networks thatmake no such choice. For the record, the fear that this Court'sfinding of publishers status for PRODIGY will compel allcomputer networks to abdicate control of their built an boards,incorrectly presumes that the market will refuse to compensate anetwork for its increased control and the resulting increasedexposure. [See, Eric Schlachter, Cyberspace, The Free Marketand The Free Marketplace of Ideas: Recognizing LegalDifferences in Computer Bulletin Board Functions, 16 HastingsCommunication and Entertainment L. J., 87, 138-139.] PresumablyPRODIGY's decision to regulate the content of its bulletinboards was in part influenced by its desire to attract a marketit perceived to exist consisting of users seeking a "family-oriented" computer service. This decision simply required thatto the extent computer networks provide such services, they mustalso accept the concomitant legal consequences. In addition,the Court also notes that the issues addressed herein mayultimately be preempted by federal law if the CommunicationsDecency Act of 1995, several versions of which are pending inCongress, in enacted. [See, Congressional Quarterly US S 652,Congressional Quarterly US HR 1004, and Congressional QuarterlyUS S 314.]The Court now turns to the second issue presented here, ofwhether Epstein was PRODIGY's agent for the purposes of the actsand omissions alleged in the complaint. Agency is a legalrelationship which results from the manifestation of consent ofone person to allow another TO act on his or her behalf andsubject to his or her control, and consent by the other to soact. [Maurillo v Park Slope U-Haul, 194 AD2d 142; Restatement(second) of Agency s1.] The starting point for an agencyanalysis in this case in the "Bulletin Board Leader Agreement"("the Agreement" found as Exhibit A to Opposition Affidavit ofWilliam C. Schneck) between PRODIGY and Epstein. ThisAgreement sets forth eleven specific responsibilities expectedof a Board Leader including (I) the posting of a minimum of 120notes on the bulletin board each month: (II) working withmember Representatives; (III) providing monthly reports and(IV) following any additional procedures provided by PRODIGY.The Agreement also requires prior PRODIGY approval of allpromotional EFFORTS. In addition, the Agreement contains thefollowing language. Although you will not be a Prodigyrepresentative, your actions as Board Leader will still reflecton Prodigy.                                        ***You will be solely responsible for all of your actions as aBoard Leader. While Prodigy will certainly support your actionsas a Board Leader and a general matter (so long as they are notin breach of this Agreement), we will not assume any liabilityfor anything you do (or fail to do) as a Board Leader. Youhereby indemnify and agree to hole Prodigy harmless from andagainst all claim cost, liabilities judgments . . . arising outof or in connections with anything you do . . .                                        ***Being a Board Leader does not make you a Prodigy ServicesCompany employee, representative or agent, and you agree not toclaim or suggest that you are one.Prodigy relies on this language to extricate itself from anyalleged agency relationship with Epstein. However, Talismaniclanguage does not determine an agency relationship. [Matter ofShulman Transport Enterprises, Inc., 33 B.R.383, 385, aff'd 744F2d 293.] The Court must look to the substance of therelationship. (Id.) Where one party retains a sufficientdegree of direction and control over another, a principal-agentrelationship exists. [Garcia v Herald Tribune Fresh Air Fund,Inc., 51 Ad2d 897.] In addition, whether one is an independentcontractor is not determinative of whether one is an agent.[Columbia Broadcasting System, Inc. v. Stokely-Van Camp Inc.,522 F2d 369; Ackert v Ausman, 29 Miso2d 962 aff'd 20 AD2d 850.]As to the substance of the relationship between PRODIGY and itsBoard Leaders, PRODIGY Security Officer McDowell testified thatBoard Leaders are required to follow the Guidelines and thatPRODIGY performs a "management function" with respect to theactivities of the Board Leaders. (McDowell depositiontranscript p. 78, found at Exhibit S to the moving papers.)Furthermore, Epstein's Supervisor, Jennifer Ambrozek, testifiedthat PRODIGY reviews the Guidelines with Board Leaders, who arethen required to enforce the Guidelines. (Ambrozek depositiontranscript pp. 23 and 191, found at Exhibit R to the movingpapers.) Board Leaders are also given a 28 page "Bulletin BoardLeader Survival Guide" (Exhibit O to the moving papers), datedOctober 1994, wherein many technical terms and procedures areexplained, and the following caveat is given:IF YOU DON'T KNOW WHAT SOMETHING IS OR WHAT IT'S SUPPOSED TO DO,LEAVE IT ALONE UNTIL YOU CAN ASK.Where the facts are not disputed the question of agency shouldbe resolved by the court. [Plymouth Rock Fuel Corp. v LeucadiaInc., 100 AD2d 842.] This is such a case. The aforementionedtestimony by PRODIGY employees and documentation generated byPRODIGY, together with the Guidelines themselves, cannot bedisputed by PRODIGY and leave no doubt that at least for thelimited purpose of monitoring and editing the "Money Talk"computer bulletin Board, PRODIGY directed and controlledEpstein's actions. In reaching this conclusion the Court hastaken care not to rely on any testimony by Epstein, inasmuch asit is the conduct of the principal which must create theimpression of authority, not the conduct of the agent. [SeeFord v Unity Hosp., 32 NY2d 464, 473.] Based on the foregoing,the Court holds that Epstein acted as PRODIGY's agent for thepurposes of the acts and omissions alleged in the complaint.Dated: May 24, 1995Mineola, New York/s/J.S.C.