Preliminary Injunction Against ML-Implode Denied

Note: ML-Implode's existence is once again threatened by the costs of fighting a frivolous legal attack. Free speech isn't free; please do consider helping us out with the cost of defending it.

Also see our first press release on the lawsuit.

Nov. 7, 2008 - For immediate release.

Injunction Against ML-Implode Denied

On November 3rd, 2008, a hearing for the Plaintiff's Motion for Preliminary Injunction in Global Direct sales, LLC, Penobscot Indian Nation, Christopher Russell, and Ryan Hill vs. Aaron Krowne and ML-Implode et al. was held in United States District Court in Maryland. Michael Braunstien and co-counsel Gary Mason attended for the plaintiffs, as did Mr. Russell himself. Julie Turner attended for the Defendants.

In a ruling from the bench, Judge Deborah Chasanow denied the motion for preliminary injunction, on the grounds that the Plaintiffs did not satisfy any of the basic legal requirements for issuing such relief.

The Court also held that issuing an injunction as to the Defendants' article would harm not only Defendants, but the public at large. The Court found that such an injunction would chill the free speech of Defendants and others. Judge Chasanow found this to be "most troubling" in light of the fact that there is perhaps no topic that has any greater public interest right now than the economy, including the home mortgage industry and its role in the troubles of the day. For that reason, she found that any injunction would harm Defendants and disserve the public interest.

Among the arguments presented by the Defense were:

• That the injunction the Plaintiffs were seeking was an unconstitutional prior restraint that would offend the First Amendment. Defendants argued that not a single court in the land had ever issued such a broad injunction on speech that had withstood an appeal, and that it would be an abuse of the court's discretion to order such relief. Further, any injunction of the nature requested would require that Defendants come to court every time they wished to make any statement about the Plaintiffs, to ask the court's advice on whether the proposed statement would violate the Court's order (such censorship is the very essence of a prior restraint).
• That Plaintiffs, in their petition, had taken the use of the terms "copycat" and "extortion" out of context in order to misrepresent that Defendants had made false statements of fact about Plaintiffs. It was demonstrated, however, by reading from the actual paragraphs in the Railey article in which those words appear that they were in fact used in a truthful fashion, and indeed reflected facts about the Plaintiffs that Plaintiffs themselves had admitted were true.
• That HUD, according to its own website, clearly says it does not "approve" any seller-funded downpayment assistance programs. Thus, the settlement agreement between the Plaintiffs and HUD did not constitute an "approval" at all, and Railey was justified in saying so.
• That the plaintiffs had not shown a likelihood of irreparable harm, since the only evidence they had provided was a declaration from Mr. Russell indicating he'd received some phone calls from people who had seen the article, and that he felt embarrassed.

In a comical twist, at one point during the proceeding Mr. Braunstein argued that the Defendants' use of the word "laundering" was intrinsically defamatory, because this would require some "illegal activity" to occur. When the Court asked Mr. Braunstein for the source of that definition, he could not provide one, as his co-counsel, Mr. Mason, had just at that moment provided him with a definition by “googling” it on his Blackberry.

[Ed. Note: According to Answers.com (as linked to by Railey in her original article), “laundering” is “to disguise the source or nature of (illegal funds, for example) by channeling through an intermediate agent.” Obviously, it is concealing the source or nature of the funds that is the key characteristic of “laundering”; not whether the source or the funds per se are illegal.]

Defendants are pleased with the ruling, and expect to prevail in opposition to all of the central claims of the Plaintiff's suit.

The next activity in the case is set for November 18th, the deadline for Defendants to file their responses to Plaintiffs' complaint.

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Relevant documents:

• Railey Grant America/Penobscot article
• complaint by Plaintiffs
• Plaintiffs' motion for injunction
• Defendants' opposition to injunction
• Krista Railey declaration
• Defendants' exhibits
• Plaintiff Attorney Exhibits
• Russell Exhibits

Defendants' detailed recounting of the hearing follows:

The Plaintiffs asked the court to prevent ML-Implode from "directly or indirectly disseminating false or misleading statements regarding the Plaintiffs, their business or their business dealings." The Plaintiffs claimed that an article written by Krista Railey and published on the ML-Implode website defamed them.

In deciding whether to grant a preliminary injunction, the United States District Court in Maryland must take into consideration four factors: (1) the likelihood of irreparable harm to the plaintiff if no injunction issues; (2) the likelihood of harm to the defendant if an injunction issues; (3) the likelihood that the plaintiff will succeed on the merits; and (4) the public interest.

In the hearing on Monday, November 3rd, the Court denied Plaintiff's motion for a preliminary injunction. Judge Deborah K. Chasanow found that Plaintiffs did not satisfy their burden on any of the four required elements.

Before hearing any argument from the lawyers, Judge Chasanow indicated that she would not issue an order as broad as what Plaintiffs had requested. A court-ordered injunction is backed by the threat of contempt proceedings, both the U.S. Constitution and the Federal Rules of Civil Procedure require that any such injunction order be specific and clear. Judge Chasanow told Plaintiffs that the order they'd requested would leave her unable to determine whether any particular speech by Defendants would be in violation or not.

Judge Chasanow then asked Plaintiff's lawyer, Michael Braunstein, to explain why Plaintiffs would be irreparably harmed if an injunction did not issue. Mr. Braunstein stated that Plaintiff Christopher Russell had received some phone calls from people who had seen the article, causing him embarrassment. Judge Chasanow expressed that this was not enough to rise to the level of irreparable harm required for a preliminary injunction to issue.

Mr. Braunstein proceeded with the main thrust of his argument, which was that the Railey article contained statements that his clients say are untrue and defamatory. Mr. Braunstein selected five statements from the article: (1) that the Plaintiffs are engaged in "laundering" money through their seller down-payment assistance program; (2) that Plaintiff Christopher Russell had made a "copycat" website of the AmeriDream website; (3) that Russell had tried to "extort" money from AmeriDream; (4) that the Grant America Program had not been "approved" by HUD; and (5) that the seller contributions to the program were a "concession."

Mr. Braunstein argued that each of these statements was untrue and made maliciously. He argued that author Railey and others affiliated with ML-Implode were retaliating against his clients because they had refused to advertise on the ML-Implode website. Mr. Braunstein further argued that no harm would befall Defendants if they were not allowed to publish these "falsehoods" because there was no value in false speech. Likewise, he argued that the public interest would be served by removing such false speech.

In connection with Mr. Braunstein's argument about the "laundering" comment, Judge Chasanow asked Mr. Braunstein to explain how it was his client's business operated. Mr. Braunstein said that a buyer, who needed to put down 3% of the home price but who didn't have it, could get a "grant" from his clients. That grant would come from a "pre-existing pool" of money that his clients had. Then after the sale went through, the seller would make a "donation" to the grant program. Judge Chasanow rather astutely asked whether the seller had to sign up with the grant program before any money was given to the buyer. Mr. Braunstein conceded that sellers did in fact have to do so. Judge Chasanow asked if a fee was paid for the service, to which Mr. Braunstein replied that the sellers pay a processing fee.

Julie Turner, counsel for the Defendants, argued next. First, she argued that the injunction the Plaintiffs were seeking was an unconstitutional prior restraint that would offend the First Amendment. She pointed out that not a single court in the land had ever issued such a broad injunction on speech that had withstood an appeal, and that it would be an abuse of the court's discretion to order such relief. Ms. Turner argued that any injunction of the nature requested would require that Defendants come to court every time they wished to make any statement about the Plaintiffs, to ask the court's advice on whether the proposed statement would violate the Court's order. Such censorship is the very essence of a prior restraint.

Ms. Turner further argued that the injunction was unconstitutionally broad, because it left Defendants guessing what speech would or would not comply.

Finally, Ms. Turner argued that Plaintiffs had not satisfied their burden on any of the four factors that the Court had to consider. First, Plaintiffs failed to show a likelihood of success on the merits. She pointed out that Plaintiffs' business sounded alot like "laundering" in the sense that they took money that could not be used for the purpose of giving the buyer a downpayment and, for a fee, converted that same money into money that could be used for the downpayment.

Ms. Turner further pointed out that Mr. Braunstein had taken the use of the terms "copycat" and "extortion" out of context, to argue that Defendants had meant something that Mr. Braunstein said was false. Ms. Turner read from the exact paragraph in the article containing those words to provide the court with the appropriate context. She showed how the words were used in a truthful fashion, and indeed reflected the facts that Mr. Braunstein had admitted were true.

For example, Mr. Braunstein had argued that the article claimed that Christopher Russell had made a "copycat" website of the AmeriDream website. Mr. Braunstein said this meant that the article accused Mr. Russell of having copied the website itself. Mr. Braunstein admitted that an arbitrator had instead found that Mr. Russell had merely made a confusingly similar domain name, not a copy of the website.

Ms. Turner showed that, read in the context of the article, the word "copycat" referred to the domain name, not the content of the website. Since Mr. Braunstein had admitted that his clients had created a confusingly similar domain name, the statement in the article was in fact true.

Ms. Turner also referred the court to the website for HUD, which states that HUD does not "approve" any seller funded downpayment assistance programs. She argued that the settlement agreement between the Plaintiffs and HUD did not constitute an "approval" at all.

Ms. Turner argued that the plaintiffs had not shown a likelihood of irreparable harm, since the only evidence they had provided was a declaration from Mr. Russell indicating he'd received some phone calls from people who had seen the article, and that Mr. Russell was embarrassed.

By contrast, she argued that the Defendants, as journalists and news media, would be gravely harmed should they have to submit to the kind of government-backed censorship that the Plaintiffs were asking for. Ms. Turner argued that the home mortgage crisis is a matter of the gravest and most avid public interest, and that anything that would limit speech on this important topic would harm the public as well.

In rebuttal, Mr. Braunstein argued that the First Amendment did not apply to Defendants' speech because, he argued, such speech was defamatory and thus not protected. He reiterated his arguments about the use of the word "laundering" and gave the court a definition of that term that required some illegal activity occur. When the Court asked Mr. Braunstein for the cite to that definition, he could not provide one as his co-counsel had just at that moment provided him with the definition by Googling it on his Blackberry.

After considering both parties' arguments, the Court rejected Plaintiffs' request for an injunction of any kind. First, Judge Chasanow explained that an injunction is an extraordinary remedy, not to be granted lightly. She said this was even more the case when the injunction was "mandatory" -- that is would force the Defendants to take affirmative action to change something, rather than merely to prevent the Defendants from changing the status quo.

The Court held that Plaintiffs had failed to meet their burden on any of the four factors. First, the Court held that Plaintiffs had not shown they were likely to prevail on their defamation claims. She found that the article at issue was very lengthy and contained links to supporting documents. She said that it was unclear if the few points that Plaintiff identified were in fact true or not, but that they were a small part of the overall article.

The Court also held that Plaintiffs did not show that they were likely to suffer irreparable harm or that the relief they requested would prevent any such harm. Since the article was already out on the Internet, the "bell could not be unrung." She also found that Plaintiffs had not provided sufficient evidence that would show what, if any, irreparable harm the Plaintiffs would suffer absent an injunction.

By contrast, the Court held that issuing any injunction as to Defendants' article would harm not only Defendants, but the public at large. The Court found that such an injunction would chill speech of Defendants and others. She found this to be most troubling in light of the fact that there is perhaps no topic that has any greater public interest right now than the economy, including the home mortgage industry and its role in the troubles of the day. For that reason, she found that any injunction would harm Defendants and disserve the public interest.

As to the First Amendment, Judge Chasanow indicated that it did give her some "consternation" in light of the relief sought, but decided that she needn't reach the First Amendment issues since she could decide on the narrower ground that Plaintiffs had not met their burdens under the standards for preliminary injunctive relief.

The next activity in the case is set for November 18th, the deadline for Defendants to file their responses to Plaintiffs' complaint.