Loan Center of California Sues Mortgage Lender Implode-O-Meter; Motion to Strike Filed

On May 9th, 2007, we received (from the Fulton County, GA Court System) the initial complaint of a lawsuit filed by Loan Center of California ("LCC"), of Suisun, CA (Solano Co.).

The complaint is in response to an email posted on the Mortgage Lender Implode-O-Meter website on April 18th, 2007. LCC alleges that as a result of that posting, nearly $4 million of funding was withdrawn by Credit Suisse and Washington Mutual (along with a variety of other business injuries).

The post that day consisted of little more than the contents of an anonymous e-mail we received, which painted a bleak picture of LCC's condition. In accordance with our usual procedure, we checked and found other information strongly suggesting LCC's business was no longer functioning, and discovered at least two mainstream media articles to the same effect (including quotations by LCC CEO Eduardo Blanche that the company was having difficulty selling loans on the secondary market---i.e., that the company's business model was breaking down). Considering the state of the market and the specific evidence on LCC, we provisionally posted them to the "imploded" list.

LCC alleges that Credit Suisse and Washington Mutual consequently cut the company's credit lines.

Since nearly our beginning (and well before April 2007), ml-implode.com has been accompanied by strong disclaimers (posted in multiple locations), all of which are to the effect that the information on the site is provisional. As the site is a public forum, the information largely originates from the public, a fact made clear in our disclaimers, which warn the reader to verify the facts by directly contacting the companies involved.

Loan Center of California contacted us, demanding that we immediately pull down the posting about them. Although we asked them to to provide us with a statement that we could release to the public to rebut the initially-posted email and to help dispel other adverse rumors concerning the company, LCC refused. Instead, the company is demanding some unspecified sum of more than $50,000 to redress their alleged injuries.

It seems clear to us that the intent here is to injure the Mortgage Lender Implode-O-Meter---perhaps even to "shut us down". We believe we are without blame and at no fault in this incident. Fundamentally, the complaint involves business between third parties of which we had no specific knowledge, as our interest in running the web site is general. We are accordingly responding to LCC's allegations with a motion to strike the suit under California's "Anti-SLAPP" statute.

This motion was filed June 25th, 2007 (see links at the end of this writeup).

The Communications Decency Act, 47 USC § 230, which we believe applies, prohibits libel claims against the hosts and users of websites (such as ml-implode.com) for posting information provided by another. As the California Supreme Court has stated: "[The provisions of the Communications Decency Act] have been widely and consistently interpreted to confer broad immunity against defamation liability for those who use the Internet to publish information that originated from another source." (Barrett v. Rosenthal (2006) 40 Cal.4th 33, 39, 146 P.3d 510, 51 Cal.Rptr.3d 55.) "SLAPP" stands for "Strategic Litigation Against Public Participation," and refers to attempts to use the legal system to silence discourse on matters of public concern. Such suits are a hazard to public discourse, despite this country's First Amendment, because the legal proceedings per se can be ruinous to small defendants, whether or not they are at fault or ultimately prevail. In response to this threat, many states, including California, have passed "Anti-SLAPP" statutes, which provide for the outright dismissal of such suits with legal costs and fees awarded to the defendant.

We are pursuing such a dismissal.

Documents for the lawsuit are available as follows:

• LCC's complaint
• Notice of Motion to Strike
• Memo of Points and Authorities supporting our motion to strike
• Krowne Declaration in Support of Motion to Strike
• Exhibits for Declaration, Memo

Aaron Krowne and Krowne Concepts, Inc., are being represented in this case by the Turner Law Firm , of Palo Alto, CA.

Even if we prevail on our motion to strike and collect compensation for court costs, all of our expenses connected to this suit will not be recovered. Please help support ml-implode by making a donation . You will be helping to advance the cause of free discourse on matters of economic, financial, or any other type of public concern, without fear of SLAPPs.

—Aaron Krowne, July 2, 2007

(for Krowne Concepts, Inc., and ml-implode.com)