Internet message boards aim to provide a forum for discussing a company's stock price and business activities, but Yahoo's board for physician practice manager PhyCor has morphed into a doctors' underground.
People claiming to be current and former PhyCor physicians file messages on the Yahoo board under pseudonyms like "Scarabviper" and "ExSlaveDoc2U," sharing stories and gossip about foundering clinics and falling salaries. They detail fistfights between physicians over whether PhyCor has been good or bad for their clinics. And they highlight other tensions that followed PhyCor's stock price decline to the single digits from $27 per share over the past year.
Now PhyCor has filed a lawsuit to remove the cloak of anonymity behind which the message posters have been hiding.
Nashville-based PhyCor is one of a growing number of companies suing Internet stock-board posters for posting defamatory or insider information. Also among them is orthopedic and rehabilitation giant HealthSouth Corp., Birmingham, Ala.
PhyCor filed suit Dec. 28, 1998, in Rutherford County (Tenn.) Circuit Court, but posters in May were just receiving notice that PhyCor was targeting them.
Such lawsuits, which have been cropping up over the past year, are plowing new legal ground, pitting First Amendment rights to free speech against company privacy issues. Attorneys say the lawsuits also emphasize that the aliases people use to chat on the Internet are pseudonymous rather than anonymous, since there are means to track down the posters.
When they first appeared in late 1997, message boards operated by Internet companies such as Yahoo and Silicon Investor were laughed off for attracting cranks and rumormongers. Now many companies -- not just in healthcare -- are taking the boards seriously because their investors and employees are confronting them about information posted online.
The lawsuits often come when a company is doing poorly, and message posters are seen as a lynch mob. PhyCor's naysayers are passionate enough that only a few masochistic supporters are posting messages. (The posters probably would argue that PhyCor's declining clinics and $256 million in 1998 write-offs are the reason for a lack of support online.)
By suing defendants called John Does, a company or an aggrieved person can convince a judge to issue a subpoena forcing an Internet service provider to turn over the e-mail addresses and identities of the message posters. No attorney contacted by Modern Physician could think of a case in which a poster or service provider fought to keep names hidden.
Previous court rulings free Internet companies from responsibility for information outsiders post on their sites.
Is speech free?
Predictably, the posters on Yahoo's PhyCor site are outraged at what they see as the company's attempt to snuff free speech. Without anonymity, many posters fear retribution if they speak candidly. Posters don't have to reveal their names to register on the Yahoo board, but they do have to disclose their e-mail addresses.
Some posters who said they were doctors have disappeared from the site since the lawsuit, but others seem emboldened by it. One poster -- who claimed to have made $5 million selling PhyCor stock short (selling borrowed shares) and then buying it later when the price fell -- in the first week of May wrote more than 50 messages with some variation of the theme, "PhyCor wants to murder me!"
Another poster, Norman Friedman, M.D., alias "coolhl7," a PhyCor dermatologist in Fort Walton Beach, Fla., came out in the open to fight the company in court, even though he isn't officially a defendant. Friedman's attorney, Patrick Calcutt, on May 4 asked that the case be moved to U.S. District Court in Nashville, saying posters came from all over the nation, if not the world.
As a result, Calcutt says, PhyCor is suspended from searching for posters until a June 14 federal court hearing decides whether the state or federal court will hear the lawsuit.
While the Securities and Exchange Commission has cited posters who illegally hyped or downplayed a stock for their own benefit, no judge has ruled on a case in which a company sued posters. And as Friedman's case illustrates, there is no consensus on where such cases should be filed.
Most companies go to great lengths to keep their lawsuits quiet because they want to catch posters unawares and they don't want to be seen as heavy-handed ogres. Therefore, the number of companies that have sued over Internet stock boards is unknown, but attorneys say the number of cases is growing.
"The more the medium becomes a powerful means of communication that people take seriously and act on, the more you are going to see litigation on what is said and done on it," says Sandra Baron, an attorney and executive director of the Libel Defense Resource Center in New York.
PhyCor says doctors and investors have challenged it to confirm or refute messages on the Yahoo board, but so far the company has only responded privately. Yahoo posters gave themselves the nickname "Gang of Four" after a PhyCor executive allegedly used the moniker to describe four particularly nettlesome naysayers. (The name originally applied to the four hard-line Communists imprisoned for trying to take over China after Mao Zedong's 1976 death.)
Even though board operators like Yahoo and Silicon Investor warn that postings are opinions and shouldn't be relied on for investment decisions, day traders often use them to guess which stocks they should buy and sell quickly.
But there is potential for traders and others to view the site as a place to find the real dirt on a company -- the stuff no firm would ever talk about publicly.
An extreme case is ITEX Corp., a Portland, Ore.-based barter company that filed a lawsuit in September 1998 in response to message board posters' accusations of stock fraud. Assistant general counsel Steve Pearson says the company had no other way to respond because it is under SEC investigation for its accounting practices and cannot release related information.
The goal of a lawsuit may not be winning in court. Since libel and defamation claims can be hard to prove, companies use the lawsuits to find out if employees are violating policy, which is easier to prove.
"Ascertaining the identity is just the first step of a series of legal maneuvers," says Martin Samson, a New York attorney who has handled Internet-related disputes. "Then you follow with action against the perceived wrongdoer."
PhyCor isn't commenting on its strategy, but other companies have used lawsuits to suss out employees who posted rumors or inside information in violation of company policy. PhyCor doctors are considered contractors, not employees. Those who post negative messages, however, could be sued or face other penalties for violating an agreement to keep quiet about company business, a prerequisite for selling their practice assets to PhyCor.
Attorneys say employees and others who sign nondisclosure agreements and then spread gossip about their companies on the Internet may have no more protection from their bosses than if they stood on a street corner shouting through a megaphone.
In fact, companies may be even more disturbed by Web chatter, since the earshot of a stock board is worldwide.
"The employee may have a First Amendment right to say something about the company, and the company may have the right to fire someone for doing so," says David Loundy, an attorney with Davis, Mannix & McGrath in Chicago who has published articles about Internet law.
As a defense contractor, Lexington, Mass.-based Raytheon Corp. is used to nasty things being said about it, so its suit focused on perceived wrongdoing by a few employees. Raytheon filed its suit in February in Middlesex Superior Court in Cambridge, Mass.
As of early May, Raytheon had received resignations from four employees identified through the lawsuit. However, later in the month Raytheon dropped the suit, saying it was hurting the company's image by making it appear intolerant.
"The filing was in no way intended to curb freedom of speech or expression," spokesman David Polk says. "There's a clear line of sharing information of a public nature and (openly) communicating information that's proprietary and would have an adverse effect."
HealthSouth's case was notable in that it sought criminal charges against a stock-board poster after finding him out.
Last year, HealthSouth became one of the first companies to file a lawsuit against an Internet poster. The Florida case targeted a person who used the pseudonym "I Am Dirk Diggler," after the porn star character in the 1997 movieBoogie Nights. According to documents filed in Centre County (Pa.) District Court, "Dirk" posted messages calling HealthSouth executives crooks and stating he was having sex with the wife of Chairman and Chief Executive Officer Richard Scrushy.
HealthSouth discovered the poster to be Peter Krum, who until mid-1998 was a food-service manager at HealthSouth's Nittany Valley Rehabilitation Hospital near State College, Pa. Krum posted messages on a computer at Penn State University, where he was working as a food and beverage manager.
HealthSouth then moved its lawsuit to State College and filed a criminal harassment complaint against Krum.
Krum, an Internet neophyte who had no idea his messages were being read by anyone except the 10 to 15 other regular posters on the HealthSouth board, never fought the lawsuit, says his attorney, William Arbuckle.
"He clearly was just playing a game with them," Arbuckle says. "Unfortunately, what he didn't realize is that people who were serious about business and about HealthSouth read that same board. It's like having a private conversation and turning around and realizing there's a whole room of people behind you."
HealthSouth decided to drop the criminal charges against Krum and settled the case April 29. As part of the settlement, he had to sign a three-page mea culpastating his messages were "thoughtless lies." He also has to send $50 a month for four years to a local charity selected by HealthSouth and perform three hours a week of public service for two years.
Krum's Internet forays also cost him his job at Penn State, forcing him to take a $22,000-a-year job as a cook at a local restaurant.
Neither Scrushy nor company attorneys were available for comment.
Arbuckle says it is clear HealthSouth wanted to "make a statement about how they would react about malicious postings."
But HealthSouth hasn't gone after every pernicious poster. At the same time Krum was posting his messages, another poster referred to Scrushy as "Scrushy-nocchio," claiming the chairman was a liar. That poster, "cyber_jack99," also claimed PhyCor is out to murder him.
And the case didn't eliminate Krum's postings, which can still be read on Yahoo. HealthSouth has not disclosed any other lawsuits against Internet stock-board posters, many of whom sent messages saying they were happy to see Krum exposed.
Fighting fire with fire
Meanwhile, on Yahoo's PhyCor board, the doctors' underground is developing into a lawyers' underground, with discussion dominated by the company's lawsuit.
The best hope for message posters, attorneys say, may be in fighting subpoenas with subpoenas. Since the suit alleges the posters proffered false information, they could ask a judge to demand that PhyCor turn over relevant documents to prove their statements were true.
With a lawsuit opening the floodgates, Loundy, the Chicago attorney who has written about Internet law, says the potential exists for a company to divulge embarrassing information it never intended to reveal.
That's the strategy employed by Les French, who is defending himself in a lawsuit brought by his former employer, ITEX.
French, who left the company in 1990, eight years before he participated in a stock board, has a judge's blessing to get sensitive stock-transfer documents to prove his online allegations of stock fraud by ITEX. However, the judge did require the information to be sealed from the public. The case, filed in September in Multnomah County Circuit Court in Portland, Ore., is continuing.
There's also the question of whether lawsuits such as PhyCor's give inordinate credence to stock boards, thereby forcing other companies to do the same.
"By suing people for in effect chatting about your company, you have unveiled a whole new level of shareholder disclosure you're required to give," says Calcutt, the St. Petersburg, Fla., attorney representing Friedman. Calcutt also represents Friedman's clinic, White-Wilson Medical Center, in another lawsuit against PhyCor regarding a management dispute.
"Say you don't file a lawsuit, then (are you saying that statements are) true or authorized?" Calcutt says. "In the company's view, does it mean they acquiesce to the statements?"