Court Slaps Stock Message-Board Poster With Restraining Order

Posters and free-speech advocates worry a chill may settle over stock message boards.
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A California court Monday issued a temporary restraining order against an Internet message-board poster who made caustic postings about a bulletin-board stock.

Message-board posters reacted angrily to the decision against Floyd Schneider and predicted a chilling effect on message-board stock discussions. The temporary restraining order was issued on behalf of Bryant Cragun, a shareholder in

ZiaSun Technologies

(ZSUN)

, who has also been a target of Schneider. And it followed a preliminary injunction filed last week against Schneider by the

U.S. District Court

in Washington state. That case was brought by ZiaSun.

Schneider says he'll abide by the restraining order, issued by

California Superior Court

in San Diego, which orders him to retract press releases and "any statements" implying ZiaSun's employees are "disreputable, dishonest, unscrupulous or engaged in criminal behavior." Says Schneider: "It's either that or going to jail."

"We don't mind criticism, but we don't like when people are twisting the truth to this level," said Mark Harris, ZiaSun's vice president of investor relations.

Schneider, who goes by "the Truthseeker" and "Floydie," started posting vitriolic missives about ZiaSun, an Internet services company based in Solana Beach, Calif., in November 1998.

"ZSUN is a very bad deal," Schneider posted on

Silicon Investor

on Dec. 7, 1999. Schneider has suggested that ZiaSun and its officers are "Satan bound" and that one of ZiaSun's vice presidents was a "stuttering liar." Schneider also posted press releases on his Web site,

TheTruthseeker.com, reiterating a strong sell recommendation. (He says he hasn't had a position in the stock.)

Last June, the company sued Schneider for engaging in a "cybersmear" campaign. Last week's injunction prevents him from posting "false and defamatory statements" about ZiaSun and its officers. But it didn't keep Schneider quiet. "It just says I can't post anything that's not the truth," Schneider said then. "I'm very careful."

Regardless of the facts of the matter, experts say the preliminary injunction and temporary restraining order were surprising.

"I don't assume that the defendant's an angel here, but this is a very unusual type of remedy," says Lyrissa Lidsky, a professor at the

University of Florida

who specializes in cases dealing with message boards. "The merits of the case haven't been adjudicated yet. Usually under First Amendment doctrine, a preliminary injunction is treated as what's called a 'prior restraint,' and it's particularly disfavored under the First Amendment. There's a heavy presumption that prior restraints are unconstitutional. Now that two courts have done it is even more surprising. It sounds like a dangerous precedent is being set."

The message-board community was disheartened. "It's muzzling of dissent," posted Janice Shell, herself a Net vigilante who says she tries to expose questionable stocks, on Silicon Investor. "I'd have preferred that Floydie be a bit more circumspect in his accusations, but this really goes too far."

The only defense for message-board posters, says Jared Silverman, a New Jersey lawyer and former chief of the

New Jersey Bureau of Securities

, is the truth. "Basically what the case says is that people who start making accusations through various Internet methods, be it chat boards or whatever, should be very careful of what they say because they could be held accountable for it."

As for the message-board community, it could result in quieter boards. "I think it's a very bad precedent," says Jeffrey Mitchell, a Silicon Investor poster who's worked alongside Shell. "It's silencing John Doe. If you put something out on a message board, you're screwed," he says.