Cubby, Inc. v. CompuServe Inc.

Issue: Whether CompuServe was liable as a publisher or distributor of defamatory statements appearing in a third-party newsletter carried on its online information service.

CompuServe operated an online information service that provided subscribers access to hundreds of forums and databases. One such resource was the Journalism Forum, managed by Cameron Communications, Inc. — a company entirely independent of CompuServe. Under a separate contract with Cameron, Don Fitzpatrick Associates published a daily newsletter called "Rumorville USA" within the Journalism Forum. Rumorville published statements in April 1990 defaming Cubby, Inc. and its founder Robert Blanchard — competitors in the electronic news space — calling Skuttlebut a "new start-up scam" and stating that Blanchard had been "bounced" from a prior employer. CompuServe had no opportunity to review Rumorville's contents before they were uploaded and had no notice of any complaints about DFA or Fitzpatrick before suit was filed. The Southern District of New York granted summary judgment to CompuServe. The court applied a distributor liability standard rather than a publisher standard, reasoning that CompuServe was analogous to a news distributor or bookseller — an entity that carries content but exercises no editorial control over it. Because CompuServe did not know and had no reason to know of the defamatory content, it could not be held liable even under the more lenient distributor standard.

The foundational pre-§ 230 defamation case for online services. Cubby established the publisher/distributor distinction in the internet context, holding that a platform which exercises no editorial control is treated as a distributor — not a publisher — and is liable only if it knew or should have known of the defamatory content. This decision gave rise to the "Moderator's Dilemma": when the later Stratton Oakmont decision held that a platform that exercises any editorial control becomes a publisher, platforms faced a perverse incentive to do nothing. Congress enacted § 230 specifically to dissolve that dilemma.