Implode-O-Meter ordered to give up sources

Implode Explode Heavy Industries (IEHE), the folks who have brought the world the popular Mortgage Lender Implode-O-Meter, has been ordered to give up the names of their sources who supplied information about The Mortgage Specialists Inc. in a frightening example of how First Amendment rights can be easily trampled. The details are in this press release:

New Hampshire Judge Orders ML-Implode To Divulge Identities of Anonymous Posters

March 31, 2009 - For Immediate Release

LAS VEGAS - A New Hampshire Superior Court Judge has ordered Implode-Explode Heavy Industries, Inc., the owner of the popular mortgage industry crash site Mortgage Lender Implode-O-Meter (ml-implode.com) to give up the identities of persons who provided information to the site about The Mortgage Specialists, Inc. of Plaistow New Hampshire.

Rockingham County Judge Kenneth R. McHugh also ordered that the allegedly "secret" and "defamatory" content about The Mortgage Specialists would have to stay down permanently.

The information consists of an anonymous posting on the ML-Implode forum about The Mortgage Specialists and the publishing of the company's 2007 "Loan Chart" sent in by an informant and placed online by the Implode-O-Meter staff.

Lots more below:

The Mortgage Specialists alleged in their complaint the forum posts were defamatory, and the 2007 Loan Chart detailing financial statistics was secret. ML-Implode immediately and voluntarily removed the information to assuage MoSpec's concerns, despite its continuing assertion that it still had the right to post them. However The Mortgage Specialists persisted in demanding the submitters' identities and a promise to permanently keep the information offline. ML-implode refused. The Mortgage Specialists filed suit on November 12, 2008, signed by company President Michael Gill.

Judge McHugh stated in his order that since the Mortgage Specialists did not hold the Implode-O-Meter culpable or ask for monetary damages, their request to divulge the identities of the persons in question was "reasonable." The Judge further stated:

The maintenance of a free press does not give a publisher the right to protect the identity of someone who has provided it with unauthorized or defamatory information."

Judge McHugh's order was issued without a full hearing on the merits of The Mortgage Specialists' claims. Specifically, plaintiffs had not yet established that any of the postings were defamatory or that the Loan Chart information posted was in fact confidential, as ML-Implode's challenges were limited to whether the New Hampshire court had jurisdiction over ML-Implode and whether the plaintiff's requested relief would violate the First Amendment.

Judge McHugh earlier ordered that New Hampshire venue was appropriate, despite the arguments that neither ML-Implode nor IEHI specifically did any business in or had any personnel or facilities in the state of New Hampshire. Such a decision theoretically construes the long-arm statute to cover any web site or web publishing outfit in the U.S., as long as it is viewed from New Hampshire. The Order therefore implies there can be no reasonable expectation of anonymity for any online posting where a New Hampshire-based party might consider the presented information defamatory or secret.

The order issued injunctive relief despite ML-Implode’s argument that Mortgage Specialists had not met the requisite test under New Hampshire law. Specifically, the petitioner did not establish that it had a valid claim for defamation based upon the postings, or that it had any claim at all against ML-Implode -- ostensibly a requirement to compel ML-Implode to disclose sources or commenters, or not to publish. Although ML-Implode argued these points, the Court failed to address them in the order, or to explain its own reasoning in ordering injunctive relief.

Judge McHugh acknowledged in his order that the ML-Implode voluntarily took down the contentious items (the forum posts and the 2007 Loan Chart), but wrote that the web site nevertheless acted in a "knee-jerk" fashion by not giving in to The Mortgage Specialists' demand to know the identities of the contributors.

The decision is being appealed to the New Hampshire Supreme Court. If the order stands, a flood of similar lawsuits filed by corporations against “whistleblower” and consumer advocacy web sites could appear across the country.

The Implode-O-Meter's founder Aaron Krowne continues to defend the site's decision to keep the submitters' identities anonymous, stating:

We do not dispute that in some cases defamatory or secret information may need to be taken down, and that the identities of those who have provided such sensitive information may need to be revealed to the court. However, such moves should not be taken lightly given the sanctity of the First Amendment.

We are disappointed and distressed by this Order because it creates a “chilling effect” whereby grassroots media sites will be greatly hindered in providing fora for critiquing and challenging corporate interests. This is all the more problematic given that it has not been shown that the underlying material was either defamatory or secret. As a result, if the order stands, we will no longer be able to operate, as we will no longer be able to risk allowing any third-party information to be placed online, which is the core function of our forum.

ML-Implode is considered by many to be the first dedicated whistleblower of the subprime crisis and credit crunch, as profiled in a July 8th, 2008 New York Times article. It is commonly cited by major news networks and financial publications regarding the economic crisis.

In 2008 The Mortgage Specialists was accused by Massachusetts and New Hampshire State banking officials of more than 60 mortgage-related violations, including forging signatures and destroying documents. Massachusetts banking officials also have accused the company of unfair and deceptive business practices. The Mortgage Specialists consented to a Massachusetts Banking Department Cease & Desist without admitting to any culpability and agreed to pay a $300,000 fine. They were also ordered to cease further originations and place all remaining loan applications with other providers, effectively shuttering the business' operations pending resolution of the state's concerns. New Hampshire imposed a fine of $300,000 against The Mortgage Specialists, with an additional $50,000 each against Michael Gill and Lisa Tracy individually, and an additional fine of $25,000 for failure to consult the National Do Not Call List.

ML-Implode's report on these developments was based on facts as reported by authoritative sources, including the states of Massachusetts and New Hampshire.