craigslist Inc v. McMaster et al

Filing 37

NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Proceedings TRANSCRIPT OF MOTION HEARING held on February 23, 2010, before Judge HONORABLE C. WESTON HOUCK. Court Reporter/Transcriber O'Brien/Janet Collins. Tape Number: Court Smart. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Parties have 7 calendar days from the filing of the transcript to file with the court a Notice of Intent to Request Redaction.. Redaction Request due 3/26/2010. Redacted Transcript Deadline set for 4/5/2010. Release of Transcript Restriction set for 6/3/2010. (obri, )

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcriptionist: For the Defendants: APPEARANCES: For the Plaintiff: Joseph P. Griffith Law Firm, LLC BY: JOSEPH P. GRIFFITH, JR., ESQ. Seven State Street Charleston, South Carolina 29401 Wilmer, Cutler, Pickering, Hale and Dorr BY: PATRICK J. CAROME, ESQ. 1875 Pennsylvania Avenue NW Washington, D.C. 20006 SC Attorney General's Office BY: DEBORAH SHUPE, ESQ. JAMES EMORY SMITH, JR., ESQ. P.O. Box 11549 Columbia, South Carolina 29211 J. Collins Reporting, LLC BY: JANET A. COLLINS, RMR, CRR, CRI 222 West Coleman Boulevard, Ste. 220 Mt. Pleasant, South Carolina 29464 [phone] IN THE DISTRICT COURT OF THE UNITED STATES DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION * * Plaintiff * * vs * * Henry D. McMaster, in his * Official capacity as Attorney * General of the State of South * Carolina, et al., * * Defendants * ******************************* craigslist, Inc., 2:09-CV-1308 Charleston, South Carolina February 23, 2010 11:00 a.m.

TRANSCRIPT OF MOTION HEARING BEFORE THE HONORABLE C. WESTON HOUCK, SENIOR UNITED STATES DISTRICT JUDGE

Proceedings recorded by digital recording system, transcript produced by Computer-Aided Transcription software

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 stay here. My name is Debbie Shupe, and I am appearing here today on behalf of the Defendants in this action. As the Court noted, we are here on the Defendants' Motion to Dismiss the action pursuant to Rule 12(b). And in (On the record, 10:54 a.m.) THE COURT: All right. This is Civil Action

09-1308, craigslist, Inc., Plaintiff, against Henry D. McMaster, et al., Defendants. The Defendants have made a Motion to Dismiss this action for failure to state a claim, and that is what we're here to do this morning, to hear that motion. THE CLERK: THE COURT: MS. SHUPE: THE COURT: MS. SHUPE: All right. You with the Attorney General? Yes, sir. It's your motion. May it please the Court? Okay. Okay?

First of all, would the Court prefer that I go up to the podium? THE COURT: difference me. MS. SHUPE: Okay, then if you don't mind, I'll I don't care, doesn't make any

going over all of the documents, this thing has been fully briefed by the parties, and I don't think I need to sit here and regurgitate the stuff that's in the Pleading for the

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court. But in going through what's been filed, it dawned on me that we've done what lawyers tend to do, and that is go around in circles and dance around and -- and the issue somehow gets lost in the shuffle. And when you boil it down

to its essence, there are essentially four basic issues before the Court today. First issue is whether this Court should abstain from deciding this case in light of the Attorney General's ongoing criminal investigation involving the Plaintiff. The second issue is whether 47 USC, Section 230, commonly referred to as the "Communications Decency Act," gives a blanket immunity from prosecution for knowingly violating South Carolina criminal law prohibiting the aiding and abetting of prostitution. The third issue is whether the threat of criminal prosecution for knowingly aiding and abetting prostitution in South Carolina violates the First Amendment rights of Plaintiff and its users. And the final issue before the Court is whether that threat of prosecution violates the commerce clause by imposing an undue burden on interstate commerce. As to the abstention issue, Your Honor, Younger and its progeny developed a three-prong test. The first prong is, there is "An ongoing state

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 judicial proceeding"; There should be an important State interest implicated, and; There should be an adequate opportunity to present Federal claims in a State Court proceeding. There can be no question that enforcement of South Carolina's criminal laws in general, and the prostitution laws in particular, constitutes an important State interest for the State of South Carolina. It can also be no question that South Carolina's State Courts are very capable of handling any Federal claims the Plaintiff may need to raise in the event of a -- of judicial -- I mean prosecution that may be instituted at the end of the investigation. THE COURT: MS. SHUPE: What's going on now? What's going on now, Your Honor? We

are still maintaining contact with Sheriffs' Offices around the State, tracking -- we are monitoring the, um -- "Adult Services" Web sites, categories, and we are getting information about any arrests that are made. But as Your Honor knows, we consented to maintain the status quo regarding prosecution until, I would -- I say, cooler heads could prevail and things could settle down and this Court could hear this on the merits. And so we have done -- while we have continued the

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Complaint? (Pause.) THE COURT: (Pause.) THE COURT: In the Complaint on Page 5, Paragraph "As of 5 Where is it? investigation just as we said we would, we have not taken any action regarding prosecution, because of the Consent Order. THE COURT: Now, in -- in the . . . do I have the

7, the following alleged quotation takes place:

p.m. this afternoon, the craigslist South Carolina site continues to display advertisements for prostitution and graphic pornographic material. as we requested. This content was not removed

We have no alternative but to move forward

with criminal investigation and potential prosecution." Is that the strongest statement that the Plaintiffs allege the Attorney General made? MS. SHUPE: believe it is. He thereafter, and I -- and I think this is also important for purposes of the strength of the threat to them. Thereafter, in all of the news articles in which the Attorney General was quoted, he made it abundantly clear, we recognized that craigslist had put in additional I believe it is, Your Honor. I

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 18th. measures to continue to -- to better monitor the now "adult Services" site. And he specifically said, in the very last

public statement that he -- that's accredited to him, that We hoped they were going to do better; That we hoped they were going to do what they promised; And they had to be given a reasonable time to fix it. That's the last public

statement that was made by the Attorney General. THE COURT: MS. SHUPE: Okay. And that was approximately May the But,

What, he said, We were doing was monitoring it.

again, he also made it clear they would have time, and then on May the 20th, they started this action. THE COURT: MS. SHUPE: Okay. Younger clearly indicates that Federal

Courts should not interfere with State officials who have a duty to enforce State Law, and; Federal Court action in cases involving State criminal proceedings, even those not yet formally instituted, is only proper under very special circumstances. Now, I would -- I noted -- I've read the case submitted by opposing counsel in the last week, and it's the -- I know I'll mispronounce this, I apologize, but it's Guillemard-Ginorio out of the Fourth Circuit on the abstention issue. And the important thing I think the Court should

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 take from that case is the Court, again, reaffirmed the civil immunity under Section 230 of the CDA. even an issue here. That's not

The Defendants don't dispute there is a

very broad civil immunity under Section 230. But what the Fourth Circuit said is they noted a split in the Circuit -- and this is on Page 520 of that opinion. They said, The Fourth Circuit has taken no position on the issue of when a criminal proceeding is sufficient to warrant abstention. I freely admit there are cases going both ways pre-indictment, you know, what exactly has -- where it has to be in the process. But the Fourth Circuit has not ruled

on that, and very clearly said they were not going to do it at this point. And then they even said, We're not going to set a brightline rule for when an agency investigation has proceeded far enough. Fourth Circuit. In South Carolina, however, under South Carolina Law, the investigation is part and parcel of the prosecution proceeding. So it all constitutes a judicial proceeding for So this is an open issue in the

purposes of when something starts and ends. And so the initiation of a formal criminal investigation like we have here is part of the prosecution

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 process and part of the judicial process in South Carolina. The important thing we'd like the Court to -- to consider is if the Younger abstention doctrine only applies after a formal indictment is issued, anytime the subject of a State criminal investigation mentioned the possibility of a Federal claim, prosecutors will be faced with having to rush to an indictment and then -- you know, and do the thorough investigation later in order to retain the case in the State Courts. And that would preclude -- that would preclude, Your Honor, the opportunity that an issue might be resolved in the course of the investigation. And I submit to the Court, it's clear from what's been submitted in the Complaint, this is a case that may very well have been resolved if the criminal proceeding was -- investigation was allowed to run its course. The Attorney General said, We recognize their efforts, we're going to continue monitoring it, we're going to continue talking to the Sheriffs, but they have to have time -- they have to have time to fix it. They want it both ways, Your Honor, and -- and I think this is kind of -- important for the Court to realize, too. Depending on what issue the Plaintiff is arguing, they

argue out of both sides of their mouth. In the Complaint, they allege that the criminal

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 me now. MS. SHUPE: THE COURT: they can show. MS. SHUPE: Well, Your Honor, I think it goes -What issue? I mean, I -- the irreparable harm that investigation was ongoing and prosecution was imminent, which justified the rush to this Court for equitable relief. Then, in response to the Defendants' abstention argument, they argue the criminal investigation may be nothing more than the Attorney General's May 5th letter demanding they take them down. So if that's the case, if what they're now arguing is the case, then they can't show the type of irreparable harm necessary to warrant the incredible injunctive relief they are seeking from this Court. They are asking this Court to permanently enjoin all the prosecutors in the State of South Carolina from even investigating craigslist for possible criminal actions. That is an extraordinary relief, Your Honor, and -- and it's -- they can't show the type of harm, irreparable harm and imminent harm, that's necessary to justify such a relief. THE COURT: Well, I don't have that issue before

it does go to the abstention issue, that if they can't -- if they're not -- if what they've alleged doesn't show

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. The next issue is the immunity under Section 230 of the "Communications Decency Act." The specific provisions of the act that are at issue here is Section (c) -- Subsection (c)(1), which provides that, "No provider or user of an interactive computer service shall be treated as the publisher or irreparable harm, then they're not entitled to it and the Federal Court should back off. So it has come up in the abstention arena as well as analyzing whether an injunction should issue. We submit, Your Honor, on the abstention issue, that the criminal investigation should be allowed to proceed. And if the issues aren't resolved during the

investigation -- and, frankly, if craigslist is as committed to cleaning up its Web sites, particularly the "Adult Services" Web site, then there's probably no issue. In fact, the Attorney General said at an -- at an on-TV interview, They'll have nothing to fear from us and they do what they say they're going to do. So it should be allowed to proceed, and; if it's not resolved, they can bring up whatever Federal claims they need to raise in any State Court proceeding that may be commenced. And that's basically our abstention argument, Your

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 speaker of any information provided by another information content provider." We don't dispute that, Your Honor;

that's what the law says, and it's clear. Subsection (e)(1) says there, No effect on Federal criminal law. criminal law. The particular subsection at issue here is subsection (e)(3), which provides that, "Nothing in this section shall be construed to prevent any State from enforcing any State Law that is consistent with this section. No cause of action may be brought and no It doesn't bar enforcement of Federal

liability . . . imposed under any State or local law that is inconsistent with this section." Again, Your Honor, as I stated earlier, we do not dispute that Section 230 - particularly as interpreted by the Courts across the nation - provides Internet service or interactive computer service providers like craigslist very broad immunity from civil actions. And even in Zeran, which is the Fourth -- the seminal Fourth Circuit case, the Fourth Circuit specifically said there was no doubt that Congress, in enacting 230, intended to protect these providers from the danger that tort-based lawsuits would pose to freedom of speech. So the issue in this case is to what extent Section 230 affords the Plaintiff immunity from enforcement

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of South Carolina criminal laws prohibiting prostitution, and the knowing aiding and abetting of prostitution. In other words, is South Carolina's -- are South Carolina's prostitution laws consistent or inconsistent with Section 230? Plaintiff contends that Section 230 preempts all State criminal laws -- it prohibits the enforcement of any State criminal law, but; the case law is clear that in order -- before preemption is found, there must be the Congressional intent: clear. And the analysis begins with an assumption that the State's historic police powers, which would include the regulation of prostitution, are not superseded by a Federal Law, absent evidence the preemption, was the clear and manifest intent of Congress. And if the Federal Law is capable of more than one plausible interpretation, the Court should accept the reading that dis-favors preemption. On its face, Section 230, contrary to the Plaintiff's contention, contains no clear and unmistakable expression of Congressional intent to preempt enfoldment of State Laws regarding prostitution and the facilitation of prostitution. On the contrary, again, it expressly allows To preempt must be unmistakably

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 enfoldment of consistent laws. sentence in that subsection. So the limitation on the immunity is the first thing Congress pointed out. And the second part is where they said, Okay, this is the only time that immunity is going to apply. To date -- well, the Plaintiff is asking this Court to interpret Section (e)(3) as if the first sentence regarding nothing barring the enfoldment of consistent laws isn't even there. And no court to date has held that Section 230 provides the type of blanket immunity from prosecution under any State criminal law that Plaintiff is now asking this Court to give it. Even the civil immunity that's afforded under Section 230 isn't complete. It isn't absolute, and; the And that is the first

Ninth Circuit has held that in the Barnes v. Yahoo case that is cited in our Brief, the important distinction here, because the Court has to determine if it's consistent or inconsistent. And the ongoing criminal investigation that is the heart of this case is not related to either Plaintiff's efforts to block or screen objectional material, which Section 230 specifically wants to promote . . . or even to hold the Plaintiff accountable for the content of ads posted

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on its Web site. Rather, the State is only investigating whether the Plaintiff itself knowingly allowed specific ads relating to prostitution in South Carolina. Their knowledge --

craigslist's knowledge and its conduct is the focus. The content of a particular ad may be relevant to the question of craigslist's knowledge of the intent of the ad, but it is not determinative of its criminal responsibility for the resulting prostitution. Now, contrary to what they've alleged, they're contending that the State is trying to impose strict liability. That is absolutely incorrect. South Carolina's statute, the statute on aiding and abetting prostitution, expressly requires knowing conduct. And that is an element the State would have to

prove beyond a reasonable doubt. We've never threatened prostitution based just on a general knowledge that illegal ads were on there, even though in November of 2008, craigslist signed an agreement in which it acknowledged that its "Erotic Services" category was being used to facilitate unlawful conduct. We've never suggested that their -- they have liability under our aiding and abetting statute because of this general acknowledgement they made. We have stated we

would have to show they knew a specific ad was related to

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 her sign. prostitution and they allowed it to be posted anyway. would be what the State would have to prove. So since the prosecution -- the prostitution laws don't impose liability for content of the ad, whether provided by the Plaintiff or a third party, it only involves the conduct of the Plaintiff. with Section 230. And I would analogize this to a bar owner, Your Honor, who has a known prostitute coming to his facility and says, "I want to stand out front your property and hold up a sign that says, 'For a good time, call Nicky,' and a phone number." And the bar owner knows that Nicky is a prostitute It is entirely consistent That

and what she's advertising is prostitution services, and he says, "Okay, you can stand on my property." He hasn't had anything to do with the content of Even if the sign said, "Best prostitute in South

Carolina," he hasn't had anything to do with what, but; he has knowingly allowed the facilitation of prosecution -- of prostitution on his property, and, therefore, he would be guilty of aiding and abetting prostitution. Again, I think it's important for the Court to keep in mind the consequences that will result if the Plaintiff prevails in its argument about the broad immunity to criminal liability. If he -- if the -- if craigslist prevails and 230

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 provides blanket immunity from State prosecution, even from craig -- even involving craigslist's intentional knowing conduct, it will have more protection than any other media outlet, newspapers, TV, anything, has under the fourth -- in the First Amendment or any other law. And they will be able to allow even the most openly and egregious criminal ads on their site, such as offering the sale of cocaine, solicitation of prostitution, or even and I realize this is an extreme example but it's

nonetheless an accurate one - murder for hire. They could put that -- they could knowingly put that on their site and they could say: We don't have

anything to do with it, We're immune; You can't go after us because, even though we knew, we didn't provide the content, so we're not liable. And if they have the immunity they seek, even if the State official calls them -- say a Sheriff in South Carolina calls craigslist and says, Here's a specific ad; I know this person, this person is a prostitute, this is how this person is advertising her services, she's out there doing it now, please take the ad down. craigslist, and any other computer service provider, can say, No; Okay, yeah, we know it's prostitution, but we don't care. South Carolina, you deal

with it and you deal with it if she's got people coming from

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 all over the State to her, if she's got people coming from neighboring States to her. So it's your resources that are

going to have to deal with the aftermath, but you deal with it because we're immune. That, Your Honor, could not be the intent of Congress in passing Section 230. And now as to the First Amendment, Your Honor. The Plaintiff does not challenge the validity of South Carolina's law prohibiting the knowing aiding and abetting of prostitution. So it's a valid law.

The issue before the Court in this action is: Does the threat of prosecution for knowingly aiding and abetting prostitution -- of prosecution for knowingly aiding and abetting prostitution constitute an unconstitutional restraint of protected speech? The United States Supreme Court has made it clear in the Pittsburgh Press case and subsequent cases that neither the Plaintiff nor its users have a constitutionally protected right to advertise prostitution. They stated, in the Pittsburgh Press case, that offers to engage in illegal transactions are excluded from First Amendment protection. The Attorney General's demand that Plaintiff remove prostitution ads, particularly from its "Erotic Services/"adult Services"" category, does not impact

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 protected speech. Now, their First Amendment and their commerce clause amendment and, in fact, a lot of their allegations, are premised on their contention that the only way craigslist can comply with the Attorney General's demands would be to shut down the entire South Carolina site. And, Your Honor, with all due respect to craigslist and its counsel, that is nonsense and it is unreasonable. And as the Fourth Circuit stated in the case, again, submitted by opposing counsel just recently, the Nemet case, for purposes of a Motion to Dismiss, the Court doesn't have to assume the truth of allegations that are unwarranted inferences, unreasonable conclusions, or arguments. Plaintiff's own pleadings reveal the ads at issue are only a small fraction of the ads on the South Carolina sites. Even if they blocked all the ads in the adult now -- "Adult Services" category, it would only impact .01 percent of the total ads on their South Carolina Web sites. On its face, that doesn't constitute an undue burden on anything. But, more importantly, no one in South Carolina, including the Attorney General, has ever demanded or even

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 implied that Plaintiff would have to, or even -- much less should, shut down the entire South Carolina Web site to comply with the prostitution laws. In fact, from the very beginning, the May 5th, 2009, letter from the Attorney General to Mr. Buckmaster of craigslist, the Attorney General acknowledged that the vast majority of the ads on South Carolina -- on the South Carolina Web sites serve a valuable -- provide a valuable service to South Carolina residents. No one disputes that. No one has ever said the In fact, quite

only way you can comply is shut it all down. the contrary.

The only demand that has been made is that

prostitution ads be removed. According to its Complaint, craigslist currently has the technology in place to detect and block ads related to illegal activity, at least in the "Adult Services" category. They say they -- they require a tel -- a verified They require a valid credit card so they So they know who the person is,

telephone number.

have the billing address.

they know the credit card number, and they say they can't -if they -- if they give an ad that is illegal conduct, they block it and they have the ability to block future ads submitted by that person. So they have the technology in place now that could do everything that the Attorney General has asked them

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 said: to do, which is, do what you promised you would do. Now they are supposedly -- according to their Complaint, they have started, as of May 12th or soon around that time, manually reviewing every ad that is submitted for the "Adult Services" category. All we're saying and all the Attorney General has Do what you promised. You promised some things in

November of '08, you didn't do 'em, or you weren't real serious about it, we're serious in South Carolina 'cause this is a problem; law enforcement's come to us and told us. Be serious. And the -- the Attorney General remarked in one of the news articles, Well, it appears they're serious now. And that's all been asked of them to do. The Plaintiff concedes that prostitution is illegal in South Carolina and it has no constitutional protections, so since prostitution ads and, more importantly, only those ads the Plaintiff knows are related to prostitution are at issue here, there is no constitutional protection and the Complaint fails to state a cognizable First Amendment claim. And finally, Your Honor, on the commerce clause, there's a two-prong analysis: The first prong is does the Federal Law preclude State legislation in this area, and;

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 If it does not, does the State Law conflict with Federal Law. Congress has determined prostitution is not in the national interest and declared it illegal in interstate or foreign commerce. And in light of that finding and

determination by Congress, the States are free to burden that commerce without violating the commerce clause. So

State Laws governing intrastate prostitution are consistent with and complementary to the Federal Laws governing prostitution in inter -- interstate or foreign commerce. Requiring the Plaintiff to remove the ads it knows are facilitating illegal prostitution does not unduly burden otherwise legitimate commerce. Again, the Plaintiff is simply not required to shut down its entire site; it need only remove the known prostitution ads, that is all that has ever been asked of them: Do what you promised; you know there's a problem, you Do what you

said you were going to try and fix it.

promised; remove the known prostitution ads and you have nothing to fear from any Prosecutor in the State of South Carolina. Thank you, Your Honor. MR. CAROME: Good morning, Your Honor, my name is

Pat Carome, thank you for the pro hac admission, and I'm appearing on behalf of Plaintiff craigslist.

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. (Pause.) THE COURT: MR. CAROME: Okay. The last paragraph, Your Honor, is It May it please the Court? Counsel has -- for Defendants has completely mischaracterized and misstated the nature of the threat that the Attorney General presented to craigslist. I would direct the Court's attention -- before we get into the legal arguments, I just want to get some basic facts correct. Exhibit E to the Complaint is the May 5th letter that the Attorney General sent to craigslist's CEO, and also posted publicly on his Web site, and also presented at a public press conference. The last paragraph of that letter -THE COURT: MR. CAROME: THE COURT: MR. CAROME: Let me find it now. Okay. That's Exhibit E to your Complaint? Exhibit E, that's correct, Your

the one that -- that I would draw your attention to. states that, "Please be advised that the craigslist

management may be subject to criminal investigation and prosecution by this office if the portions of the Internet site dedicated to South Carolina and its municipal regions

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and which contain categories for and functions allowing for the solicitation of prostitution and the dissemination and posting of graphic pornographic material are not permanently removed on or before 5 p.m. ten days hence." There was nothing about "knowledge," this -this -- this demand required craigslist to insure that none of its users could post anywhere on the South-Carolina-directed portions of its site an ad soliciting prostitution or an ad containing graphic pornographic images. Nothing about "knowledge."

That -- to comply with that threat, we allege this in the Complaint, it must be taken as true at this stage, and it is absolutely true and it is explained in detail in the Complaint. To comply with that threat, craigslist had no choice but to take down its entire site. THE COURT: And it is a threat. Well, now, you call that a "threat." But it -- what is it a threat to do? It's a threat to prosecute. I don't think it is. "Please be advised" -You say in your Complaint that there This is a threat of

MR. CAROME: THE COURT: MR. CAROME: THE COURT:

was a "threat of prosecution."

investigation and possible prosecution. MR. CAROME: It doesn't say "Possible

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 May -THE COURT: I mean, if he said "We are going to prosecution," Your Honor. and prosecution." THE COURT: It's only the criminal investigation, It says "criminal investigation

and you're subject to that whether he puts it in a letter or not. I'm subject to that every time I file my income tax I mean, you know, everybody's subject to criminal

return.

investigation and prosecution. MR. CAROME: Your Honor, on the 18th of -- of

prosecute you if you don't do this," then that's a threat. MR. CAROME: He -- he called Mr. Buckmaster, the He

CEO of the company, "Defendant Number 1" on FOXNews.

said they haven't stopped, they haven't done what I demanded in my May 5th letter, I'm opening an investigation and Mr. Buckmaster is Defendant Number 1. What -- what that does, Your Honor, it puts an entity like craigslist at -- it forces it to choose between two things which the Supreme Court has said time and again, and the Fourth Circuit as well, a -- a citizen cannot be pushed -- put in this situation with not having a right to go to Federal Court. He put us in the position of either abiding by that threat, which to -- I -- for these purposes, abiding by that threat meant shutting down the entire South Carolina

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 component of the Web site. We could do that, and then we

could say "Now we can breathe free, we're not -- we're not at risk of being prosecuted." Or, we proceed as we're doing with what we believe to be completely lawful constitutionally and statutorily protected conduct. And, if we do that, we're putting

ourselves at peril of -- of criminal prosecution. This is precisely -THE COURT: That letter doesn't put you in any You're

more peril than you're in without that letter.

always subject to criminal prosecution if you break a criminal law. MR. CAROME: Your Honor, the Courts have held that

threats of prosecution, short of actually bringing the indictment, may be indicted because they have precisely the impact that this threat had. You -- if -- if prosecutors were free to do this without any potential for court review, they could -THE COURT: MR. CAROME: Do what? Start going around and saying what --

what you're doing -- "You have to stop what you're doing or you're going to be investigated and prosecuted." People

then have to -- if there's not Federal review of those kinds of statements, then people are put to the choice of stopping the behavior, which is frankly what I'm sure the Attorney

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 General wanted; the Attorney General wanted craigslist just to completely abide by what he was demanding. that is the force of State action. It's not a -- it's not an indictment, but it is action that a citizen has to take extraordinarily seriously. If the State -- if the highest-ranking State Law enforcement officer says, Look, if you don't -- ten days from now, stop what you're doing right now, or I'm going to commence an investigation and may prosecute you, that is extraordinary State action. And if there is no -- it puts -- the Courts have referred to this as putting you between a sylla and charybdis, a two -- a Catch 22, a rock and a hard place: The choice between knuckling under to a threat that goes beyond what the -- the law enforcement Executive Branch can, in fact, compel you to do, or going forward with the conduct but being at risk of putting yourself and your company in -in criminal prosecution. That is precisely the situation that the Courts like Telco, and -- and Steffel versus Thomas, and case after case that we site on abstention say, that is the sylla and charybdis; that is the rock and a hard place that no Federal citizen should be put between without having a right to go to Federal Court. The -And that --

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: different, wasn't it? MR. CAROME: THE COURT: I -- I -You don't -- you don't place any Well, now, Telco was a little

distinction between a -- a State criminal prosecution and a Federal civil action; you think they're all the same? MR. CAROME: Well, for Younger purposes, Your

Honor -- I -- I think, Your Honor -THE COURT: How would -- let's assume we don't Then what kind of

dismiss and let's assume we go to trial.

discovery are we going to have; are we going to have civil discovery or criminal discovery? And if we have civil

discovery, how does that impact on a criminal justice system, if at all? MR. CAROME: Your Honor. This is a -- this is a civil case,

I would submit that -But the issues are criminal. We're

THE COURT:

talking about criminal prosecution. MR. CAROME: We are talking about whether or not

craigslist as a matter of law is subject to -- or may be subject to criminal prosecution for the content that is posted by third parties. THE COURT: driven by facts. MR. CAROME: Well, Your Honor, I don't think any As a matter of law, but that law is

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the facts will be disputed. The question here is -- now

I think we're into, first and foremost, the section of the 230 immunity argument. Case law couldn't be clearer, and Zeran from the Fourth Circuit is the -- is the -- the fountainhead of this case law, that a on-line service provider cannot be held liable for third-party content. content, Your Honor. The only argument that I hear the Defendants -I'm sorry, I hear the Defendants making on that is simply that -- that the statute doesn't reach -- doesn't provide immunity from State criminal laws. The -- that -- they're plainly wrong about that as a matter of law on the face of the statute. THE COURT: But in Paragraph B of your Prayer, you This is classic third-party

ask the Court to enjoin the Defendants from issuing further threats of prosecution against craigslist or its officers, employees in relation to contents posted by third parties on craigslist's Web site or from initiating or pursuing any such prosecution -MR. CAROME: That's exactly right.

THE COURT: -- in the future. MR. CAROME: THE COURT: MR. CAROME: That's correct, Your Honor. No matter what the facts are. No, the --

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: some later date. MR. CAROME: No, the -- no, the facts -- I think The Prayer says, with No matter what they may undercover at

the facts are limited by the Prayer.

respect to third-party content posted on the site: Regardless of the facts, regardless of whether craigslist knows about the content, regardless -- unless craigslist itself is posting prostitutions here, or is requiring its users to post prostitution ads, which no one is remotely suggesting, Section 230 provides immunity. So that the

Prayer for Relief is confined to the relief that we're entitled to under Section 230. It is with respect to -- we cannot be held liable -- craigslist may not be held liable, Federal -- I'm sorry, under civil or criminal State Law, with -- if that liability is based on postings by third parties on its Web site. And that is what -- that is how the Fourth Circuit

and every other Court has interpreted Section 230. Counsel for Defendants said there haven't been -cases haven't said that that Section 230 is an immunity from State criminal prosecution. They're wrong about that.

The only two cases that have looked at that issue, we've cited in our Brief, have held that Section 230 extends to provide immunity from State criminal prosecution. Not --

not absolute immunity, but immunity where the -- where

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the -- the liability is based on what some third party posted on the craigslist site or an on-line provider. Counsel says, well, this gives craigslist greater protection than a newspaper has or that a bar owner has if somebody stands up in his bar saying this. right. That's exactly

That is exactly right; Section 230 provides

protections that go beyond what any other medium of communication has. choice about that. That is because Congress made a policy It's clear in the statute, section --

the Zeran Court carefully walked through it. The purpose of Section 230 is to do two things. It's to promote the growth of Internet media -- craigslist, in fact, being probably the best example of how the -- an Internet media can provide enormous value to society, basically for free. Congress sought to promote the growth of those sorts of media by shielding them from what would be enormous liability that could otherwise fall on their shoulders by virtue of all of the potentially unlawful conduct or content that third parties could post on the service. craigslist has 40 million postings per month on its service. time. That's what we alleged in the Complaint at the The --

It's grown enormously since then. THE COURT: MR. CAROME:

Do you charge for it? In almost all respects, it's free,

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. In almost all respects, it's free. Well, how do you make it a

THE COURT:

profit-making business? MR. CAROME: Well, Your Honor, in many respects, I

think craigslist has decided that maximizing profits is not really its -- its ultimate goal. It does make a profit.

There are a few categories in which it charges people to post. A small -- real estate ads by brokers in a couple

cities, help-wanted employment ads in some places are paid for. Also for different reasons, to post in -- in the "Adult Services" category, there's a payment required, and that was suggested by the Attorneys General around the country to create another method for tracking the posters. So that -- who are the ones -- if someone's committing a crime here, those are the people who liability is to be directed at. So, amazingly, craigslist, it's used by, at the time of the Complaint, over 50 million people in the U.S., 20 billion page views per month. It's the seventh most It does

visited English language Web site in the world. this with only 30 employees. employees.

It does this with only 30

And it is the notion that craigslist can be held responsible, civilly or criminally, for that huge torrent of

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 content from others that flows through it. There wouldn't

be a craigslist if there could be civil and criminal liability of the sort being talked about here and the sort that Attorney General McMaster threatened in his May 5th letter when he said that "Mr. Buckmaster is Defendant Number 1." So, I mean -- maybe I . . . if I could just briefly go through the -- the -- the four legal arguments. I think that Defendants' counsel is right, we are talking about an abstention question, we're talking about a Section 230 question, and then there are two constitutional claims that we make. And we're Plaintiffs, we're proceeding under the declaratory judgment action under Section 1983, and so that all of the allegations in the Complaint at this stage must be -- must be accepted as true. THE COURT: Nobody's briefed you -- you talk about

"declaratory judgment action," and of course the language of that act contains the words "case or controversy." MR. CAROME: THE COURT: That's correct, Your Honor. Nobody briefs that -- nobody has any

concern about whether or not there is existing in this case a case or controversy such as to make that declaratory judgment action applicable? MR. CAROME: That certainly is applicable. There

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 brought -THE COURT: couldn't do anything. MR. CAROME: THE COURT: MR. CAROME: We'd be out of luck. Yeah. Now, they say -- I do not contend You'd be -- you couldn't -- you question. issue. must be a case in controversy -THE COURT: MR. CAROME: No question about it. -- for there to be jurisdiction in

this court; absolutely right, Your Honor. I had not thought that there was doubt about that Certainly the Defendants have not raised that

Of course the Court may -- is free to raise, and

properly should raise, subject matter jurisdiction at any point in the case. I believe, Your Honor, that the nature of the public threats, the drumbeat of -- of threats, a ten-day ultimatum letter, you're Defendant Number 1, Mr. craigslist, is about as clear-cut a case of there being a -- a fully ripe, crystallized dispute that puts in place whether -puts properly before this Court a crystallized question of whether the -- the threat that Attorney General McMaster made in his May 5th letter is or is not consistent with Federal Law. If we had waited until an indictment was

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 case. that the indictment is the brightline. The -- the point

that -- our main point under the Younger abstention is that no case, no case, has ever held that a -- their assertion by an Executive Branch official that a investigation is taking place or something is enough to trigger the Younger abstention. There must be an ongoing judicial proceeding.

For example, in the -- in the -- in the Sachs versus Pepco case, which the Defendants heavily rely upon, that was pre-indictment. THE COURT: There was a Grand Jury.

I don't think that was a criminal

That was an administrative proceeding. MR. CAROME: No, Your Honor, I believe -- I

believe that was. THE COURT: MR. CAROME: Was that the solicitation case? No, this was a case for -- this was

an environmental crimes case. THE COURT: MR. CAROME: Okay, okay. And -- and that was a case -- it

was -- and Pepco, the power company, was asserting that there was Federal preemption, that Federal Law governed the area completely; akin to the argument that we're making here. And there there was a Grand Jury proceeding up and

running fully focused on the matter. THE COURT: MR. CAROME: Subpoenas issued? Subpoenas have been issued to Pepco,

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 so there was a judicial proceeding underway, with a judge, an independent decision maker. Pepco could have gone into contempt, for example, on the subpoenas and raised in the State proceeding its -its Federal claims. THE COURT: MR. CAROME: THE COURT: We certainly don't have that here. Absolutely not, Your Honor. I think probably the -- I don't know

all about it, because it kind of came along after I finished practicing law, but the State Grand Jury, I think, sits all the time, and I think the Attorney General probably has control of it. But I don't think -- I think it's clear that no witnesses had been brought before that Grand Jury, as far as this investigation is concerned. don't contend they have. MR. CAROME: That's absolutely right. Nor do they At least the Defendants

contend that any Grand Jury, even one that's otherwise generally pending, has -- has spent a second thinking about this matter. And really I think -- if, you know, they had issued subpoenas, you know, before we came to Federal Court and before we began this proceeding, this -- that would be a different case. So I'm not -- I'm not asserting that --

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Defendants' counsel talked about there being some problem of, you know, prosecutors having to race to indict. That's -- that's not at all the situation we're talking about here. What the Younger abstention -- I think we agree on what the test is. There has to be an ongoing judicial

proceeding, and "administrative proceedings" can be, for these purposes, judicial proceedings as long as they have the trappings of -- of trial-like proceedings with independent factfinders, neutral decision makers, which of course we don't have anything of the sort here. All we have here is Mr. McMaster asserting, I'm investigating you and I'm free to indict you anytime I want. And there's nothing -- and there's no -- so there's no ongoing judicial proceeding, there is also no opportunity in the -THE COURT: I don't think he said that. I mean,

he didn't say, "I've got an ongoing investigation and I'm going to" invite you -- "indict you anytime I want." I

think that we can assume that he was not going to indict the Defendants, or any of them, unless his investigation revealed that they committed a crime. MR. CAROME: THE COURT: Yes, but -I think we can assume that. I mean,

that's what his oath would require him to do, and we can't

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assume that he's going to violate his oath. MR. CAROME: I -- I accept that, Your Honor, but I

also think we can assume that he was going to proceed in accordance with what he publicly threatened, which is if you don't make sure that you've removed all functionalities that allow someone to post a prostitution ad somewhere on the craigslist service, you -- if you don't remove all those functionalities, you -- you will be subject to investigation and prosecution. So may -- maybe I should step back on that point just a little bit to explain. The -- the functionalities that would allow someone to post a prostitution ad or a solicitation of prostitution on craigslist is the craigslist service. Nothing -- anybody can just go on the craigslist service, pick any category they want. They could pick "Used Cars" There's nothing -- there's

and post an ad for prostitution.

nothing in the world that -- that craigslist can do to stop that. And so when you say, as -- as the Attorney General did in the May 5, letter, remove all the functionalities that allow for the posting of such an ad, you're talking about removing -- you know, stopping the craigslist service because there's -- anyone can post at anytime for free an ad for anything they want on the craigslist service. That

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 indeed is what makes it what it is. It is -- it is an extremely easy-to-use platform where third parties can advertise to one another and express, you know, their needs and have their needs met. So it's not -- it's not possible to comply with that demand, other than to take -- other than to take the service down in South Carolina. So -- and what the key is at that point, when you're between that rock and a hard place, Federal Courts have got to be there to save you from being -- having to make that choice about stopping conduct which is absolutely protected by Federal Law, and going forward with that conduct, even though you've been told if you do so, you're subjecting yourself to criminal investigation and prosecution. That is pre -- if this is not a situation where craigslist can get -- where a party can get to Federal Court to have its rights heard, then the Younger abstention has swallowed the entire possibility of there ever being a right to go into Federal Court and getting a Federal Court to assess whether Federal rights are being -- are being -- are going to be violated. The Fourth Circuit has held the Younger abstention is an exception to the general rule that Federal Courts are to hear all cases that are properly within their

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 jurisdiction and put before them. I think I probably said all I have to say on abstention, unless Your Honor has questions. On the Section 230 point, I think the main thing that I haven't talked about is why is the statute properly construed as extending to provide immunity from State criminal prosecution. And as I said, the two Courts that have looked at that question, they're lower-level Courts -- actually, one is a Federal District Court in Pennsylvania; that's the Voicenet case. The other is a -- is a Michigan intermediate appellate court. That's People versus Gourlay.

Both of those cases, as we discuss in our Brief, looked at the language of Section 230 and found that it does, indeed, provide immunity, not just from State civil laws, but also from State criminal laws. The analysis for

that is really right on the face of the statute. First of all, Section 230(e)(3) says that, "No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section." "Any" means any; it means all State or

local laws, which is both civil and criminal. The Fourth Circuit in the Mapoy case specifically talked about the fact that any -- "Any" in a Federal Statute

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 means all. The -- the -- what Plaintiffs -- I'm sorry, what Defendants point to is the fact that the statute has an exception for enforcement of criminal laws, but the statute couldn't be more clear -THE COURT: interrupt you. MR. CAROME: THE COURT: Sir? Your Prayer for Relief, I think, is I've been kind of searching Let me interrupt you. Let me

something that disturbs me.

for -- for a solution to this case and, of course, you always get first impressions when you read something, and; as you get into them deeper, sometimes those first impressions are fortified and sometimes they vanish. But in Paragraph A of your Prayer, you asked me to declare that "Defendant McMaster threatened prosecution" is inadmissible in the light of Section 230 and certain constitutional provisions. good stretch for me. And then in B you ask me to permanently enjoin the Defendants from doing certain acts. In other words, I'm -And that seems like a pretty

I'm asked to enjoin a constitutional officer in the State of South Carolina from carrying out what he might consider as his duty. Seems to me that that's broad, and I'm not so sure

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 but what the broadness of it is what kind of made me look at it in a certain way. If you boil down what you're doing here, it seems to me it boils down -- and this is in the form of a question. It boils down to an interpretation of Section

230, and what 230 gives the Defendants immunity from, civil or criminal. Now, if that were in the Prayer for Relief, I think my fears about case or controversy would be minimized, and I think my fears about enjoining the Defendants in an overly broad fashion, so as to take their discretion and their job away from them, so far as this case is concerned, may be allayed. Because I think after hearing your arguments and considering what I considered before I came in here, the whole crux of the whole matter is Section 230 and interpretation of that. And what you're asking for, even

though you didn't ask for it, is for determination by the Court of what type immunity 230 actually gives to the Defendants or people who fall within the category described in 230. Is that -- make sense? MR. CAROME: It does, Your Honor. I think that

certainly the 230 claim, I think is the -- is really the crux of the case. THE COURT: And certainly we've got an interest in

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 interpreting Federal Law. MR. CAROME: THE COURT: MR. CAROME: Absolutely, Your Honor. Okay. Go ahead.

Well, I -- no, I think you're putting

your finger on a very important part of the -- of the case. THE COURT: Because what you -- what you ask this

Court to do in your Prayer is pretty strong stuff. MR. CAROME: But I think it's -- I think it's

simply saying -- it's no more than interpreting what Section 230 says on its face, though, I believe, as construed by the Courts, that -- that a -- a State prosecutor may not prosecute an entity such as craigslist on interactive computer service provider based on the content of postings that originated entirely with a third party. That cannot --

that -- that cannot be a basis for prosecution. Zeran said that that's clear as on the civil side; you cannot be -- any cause of action that holds you liable for the content of third-party postings is contrary to Section 230. So the only additional stretch here for Zeran, I think, and this is first impression in the Court -- or Fourth Circuit, and certainly in this district, is whether section -- whether that same immunity that Zeran recognized in the civil context applies to State criminal liability. I think that, as we lay out in our Brief, that

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Congress very carefully preserved the ability -- said that Federal criminal statutes -- Federal criminal statutes do trump Section 230. And some State statutes trump 230. For example,

the -- the last exception to Section 230 immunity is spelled out in the statute; it's a very narrow one, doesn't apply here, but I think it shows how Congress thought the -understood the statute works. This is (e)(4), 230(e)(4). communications privacy law. "Nothing in this section shall be construed to limit the application of the Electronic Communications Privacy Act of 1986," that's a Federal statute, "or any similar State Law." So there Congress said there's -- here's a small category of laws that trump Section 230, this particular Electronic Communications Privacy Act or any similar State laws. What -- what I hear Defendants trying to argue is to say, Well, because there's a sentence in the statute that says States may enforce consistent State laws, well, then the fact that Federal criminal laws are excepted from the immunity, State criminal laws should -- because they're similar to Federal criminal laws, should be accepted. That's not at all how the statute is set up, and you can see "No effect on

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that in (e)(4). What Congress is very clear -- when it wrote Section 230, to pick and choose its words about whether it was speaking about Federal statutes or Federal liability, or State liability. And when it chose to do so with respect to

criminal laws, it very clearly spoke only of Federal -Federal criminal laws trumping -- trumping the immunity. So I don't think that -- the parade of horribles that the Attorney General puts out there of, Well, if there's immunity here, prostitution is just going to run wild on the Internet. what they're saying. That's not at all the result that -- that -- that immunity for craigslist here provides. In fact, I would I think that's sort of, at bottom,

submit that immunity for craigslist here helps to control prostitution on the Internet. That may seem

counterintuitive, but that's how -- that is how Courts have thought through the statute, including Chief Judge Wilkins for the Fourth Circuit in the Zeran case. What the statute makes clear is, is that the posters -- the people who post unlawful content, the originators of that content, are fully subject to the full force of State and Federal Law enforcement. Congress in

Section 230 chose to not got after the intermediators for that harmful content but to go after the originators.

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So what does craigslist do? many different things. Craigslist does many

It was at the request of State Law

enforcement that craigslist began to insist on credit card charges for post -- people posting in the "Erotic Services" and then the "Adult Services" category, so that it would be easier to go after the posters. on working telephone numbers. And so -- indeed the fact that craigslist has quarantined ads for legal "adult Services" in one particular area is itself a great assistance to law enforcement. It is Same thing with insisting

very easy -- if law enforcement wants to see where most likely -- while it's not the only place, but it -- where most likely there may be ads that are crossing the line between lawful and unlawful conduct related to "adult Services," they can go to the "Adult Services" section and see the postings, they can respond to the postings. Law enforcement all around the country is doing sting operations on these things and the liability is properly being put, not on the intermediary, but on the -on the source of the illegal conduct. In fact, and this is the counterintuitive part and Zeran recognized this, providing immunity from liability for unlawful speech actually gives an entity like craigslist the breathing space to do self-regulation and self-policing to try to cooperate with law enforcement's desires to stamp out

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this kind of terrible unlawful content. Craigslist set aside this first "Erotic Services" and then "Adult Services" category, not because it wanted to attract ads for those categories, it's because ads for legal adult services, escort services and the like. Legal escort

services, legal massage services and things like that, may not be my cup of tea, but it's lawful. Craigslist was getting complaints from its users that they were seeing those ads when they were, you know, shopping for used furniture and the like. And so in response to craigslist's desire, it quarantined those ads off in a particular category so that only people who were looking for those lawful services would -- would find them. That itself is the -- is something that -- that the statute is designed to -- Section 230 is designed to give providers the incentive to -- to channel the -- what may be offensive to some speech so it's not popping up in front of people who don't -- who don't want to see that. It also -- craigslist engages in electronic screening and it has flagging systems so that users can flag content that they think is contrary to craigslist's rules. Which if they prohibit anything, clearly, they absolutely prohibit prostitution ads. Craigslist would not be able to -- craigslist

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would have a strong disincentive to be -- to be looking for problem ads, receiving information about problem ads and acting on them if it was going to be liable every time it knew about a particular unlawful ad. Because, as the Zeran Court recognized, notice liability, liability because you know it's there, well, the best way to avoid that is to stick your head in the sand if you're craigslist and not do any screening. Not -- not --

not do any policing, as craigslist does enormous amounts. But with so much -- with $40 million -- 40 million postings every month, this huge torrent of -- of -- of -- of third-party content, there's no way that any screening efforts are going to be completely successful. Congress

recognized that if you impose notice liability of the sort, that what you'll do is drive these providers to put their head in the sand, not do any self-policing, not do the sort of screening that craigslist does. So, in fact, the statute -- by providing craigslist immunity here, we are actually helping craigslist to be able to have the breathing space to do what it is doing to -- to do its best to limit the amount of unlawful speech that's on its service. It's never going to be

perfect, but it does -- certainly does the best it can. I've been talking a very long time, Your Honor, I think perhaps I should sit down, unless you have --

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 prolific. you. MR. CAROME: THE COURT: MS. SHUPE: All right, thank you. Anything in reply? Yes, Your Honor. THE COURT: No, I don't have any questions. Thank

You were looking at the letter on May 5, 2009, and that is the basis of craigslist's contention, that one paragraph in that letter is what they're saying we had no choice but to shut down our whole site. If it ended

there -- even though I agree with you that that's nothing more than any citizen, corporate or individual, is subjected to, if that's where it ended, you -- they might have something of an argument, even though we don't agree with it. But it didn't end there, and it's in their Complaint that it didn't end there. Admittedly, that first letter was broad, as the first salvo in any criminal process generally is. to get their attention. You need

And craigslist, in November '08,

entered into an agreement that the Attorney General signed off on as well, in which it said, We know there's a problem and we agree we're going to try and fix it. That didn't appear to be done. The ads were still

So you fire off a salvo to get their attention

and let them know you're serious.

2/23/2010 - 2:09-CV-1308 - craigslist v. McMaster, et al. 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 However, if you look at Exhibit K, that is a news article from 5-15 of '09 in which it says, "McMaster threatened to prosecute craigslist officials." second paragraph. This is the

"While no charges are imminent, he

iterated, the San Francisco-based company will be responsible for ads after that deadline." week, they did these new things. Earlier this

"If prostitution listings

come up on the revamped site," which is the 'Adult Services' site," so that's all we're talking about, "McMaster could," not would but could, "charge craigslist executives with aiding and abetting prostitution." Next paragraph. Quote from Henry McMaster, "All

we're asking craigslist to do is take the prostitution ads off its Web site." So the issue starts to get narrow.

If you look at Exhibit L, which is another news article from the State, and he says that the -- "The Attorney General's office can't prosecute until a sheriff" brings it a case and brings the -- "makes a case and brings it to the Attorney General's Office."