The Securities and Exchange Commission’s Report of Investigation (Release No. 69279, April 2, 2013) into the posting by Netflix Inc.’s CEO of a significant company milestone on his personal Facebook site compels consideration of the intersection of new opportunities for discovery available via social networking sites with the broad discovery orders that Pennsylvania trial courts have granted.
Pennsylvania trial courts generally have permitted social media discovery once the requesting party satisfies a factual predicate justifying discovery. The requesting parties are given the user’s username and password, providing them access not just to information relevant to the specifics of the case, but also to the user’s entire profile, which, in the case of Facebook, includes information posted by the user (such as likes and dislikes, political views and other biographical information), emails, instant messages, photographs and information posted by third parties on the user’s profile.
The broad discovery orders granted by Pennsylvania trial courts contrast with the limited orders from federal trial courts. Given the dangers stemming from the business world’s increased use of social media to interact with its investors and customers, however, it is clear that regardless of jurisdiction, tight controls over the use of social media will benefit companies facing social media discovery requests.
Discovery Orders in Pa. and Federal Trial Courts
Pennsylvania’s appellate courts have not yet addressed the issue of social media discovery, but Pennsylvania’s trial courts have ruled on the issue 13 times. (See Hoy v. Holmes, 107 Sch.L.R. 19, 20-23 (Ct. Com. Pl., Schuylkill Cnty. Jan. 31, 2013) (listing cases); Trail v. Lesko, 2012 Pa. Dist. & Cnty. Dec. LEXIS 194, *9-19 (Ct. Com. Pl., Allegheny Cnty. July 3, 2012) (same).) The plaintiffs’ physical and emotional condition was a factor in each of these cases, because they all involved personal injuries, most often from vehicular accidents. The courts denied the requests seven times and granted the requests six times. These decisions display an admirable consistency in requiring the requesting party to make a threshold showing of relevance based upon information from the publicly available portions of the answering party’s social media site (such as Facebook or Myspace) before granting access to the private portions of the site. Accordingly, the typical pattern in the cases permitting discovery is that the defendant found information on the publicly available portions of the site that undermined the plaintiff’s claimed injuries, and on that basis the court ordered the plaintiff to provide his or her username and password. (See, e.g., Zimmerman v. Weis Markets, 2011 Pa. Dist. & Cnty. Dec. LEXIS 187, at *12 (Ct. Com. Pl., Northumberland Cnty. May 19, 2011).)
Pennsylvania courts have thus granted defendants unfettered access to plaintiffs’ social media sites once they have shown the required factual predicate for the requests. While the courts have not gone beyond what the defendants requested, they nonetheless appear unconcerned about the unlimited scope of the access granted, because they have been dismissive of plaintiffs’ privacy concerns. Mazzarella v. Mount Airy #1, No. 1798 Civ. 2009 (Ct. Com. Pl., Monroe Cnty. Nov. 7, 2012), held that "those who elect to use social media, and place things on the Internet for viewing, sharing and use with others, waive an expectation of privacy."
In contrast, in cases that involved similar claims of emotional and physical injuries, the orders resulting from federal trial courts have set more reasonable limits. For example, in E.E.O.C. v. Simply Storage Management, 270 F.R.D. 430, 434, 436 (S.D. Ind. 2010), the court denied the defendant’s request for the production of all of the information contained on the social media sites of two claimants; it instead ordered the production of only the information, including photographs, that "reveal, refer, or relate to any emotion, feeling, or mental state, as well as communications that reveal, refer, or relate to events that could reasonably be expected to produce a significant emotion, feeling, or mental state."
Similarly, in Davenport v. State Farm Mutual Automobile Insurance, No. 3:11-cv-632-J-JBT, 2012 U.S. Dist. LEXIS, at *6 (M.D. Fla. 2012), the court denied the defendant’s broad request for all devices by which the plaintiff had access to her social media sites, noting that the "’defendant does not have a generalized right to rummage at will through information that plaintiff has limited from public view.’" It instead ordered limited discovery of "any photographs depicting [the plaintiff], taken since the date of the subject accident, and posted to a [social networking site], regardless of who posted them."
Dangers and Opportunities in Social Media Discovery
Although the decisions of the Pennsylvania state courts have all been in personal injury-type cases, attempts to expand this type of discovery to business cases cannot be far behind, given the risks from the business world’s increased use of social media to interact with its customers and investors. One such risk is identified by the SEC’s report regarding the posting by Netflix’s CEO, Reed Hastings. Hastings caused an uproar in July 2012 when he posted on his personal Facebook page that Netflix had streamed 1 billion hours of content during June 2012, but neither he nor Netflix disclosed this information through standard distribution channels. The staff of the SEC commenced an investigation, and in December 2012 sent both Hastings and Netflix a "Wells Notice" that stated that it intended to recommend to the SEC that it bring a civil injunctive action and/or cease-and-desist proceedings against Hastings and Netflix. In light of this history, the Hastings Report surprised some by explaining that the SEC had decided not to pursue an enforcement action against Netflix or Hastings, because it concluded that public companies’ use of social media outlets like Facebook and Twitter to announce key information will not violate Regulation Fair Disclosure (17 C.F.R. §243.100 et seq.).
The Hastings Report did not, however, absolve the subject posting by Hastings or other postings like it. The report stated that the "disclosure of material, nonpublic information on the personal social media site of an individual corporate officer, without advance notice that the site may be used for this purpose" would likely violate fair disclosure regulations.
As such, the Hastings Report highlights a risk in corporate officers’ use of social media, just at a time when companies are increasing their efforts to interact with their investors and their customers via social media. As the report indicates, "An increasing number of public companies are using social media to communicate with their shareholders and the investing public." The risk here is two-fold, because communications over social media often use an informal tone, and companies often fail to implement social media guidelines for their boards of directors, senior management and employees. In light of these risks, it is not surprising that several other chief executives have, like Hastings, created legal challenges for their companies with their social media postings.
The current lack of discipline with respect to communications over social media sites is certain to thrill those who will seek social media discovery, while terrifying those answering such discovery requests. To take Hastings’s use of Facebook as an example, in a case concerning either his or Netflix’s compliance with securities laws, his posting of unique and material information on his personal Facebook page probably would have satisfied the factual predicate that Pennsylvania and federal trial courts have required before ordering broader social media discovery.
Accordingly, if in Pennsylvania trial court, the requesting party would have a strong argument (based on case law cited above) that it is entitled to Hastings’s password and log-in information so that it could determine whether any of his other postings or communications (given that Facebook has both instant messaging and emailing functions) were improper.
The scope of discovery that Pennsylvania trial courts have ordered is arguably overbroad and limited only to personal injury cases. The risk exists regardless of jurisdiction, however, that statements made by employees, executives and board members over personal social media sites will be relevant and discoverable. Therefore, companies should consider adopting strict policies that prohibit the posting of company-related information over personal social media sites.
Michael S. Hino is a partner with Pepper Hamilton’s litigation and dispute resolution department. He focuses his practice on commercial litigation matters, including those involving real estate, technology, employee-employer disputes (including non-competition agreements) and nonprofit organizations.
William M. Taylor is an associate in the commercial litigation practice group of the firm, resident in the Boston office. He concentrates his practice in commercial litigation. His experience includes a wide variety of cases involving contract, tort, antitrust, white-collar criminal, products liability, consumer protection, employment discrimination and franchise law.