COMPUTER CRIMES AND THE RESPONDEAT SUPERIOR DOCTRINE:EMPLOYERS BEWARE!Mark Ishman The
Law Office of Mark W. Ishman, P.C. Durham, NC 27703 Phone: (919) 468-3266 Boston University School of Law I. IntroductionImagine that it is Friday afternoon and Mr. White, the manager of office services at ANGELIC Company, asks Bob, an employee whom he supervises, which National Football League ("NFL") stars he plans to select to start this week in his "fantasy football league."[1] Bob replies, "Brett Favre, Emmitt Smith, Jerry Rice, Shannon Sharpe and Morten Anderson."[2] Mr. White responds with encouragement, "Sounds like a winner to me." Shortly thereafter, Bob uses the company's computer to log[3] onto the "Internet"[4] to perform company business. During this Internet session, Bob verifies that the mail that ANGELIC sent arrived at its destination by accessing the Federal Express Website. While at the Federal Express Website, Bob remembers that he must change his starting line-up for this weekend's games. Bob quickly interrupts his daily work, accesses his fantasy football Website and enters this week's starting line-up for his fantasy football league. After finalizing his starting line-up, Bob returns to the Federal Express Website and completes his daily work. If Internet gambling is illegal in Bob's state, can ANGELIC Company be held liable for Bob's fantasy football league? ANGELIC Company had knowledge of Bob's activities, and Bob used the company's computer while engaged in the scope of his employment. Moreover, what if ANGELIC Company had a policy prohibiting all non-business and illegal Internet activity and had monitored Bob's activity on the Internet but failed to discipline him?; Moreover, what types of sanctions could state and federal governments impose on ANGELIC Company for the illegal activity of Bob, its employee? The purpose of this Comment is to explain the potential liability that an employer can be exposed to when an employee at its workplace conducts illegal online activity. First, this Comment will begin with a general discussion of technology in the workplace. Second, this Comment will focus on traditional and modern theories of respondeat superior[5] and explain when an employer may be held liable for an employee's illegal activity. Third, this Comment will analyze when an employer may be held liable when it allows its employees the right to use its equipment and they thereby conduct illegal online activity. Lastly, this Comment will propose several necessary precautions that all employers that utilize modern technology in the workplace must take to avoid liability. II. BackgroundBoth technology in the workplace and computer crime laws have expanded enormously over the last ten years.[6] However, modern law has failed to keep up with technology in regulating illegal online activity.[7] Presently, both state and federal laws are being enacted to help halt this expansion by holding employers liable for the illegal online activity of its employees.[8] Thus, employers may be liable for their employee's illegal online activity.[9] A. Technology In The WorkplaceThe Internet is a giant network that allows global communication between individuals, institutions, corporations and governments.[10] Between 1983 and 1994, the Internet "underwent an explosive growth period with the number of host computers and users doubling every year."[11] Moreover, as of July of 1999, there were approximately 201 million Internet users worldwide (112.4 million in the United States)[12] and more than 65 million top-level domain names.[13] One of several reasons for the Internet's phenomenal growth is that the Internet is accessible from anywhere (e.g., at the office, home and while traveling).[14] In addition, the use of electronic mail ("e-mail")[15] over the Internet and in the workplace has grown exponentially in the last five years.[16] Consequently, the workplace has become increasingly dependent on the Internet, and this dependence will continue through the new Millenium.[17] The benefits produced by using the Internet and e-mail in the workplace are impressive. First, the Internet is a "revolutionary tool" that has dramatically affected the way society communicates, conducts business and accesses information.[18] The Internet provides access to a seemingly endless amount of information from various institutions, corporations, governments and individuals worldwide.[19] Furthermore, e-mail provides instant written communication between individuals, while eliminating the typical problems associated with mail, hand deliveries and the telephone.[20] In the workplace, e-mail encourages intra-company communication, while increasing employee productivity and reducing the need for inefficient forms of communication, e.g., telephone calls, paper memos and face-to-face meetings.[21] E-mails are used in the workplace for more than just messages, e.g., employees are using e-mail to send inventory lists, minutes of meetings, drafts of documents, business strategies, or records of important business decisions.[22] Thus, the employee can use the time saved to conduct other work-related tasks.[23] Although the benefits of using technology in the workplace are experienced every day,[24] these benefits come with a price.[25] As employers increase employee's access to the Internet and e-mail, they also increase its usage for non-business and even illegal activity.[26] For example, employees often send e-mail messages that may be too candid to "put in writing" or are merely inappropriate for the workplace.[27] E-mail systems are now capable of creating a complete and exact record of the communication,[28] and consequently, the employer's risk of liability have increased substantially from e-mail statements, e.g., a statement that manipulates the company's stock value.[29] Consequently, this technology has created expanding areas of potential liability for employers.[30] B. Employer LiabilityWhile the government does not want to restrict the advancement of technology in the workplace,[31] there is a strong public policy that imposes liability on employers for an employee's wrongful and illegal actions.[32] This policy stems from two deeply rooted concepts in the history of American corporations.[33] First, there is a general mistrust of corporate power.[34] Secondly, self-regulation is more efficient than government regulation.[35] Moreover, holding employers liable for their employee's wrongful and illegal actions provides another liable source, i.e., a deep pocket, from which a damaged party may recover damages, and consequently, plaintiff attorney's are adding these potential claims against liable employers as defendants.[36] Under the common law, an employer could be held liable for the wrongful acts of an employee if the wrongful acts occurred within the scope of the employee's employment.[37] The burden was placed on the employer to show that the employee's actions were not within the scope of his employment.[38] If the evidence presented left any questions of doubt, then it became an issue for determination by the finder of fact.[39] The Restatement of Agency[40] reflects the court's traditional exposition of the scope of employment and provides that the conduct of an employee is within the scope of employment if: (1) it is of the kind he is employed to perform; (2) it occurs substantially within the authorized time and space limits; (3) it is actuated, at least in part, by a purpose to serve the employer; and (4) if force is intentionally used by the employee against another, the use this force is not foreseeable to the employer.[41] Conversely, conduct of an employee is not within the scope of the employment if it is different than that is authorized, since it occurred beyond the agreed upon time or space limits, or is not actuated by a purpose to serve the employer.[42] However, the current trend of the courts is to expand the situations when an employer may be liable for the wrongful and illegal acts of its employees.[43] Two examples of cases demonstrating the modern trend of expanding the scope of employment, and specifically, the requirement that the employee be motivated, at least in part, by a purpose to serve the employer are McNair v. Lend Lease Trucks, Inc.>[44] and Martin v. Cavalier Hotel Corp.[45] In McNair, the Fourth Circuit held Lend Lease Trucks, Inc., a corporation, liable for a wrongful death caused by its employee.[46] The employee was a truck driver who during working hours, went to a tavern and consumed 15 to 20 drinks.[47] A few hours later, the truck driver left the tavern, walked (or staggered) towards his truck and stepped in front of and collided with the plaintiff who was driving a motorcycle.[48] Consequently, both the plaintiff and the truck driver died.[49] Lend Lease stipulated that the truck driver's three to four hour break, coupled with his extraordinary drinking was a reasonable break, and therefore, the truck driver was not acting within the scope of his employment.[50] The court disagreed and found that the truck driver did in fact act within the scope of his employment, and thus, Lend Lease was held vicariously liable for McNair's death.[51] Similarly, in Martin,[52] the Fourth Circuit held an employer criminally liable for its employee's acts. In this case, the employee committed acts of sexual assault.[53] The court reasoned that because the criminal act was committed during office hours and at the workplace, the act was within the scope of the employment.[54] The court also noted that the criminal act was foreseeable because the employer's policy prohibited such behavior.[55] On this point, courts have expanded employer liability for foreseeable acts of its employees, even if the acts only benefited the employee.[56] One rationalization for this view is that since the employer's job had created the opportunity for the employee to commit the wrongful or illegal act,[57] i.e., apparent authority,[58] and therefore the employer possessed the requisite element of control.[59] In other words, the employer "more or less fictitiously controls" the employee,[60] and therefore, any act of the employee is an act of the employer.[61] In Lyon v. Carey,[62] the Court of Appeals for the District of Columbia held Pep Line Trucking Company vicariously liable when its employee raped and slashed the sister of a customer of a furniture store for which Pep Line made deliveries.[63] Although the court reasoned that the evidence would not support a finding that Pep Line knew or should have known that its employee had any inclination to commit sexual assaults, the court held Pep Line vicariously liable because its employee's credentials as a deliveryman enabled him to enter the victim's residence.[64] The court reasoned that deliverymen "are likely to be in situations of friction with customers," and "these foreseeable altercations may precipitate" within the enterprise liability of Pep Line Trucking.[65] Recently, courts have affirmed the expanded employer liability for foreseeable acts of its employees, even if the acts only benefited the employee. For example, in Davis v. Liberty Mutual Insurance Company, [66] a Vermont federal district court held that the injury "arises in the course of employment" when it occurs within a period of time when the employee is on duty and in a place where the employee may reasonably be expected to be while fulfilling the duties of his or her employment contract."[67] Similarly, in Goff v. Teachers' Retirement System of State of Illinois<,[68] an Illinois federal district court held that the injury can be said to "arise out of" one's employment if its origin is in some way connected with the employment so that there is a causal connection between the employment and the injury.[69] Therefore, under the modern trend of respondeat superior, an employer may be held liable for an employee's wrongful act if: (1) the act occurred within the employee's scope of employment; and (2) the wrongful act was known or should have been known by the employer.[70] III. ANALYSISThe analysis portion of this Comment discusses the instances in which an employer may be liable for an employee's illegal online activity at the workplace. Second, this Comment analyzes illegal employee computer activity and employer liability under a modern theory of respondeat superior. Finally, this Comment proposes several steps that all employers must take to avoid liability for its employee's illegal online activity. A. Computer Crimes1. Stock Manipulation -- and Its Secondary Effect, Cybersmearing Over the last five years, the security market has seen a tremendous growth due largely in part to the Internet. Recent reports estimate that three million people now have online investing accounts and by 2001, fourteen million people will be investing online.[71] This tremendous growth of online investors can be attributed to the ease of obtaining information available through the Internet. This information provides individuals with a virtual tidal wave of knowledge concerning all aspects of investing that was previously only available to professional investors. Unfortunately, many of the characteristics that make the Internet a fanatical means in obtaining information also provide new opportunities to manipulate the stock market. Creating "hype" and manipulating a certain security has become easier by posting false information on various Bulletin Board Systems (BBS) (i.e., an Internet message board), newsgroup or through e-mail. Posting fraudulent information by using any of the above named tools is relatively inexpensive, capable of reaching millions of people and fairly easy to accomplish by a single person. Moreover, using the Internet for a market manipulation scheme is much more effective due to the anonymity and jurisdictional issues in attempting to prosecute market manipulators.[72] Consequently, stock manipulation via the Internet is also increasing at a rapid rate. In defining when the employer may be held liable for the employee's use of its technology to commit securities fraud, it is necessary to first examine the behavior that constitutes illegal manipulation of the securities market. a. Employer Liability Based On Securities Law If an employee of a company whose stock is publicly traded uses a BBS, an Internet chat room or an e-mail to commit a stock manipulation scheme, there is at least a risk in some jurisdictions that the company could be sued under the theory of respondeat superior to answer for the employee's misconduct.[73] Under Section 10(b) of the Securities Act of 1934, to establish a primary liability claim for aiding and abetting, a plaintiff must prove: (1) that the defendant made an untrue statement of material fact, or failed to state a material fact; (2) that the conduct occurred in connection with a purchase or sale of security; (3) that the defendant made the statement or omission with scienter; and (4) that the plaintiff relied on the misrepresentation and sustained damages as a proximate result of the misrepresentation.[74] Since corporations and other entities can only act through their agents, courts must recognize liability under the respondeat superior doctrine and other principles of agency law as a source of primary liability.[75] Applying the theory of respondeat superior, an employer may be liable for its employee's stock manipulation if: (1) the act occurred within the employee's scope of employment; and (2) the wrongful act was known or should have been known by the employer.[76] However, there is a debate in whether employer liability is applicable in securities fraud cases. In Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.,[77] the Supreme Court rejected aiding and abetting liability under the securities laws.[78] However, the Central Bank of Denver decision left open the possibility that a corporation could be held liable if any manipulation of the corporation's stock could have been prevented.[79] In this regard, the majority of the jurisdictions have held that such a theory remains viable.[80] In Seolas v. Bilzerian, [81] a Utah federal district court held that respondeat superior is a legitimate basis for liability under Section 10(b) because the employer's status merits responsibility for the tortious actions of its employees.[82] The court reasoned that the intent and purpose of the securities laws are to promote full disclosure and discourage fraud in the securities markets.[83] In Pollack v. Laidlaw Holdings, Inc.,[84] a New York federal district court denied the employer's motion to dismiss Section 10(b) claim based on agency liability because such a theory was still available after Central Bank.[85] Thus, the legislative history of the Securities Exchange Act of 1934 and case law supports the theory of respondeat superior as a legitimate basis for liability for fraudulent stock manipulation.[86] Moreover, by explicitly including corporations in its definition of "person,"[87] Congress foresaw that corporations would be held liable under agency principals.[88] Therefore, as explained by the Third Circuit in AT&T v. Winback & Conserve Program, Inc.:[89] courts imposing liability on agency theories are not expanding the category of affirmative conduct prescribed by the relevant statute; rather, they are deciding on whose shoulders to place responsibility for conduct indisputably proscribed by the relevant statute. The principal is held liable not because it committed some wrongdoing outside the purview of the statute, which assisted the wrongdoing prohibited by the statute, but because its statute merits responsibility for the tortious actions of its agents.[90]
Therefore, respondeat superior liability is still applicable in security fraud cases.[91] Moreover, the Supreme Court has acknowledged that the employer owns the communication equipment used at work and it is the employer's business that is being conducted on this equipment.[92] However, because this equipment may also allow the employee the opportunity to manipulate the corporate employer's stock value, the majority of the courts will hold the employer liable for its employee's act of stock manipulation because the act occurred within the scope of the employee's employment.[93] Additionally, under the Racketeer Influenced and Corrupt Organizations Act ("RICO"),[94] an employer may also be penalized for its employee's manipulation of its stock value. Under RICO, racketeering activity includes activities by an enterprise that represents a pattern of racketeering activity or manipulation of a security, and that are indictable under, among other statutes, i.e<., securities fraud, wire fraud and fraud involving the use of mail.[95] RICO defines an "enterprise" as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity."[96] A "pattern of racketeering activity" is defined as "at least two acts of racketeering which occurred within ten years . after the commission of a prior act of racketing activity and an "unlawful debt" is defined as "debt incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof . and which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof ."[97] Thus, if an employee manipulates the company's stock value using the employer's technology while at the workplace, the employer may also be penalized under RICO. b. Examples of Stock Manipulation Conduct By Employees One possible stock manipulation scenario in the workplace can occur when employees, by using aliases or intermediaries, post rumors on the Internet to hype their company in connection with their personal purchase or sale of its company's stock.[98] Rumors posted on the Internet are especially damaging because they can be so easily spread.[99] Moreover, once the rumor is posted in cyberspace, it takes on a life of its own.[100] For example, a person who reads the rumor can easily forward it to hundreds of friends or can post it on an Internet BBS where it will be very likely to be read by thousands of other people, each of whom can forward the rumor to all of his or her friends.[101] Furthermore, these Internet rumors are impossible to control and can circulate on the Internet for years long after the anger of the disgruntled employee who posted the rumor has subsided.[102] For example, in April of 1999, Gary D. Hoke, a 25-year old PairGrain Technologies employee, posted a false message on Yahoo! Finance message board that said "BUYOUT NEWS!!! ECLIF is buying [PAIRGRAIN TECHNOLOGIES] . Just found it on Bloomberg."[103] The posting also included a hyperlink to a Web page that appeared to be part of Bloomberg L.P.'s news site.[104] The linked to page contained an "announcement" that PairGrain was being acquired by ECI Telecom Ltd., an Israeli company, in a transaction with "an implied value of $13.5 billion," including the equity purchase price as well as a technology development incentive plan."[105] As a result, PairGrain's stock price quickly rose from $8-1/2 to $11-1/8, i.e., an approximate 31 percent increase, before the markets settled and the share price fell back.[106] After the public realized that Hoke's message was false, Bloomberg L.P., the Los Angles U.S. Attorney's Office and the Securities and Exchange Commission ("SEC") each filed a separate lawsuit against Hoke.[107] As a result of his stock manipulation scheme, Hoke faced claims of securities fraud for manipulating the price of PairGrain's publicly traded securities in violation of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under that Act.[108] On August 30, 1999, Hoke pleaded guilty to posting the fake corporate takeover story on the Internet and was sentenced to five years probation and ordered to pay more than $93,000 in restitution.[109] Through all of this, PairGrain cooperated in the investigation that revealed that nobody else at PairGrain was involved in the scheme.[110] Yet, there can be little doubt that the company suffered through anxious moments, worried about liabilities that it might face as a result of the misguided scheme implemented by a 25-year old "mid-level" engineer employed in its North Carolina development facility. Another likely scenario can occur when employees of e-brokerage firms actively participate in investor chat rooms. For example, if an employee of an e-broker actually uses a chat room to commit securities fraud, through a stock manipulation scheme or otherwise, there is at least a risk that the e-broker could be sued under the theory of respondeat superior in answering for the misconduct of its employees.[111] Yet another likely scenario occurs when employees register their viewpoints about their corporate employer on a BBS, newsgroup or chatroom that intentionally or unintentionally manipulates investors to buy or sell their shares in the corporation's stock.[112] For example, a case that demonstrates the type of damages that can be caused by posting false rumors on the Internet in order to manipulate a corporation's stock value is Zeran v. America Online Inc.[113] Although this case did not involve a disgruntled employee, a situation like the one described in this case could easily occur between an employee and employer.[114] Mr. Zeran was the victim of a cruel hoax in which an anonymous person attached Zeran's name and home phone number to several postings on America Online's bulletin boards.[115] The postings were advertisements for T-shirts and other products with incredibly offensive slogans that glorified the bombing of the Alfred P. Murrah Federal Building in Oklahoma City.[116] Soon after the ads were posted, Zeran began to receive a tremendous amount of calls, consisting mostly of angry messages.[117] Some of these angry calls were death threats.[118] At one point, Zeran was getting an abusive call every two minutes.[119] Once an Oklahoma City radio station learned of the ads, one of the announcers instructed listeners to call the number to complain.[120] After the radio announcement, the number of death threats that Zeran received increased.[121] Yet, Zeran could not change his phone number because he ran his business out of his home and relied on the phone number for his business.[122] After Zeran told it about the false ads, American Online told Zeran that they would like to remove the ads from its bulletin board, but its company policy prohibited it from posting a retraction of the false ads.[123] Consequently, Zeran filed a lawsuit against America Online for not printing a retraction to the false ad and for taking too long to remove the ads.[124] However, Zeran lost his case because the theory for his recovery, i.e., Communication Decency Act,[125] barred his cause of action.[126] If is obvious that not only posting false statements on the Internet can manipulate a corporate employer's stock value, but also "cybersmear" the employer.[127] c. The Secondary Effect of Stock Manipulation, Cybersmearing "Cybersmearing" is the posting of a false and damaging statement over the Internet.[128] Employers need to be aware of the risk of this kind of cybersabotage because they need to react quickly in order to minimize the damage if it should happen to them.[129] While the stories behind a cybersmear are not real, the damage suffered by the employers who are victims of the false rumor is very real.[130] There are several Websites that list false Internet rumors and debunk each of them.[131] One such site is http://urbanlegends.miningco.com. However, by the time such rumors are dispelled, irreparable damage to a company's reputation often has already been done.[132] For example, Blue Mountain Arts, a small, family-owned business that offers free electronic greetings cards, was recently devastated by a false Internet rumor.[133] Someone posted a rumor on the Internet that Blue Mountain greeting cards contained a virus that would destroy the recipient's computer system when the card was opened.[134] Tommy Hilfiger, a clothing designer, was also the victim of a false Internet rumor.[135] The rumor stated that the designer said on the Oprah Winfrey Show that he wished minorities would not buy his clothing.[136] The Internet message asked everyone who read it to boycott Tommy Hilfiger clothing.[137] False Internet rumors about Taco Bell being infested with roaches and about Kentucky Fried Chicken deep-frying rodents have been circulating on the Internet for years.[138] While it is not known if disgruntled employees were behind any of these rumors, they likely could have been.[139] The Internet is a powerful tool and when used by an angry employee, it could have damaging effect on a company's stock value and reputation.[140] 2. Copyright InfringementEnormous amounts of the material that can be found on the Internet that are subject protected by the copyright laws of the United States.[141] Moreover, today's technology allows Internet users not only the opportunity to access, upload and download simple text, but also allows these users the opportunity to do the same with pictures, movies, software, musical works, multimedia works and audiovisual works.[142] However, any copying of the above mentioned subjects in violation of the exclusive rights of its copyright owner would clearly constitute copyright infringement under federal law.[143] Yet, copyright infringement activity on the Internet is also increasing at a rapid rate.[144] In defining when the employer may be held liable for the employee's use of its technology to infringe the rights of a copyright owner, it is necessary to first examine the behavior that constitutes copyright infringement. a. Employer Liability Based On Copyright Law Under copyright law, an employer may be held liable for copyright infringement committed by one of its employees, even when an employer did not actually perform the copying or distributing.[145] First, under the theory of respondeat superior, an employer may be liable for its employee's infringement if: (1) the act occurred within the employee's scope of employment; and (2) the wrongful act was known or should have been known by the employer.[146] Second, under the theory of vicarious liability, an employer may be liable for infringement committed by its employee if the employer: (1) had the right to supervise the employee's infringing activities; and (2) had a direct financial interest in such infringing activities, even when the employer had no knowledge of the infringement nor intent to infringe.[147] Third, under the theory of contributory infringement, an employer may be liable for infringement committed by its employee if: (1) the employer had knowledge of the infringing activity; and (2) the employer induced or materially contributed to the infringing conduct.[149] a Texas federal district court held Webbworld, an Internet service provider which sold adult images that were obtained from various newsgroups, vicariously liable for its employees infringements of Playboy's copyrights.[150] The court reasoned that Webbworld: (1) had full control of day-to-day operations of its Website; (2) created and controlled the operation software that was the heart of the enterprise; and (3) chose which newsgroups it would serve as sources of material, in return for which Webbworld collected fifty percent of the net profits.[151] In Religious Technology Center v. Netcom On-Line,[152] a California federal district court held that sufficient evidence existed such that a jury could reasonably find Netcom contributory liable for a third party's infringing posting that passed through Netcom's network.[153]> In this case, Netcom, an Internet service provider, was initially unaware of the infringing activity, but late received notice of the infringing activity from Religious Technology.[154] The court reasoned that this notice was sufficient to raise the issue of Netcom's responsibility to verify Religious Technology's allegation of infringing activity occurring on its' system.[155] Therefore, if an employer is in possession of improperly obtained software or other copyrighted material, it may be accused of copyright infringement under respondeat superior doctrine, vicarious liability or contributory liability. b. Examples of Copyright Infringement Conduct By Employees If an employer has copy of a software program that cannot be validated by purchasing records, an allegation of copyright infringement may be brought against it.[156] This can be caused by software that was brought in from an employee's home, or was created by conscientious employees trying to get a job done more efficiently via the Internet.[157] Or, perhaps the software was an unauthorized copy created by a well-meaning but misguided cost-conscious manager.[158] For example, in Marobie-FL, Inc. v. National Association of Fire Equipment Distributors,[159] an Illinois federal district court held the trade organization was vicariously liable for copyright infringement after one of its employees who was responsible for its Website adorned the site with copyrights clip art.[160] The court reasoned that the trade organization could not rely on an "innocent infringer"[161] defense because the defense may only be raised when the infringer relied on an authorized copy that omitted the copyright notice, and in this case the employee relied on unauthorized copies of plaintiff's clip art files.[162] Thus, the risks of online copyright infringement claims as a result of an employee's misconduct are very real.[163] The nature of the Internet makes it easy to copy and to forward or publish copyrighted images or content.[164] As the National Association of Fire Equipment Distributors discovered, liability can result from what may otherwise seem to be the most innocent of activities.[165] Another concern that employers must be concerned about is the fact that copyright infringement settlements are expensive.[166] For example, suppose there is an average of two illegal programs per computer, with an average cost of two hundred dollars, and assume that there are five hundred machines within an organization's headquarters and branch offices.[167] The cost of purchasing legitimate copies of the illegal software might be two hundred thousand dollars.[168] Moreover, penalties are usually one to two times the retail value of the illegal software.[169] c. Employer Liability Based On Trademark and Trade Secret Laws These rationales of holding an employer liable for its employee's copyright infringement, i.e., respondeat superior doctrine, vicarious liability and contributory liability, can also be applied to both trademark[170] and trade secret[171] laws. For example, if employees post a third party's trademark on their employer's Website, and the employer failed to take remedial action once it received notification of the trademark violation, the employer may be held liable for its employee's trademark infringement either under the respondeat superior doctrine, vicarious liability or contributory liability.[172] Likewise, if employees use their employer's technology, e.g., a computer, computer disk, Internet access, telephone or e-mail, to obtain proprietary information from a third party, e.g., a customer list, software program or secret formula, the employer may be held liable for its employee's misappropriation of a third party's trade secrets either under trade secret law[173] the respondeat superior doctrine, vicarious liability or contributory liability if it had notice of the trade secret violation.[174] 3. Computer Viruses and WormsWhen computer viruses and worms are executed, they destroy data found in their hosting computer system. Moreover, after infecting a computer system, both computer viruses and worms then use the Internet to find additional hosts to spread their infection. If employees, while at their workplace, introduce computer viruses and worms into electronic commerce, their employers may be held liable for the damage caused by this introduction. However, a fundamental understanding of computer viruses and worms are required in order to understand this type of potential liability to employers. First, a computer virus is a portion of a computer code that affixes itself to other computer codes located in a computer system, e.g, software application codes that are used to boot a computer or macro instructions placed in documents.[175] The computer virus is thereby activated by any action that causes the infected computer code to run, e.g., "turning on the computer, starting an application, or opening an e-mail attachment."[176] This activation occurs because the computer virus is affixed in such a manner to its hosting computer code that it causes the virus to be activated first when the host is loaded for execution.[177] Thereafter, the computer virus then looks for additional uninfected hosts and affixes a copy of itself to them and the computer virus multiplies.[178] Second, a computer worm is a program that spreads itself from one computer to another through the use of a computer network.[179] Unlike computer viruses, computer worms do not get any assistance from unsuspecting users.[180] They must locate a computer system that "they can penetrate, carry out an attack and transfer a replica of their code to the target host for execution."[181] Thus, a computer worm is simply a program that computerize all of the necessary steps needed to break into one computer system to the next.[182] The next necessary step needed to define when an employer may be held liable for its employee's use of the Internet to originate a computer virus or worm into e-commerce at the workplace is to examine which theory of law will hold the employer liable under the respondeat superior doctrine. a. Employer Liability Based On The Computer Fraud and Abuse Act The advent of computer viruses and worms are perhaps the scenarios Congress envisioned in enacting the precedent Computer Fraud and Abuse Act[183] ("CFAA"). Under the CFAA, "whoever . knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer" may face five to ten years in prison and/or fines up to $250,000.[184] Furthermore, under the CFAA, persons who suffer harm as the result of illegal access or damage to a protected computer have a private right of action against the person who caused the harm.[185] In terms of prosecuting the originators of computer viruses and worms,[186] there exists interesting precedential case law under the CFAA. For example, in U.S. v. Kashpureff, the self-proclaimed "webslinger" defendant designed a computer virus that infected a computer system that allowed "Internet-linked computers to communicate with each other." Once the computer virus was launched, Internet users that attempted to reach the defendant's major competitors were instead linked to the defendant's commercial Internet site. As a result, the defendant pleaded guilty to the CFAA charges, and now faces a maximum sentence of five years and a maximum fine of $250,000. In addition to the sanctions under the CFAA, the originator of the computer virus and worms might face potential prosecution under other federal statutes, such as the U.S. wire fraud laws.[187] Additionally, a substantial number of states have enacted legislation that address computer-related crime.[188] b. Examples of Virus And The Potential Liability To Employers The latest Internet virus was unleashed on March 26, 1999, when the "Melissa Macro Virus" was posted to the "alt.sex." newsgroup. In just a few days, the Melissa virus became the fastest-spreading virus in the history of the Internet. Recipients of the message containing the Melissa virus activated the virus by opening the attached "list.doc" Word document. Upon opening the document, the virus re-sent itself and the triggering document to the first 50 addresses on the recipient's Microsoft Outlook e-mail list. The document that was sent to the subsequent recipients contained the subject line "Important message from [sender's name]". Since the attached document appeared to come from a trusted source, most recipients opened the document with little suspicion that they were triggering the Melissa virus. The FBI's National Infrastructure Protection Center ("NIPC") (www.fbi.gov/nipc/w97melissa.htm) subsequently issued a warning to Internet users with respect to the operation and effect of the Melissa virus. Additionally in its warning, the NIPC stated that the spreading of a computer virus was a criminal offense, and that it was currently conducting an investigation as to the creation and proliferation of the Melissa virus. NIPC's initial reports indicated that the Melissa virus might be the work of a programmer who wrote and distributed a similar program two years ago. It took experts several days to get the Melissa virus under control. As a result, the FBI's NIPC director Michael A. Vatis urged "e-mail users to exercise caution when reading their e-mail ... and to bring unusual messages to the attention of their system administrator."[189] On April 1, 1999, the FBI and the New Jersey Attorney General Office arrested David L. Smith for creating and disseminating the Melissa virus.[190] Smith pleaded not guilty to charges of interrupting public communication, conspiracy to commit the offense and the attempt to commit the offense.[191] But on August 24, 1999, Smith admitted to the authorities that he created the Melissa virus.[192] As of this writing, the outcome of this case is still pending, but if Smith is convicted on the state charges, he will face a maximum of 40 years in prison and fines of $480,000.[193] However, if Smith's employer made it possible for him to create and disseminate the Melissa virus into e-commerce by providing him with a computer with Internet access;[194] and if it was foreseeable that Smith would use the Internet for personal use, his employer may face liability due to Smith's illegal online activity.[195] c. Examples of Worms And The Potential Liability To Employers The largest worm incident in Internet history began on November 2, 1988, when Robert Tappan Morris, a computer science graduate student at Cornell University, unleashed a program that spawned copies of itself and spread throughout the network.[196] Within hours, the worm had invaded 2,000 to 6,000 computers, between 3 percent and 10 percent of the total Internet at the time.[197] The program also clogged the systems it hit, dialing virtually every computer it invaded.[198] Systems had to be disconnected from the Internet or shut down completely, some for several days, while system administrators cleaned up the mess.[199] After conducting an investigation, the government arrested Morris and charged him for violating the CFFA.[200] The Second Circuit held that when Morris released the computer "worm" onto the Internet that multiplied and caused computers at various educational, governmental and military institutions to "crash," Morris knowingly accessed and damaged "protected computers," and therefore violated the CFAA.[201] Consequently, Morris was sentenced to three years of probation, 400 hours of community service, a fine of $10,050, and the cost of his supervision.[202] Similar to the virus analysis, if an employer makes it possible for it employee to create and disseminate a worm into e-commerce by providing its employee with a computer that has Internet access;[203] and if it was foreseeable that the employee would use the Internet for personal use, the employer may face liability due to its employee's illegal online activity.[204] In summary, an employer may be held liable for its employee's act of creating and disseminating a virus or a worm into e-commerce if: (1) the act occurred within the employee's scope of employment, such as providing Internet access to its employees;[205] and (2) the employer knew or should have known that the employee was creating and disseminating a virus or a worm into e-commerce via the Internet at the workplace.[206] 4. Internet Gambling Similar to the increase of e-mail and Internet usage in the workplace, "gambling"[207] is growing at an astronomical rate in the United States.[208] Over the last thirty years, the number of Americans that have gambled have increased substantially.[209] It is estimated that Americans will wager at least $600 billion this year alone, or in other words, "$2,400 per man, woman and child."[210] Furthermore, it is estimated that compulsive gambling affects about three percent of the population (or approximately nine million people), and an estimated eighty-percent of the general population has gambled to some degree.[211] As one might expect, gambling has been declared an undesirable activity.[212] Several states have exercised their Tenth Amendment police power by prohibiting gambling in order to protect the health and safety of their citizens.[213] Moreover, under federal law, the government regulates gambling through the use of the Commerce Clause.[214] However, despite state and federal effort, gambling remains a part of the American culture and continues to grow.[215] A contributing factor attributed to this growth is the introduction of the Internet in 1995.[216] Presently, there are hundreds of gambling Websites operating on the Internet.[217] Not only can the Internet gambler participate in all the traditional forms of gambling (e.g., casino wagering, sports wagering, horse and dog wagering and lotteries), but the Internet gambler can also participate in non-traditional forms of gambling such as political elections and armed conflict wagering.[218] One explanation for the rapid growth of Internet gambling is that it is easy to accomplish - just a few clicks on a user's mouse, and one can gamble at a "cyber-casino."[219] First, the gambler conducts a search on the Internet for a gambling site.[220] Once linked to a gambling site, the gambler opens an account with the site by either a credit card, cash advance, bank-wire transfer, bank check or money order.[221] The account is opened, and the gambling begins.[222] Generally, winnings are delivered to the gambler via credit to the gambler's account.[223] Otherwise the winnings are mailed or delivered to the gambler by a courier.[224] Experts anticipate that Internet gambling will be a multi-billion dollar industry within the next five years.[225] In 1996, it was estimated that Americans wagered between $100 million and $200 million over the Internet.[226] Currently, the United States Justice Department estimates that at least fifteen million Americans have lost approximately $1 billion in gambling on the Internet.[227] Moreover, statistical experts predict that Internet gambling will generate "approximately $50 billion in revenues by the year 2000"[228] and over $200 billion by the year 2005.[229] In addressing Internet gambling under the respondeat superior doctrine, an employer may be held liable under both state and federal law, when its employee wagers online.[230] In defining when the employer may be held liable for its employee's use of the Internet to gamble at the workplace, it is necessary to first examine the behavior that constitutes illegal Internet gambling. a. Employer Liability Based On Federal Law Presently, under federal law, the individual act of Internet gambling is surprisingly not illegal.[231] There are three federal statutes that regulate, but do not criminalize the individual act of Internet gambling. Under Section 1084 of the Interstate Wire Act, it is illegal to "engage in the business of betting" and to "knowingly use a wire communication facility" to transmit bets or wagering information in interstate or foreign commerce.[232] Despite the definition of "wire communication," which includes the Internet,[233] the Act does not make it a federal crime for an individual gambler who is not in the business of betting, to gamble on the Internet.[234] Moreover, this statute was designed to prevent "bookies" from accepting bets or wagers on a telephone.[235] Thus, a "wireless" communication by an individual to transmit bets or wagering information in interstate or foreign commerce is not illegal.[236] Under section 1952 of the Travel Act it is illegal to use an interstate facility to operate or facilitate a gambling enterprise.[237] Congress drafted the Travel Act broadly to prohibit the use of channels of interstate and foreign commerce for the furtherance of criminal activity.[238] Moreover, the Travel Act has been interpreted only to apply to those engaged in criminal enterprises, and not individuals.[239] Therefore, the Travel Act does not regulate the individual act of Internet gambling. Finally, under section 1955 of the Organized Crime Control Act, it is illegal to conduct a gambling business.[240] Under this Act, any person convicted of owning or operating an illegal gambling business is subjected to a fine, imprisonment for five years, or both.[241] Once again, this Act does not regulate the individual Internet gambler because the Supreme Court has held that this Act does not apply to individuals, and therefore, this Act may only be used to prosecute Internet gambling businesses.[242] Therefore, under federal law, an employer may be held vicariously liable for its employee's online gambling only if: (1) the employee is operating a "bookie" operation; (2) the bookie activity occurred within the employee's scope of employment; and (3) the wrongful act was known or should have been known by the employer. However, as of this comment, the individual act of online gambling is not punishable under federal law. Recently, Senator Jon Kyl of Arizona and Congressman Bill McCollum of Florida introduced similar bills in both the United States Senate and House of Representatives that seek to prohibit online gambling businesses.[243] Both bills includes extensive sets of provisions dealing with interactive computer services such as American Online and Web hosting companies, which seek to provide interactive computer service from liability for providing the communication for others to gamble online.[244] However, neither of these two bills penalize the individual online gambler. Currently, federal law imposes no penalties to the individual act of Internet gambling.[245] Consequently, in defining when an employer may be held liable for its employee's criminal act of Internet gambling, it is necessary to examine state law. b. Employer Liability Based On State Law Generally, gambling of any type is regulated by the states through respective state laws.[246] Each state determines whether gambling will be permitted within its boundaries and, if it is permitted, what specific forms of gambling are allowed.[247] Currently, Hawaii and Utah are the only states that prohibit all forms of gambling completely. All other states permit gambling to some degree (e.g. casinos, horse wagering, dog wagering and lotteries).[248] As of this writing, the majority of the states have banned Internet gambling, including Alabama,[249] Arizona,[250] California,[251] Colorado,[252] Connecticut,[253] Delaware,[254] Hawaii,[255] Illinois,[256] Kansas,[257] Louisiana,[258] Massachusetts,[259] Minnesota,[260] Missouri,[261] Nebraska,[262] Nevada,[263] North Carolina,[264] Pennsylvania,[265] Texas[266] and Utah[267] who have or arguably have prohibited the individual act of Internet gambling. California,[268] Hawaii,[269] Indiana,[270] and New York[271] are just a few of the many states that are currently in the process of reforming their laws to clearly prohibit the individual act of Internet gambling. Thus, many states support the view that Internet gambling is a repugnant act warranting a criminal violation.[272] This view is rationalized by the states' pro-active stance in prohibiting various forms of Internet gambling.[273] Moreover, under RICO, an employer may also be penalized for its employee's illegal online gambling activity if it constitutes a racketeering activity. Under RICO, racketeering activity includes activities by an enterprise that represents a pattern of racketeering activity or collections of unlawful debt, and that are indictable under, among other statutes, i.e., The Wire Act and The Travel Act.[274] Thus, if an employee operates an online gambling enterprise using the employer's technology while at the workplace, the employer may also be penalized under RICO. c. Examples of Online Gambling Conduct By Employees Employers that provide employees with Internet access to conduct business, also provide employees the opportunity to gamble on the Internet.[275] As explained earlier, the Supreme Court has acknowledged that the employer owns the communication equipment used at work and it is the employer's business that is being conducted on this equipment.[276] However, because this equipment may also allow the employee the opportunity to gamble, some courts will hold the employee's act of Internet gambling to fall within the scope of the employee's employment.[277] Furthermore, if the employer is located in a state were the individual act of Internet gambling is illegal, the employer may be held liable for its employee's criminal act of Internet gambling.[278] Moreover, a state will have personal jurisdiction over a non-resident employer through its long-arm statute.[279] Although there is no case law on point, there is a notable case that has just settled in the state of California. In Providian National Bank v. Haines, the defendant lost over $70,000 while using her Providian credit card to gamble on the Internet.[280] When Providian sued the defendant for not paying her credit card bills, the defendant counterclaimed against Providian claiming that online gambling is illegal in California, and therefore credit card companies should be barred from collecting gambling debts owed by a California resident.[281] In August of 1999, the parties reached a settlement whereby Providian agreed to dismiss its collection lawsuit against the defendant and seek reimbursement from the gambling Websites where the defendant lost her $70,000.[282] For our purposes, lets assume that the defendant in the Providian National Bank case was performing her duties for her employer and took a reasonable break and made her online wagers while using her employer's computer. The state of California could prosecute the defendant's employer for her online gambling because Internet gambling is illegal in the state of California.[283] If the court applies the modern trend of employer liability, the state of California will succeed. Her employer made it possible for her to make the online wagers by providing her a computer with Internet access.[284] It was foreseeable that an employee may use the Internet for personal use.[285] Consequently, under the modern trend of employer liability, the defendant's online gambling occurred within the scope of her employment and liability may be imposed upon the employer for the defendant's illegal act of Internet gambling.[286] In summary, an employer may be held liable for its employee's act of Internet gambling if: (1) the individual act of Internet gambling is illegal;[287] (2) the act occurred within the employee's scope of employment, such as providing Internet access to its employees;[288] and (3) the employer knew or should have known that the employee was gambling via the Internet at the workplace.[289] B. Employer Policy: Defense and Prevention If an employer provides its employees with Internet and e-mail access, then a clear computer policy must be implemented prohibiting the usage of the Internet and e-mail for non-business and illegal activity. The computer policy should be in writing, and if possible, the computer policy should also be available in the employer's internal computer network.[291] Additionally, a signed copy of the computer policy should be collected from each employee that has Internet and/or e-mail access.[292] Recently, some employers are having their computer policy appear on the employee's computer screen immediately after their employees turn on their computer. Then, in order to sign onto the network, all employees must agree to the terms of the computer policy by "clicking" the "I agree" icon. The computer policy should also clearly define acceptable and unacceptable Internet and e-mail use.[293] The computer policy also should warn all employees that any illegal conduct is strictly prohibited and will be grounds for disciplinary actions that may include termination of their employment.[294] Moreover, employers should state in their computer policy that they are openly "monitoring"[295] their employee's Internet and e-mail activities.[296] However, unless the employer requires each employee to read, comprehend and sign the policy, the adoption of this policy will not shield employers from liability.[297] Therefore, for the policy to effectively shield an employer from liability, the policy must be strictly enforced.[298] In Daniels v. Worldcom Corporation, Inc.,[299] the court held that the employer, Worldcom, avoided liability of its employee's wrongful act because the employer took prompt disciplinary actions as defined in its employee manual.[300] The employer, verbally and in writing, warned its employees "regarding the proper use of the company's e-mail system."[301] After the employer had knowledge of its employee's wrongful act of e-mail sexual harassment, it held two meetings to discuss its disciplinary policy against non-business activity on the company's e-mail system and later terminated the employee.[302] Unfortunately, an employer's policy prohibiting non-business Internet activity can be a double-edged sword.[303] If the employer fails to enforce the policy or, upon "knowledge"[304] of its employee's wrongful act, fails to take prompt disciplinary action, then the employer's policy will not shield the employer from liability.[305] Additionally, many large employers contend that monitoring all of its employee's Internet activity is impossible.[306] However, even if the "impossibility" was proven by the employer, courts may still hold the employer liable because of the modern trend of employer liability.[307] Ironically, modern technology has some solutions. There are various software programs that will inform the employer when its employees are accessing prohibited Websites.[308] These software programs act like filters that identify unwanted words, phrases or non-work related Internet sites and denies the employee access to the site.[309] This will allow the employer to take prompt disciplinary actions in an effort to avoid liability.[310] Moreover, these programs are relatively inexpensive when compared to litigation.[311] Furthermore, a software program may reduce the risks of liability for an employee's copyright infringement of counterfeit or copied software.[312] However, courts may hold the employer's conduct of monitoring an employee as an invasion of privacy,[313] unless the employer has a formal policy on electronic communications in place and has informed its employees that all supervisors can read their e-mail.[314] Besides having a computer policy that is strictly enforced and software monitoring employee's Internet activity, employers may want to hire one of several services that actually search through the thousands of chat rooms and discussion groups that are on the Internet to see what is being said about specific companies.[315] If an untrue rumor or defamatory statement is found, the company can then post a corrective message and take any necessary legal action against the person who posted the message.[316] Additionally, companies need to take all measures to protect confidential information.[317] Encryption technology is becoming an absolute necessity.[318] This technology scrambles the information on the computer and makes it unreadable to everyone except the person with the encryption key.[319] Any employer who uses encryption technology must be aware, however, that it is classified as a munition and thus, there are many laws regarding the use of such technology in dealings with other countries.[320] If an employer who has dealings with businesses or people outside of the United States wants to use encryption technology, an attorney should be contacted in order to ensure that all laws dealing with encryption technology are followed.[321] If affordable, employers can increase security by hiring a computer network security consultant.[322] Such consultants should not be hired only after a security problem arises.[323] Security consultants can be of the most benefit if they are hired to prevent security problems from happening in the first place.[324]> IV. CONCLUSIONBecause access to the Internet makes it extremely easy to conduct illegal online activity, all employers are exposed to potential liability.[325] Although employees are rarely arrested for their illegal online activity,[326] employers must still protect themselves from potential liability. Not only should the employer be concerned about an employee's lost productivity when the employee is using the Internet for unauthorized activity, but an employer must also be concerned about being held liable for that employee's illegal online act.[327] An employer may never know if the government is monitoring its business activities, and if it is, employers beware, because the government has the capability to know what its employees are doing at the workplace.[328] To reduce the potential of employer liability, a strict company policy would deter the employee from abusing company property. Employers, who provide employees Internet access to conduct business, also provide employees with the opportunity to conduct illegal online activity.[329] By allowing their employees the opportunity to conduct illegal online activity, courts will consider the employee's illegal act within the scope of the employment and hold the employer liable for its employee's illegal online activity.[330] Furthermore, if the employer is located in a state were the individual act of Internet gambling is illegal, the employer may be held liable for its employee's illegal act of Internet gambling.[331] Since the Internet is global in nature, employers may also be exposed to liability in foreign jurisdictions. Moreover, future law may likely expand employer liability by making it a crime to assist anyone, in any manner, in conducting illegal online activity. To minimize the risk of employer liability for illegal online activities of its employees, employers must establish a strict company policy prohibiting employee's access to its technology and any communication by this technology for the purpose of conducting an illegal online act.[332] Moreover, a strictly enforced company policy puts employees on notice that the employer is monitoring their activity.[333] As technology advances in society, the employer must keep pace with this growth to avoid internal legal chaos.[334]
[1] Ten or twelve fans simulate that they are owners of a NFL football team. See Adam D. Thierer, Internet Law Threatens Fantasy Sports Leagues, Dallas Morning News, June 9, 1998, at 7A. Each fan chooses a team name. Collectively, they agree to a scoring system and some basic ground rules and have a hypothetical draft of real football players from the NFL. See id. Indubitably, each fantasy league member wagers money that his or her fantasy football team will outplay the other. See Adam D. Thierer, Making Criminals of Fans On Internet, Portland Oregonian, May 8, 1998, at B11. [2] Brett Favre is the starting quarterback for the Green Bay Packers; Emmitt Smith is a starting running back for the Dallas Cowboys; Jerry Rice is the starting wide receiver for the San Francisco 49ers; Shannon Sharpe is the starting tight end for the Denver Broncos; and Morten Anderson is the starting place kicker for the Atlanta Falcons. See generally Teams, National Football League (visited Nov. 18, 1999) <http://www.nfl.com/teams/>. [3] A "user" typically uses a password to log onto the computer system. See C. Forbes Sargent, III, Electronic Media and the Workplace: Confidentiality, Privacy and Other Issues, 41 Boston B.J. 6, 6 (May/June 1997). Thereafter, the computer stores each and every step the user takes on the Internet, including Internet gambling activity and communications via e-mail. See id. Additionally, it is theoretically possible to retrieve even deleted e-mail See id. [4] The Internet is "a giant network which interconnects innumerable smaller groups of linked computer networks." Am. Civil Liberties Union v. Reno, 929 F. Supp. 824, 830 (E.D.Pa. 1996), quoted in Cyber Promotions, Inc. v. Am. Online, Inc., 948 F. Supp. 456, 459 (E.D.Pa. 1996). As noted by numerous courts, the Internet is a unique, international, as well as interstate phenomenon. See, e.g., Reno v. Am. Civil Liberties Union, 521 U.S. 844 (1997); Am. Libraries Ass'n v. Pataki, 969 F. Supp. 160 (S.D.N.Y. 1997); Shea v. Reno, 930 F. Supp. 916 (S.D.N.Y. 1996); ACLU v. Reno, 929 F. Supp. at 830-31; Hearst Corp. v. Goldberger, No. 96 Civ. 3620 (PKL)(AJP), 1997 WL 97097, at *1 (S.D.N.Y. Feb. 26 1997); Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949, 951 (C.D.Ca. 1997); see also Sam Puathasnanon, Cyberspace and Personal Jurisdiction: The Problem of Using Internet Contacts to Establish Minimum Contacts, 31 Loy. L.A. L. Rev. 691, 694 nn.24-27 (Jan. 1998) (discussing the development and operation of the Internet, and how it is being used today). [5] "Respondeat superior" is defined as "[l]et the master answer." Black's Law Dictionary 1179 (5th ed. 1979). In other words, the employer is liable in certain situations for the wrongful or illegal acts of its employee. See id. [6] See ACLU v. Reno, 929 F. Supp. at 871. Over 9.4 million computers, sixty percent of which are located in the United States, are estimated to be linked to the Internet. See id. This does not include personal computers that people use to access the Internet using modems. See id. As 40 million people around the world can and do access the Internet. See id. These figures are expected to grow to 200 million Internet users by 1999. See id. For commercial use, the Internet allows companies (internally within the company and to its clients and the general public) to communicate, advertise and allows the consumer to directly access its goods and services. See Lockheed Martin Corp., 985 F. Supp. at 951; see also Louise Ann Fernandez, Workplace Claims: Guiding Employers and Employees Safely Through the Revolving Door, 571 PLI/Lit 775, 789 (Sept. 1997) (explaining why the Internet is the workplace of the 90's). Likewise, gambling has exploded on the Internet and is multiplying at a phenomenal rate. See Scott M. Montpas, Gambling Online: For A Hundred Dollars, I Bet You Government Regulation Will Not Stop The Newest Form Of Gambling, 22 U. Dayton L. Rev. 163, 167-68 (1996). [7] See generally Nightline: Betting Without Borders [sic] The Odds of Stopping Gambling on the Internet, ABC News television broadcast, Apr. 7, 1998, available in WESTLAW, NIGHTLINE File (explaining that policy makers "are looking at a twenty-first century technology through ninetieth-century century eyes"). [8] See infra sections II A (discussing the modern trend of holding an employer liable for the wrongful and illegal online activity of its employees). [9] See John E. Davidson, Reconciling The Tension Between Employer Liability and Employee Privacy, 8 Geo. Mason U. Civ. Rts. L.J. 145, 180 (1997-1998) (discussing that the modern trend is to hold the employer liable without fault for its employee's wrongful or illegal activities); see also Joel M. Androphy, et al., General Corporate Criminal Liability, 60 Tex. B.J. 121, 127-28 (Feb. 1997) (recognizing that an employer may be held liable even though the individual employee acted contrary to corporate policy or instructions). [10] See Cyber Promotions, Inc. v. Am. Online, Inc., 948 F. Supp. at 459; see also Puathasnanon, supra note 4, at 694 (explaining the origins of the Internet created by the United States Department of Defense). [11] Puathasnanon, supra note 4, at 694 & n.29. It only took four years for the Internet to have 90 million users worldwide. See Aaron Katz, Online Transactions, Finance and Commerce, Presentation Before the Chicago Bar Association Computer Law Committee (Oct. 28, 1998). It took television 15 years and radio 30 years to reach 60 million people. See id. [12] See Nua Internet How Many Online, Nua Internet Surveys (visited Nov. 11, 1999) <http://www.nua.ie/surveys/ how_many_online/index.html> (explaining as of September 1999, there are approximately 201 million Internet users worldwide; 1.72 million in Africa; 33.61 million in Asia/Pacific; 47.15 million in Europe; 0.88 million in the Middle East; 112.4 million in Canada & USA; and 5.29 million in Latin America); see also Strategis Group: Over Half of US Adults Use the Internet, Nua Internet Surveys (visited Nov. 11, 1999) <http://www.nua.ie/surveys/index.cgi?f=VS&art_id=905355395&rel=true> (explaining that half of the United States entire adult population are Internet users). [13] See Current stats for Top Level Domains ., Telcordia Technologies (visited Nov. 8, 1999) <http://www.netsizer.com/ daily/TopLevel/Domain.html>; see also U.S. Internet Users Surpass 100 Mln Mark - Study, Excite (Nov. 11, 1999) <http://news.excite.com/news/r/991110/03/net-tech-internetgrowth"printstory=1> (explaining that "that the number of adults using the Internet in the United States surpassed the 100 million mark"); ZD Marketing Intelligence: Internet Increase All Round,Nua Internet Surveys (visited Nov. 11, 1999) <http://www.nua.ie/surveys/index.cgi?f=VS&art_id=896362216&rel=true> (explaining that the "average computer is connected to the Internet about 4.5 hours per week"). [14] See Puathasnanon, supra note 4, at 694 & n.29. [15] See Fernandez, supra note 6, at 789. The Internet allows one-to-one communication via e-mail. See id. It has now become the most popular and widely used service for a user to exchange communication between another user, which millions of people all over the world utilize. See John R. Levine & Carol Baroudi, Internet For Dummies, at 11 (11th ed. 1993). Moreover, e-mail may be used for any purpose for which a person might use paper mail or telephone for communication. See id. In addition, one person can reach many other users through bulletin board services, newsgroups and numerous other Internet-related means of communication. See ACLU v. Reno, 929 F. Supp. at 834. Also, e-mail messages can "carry attached files including word processing documents as well as graphical files of both still and action illustrations." David M. Clark, . By any other name .!, Standing Comm. on Legal Tech. (Illinois Bar Assoc.), Oct. 1998, at 3. [16] See Fernandez, supra note 6, at 883; see also U.S. Internet Users Surpass 100 Mln Mark - Study, Excite (Nov. 11, 1999) <http://news.excite.com/news/r/991110/03/net-tech-internetgrowth"printstory=1> (explaining that 77 percent of Internet users send e-mails with files or attachment every week; and 69 percent of employees sends more than six e-mails each day). [17] See Fernandez, supra note 6, at 789. [18] See John T. Fojut, Ace In The Hole: Regulation of Internet Service Providers Saves the Internet Gambling Prohibition Act of 1997, 8 DePaul-LCA J. Art & Ent. L. 155, 157-58 (1997). [19] See id. at 155. [20] See ACLU v. Reno, 929 F.Supp. at 871; see also Michael S. Leib, E-Mail and the Wiretap Laws: Why Congress Should Add Electronic Communication to Title III's Statutory Exclusionary Rule and Expressly Reject A "Good Faith" Exception, 34 Harv. J. on Legis. 393, 412 (1997) (explaining the benefits of e-mail in the workplace, e.g., minimization of telephone tag, reducing the problems posed by communication between different time zones, allowing employees to find co-workers who have expertise on particular issue, and enabling companies to put together teams of the best people without regard to location). [21] See Gary G. Mathaison, Cybersabotage - The Internet As A Weapon In The Workplace: Internet Zone One, FindLaw.Professionals (visited Oct. 10, 1999) <http://professionals.findlaw.com/electronic/electronic_2.html>. [22] See id. [23] See Leib, supra note 20, at 412. [24] See id.; see also Diana J.P. McKenzie, Information Technology Policies: Practical Protection In Cyberspace, 3 Stan. J.L. Bus. & Fin. 84, 99 (1997) (discussing that the Internet and e-mail offer "significant advances in efficiency, productivity, and convenience"). [25] See Fernandez, supra note 6, at 789; see also Stuart Rosove, Employee Internet Use and Employer Liability, Andrews Employment Litig. Rep., Apr. 8, 1997, available in WESTLAW, ANEMPLR File (discussing a recently conducted CommerceNet Nielson spot telephone poll that revealed that 66 percent of the people using the Internet had done so at the workplace in the previous 24 hours and the belief by employers that their employees are using the Internet for non-business activity on company time); Pitney Bowes: Email is Changing the Working Day, Nua Internet Surveys (visited Nov. 11, 1999) <http://www.nua.ie/surveys/index.cgi?f=VS&art_id=897306427&rel=true> (explaining that the "daily floods of e-mail are leaving 60 percent of executive, managers and professionals feeling overwhelmed"); BBC Online Network: Technology Proving A Work Distraction, Nua Internet Surveys (visited Nov. 11, 1999) <http://www.nua.ie/surveys/index.cgi?f=VS&art_id=905354946&rel=true> (explaining that the increasing amount of technology in the workplace is hindering productivity). [26] See Rosove, supra note 25, at Internet Use Exploding. [27] See Mathaison, supra note 21, at <http://professionals.findlaw.com/electronic/electronic_2.html>. [28] See id. (explaining that "e-mail records usually store information regarding their transmission and receipt, including the names of the sender and recipient, the dates and time that the messages were sent and received, and an acknowledgment that the e-mail was retrieved"). [29] See id. [30] See Rosove, supra note 25, at Internet Use Exploding; Mark Grossman, Employee E-mail Presents Problems, Law News Network (visited June 15, 1999) <http://www.lawnewsnet.com/stories/A2282-1999Jun11.html>. [31] See Am. Libraries Assoc. v. Pataki, 969 F. Supp. 160, 169 (discussing that "inconsistent legislation" could paralyze the advancement of technology). [32] See Petro-Tech, Inc. v. W. Co. of N. Am., 824 F.2d. 1349, 1358 (3d Cir. 1987) (explaining that the doctrine of respondeat superior "can probably be best explained as an outgrowth of the sentiment that it would be unjust to permit an employer to gain from the intelligent cooperation of others without being responsible for the mistakes, the errors of judgment and the frailties of those working under his direction and for his benefit"); see also Davidson, supra note 9, at 180 (discussing that courts general trend to impose "liability without fault" upon the employer). [33] See Harvey L. Pitt & Karl A. Groskaufmanis, Minimizing Corporate Civil and Criminal Liability: A Second Look At Corporate Codes of Conduct, 697 PLI/Corp 319, 340 (1990) (discussing studies that have found that there "two concepts deeply rooted in American economic history"). [34] See id. (recognizing since the early years of America, there has been a general mistrust of corporations). [35] See id.(recognizing that self-regulation "is preferable and more effective than government regulation," and noting the general difficulties of government regulation of the everyday operation of a corporation); see also Bradley J. Haight, Civil RICO Section 1962(c): Vicarious Liability and Arguments For Expanding Its Scope and Elements, Andrews Civ. Rico Litig., May 1999, available in WESTLAW, LEGNEWSL file. [36] See Haight, supra note 35, at Civil RICO Section 1962(c): Vicarious Liability and Arguments For Expanding Its Scope and Elements, Andrews Civ. Rico Litig., May 1999, available in WESTLAW, LEGNEWSL file. [37] See, e.g., Commercial Bus. Sys., Inc. v. BellSouth Servs., Inc., 453 S.E.2d 261 (Va. 1995) (reversing summary judgment ruling that employer was not liable because employee was not acting within the scope of employment); Martin v. Cavalier Hotel Corp., 48 F.3d 1343, 1351 (4th Cir. 1995) (affirming jury verdict ruling employer was liable because employee was acting within the scope of employment); Fitzgerald v. Mountain States Tel. & Co., 68 F.3d 1257, 1263 (10th Cir. 1995), cited in Daniels v. Worldcom Corp., Inc., No. CIV.A.3:97-CV-0721-P, 1998 WL 91261, at *5 (N.D. Tex. Feb. 23, 1998); see also Smith v. Landmark Communications, Inc., 306 S.E.2d 306, 307-08 (Va. 1993) (discussing that corporate liability under Virginia's respondeat superior doctrine is established when the "relationship of master and servant existed at the time and with respect to the specific action out of which the act occurred); United States v. Cincotta, 689 F.2d 238, 341-42 (1st Cir. 1982), cert. denied, 459 U.S. 991 (1982), cited in United States v. MacDonald & Watson Waste Oil Co., 933 F.2d 35, 42 (1st Cir. 1991); United States v. Gold, 743 F.2d 800, 822-23 (11th Cir. 1984), cert. denied, 469 U.S. 1217 (1985); Standard Oil Co. v. United States, 307 F.2d 120, 127-28 (5th Cir. 1962). [38] See Commercial Bus. Sys., Inc. v. BellSouth Servs., Inc., 453 S.E.2d at 265; accord. Martin v. Cavalier Hotel Corp., 48 F.3d at 1351. [39] See Orr v. William J. Burns Int'l Detective Agency, 12 A.2d 25 (Pa. 1940); see also Bowman v. Home Life Ins. Co. of Am., 243 F.2d 331 (3d Cir. 1957) (recognizing that the issue of whether a person acted within the scope of employment is still a question ordinarily for the jury). [40] Restatement (Second) of Agency 228 (1985). [41] See Restatement (Second) of Agency 228 (1985). [42] See Restatement (Second) of Agency 228 (1985) [43] See, e.g., Davidson, supra note 9, at 176; Domar Ocean Transp. v. Indep. Refining Co., 783 F.2d 1185, 1190 (5th Cir. 1986); W. Page Keeton et al., Prosser and Keeton on the Law of Torts 85, 502 (5th ed. 1984); 1 Kathleen Brickey, Corporate Criminal Liability 3:01 (1984); Androphy, et al., supra note 9, at 122 ; Martin v. Cavalier Hotel Corp., 48 F.3d at 1351 (emphasis added); Commercial Bus. Sys., Inc. v. BellSouth Servs., Inc., 453 S.E.2d at 266; see also Davidson, supra note 9, at 195-96 (recognizing employers reluctance to assert the right to indemnity a claim against an employee); Gary T. Schwartz, The Hidden and Fundamental Issue of Employer Vicarious Liability, 69 S. Cal. L. Rev.1739, 1754, 1764-65 (1996); Jane Doe v. United States, 912 F. Supp. 1993, 1994-95 (Va. 1995). [44] McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 328 (4th Cir. 1996). [45] Martin v. Cavalier Hotel Corp., 48 F.3d 1343 (4th Cir. 1995). [46] See McNair v. Lend Lease Trucks, Inc., 95 F.3d at 328. [47] See id.at 327-28. [48] See id. [49] See id.[50] See id. [51] See id. [52] Martin v. Cavalier Hotel Corp., 48 F.3d 1343 (4th Cir. 1995). [53] See id. In Martin, a psychologist employed by VA Hospital committed the sexual assault during regular scheduled therapy sessions and during the hospital's recognized working hours. See id. at 1351. The criminal act occurred in the psychologist's office, an office that the hospital provided for him use to carry out the hospital's mission of psychiatric treatment. See id. at 1352. Furthermore, the psychologist's acts were foreseeable because the hospital understood or should have understood the potential for health care providers to sexually abuse their patients. See id. In fact, the majority of the public is cognizant of ethical code prohibiting the mistreatment of vulnerable psychiatric patients. See, e.g., Elliott v. N. Carolina Psychology Bd., 485 S.E.2d 882, 884 (N.C. Ct. App. 1997). [54] See Martin v. Cavalier Hotel Corp., 48 F.3d at 1343. [55] See id. [56] See Keeton et al., supra note 43, 69, at 499. In addition, when the plaintiff established the existence of an employer-employee relationship between the defendant and the actual tortfeasor-employee, the burden is on the employer to prove that the employee was not acting within the scope of his employment when he committed the tort. See Plummer v. Ctr. Psychiatrists, Ltd., 476 S.E.2d 172, 174 (Va. 1996). Moreover, if the evidence leaves the question in doubt it becomes an issue to be determined by the jury. See, e.g., Jane Doe v. United States, 912 F. Supp. at, 1995; Kemezy v. Peters, 622 N.E.2d 1296, 1298 (Ind. 1993); Stropes v. Heritage House Children's Ctr., 547 N.E.2d 244, 247 (Ind. 1989); but see Blakey v. Continental Airlines, No. A-5462-97T3 (N.J. June 9, 1999) (holding that an airline pilot who was subject of several allegedly defamatory comments that were posted by her co-workers on the airline's bulletin board, use of which was restricted to airline's flight crews, had no defamation claim against the airline based on the doctrine of respondeat superior because the airline employees were not required to use the bulletin board). Similarly, in trademark regulation, a franchisor may be liable for contributory trademark infringement even if the franchisor did not perform infringing acts and even though the franchisor may be held liable for single franchisee's infringement solely as a result of franchisor's failure to exercise reasonable diligence to foresee or prevent the violation. See, e.g., Inwood Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844 (U.S.N.Y. 1982); Babbit Elec., Inc. v. Dynascan Corp., 38 F.3d 1161 (C.A. Fla. 1994); Mini Maid Serv. Co. v. Maid Brigade Sys., Inc., 967 F.2d 1516 (C.A.Ga. 1992); Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472 (C.A. Fla. 1991); Ramada Inns, Inc. v. Gadsden Motel Co., 804 F.2d 1562 (C.A. Ala. 1986); Mead Johnson & Co. v. Baby's Formula Serv., Inc., 402 F.2d 19 (C.A. Fla. 1968); Sony Corp. of Am. v. Univ. City Studios, Inc., 464 U.S. 417 (U.S. Cal. 1984); Bedford, Clarke & Co. v. Scribner, 144 U.S. 488 (U.S. Ill. 1892); Cable/Home Communication Corp. v. Network Prods., Inc., 902 F.2d 829 (C.A. Fla. 1990); Casella v. Morris, 820 F.2d 362 (C.A. Fla. 1987); Am. Intern. Pictures, Inc. v. Foreman, 576 F.2d 661 (C.A. Ala. 1978); Dream Dealers Music v. Parker, 924 F. Supp. 1146 (S.D. Ala. 1996); Chi-Boy Music v. Towne Tavern, Inc., 779 F. Supp. 527 (N.D. Ala. 1991). For a similar rational, look at the "willful blindness" doctrine. See, e.g., United States v. Mapelli, 971 F.2d 284, 286 (9th Cir. 1992); United States v. Lara-Velasquez, 919 F.2d 946 (5th Cir. 1990); United States v. de Luna, 815 F.2d 301, 302 (5th Cir. 1987); United States v. Jewell, 532 F.2d 697, 700-01 (9th Cir. 1976), cert. denied, 426 U.S. 951 (1976). The doctrine can create liability for a corporation due to the corporation's deliberate disregard of criminal activity. See, e.g., United States v. Mapelli, 971 F.2d at 286. If an employer deliberately remains ignorant to avoid knowledge of criminal conduct, then it will be subject to criminal liability. See, e.g., United States v. Bank of New England, N.A., 821 F.2d 844, 855 (1st Cir. 1987), cert. denied, 484 U.S. 943 (1987); United States v. St. Michael's Credit Union, 880 F.2d 579, 584 (1st Cir. 1989). [57] See Davidson, supra note 9, at 179. [58] See Restatement (Second) of Agency 8B (explaining that an employer may be held liable for its employees tortious action, while not actually authorized by the corporation, when it appears that the employee action was authorized by the employer). [59] See Richardson v. Hennly, 209 Ga. App. 868, 872, 434 S.E.2d 772, 776 (Ga. Ct. App. 1993) (recognizing that an employer has the element of control over all acts arising in the workplace setting). [60] Keeton et al., supra note 43, 69, at 499; see also Hard Rock Caf Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1148 (7th Cir. 1992) (holding that the landlord/tenant relationship between a flea market operator and vendors will hold the flea market operator liable for the vendors act because the flea market operators directly control and monitor their premises). [61] See Restatement (Second) of Agency 219 (1) cmt. a (1958) (stating that "the act of the [employee] is the act of the [employer]"). [62] Lyon v. Carey, 533 F.2d 649 (D.C. Cir. 1976). [63] See id. at 652. [64] See id. [65] See id. at 651. [66] Davis v. Liberty Mut. Ins. Co., 19 F. Supp.2d 193 (D.Vt. 1998). [67] See id. [68] Goff v. Teachers' Retirement Sys. of State of Illinois, 713 N.E.2d 578 (Ill. App.5. Dist. 1999). [69] See id. [70] A competent plaintiff's attorney should never have a cause of action under the respondeat superior doctrine dismissed because it is a question of fact, which must be resolved by the jury. See, e.g., Goldwater v. Metro-N. Commuter, R.R., 101 F.3d 296 (2d. Cir. 1996). However, imposing punitive damages liability on employers when their employees engage in wrongful conduct will only be rewarded when the employer, recklessly employed or retained an employee, whose wrongful conduct was known to the employer prior to the commission of the wrongful conduct. See Restatement (Second) of Torts, Section 909, com. b., p. 468; see also M. White v. Ultramar, Inc., 88 Cal. Rptr.2d 19, 23-24 (Ca. 1999) (holding that the corporation was not responsible for punitive damages where it neither personally directed no ratified the wrongful act). [71] See generally IT/C Crimes, Baker & McKenzie, (visited Nov. 10, 1999) <http://www.bmck.com/itc/getarchive.asp?action=ID=11&topic=CRIME>. [72] See id. [73] See Robert A. Prentice, The Future of Corporate Disclosure: The Internet, Securities Fraud, and Rule 10b-5, 47 Emory L.J. 1, 77 (1998). Even accurate representations could be viewed as "selective" and, if acted upon by chat room participants, might "invite insider trading liability." Id. [74] See Securities Exchange Act of 1934, 10(b); 15 U.S.C.A. 78j(b); see also Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1225 (10th Cir. 1996). [75] See Seolas v. Bilzerian, 951 F. Supp. 978, 984 (D. Utah, Jan. 28, 1997); Securities and Exchange Commission v. Gary D. Hoke, Jr., Action No. 99-04262 (LGB) (Ex) (complaint filed Apr. 21, 1999); see also SEC Litig. Rel. No. 16117 (Apr. 21, 1999), Securities and Exchange Commission (visited Oct. 23, 1999) <http://www.sec.gov/enforce/litigrel/lr16117.txt>; SEC News Digest: Enforcement Proceedings, No. 99-77, Apr. 22, 1999, Securities and Exchange Commission,(visited Sept. 10, 1999) <http://www.sec.gov/news/digests/04-22.txt>. [76] See generally section II B (discussing the modern theory of respondeat superior). [77] Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994). [78] See id. at 117; see also Chiarella v. United States, 45 U.S. 222, 235 (1980) (trading securities without disclosing inside information does not violate Section 10(b) unless the trader has an independent duty to disclose); Santa Fe Indus. v. Green, 430 U.S. 462 (1977) (holding that Section 10(b) does not prohibit "a breach of fiduciary duty by majority stockholders, without any deception, misrepresentation, or nondisclosure" because such an act is not manipulative or deceptive conduct); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 201 (recognizing that "manipulative or deceptive" language in Section 10(b) refers to "knowing or intentional" misconduct and refusing to expand scope of liability under Section 10(b) to included negligent misconduct); Converse, Inc. v. Norwood Venture Corp., 1997 WL 742534, at *3 (S.D.N.Y. 1997); but see Am. Society of Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556, 570-74 (1982) (finding that an agency theory of liability in the context of antitrust statutes was "consistent with the intent behind the antitrust laws," and held that a principal may be held liable for the antitrust violations of its agent). [79] See Central Bank of Denver, 511 U.S. at 191. [80] See, e.g., In re Centennial Techs. Litigation, 52 F. Supp.2d 178, 183 (D. Mass. 1999) (holding any "person," entities may be held vicariously liable under general agency principles, since the Act's definition of "person" includes "company"); U.S. S.E.C. v. Fehn, 97 F.3d 1276, 1282, 1283 (Nev. 1996) (holding that the SEC may bring injunctive actions against those who aid and abet violations of Securities Exchange Act's general antifraud provision and provision governing filing of supplementary and periodic information. Securities Exchange Act of 1934, 10(b), 15(d), 20(f)); Infinity Investors Ltd. v. Subramaniam, 1998 WL 47602 (N.D. Tex. Jan 30, 1998) (NO. CIV.A. 3:97-CV1703G); U.S. v. Irwin, 149 F.3d 565, 570 (7th Cir. 1998) (explaining the three-part formula for aiding and abettor liability is "knowledge of the illegal activity that is being aided and abetted, a desire to help that activity succeed, and some act of helping"); Trustees of Boston Univ. v. ASM Communications, Inc., 33 F. Supp.2d 66, 73 (D. Mass. Dec 04, 1998); In re Kidder Peabody Sec. Litig., 10 F. Supp.2d 398, 407 (S.D.N.Y. 1998); Vento & Co. of New York v. Metromedia Fiiber Network, Inc., 1999 WL 147732, at *12-13 (S.D.N.Y. 1999); State ex rel. Goettsch v. Diacide Distribs., Inc., 561 N.W.2d 369, 374 (Iowa 1997) (following Iowa Code section 502.503(1) that imposes secondary liability on any person who "materially aid[s] and abet[s] in the act or transaction constituting" the securities fraud defined in section 502.401). There are also a number of pre-Central Bank decisions that had established respondeat superior as a viable theory of liability in Section 10(b) cases. See, e.g., Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1576 n.27 (9th Cir. 1990); Castleglen, Inv. v. Commonwealth Sav. Ass'n, 689 F. Supp. 1069, 1072 (D. Utah 1988); accord. Kerbs v. Fall River Indus., 502 F.2d 731, 740-41 (10th Cir. 1974); In re Atlantic Fin. Management, 784 F.2d 29, 32 (1st Cir. 1986) (holding that "there are strong reasons for believing that the 'direct or indirect' language of the Securities Act encompasses . common law agency liability"). These courts held that Section 20(a) of the 1934 Act, which provides for "controlling person" liability under Section 10(b), did not supplant common-law agency principles and was therefore not the exclusive source of secondary liability for Section 10(b) violations. See Securities Exchange Act of 1934, 20(a); 15 U.S.C. 78t(a). Section 20(a) states: Every person who, directly or indirectly controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. 15 U.S.C. 78t(a). Under this view, respondeat superior and other agency theories were valid bases of liability under Section 10(b) independent from Section 20(a). See Hollinger, 914 F.2d at 1576; Castleglen, 689 F. Supp. at 1072. [81] Seolas v. Bilzerian, 951 F. Supp. 978 (D. Utah, Jan. 28, 1997). [82] See id. at 983; see also AT&T v. Winback & Conserve Program, 42 F.3d 1421, 1429-32 (3d Cir. 1994) (holding that the issue is "deciding on whose shoulders to place responsibility for conduct indisputably proscribed" by Section 10(b) should be placed on the principal "because its status merits responsibility for the tortious actions of its agent), cert. denied, 514 U.S. 1103 (1995); Peltz v. SHB Commodities, Inc., 115 F.3d 1082, 1088 (2d. Cir. 1997) (noting in context of a commodities trading case that where there is actual authority, the principal is bound by the actions of its agent). [83] See Seolas, 951 F. Supp. at 983. [84] Pollack v. Laidlaw Holding, Inc., 1995 WL 261518 (S.D.N.Y. 1995). [85] See id. at *17. [86] See generally, In re Atlantic Fin. Management, 784 F.2d at 32-33; Paul F. Newton & Co. v. Texas Commerce Bank, 630 F.2d 1111, 1115-16 (5th Cir. 1980); Castleglen, 689 F. Supp. at 1072; see also Prentice, supra note 73, at 77 n.345 (1998). [87] See 15 U.S.C. 77b(a)(2). [88] See AT&T, 42 F.3d at 1431; see also Central Bank, 511 U.S. at 191 (recognizing that "[a]ny person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under Section 10(b), assuming all of the requirements for primary liability under Section 10(b)(5) are met"). [89] AT&T v. Winback & Conserve Program, Inc., 42 F.3d 1421 (3d Cir. 1994). [90] See id. at 1430-31 (holding that "Central Bank's discussion of aiding and abetting should not be transplanted into the more settled realm of agency law" in the conduct of a Lanham Act case). [91] For further analysis, see Prentice, supra note 73, at 1; Anne C. Flannery & Kristine Zaleskas, Damage Control: Managing The Inevitable Corporate Crises, 1121 PLI/Corp 423 (1999). There are also a number of other provisions of the Exchange Act of 1934 that arguably prohibit the manipulation of stock prices through false or misleading Internet communication including: (1) Section 10(b), 15 U.S.C.A. 78j(b); (2) Rule 10b-5, 17 C.F.R. 240.10b-5 (1996); (3) Rule 10b-1, 17 C.F.R. 240.10b-1); (4) Section 9(a)(2), 15 U.S.C.A. (v) Section 9(a)(3), 7i(a)(3); and (4) Section 9(a)(4), 15 U.S.C.A. 78i(a)(4). [92] See O'Connor v. Ortega, 480 U.S. 709, 718-22 (1987) (plurality opinion). [93] See Keeton et al. supra note 43, 69, at 499. [94] See The Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962 (1984). [95] See Chapter VIII Other Causes of Action, 50 Baylor L. Rev. 761 (1998), available in WESTLAW, BLRLR file, at I. Civil RICO. [96] See 18 U.S.C. 1961(4)&(5). [97] See 18 U.S.C. 1961(4)&(5). [98] See Mathaison, supra note 21, at <http://professionals.findlaw.com/networked/networked_6.html>. [99] See id. [100] See id. [101] See id. [102] See id. [103] See Blake A. Bell, Reducing The Liability Risks of Employee Misuse of the Internet, Glasser LegalWorks, June 1999, available in WESTLAW, GLWSLAW File at Securities Law Violations. [104] See id. [105] See id. [106] See The Associated Press, Man Gets Probation and Home Detention in Online Stock Hoax, NY Times - Technology, (visited Nov. 11, 1999) <http://www.nytimes.com/library/tech/99/08/biztech/articles/30hoax.html>. [107] See Securities and Exchange Commission v. Gary D. Hoke, Jr., Action No. 99-04262 (LGB) (Ex) (complaint filed Apr. 21, 1999); see also SEC Litig. Rel. No. 16117 (Apr. 21, 1999), Securities and Exchange Commission (visited Oct. 23, 1999) <http://www.sec.gov/enforce/litigrel/lr16117.txt>; SEC News Digest: Enforcement Proceedings, No. 99-77, Apr. 22, 1999, Securities and Exchange Commission, (visited Sept. 10, 1999) <http://www.sec.gov/news/digests/04-22.txt>. [108] See id. [109] See The Associated Press, supra note 106, at <http://www.nytimes.com/library/tech/99/08/biztech/articles/30hoax.html>. [110] See id. [111] See Bell, supra note 103, at E-Broker Chat Rooms and Federal Securities Laws, Wallstreetlawyer.com, Aug. 1998, available in WESTLAW, LEGNEWSL file. [112] See id. [113] Zeran v. Am. Online Inc., 129 F.3d 327 (4th Cir. 1997). [114] See id. at 329. [115] See id. [116] See id. [117] See id. [118] See id. [119] See id. [120] See id. [121] See id. [122] See id. [123] See id. [124] See id. [125] See The Communications Decency Act, 47 U.S.C. 230 (barring lawsuits that seek to hold interactive computer services providers liable for its exercise of publisher's traditional editorial functions, e.g., whether to publish, withdraw or postpone content). [126] See id. at 334-35. [127] See Mathaison, supra note 21, at <http://professionals.findlaw.com/networked/networked_6.html>. [128] See id. [129] See id. [130] See id. [131] See id. [132] See id. [133] See id. [134] See id. [135] See id. [136] See id. [137] See id. [138] See id. [139] See id. [140] See id. [141] See The Copyright Act, 17 U.S.C. 102 (1994) (defining protectable subject matter of copyright). [142] See David N. Weiskopf, The Risks Of Copyright Infringement On The Internet: A Practitioner's Guide, 33 U.S.F.L. Rev. 1, 3 (1998). [143] See id., citing The Copyright Act, 17 U.S.C. 106(1)-(5). [144] See, e.g., Justice Department, F.B.I. and Customs Service July 23, 1999, Press Release to Combat Intellectual Property Crime, United States Department of Justice, (visited Nov. 11, 1999) <http://www.usdoj.gov/opa/pr/1999/July/323civ.htm> (explaining that the United States Law Enforcement will target high tech corridors to fight the piracy and counterfeiting surge). [145] See Fonovisa, Inc. v. Cherry Auction, Inc., No. 94-15717 (9th Cir Jan. 25, 1996) available in WESTLAW, BNA file; Garry G. Mathaison & Michelle R. Barrett, The Electronic Workplace: Employment Law Implications and Solutions, FindLaw.Professionals (visited Oct. 1, 1999)<http://professionals.findlaw.com/electronic/electronic_18.html>. [146] See, e.g., Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d. Cir. 1963) (recognizing the respondeat superior rule to copyright infringement); Gershwin Publ'g Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (2d. Cir. 1971) (impliedly recognizing the respondeat superior rule to copyright infringement); Buck v. Cecere, 34 F. Supp. 441 (2d. Cir. 1942) (recognizing the rule by implication); Buck v. Coe, 32 F. Supp. 829 (3d Cir. 1940) (recognizing the rule by implication); M. Witmark & Sons v. Pastime Amusement Co., 298 F. 470 (4th Cir. 1924), aff'd 2 F.2d 1020 (1924) (recognizing the rule by implication); Bourne v. Fouche 238 F. Supp. 745 (4th Cir. 1965); Shapiro, Bernstein & Co. v. Velton, 47 F. Supp. 648 (5th Cir. 1942); M. Witmark & Sons v. Calloway, 22 F.2d 412 (6th Cir. 1927); Wihtol v. Crow, 309 F.2d 777 (8th Cir. 1962); Bradbury v. Columbia Broad. Sys., Inc., 287 F.2d 478 (9th Cir. 1961) (recognizing the rule by implication), cert. dsmd. 368 U.S. 801 (1961). Courts have even held the employer liable under the respondeat superior doctrine for a copyright infringement committed by an employee after the employee acts against the employer's orders. See, e.g., Buck v. Cecere, 45 F. Supp. 441 (2d. 1942) (recognizing the rule by implication); Buck v. Coe, 32 F. Supp. 829 (3d Cir. 1940) (recognizing the rule by implication); Bourne v. Fouche, 238 F. Supp. 745 (4th Cir. 1965); Shapiro, Berstein & Co. v. Veltin, 47 F. Supp. 648 (5th Cir. 1942); M. Witmark & Sons v. Calloway, 22 F.2d 412 (6th Cir. 1927) (recognizing the rule). [147] See, e.g., Shapiro, Berstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d. Cir. 1963); Roy Export Co. Establishment v. Trustees of Columbia Univ., 344 F. Supp. 1350 (2d. Cir.) (recognizing the vicarious liability rule to copyright infringement; along with the idea that no financial interest needs to be shown by alleged vicarious infringer); L & L White Metal Casting Corp. v. Cornell Metal Specialties Corp., 353 F. Supp. 1170 (2d. Cir); Microsoft Corp. v. Grey Computer, 910 F. Supp. 1077 (4th Cir. 1995); Realsongs v. Gulf Broad. Corp., 824 F. Supp. 89 (5th Cir. 1993); Univ. City Studios, Inc. v. Nintendo Co., 615 F. Supp. 838 (S.D.N.Y. 1985). [148] See, e.g., Sony Corp. of Am. v. Univ. City Studios Inc., 464 U.S. 417 (1984); Gershwin Publ'g Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (2d. Cir. 1971); Matthew Binder & Co., Inc. v. West Pub. Co., 158 F.3d 693 (2d. Cir. 1998), cert. denied, 119 S.Ct. 2039 (1999) (explaining that there are two types of contributory infringement: (1) personal conduct that encourages or assists the infringement; and (2) providing the use of machinery or goods that facilitate the infringement); Screen Gems-Columbia Music, Inc. v. Mark-Fi Records, Inc., 256 F. Supp. 399 (S.D.N.Y. 1966); Telerate Sys., Inc. v. Caro, 689 F. Supp. 221 (S.D.N.Y. 1988); Metzke v. May Dep't Stores Co., 878 F. Supp. 756 (W.D.Pa. 1995); Broad. Music, Inc., Inc. v. Jeep Sales & Serv. Co., 747 F. Supp. 1190 (E.D. Va. 1990); Schuchart & Assocs., Prof'l Engineers, Inc. v. Solo Serve Corp., 220 U.S.P.Q. 170 (W.D. Tex. 1983); S. Mississippi Planning & Dev. Dist., Inc. v. Robertson, 660 F. Supp. 1057 (S.D. Miss. 1986); Compaq Computer Corp. v. Procom Tech., 908 F. Supp. 1409 (S.D. Tex. 1995); Playboy Enters., Inc. v. Russ Hardenburgh, Inc., 982 F. Supp. 503 (N.D. Ohio 1997); Broadcast Music, Inc. v. Fox Amusement Co., 551 F. Supp. 104 (N.D. Ill. 1982); Burdick v. Koerner, 988 F. Supp. 1206 (E.D. Wis. 1998); Aitken, Hasen, Miller, P.C. v. Empire Constr. Co., 542 F. Supp. 252 (D.C. Neb. 1982); Johnson v. Salomon, 197 U.S.P.Q. 801 (D.C. Minn.); Sega Enters. V. Maphia, 857 F. Supp. 679 (N.D. Cal. 1994); Cable/Home Communication Corp. v. Network Prods., Inc., 902 F.2d 829 (11th Cir. 1990); Nick-O-Val Music Co. v. P.O.S. Radio, Inc., 656 F. Supp. 826 (M.D. Fla. 1987 |