Due to popular Demands: Here it is againTuesday, 23 May 2000 at 12:03 PM EDT
Company Finds Surprise Critic Among Message-Board Posters
By AARON ELSTEIN,THE WALL STREET JOURNAL INTERACTIVE EDITION
A Miami company that has been relentlessly hammered by anonymous critics on the Internet has identified a surprising enemy
among them: a trader at a securities firm that makes a market in its stock.
Quest Net says it has won a court order from a Florida state judge barring Jerry Rosen, a trader at J. Alexander Securities, from
continuing to post "false and defamatory"
statements about the Internet service provider. Mr. Rosen, the company contends, posted messages on a Raging Bull message
board (www.ragingbull.com) under the alias "Cats3."
The court order, along with a confidential settlement with Mr. Rosen, is an interesting development in a cyberlibel lawsuit the
company filed Feb. 17 against five of its
message-board critics. It's highly unusual for a company to face criticism from among the ranks of its market maker. After all, the
market maker maintains an inventory in the stock using its own money.
"Stock brokers have been named in past cases," says Blake Bell, a New York lawyer who tracks cyberlibel suits. "But this is the
first time a company's market maker has been
identified."
Market makers are responsible for maintaining an orderly, or liquid, market in a stock, standing ready to buy or sell shares even
when no one else will. According to the National Association of Securities Dealers, J.Alexander, based in Los Angeles, is the
seventh-largest dealer in Quest Net stock.
Mr. Rosen, who lives in Miami and consented to the court order, declines to comment on the settlement or the court order, which
was issued March 23 by Judge Thomas S.Wilson. Quest Net's lawyer, Bob Pearce, also declines to discuss the case. "We have
settled with Mr. Rosen and wish to move on," he says. James Alexander, president of J.Alexander, says the matter with Quest Net
has been resolved and declined to comment further.
In its original lawsuit, Quest Net had named only one of the defendants, David Engel, a former marketing manager at the company
who, according to the suit, was fired on Feb.4. The other four were identified by their online aliases.
The company hasn't disclosed how it linked Mr. Rosen and Cats3. But companies usually identify anonymous posters through
records subpoenaed from message board operators
and Internet access providers. But even before the lawsuit an online poster had provided a lead, naming Mr. Rosen as Cats3.
Quest Net's lawsuit, in general, alleges its online critics were short-sellers out to hurt the company's stock for financial gain.
Short-sellers sell borrowed stock, hoping profit by replacing it with shares bought later at a lower price. The company is seeking
unspecified damages and a court injunction ordering the defendants to cease their activities.
The company alleged in the lawsuit that Mr. Rosen, through the online alias Cats3, was actively involved in posting false, derogatory
and hurtful messages about the company.
Cats3 has referred to the company as a "dog" and has posted messages discouraging investors from buying its stock.
Cats3 posted a dozen messages about Quest Net from Jan. 21 to Feb. 28 on Raging Bull. One cited in the lawsuit suggested
someone was trying to inflate the company's
stock price. "Quit pumping this dog and get a real life," it said. "How much are they paying you to pump this stock????"
David Ruder, a law professor at Northwestern University and former chairman of the Securities and Exchange Commission, says
securities rules require industry professionals to get clearance from their employers before making comments to the public about
stocks handled by their firms. Officials
from NASD, an industry self-policing, didn't return phone calls Wednesday, and the SEC declined to comment