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AOL hit by $100-Million Lawsuit!

Source: 15 March 1997, The Arizona Daily Star, Tucson, Arizona, p. A-11:

.....

$100 million suit hits AOL chiefs with racketeering, fraud charges

LOS ANGELES (AP) - America Online, already forced to make refunds to many of its 8 million customers, now faces a $100 million lawsuit accusing its executives of wire fraud and racketeering.

The action says the nation's largest consumer online service is party to offenses ranging from recklessly endangering customers' privacy rights to plundering their intellectual property.

Plaintiffs in the suit, which seeks class-action status, want a court-appointed receiver to take over the service ``to operate AOL in a lawful manner.''

The suit was filed Thursday in U.S. District Court by attorneys for four California customers of AOL.

AOL spokeswoman Wendy Goldberg declined to comment. The company's chief attorney, George Vradenburg, called the claims ``ridiculous piling on'' and said the case was without merit.

In January, the online service became so swamped with responses to its $19.95 flat rate for unlimited Internet access that it was forced to give frustrated customers refunds and credits.

``This is not just another lawsuit about the cyberspace traffic jam,'' plaintiffs' attorney Bruce C. Fishelman said yesterday. ``We are seeking to establish a pattern of racketeering violations, and violations of the Federal Communications Act.''

The suit also differs from others filed against the online giant in that it alleges AOL should be defined as a public trust and fall under regulations of the Federal Communications Act.

The suit asks that AOL be classified as a common carrier or a broadcaster, making its business more tightly regulated by the Federal Communications Commission.

The plaintiffs contend AOL's chief officers portrayed the company as robust and profitable, while selling large blocks of their personal stock at enormous profit.

AOL President Steve Case, for example, sold 76 percent of his stock for $29.1 million, the lawsuit claims.

The suit also says AOL committed mail fraud by mailing free software promising unlimited Internet access and committed wire fraud with the ad campaign for $19.95 unlimited access.

The lawsuit also contends AOL improperly claims perpetual rights to material posted in ``public areas'' of the service, without negotiating or paying for it. Plaintiffs labeled that a misappropriation of intellectual property rights.

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Sincerely, Steve Langford 

©Stephen A. Langford, Oro Valley, Arizona, 12 April 1997.  
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