Cheap VoIP company forced to pay $50,000 after defamation case goes belly up...
While Magic Jack's cheap VoIP dongle
generally works rather well, our forums are occasionally littered with complaints about the company's business practices, be it it for little things like a website hit counter that used to artificially inflate their trial participant count
(since fixed), or misleading marketing practices
(like saying today is the last day of a free trial promotion, every single day). Our users generally overlook these problems for one reason: the service is dirt cheap, and works.
Like many companies, Magic Jack also likes burying things in their fine print and terms of service. Among them, the company includes language that requires users engage in binding arbitration -- a process that usually ends with the consumer losing
, since the arbitration company works for the corporation being complained about. For most of the decade, the courts have repeatedly told companies
that this language isn't legal, but that hasn't stopped it from being included in TOS anyway.
Back in 2008, gadget and culture blog Boing Boing
ran a rather simple post
highlighting some of Magic Jack's more dubious practices, including their bogus free trial user counter, their use of behavioral ad technology, and their inclusion of arbitration language in their terms of service. Magic Jack didn't like the post very much apparently, because they wound up suing Boing Boing
for defamation. Unfortunately for Magic Jack, all of Boing Boing
's claims were true, and Magic Jack has been forced to pay the website $50,000
We had no idea that it would file a baseless lawsuit to try and shut me up, that CEO Dan Borislow would offer to buy our silence after disparaging his own lawyers, or that MagicJack would ultimately face legal consequences for trying to intimidate critics. . . At several points in the process, we could have taken a check and walked away: as it is, the award doesn't quite cover our costs. But we don't like being bullied, and we wanted the chance to tell anyone else threatened by this company what to expect.
According to Boing Boing
, Magic Jack's suit claimed the blog's post subjected the VoIP outfit to "hate, ridicule and obloquy." The site claims MagicJack CEO Dan Borislow contacted them once he learned of the tenuous nature of his case in California court, agreed to a settlement, and then subsequently backed out. Once forced to settle, Magic Jack then demanded that the settlement dollar total be kept confidential. Boing Boing
, unsurprisingly, didn't think that was a good idea:
We offered not to publish the amount of this settlement if Borislow would donate $25,000 to charity. MagicJack, however, offered to pay our entire legal bill only if we'd agree to keep the whole dispute confidential; when we refused, Borislow wrote that he would 'see us in court.' Nonetheless, we're happy with the outcome. The irony for MagicJack is that the proceedings are public record, so the silence it sought was effectively worthless.
Of course the lesson learned is that in the Internet age, the harder a company works to stifle criticism, the more attention that criticism gets. The better path is perhaps to listen to what your customers are saying about your business practices, and change them where possible if you value your customers.
Boing Boing has posted all legal documents
pertinent to the case for those interested.