Title: America Online v. Nam Tai Electronics Inc.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Carrico, C.J., Lacy, Hassell, Koontz, Kinser, and 
Lemons, JJ., and Stephenson, S.J. 
 
AMERICA ONLINE, INC. 
 
OPINION BY 
v.  Record No. 012761 
JUSTICE LAWRENCE L. KOONTZ, JR. 
 
November 1, 2002 
NAM TAI ELECTRONICS, INC. 
 
 
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY 
Thomas D. Horne, Judge 
 
In this appeal and in the context of the Uniform Foreign 
Depositions Act, Code § 8.01-411 through –412.1 (UFDA), we 
consider whether a Virginia trial court properly applied 
principles of comity in refusing to quash a subpoena duces tecum 
obtained under a commission for out-of-state discovery issued by 
a California trial court. 
BACKGROUND 
On January 26, 2001, Nam Tai Electronics, Inc. (Nam Tai) 
filed a complaint in the Superior Court of the State of 
California for the County of Los Angeles (the California court) 
against fifty-one unknown individuals alleging libel, trade 
libel, and violations of California Business and Professions 
Code Section 17000 et seq. (California’s unfair business 
practices statutes).  In summary, Nam Tai alleged that the 
unknown individuals had posted “false, defamatory, and otherwise 
unlawful messages” on an Internet message board devoted to 
discussion of Nam Tai’s publicly traded stock. 
The message board was maintained by Yahoo! Inc. (Yahoo), an 
Internet services company located in California.  The message 
board was available to be viewed by any Internet user.  However, 
in order to post a message an Internet user must first establish 
a Yahoo account, for which the company does not charge a fee, 
and create a “login name,” which is subsequently used to 
identify the user when posting messages on the service.  In its 
complaint, Nam Tai identified one of the unknown defendants by 
the Yahoo login name “scovey2.”  Attached to the complaint was a 
printout of a single message posted by “scovey2” to the message 
board devoted to Nam Tai’s stock.  Dated as having been posted 
on January 8, 2001 at 10:03 p.m. Eastern Standard Time, the 
message was titled “sinking again,” and read as follows: 
Sinking is not a province in China but an observation 
of this company’s stock market performance.  This low 
tech crap that they produce is in an extremely 
competitive and low profitability industry.  I see 
see-sawing of the stock with no real direction.  (See-
sawing is also not a province.) 
 
Nam Tai alleged that this message “among others” posted by 
“scovey2” was part of a concerted effort by the unknown 
defendants to defame Nam Tai in order to discourage investors 
from purchasing or holding stock in Nam Tai.  Nam Tai further 
alleged, in part, that the defendants’ intent was to “interfere 
 
2
with [Nam Tai’s] relationship with its shareholders and the 
general public and to manipulate the price of Nam Tai stock to 
their advantage.”  It further alleged that the acts of the 
defendants “constitute unlawful, unfair, and deceptive business 
practices against [Nam Tai] . . . in violation of” California’s 
unfair business practices statutes.  Nam Tai sought both 
compensatory and punitive monetary damages and injunctive 
relief.1
Following the filing of the complaint, Nam Tai obtained a 
subpoena duces tecum in California directing Yahoo to disclose 
its subscriber data on “scovey2.”2  Based on the information 
subsequently disclosed by Yahoo, Nam Tai was able to determine 
that “scovey2” obtained his Internet access through America 
Online, Inc. (AOL), an online services company that also serves 
as a portal site to the Internet.  Specifically, Yahoo disclosed 
                     
1 Because no defendant was identified with specificity, Nam 
Tai’s complaint has not been served on any party, and all the 
proceedings in the California court have occurred ex parte. 
 
2 Although Yahoo requires its users to provide certain 
personal information when registering, it does not attempt to 
verify the accuracy of the information provided.  Yahoo 
discloses in a privacy statement that it will “respond to 
subpoenas, court orders, or legal process” requiring it to 
disclose registration and usage information. 
 
 
3
the Internet protocol (IP) address3 used by “scovey2” to access 
Yahoo’s Nam Tai message board on January 8, 2001 and the 
“alternate email address” given by “scovey2” when registering 
for a Yahoo login name.  The Internet protocol address recorded 
when “scovey2” posted the January 8, 2001 message was 
“152.163.194.186,” which is registered to AOL.  The alternate 
email address “scovey2” supplied to Yahoo was “scovey@aol.com.” 
Nam Tai obtained a commission for out-of-state discovery 
from the California court to depose AOL’s custodian of records.  
AOL’s principal corporate offices are located in Loudoun County 
and, accordingly, the commission was directed to a registered 
court reporting service authorized to take depositions within 
Virginia.  On March 19, 2001, Virginia counsel for Nam Tai filed 
a praecipe in the Circuit Court of Loudoun County (the trial 
court) for a foreign subpoena duces tecum.  On the same date, 
the clerk of the trial court issued the subpoena directing AOL’s 
custodian of records to produce, among other things, records 
                     
3 An IP address is a string of four integer numbers between 
0 and 255 separated by periods that identifies the location of a 
specific computer connected to the Internet.  While many 
Internet connections are permanent and, thus, are assigned fixed 
IP addresses, the IP address assigned to a personal computer 
accessing the Internet through a portal site is drawn from a 
pool of open addresses and identifies that computer only during 
the time that computer is connected to the Internet. 
 
 
4
related to the opening of the account assigned the email address 
“scovey@aol.com” and “[d]ocuments sufficient to identify the AOL 
customer or subscriber . . . assigned the AOL Internet Protocol 
Address 152.163.194.186 . . . on January 8, 2001, at 10:03 PM 
EST.” 
On April 17, 2001, AOL filed a motion to quash Nam Tai’s 
subpoena duces tecum.  In that pleading, AOL acknowledged that 
counsel for Nam Tai had provided it with a copy of a second 
message, posted by “scovey2” on June 3, 1999, which criticized 
the company’s stock trading practices and accused Nam Tai’s 
president of “manipulat[ing] the stock [of] this and other 
smaller companies.”4  AOL contended that it should not be 
required to reveal subscriber information because this would 
“infringe on the well-established First Amendment right to speak 
anonymously,” and that Nam Tai could not meet the heightened 
scrutiny required to overcome that right.  AOL further contended 
that the First Amendment protection applied to all claims made 
in Nam Tai’s California complaint, including the statutory 
unfair business practices claim. 
                     
4 As AOL noted, this message was not set forth, referenced 
in, or attached to Nam Tai’s complaint.  On appeal, Nam Tai 
assigns cross-error to the trial court’s failure to consider 
this message in ruling on AOL’s motion to quash. 
 
 
5
On April 27, 2001, Nam Tai filed a brief opposing AOL’s 
motion to quash.  Nam Tai contended that AOL was seeking a 
review of both the procedural process already approved by the 
California court and a substantive review of the merits of the 
underlying cause of action stated in the California complaint.  
Nam Tai asserted that principles of comity required the trial 
court to give deference to the procedures used in obtaining the 
commission from the California court.  Nam Tai further asserted 
that “scovey2” had been notified by AOL of the subpoena, but had 
not joined in the motion to quash.  Thus, Nam Tai contended that 
AOL did not have standing to challenge the merits of the 
underlying claim. 
On May 1, 2001, AOL filed a reply to Nam Tai’s brief 
opposing AOL’s motion to quash.  AOL contended that Nam Tai had 
not met the criteria for applying principles of comity because 
Nam Tai could not show that its California complaint stated a 
viable cause of action.  AOL further contended that the absence 
of the real party in interest did not deprive AOL of standing to 
challenge the underlying merits of the case because the notice 
 
6
to “scovey2” was informal and that “scovey2” might have elected 
not to join the motion for strategic or economic reasons.5
Following a hearing on May 4, 2001, the trial court, 
relying on America Online, Inc. v. Anonymous Publicly Traded 
Co., 261 Va. 350, 542 S.E.2d 377 (2001) (hereinafter AOL v. 
APTC), determined that before enforcing Nam Tai’s subpoena it 
was required to “determine whether comity should be granted to 
the California court’s Order and, if not, whether the subpoena 
should nevertheless be enforced in light of the merits of Nam 
Tai’s underlying California law-based claims.”  Having 
determined that it could not address either issue “without 
further guidance from the California court,” the trial court 
entered a protective order barring the discovery until it had 
received and reviewed “guidance from the California court . . . 
with respect to the procedural and substantive law applicable to 
the California court’s Order.” 
Responding to the trial court’s request for guidance, the 
California court made the following findings in an order dated 
                     
5 Subsequent to the proceedings in the trial court, the 
General Assembly enacted Code § 8.01-407.1, which, effective 
July 1, 2002, set procedures governing the right of an anonymous 
Internet user to receive notice of discovery directed at seeking 
his identity and providing the method for the user to oppose 
that discovery.  Neither party asserts that this statute impacts 
the issues raised in this appeal. 
 
7
June 22, 2001 clarifying the commission for out-of-state 
discovery: 
1. That Nam Tai has alleged sufficient facts in its 
complaint, under California law, for libel, trade 
libel and for injunctive relief under California 
Business and Professions Code Section 17200, such 
that Nam Tai is entitled under California law to 
conduct discovery to identify the anonymous 
defendant in this matter notwithstanding the First 
Amendment privacy concerns raised in AOL’s motion 
to quash. 
 
2. That, under the facts and circumstances of this 
case, the First Amendment privacy concerns of the 
anonymous defendant are outweighed by the State of 
California’s interest in the ability of its 
litigants to conduct out-of-state discovery. 
 
3. This Court reaffirms its March 15, 2001, Order for 
the issuance of a commission for out-of-state 
discovery notwithstanding the concerns raised in 
AOL’s motion to quash related to the First 
Amendment privacy rights of the anonymous defendant 
and the sufficiency of the allegations in Nam Tai’s 
complaint. 
 
In making these findings, the California court apparently 
reviewed the briefs and arguments made in the trial court as 
previously recited herein.  Accordingly, the California court 
was aware of, and may have considered, the content of the June 
3, 1999 message, although the content of that message and 
allegations related to it had not been included in Nam Tai’s 
complaint. 
Following a subsequent teleconference, during which the 
parties stated arguments that essentially parallel the positions 
asserted in this appeal, the trial court issued an opinion 
 
8
letter dated August 7, 2001.  Applying the standards enunciated 
in AOL v. APTC, the trial court first concluded that “[n]either 
of the defamation claims would withstand demurrer if filed in 
Virginia.”  Thus, the trial court concluded that comity did not 
require enforcement of the subpoena as to those claims because 
“it would facilitate process not otherwise available to 
litigants in the Commonwealth.”  In reaching this conclusion, 
the trial court focused solely on the January 8, 2001 message 
and did not consider the alleged defamatory content of the June 
3, 1999 message. 
The trial court determined, however, that the statutory 
unfair business practices claim stated in the California 
complaint “is not offensive to the public policy of Virginia and 
states a claim predicated upon an alleged malicious interference 
with the operation of [Nam Tai’s] business.”  Relying on Chaves 
v. Johnson, 230 Va. 112, 122, 335 S.E.2d 97, 103 (1985), the 
trial court concluded that the First Amendment concerns 
expressed by AOL were not applicable to this claim.  Based upon 
this reasoning, in an order dated September 11, 2001, the trial 
court denied AOL’s motion to quash, lifted the protective order 
previously entered, and directed AOL to comply with the subpoena 
duces tecum.  We awarded AOL this appeal and accepted 
assignments of cross-error raised by Nam Tai. 
 
9
DISCUSSION 
“We review the trial court’s refusal to quash the issuance 
of a subpoena duces tecum . . . under an abuse of discretion 
standard.”  AOL v. APTC, 261 Va. at 359, 542 S.E.2d at 382; see 
also O’Brian v. Langley School, 256 Va. 547, 552, 507 S.E.2d 
363, 366 (1998). 
The issues of comity central to this appeal arise from the 
trial court’s application of the UFDA.  Relevant to those 
issues, Code § 8.01-411 provides that: 
Whenever any mandate, writ or commission is 
issued out of any court of record in any other state 
. . . witnesses may be compelled to appear and testify 
and to produce and permit inspection or copying of 
documents in the same manner and by the same process 
and proceeding as may be employed for the purpose of 
taking testimony or producing documents in proceedings 
pending in this Commonwealth. 
 
Code § 8.01-412 requires that “[t]he privilege extended to 
persons in other states by § 8.01-411 shall only apply to those 
states which extended the same privilege to persons in this 
Commonwealth.”  Although California has repealed its version of 
the UFDA, it has enacted California Code of Civil Procedure 
Section 2029, which provides for the same privileges to out-of-
state parties as does the UFDA.  Accordingly, we hold that 
California is a reciprocal state for purposes of applying the 
UFDA in Virginia to a commission for out-of-state discovery from 
a court of that state.  See Smith v. Givens, 223 Va. 455, 460, 
 
10
290 S.E.2d 844, 847 (1982) (recognizing UFDA reciprocal status 
of Indiana based upon equivalent process available under Indiana 
Trial Procedure Rule 28(E)). 
In AOL v. APTC, we recognized “the importance of comity as 
a guiding principle in the relationship between sovereigns and 
as a tool of judicial economy.”  261 Va. at 361, 542 S.E.2d at 
383.  Nonetheless, comity has its limitations and will not be 
“given effect when to do so would prejudice [Virginia’s] own 
rights or the rights of its citizens.”  McFarland v. McFarland, 
179 Va. 418, 430, 19 S.E.2d 77, 83 (1942). 
Drawing on our prior case law examining questions of 
comity, we have stated the principles that must be considered by 
the trial court before affording comity to an order of a foreign 
court.  First, the foreign court must have personal and subject 
matter jurisdiction to enforce its order within its own 
judicatory domain.  Second, the procedural and substantive law 
applied by the foreign court must be reasonably comparable to 
that of Virginia.  Third, the foreign court’s order must not 
have been falsely or fraudulently obtained.  And, fourth, 
enforcement of the foreign court’s order must not be contrary to 
the public policy of Virginia, or prejudice the rights of 
Virginia or her citizens.  See AOL v. APTC, 261 Va. at 361, 542 
S.E.2d at 383, and cases cited therein.  Guided by these 
principles in the present case, we will address seriatim each of 
 
11
the “numerous deficiencies” in the California court’s commission 
alleged by AOL. 
Initially, we note that AOL does not contest the subject 
matter jurisdiction of the California court over the claims 
asserted in Nam Tai’s lawsuit.  Rather, AOL first contends that 
the California court did not have “jurisdiction over any party 
other than Nam Tai itself.”  Nam Tai responds that California 
law permits the filing of a “John Doe” lawsuit against an 
unknown defendant pending discovery of the defendant’s identity 
and the appropriate amendment of the pleading.6  See California 
Code of Civil Procedure Section 474. 
In AOL v. APTC, we observed that where, as here, an action 
is filed against unknown parties, “it is uncertain whether 
personal jurisdiction may be obtained over any of the anonymous 
defendants.”  261 Va. at 361, 542 Va. at 383.  We recognize, 
however, that it is not uncommon for a plaintiff to use the 
“John Doe” pleading style to initiate a lawsuit against a 
defendant whose identity is unknown at the time the lawsuit is 
                     
6 Nam Tai also asserts that AOL did not raise this specific 
argument in the trial court and, thus, it should not be 
considered for the first time on appeal.  Rule 5:25.  However, 
for purposes of this appeal, we will assume, without deciding, 
that AOL’s arguments in the trial court opposing the subpoena 
duces tecum were sufficiently broad to challenge the trial 
court’s entire analysis of the request for comity.  
 
12
filed for the purpose of subsequently using discovery to learn 
the identity of the defendant so that proper service of process 
on the defendant can be obtained.  See Code § 8.01-290.  
Accordingly, for the purpose of determining whether to afford 
comity to the California court’s commission, we need not be 
concerned with whether that court will ultimately be able to 
exercise personal jurisdiction over the unidentified defendant 
in this case.7  Rather, because the procedural requirements for 
maintaining suits against unknown defendants in California are 
reasonably comparable to those in Virginia in the context of the 
present case, we hold that comity is not barred on that ground.8
                     
7 AOL notes on brief that in Nam Tai Electronics, Inc. v. 
Titzer, the California Court of Appeals has ruled that personal 
jurisdiction could not be had over an out-of-state defendant, 
originally named as a “John Doe,” where that defendant lacked 
sufficient contacts with California.  113 Cal. Rptr. 2d 769, 
774-76 (Cal. Ct. App. 2001).  Because the identity of “scovey2” 
has not been clearly established and no factual determinations 
concerning his contacts with California have been made, it is 
not possible to determine at this time whether the rationale of 
Titzer would be applicable to the present case. 
 
8 AOL also contends that the California court lacks personal 
jurisdiction over AOL.  However, we need not consider whether 
California’s long-arm statute would permit it to exercise 
jurisdiction over AOL on the facts of this case for the obvious 
reason that AOL is not being subjected to the personal 
jurisdiction of the California court, but to that of the trial 
court under the UFDA.  Indeed, it is self-evident that the UFDA 
and its equivalent in California exist principally to permit the 
courts of foreign jurisdictions, through comity, to extend the 
 
 
13
AOL next contends that the ex parte proceedings in the 
California court resulted in “a superficial or abstract 
judgment” that “was not the product of a full-fledged, 
adversarial consideration of the First Amendment issues at the 
core of this matter.”  Thus, AOL asserts that “[t]hese are 
plainly not the circumstances in which a Virginia court should 
defer to the findings of a foreign court.”  AOL does not contend 
that the California court’s commission was obtained falsely or 
fraudulently, but only that, due to the ex parte nature of the 
proceedings, “there is no indication that the California court 
devoted any substantive attention” to the issues. 
Unlike AOL v. APTC, where no clarifying order was requested 
by the Virginia trial court, 261 Va. at 356, 542 S.E.2d at 381, 
the record here supports the conclusion that, upon application 
for the clarifying order, the California court undertook a 
review of the record developed in Virginia and issued its order 
thereon after reasoned consideration of the First Amendment 
issues asserted by AOL in its pleadings filed in the trial 
court.  Moreover, it is clear that the trial court did not 
arbitrarily defer to the California court, as AOL implies, but 
                                                                  
reach of their discovery proceedings to third parties not 
immediately within their jurisdiction. 
 
 
14
undertook its own analysis of the issues with respect to their 
viability under the law of Virginia, and in doing so gave proper 
consideration to the adversarial proceedings before it.  Under 
these circumstances, we find no abuse of discretion by the trial 
court in accepting those elements of the California court’s 
clarifying order which supported the ultimate determination to 
grant comity based on one of the three claims approved by the 
California court. 
AOL next contends that the California court did not 
properly apply the substantive law of California in ruling that 
First Amendment concerns did not apply to the alleged violation 
of California Business and Professions Code Section 17200.  AOL 
premises its contention that the California court misapplied 
California law by citing a series of cases beginning with Blatty 
v. New York Times Co., 728 P.2d 1177 (Cal. 1986), where the 
state and federal courts in California have rejected attempts to 
bring non-defamation tort actions where the “gravamen [of the 
underlying action] is the alleged injurious falsehood of a 
statement,” and, where the statement in question qualified as 
protected speech under the First Amendment.  Id. at 1180. 
It is not, however, the role of the Virginia courts when 
asked to afford comity to an order of a court of a foreign 
jurisdiction to act as surrogates for the appellate courts of 
that jurisdiction.  We presume that the foreign court is in a 
 
15
better position than the Virginia courts to determine the 
substantive law of its jurisdiction and, thus, afford a high 
degree of deference to its judgment in such matters.  Such 
deference is particularly appropriate where, as here, the 
foreign court enters a clarifying order specifically addressing 
the substantive law of its judicatory domain upon which the 
proceedings there are premised.  The determination whether to 
grant comity to such an order is not a matter of the ultimate 
viability of the underlying claim in the foreign jurisdiction 
but, rather, whether the substantive law of the foreign 
jurisdiction as addressed and expressed by the foreign court in 
its clarifying order is “in terms of moral standards, societal 
values, personal rights, and public policy . . . reasonably 
comparable to that of Virginia.”9  Oehl v. Oehl, 221 Va. 618, 
623, 272 S.E.2d 441, 444 (1980). 
Finally, AOL contends that the trial court erred in 
determining that the law applied by the California court with 
                     
9 We do not mean to suggest, however, that deference should 
be given to the judgment of a foreign court that is plainly 
wrong.  Because the scope of California’s unfair business 
practices statutes is broad and the authority for a California 
trial court to determine whether a cause of action falls within 
its scope is equally broad, Kasky v. Nike, Inc., 45 P.3d 243, 
249 (Cal. 2002), we cannot say that the California court in the 
present case was plainly wrong in determining that Nam Tai had 
stated a cause of action pursuant to that statutory scheme. 
 
16
respect to Nam Tai’s statutory unfair business practices claim 
is reasonably comparable to the law of Virginia.  AOL premises 
this contention upon the assertion that the trial court’s 
reliance on Chaves was misplaced.  AOL specifically asserts that 
Chaves has been called into question by the United States 
Supreme Court’s holding in Hustler Magazine, Inc. v. Falwell, 
485 U.S. 46, 56 (1988), that First Amendment protections apply 
even though a suit alleging an injurious publication is filed 
under a theory of intentional infliction of emotional distress 
rather than defamation. 
In Chaves, we stated that: 
The tort complained of here is an intentional 
wrong to the property rights of another, accomplished 
by words, not defamatory in themselves, but employed 
in pursuance of a scheme designed wrongfully to enrich 
the speaker at the expense of the victim.  The law 
provides a remedy in such cases, and the 
constitutional guarantees of free speech afford no 
more protection to the speaker than they do to any 
other tortfeasor who employs words to commit a 
criminal or a civil wrong. 
 
230 Va. at 122, 335 S.E.2d at 103. 
Unquestionably, since the Hustler Magazine decision, some 
courts have sustained challenges to tort litigation on the 
ground that the plaintiff was seeking to “avoid the protection 
afforded by the Constitution . . . merely by the use of creative 
pleading.”  Beverly Hills Foodland, Inc. v. United Food & 
Commercial Workers Union, 39 F.3d 191, 196 (8th Cir. 1994) 
 
17
(claim that union tortiously interfered with employer’s right to 
contract was subject to First Amendment considerations).  
However, in Maximus, Inc. v. Lockheed Information Management 
Systems Co., 254 Va. 408, 412, 493 S.E.2d 375, 377 (1997), a 
decision rendered after Hustler Magazine, we acknowledged “the 
similarity . . . [of] the defamation law construct to business 
torts” noted in Chaves, but declined to extend First Amendment 
protections to a tortious interference with a contract 
expectancy cause of action. 
The First Amendment concerns applicable to the law of 
California considered by the California court in this case are 
the same concerns applicable to the law of Virginia.  Those 
concerns remain to be ultimately determined in the California 
courts rather than in the Virginia courts.  Given that the 
holding in the Maximus case clearly supports the proposition 
that Chaves is sound precedent, we cannot say that the trial 
court erred in determining that Nam Tai’s statutory cause of 
action for unfair business practices under California law is 
reasonably comparable to the law of Virginia and is not 
repugnant to the public policy of Virginia.  Accordingly, we 
hold that the trial court did not abuse its discretion in 
concluding that the California court’s commission for out-of-
state discovery was entitled to comity and, thus, properly 
 
18
denied AOL’s motion to quash the subpoena duces tecum issued in 
support of that commission. 
CONCLUSION 
For these reasons, we will affirm the judgment of the trial 
court enforcing the California court’s commission for discovery 
of AOL’s records regarding “scovey2.”10
Affirmed. 
                     
10 Having resolved the issues raised by AOL in favor of Nam 
Tai, we need not consider the assignments of cross-error raised 
by Nam Tai in this appeal. 
 
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