America Online, Inc. v. Nam Tai Electronics, Inc.

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) address 3 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.

19