Farallon wins internet defamation suit

Justice was a long time coming, but for Farallon Mining (FAN-T) it was well worth the wait.

A decision from the Supreme Court of British Columbia sided with the company in its defamation suit against Robert Butler and a John Doe, and in doing so, the company has cleared its name and set a precedent for what is and isn’t acceptable for investors to post on stock message boards.

The two defendants were accused of posting a rash of negative comments back in the early part of the decade regarding Farallon’s ownership claims on the Campo Morado property in Mexico.

At the time, Vancouver-based Farallon was itself being sued by David Hermiston, who argued that the Campo Morado claims belonged to him.

Butler, and another unidentified individual, jumped into the fray by posting comments — most visibly on Stockhouse.com — that accused Farallon management of being crooks that stole the Campo Morado claims.

The courts have since ruled against Hermiston’s claims, and Campo Morado now sits firmly in Farallon’s possession.

But simply proving the legitimacy of its ownership of the property was not enough for Farallon.

Company president and chief executive, Dick Whittington, says it was important to stand up against unsubstantiated comments that can stain the reputation of a company.

“We felt it was in our shareholders’ interest to have it clarified that any one that follows this course of action in the future can expect severe damages to come their way,” Whittington says.

The B.C. court ruling orders Butler to pay a total of $425,000, which is to be divided amongst Farallon, Farallon’s chairman Ronald Thiessen and Hunter Dickinson, and also places a permanent injunction on the defendants from publishing any further defamatory remarks.

For Whittington the punishment was appropriate.

“It sends a strong message and it will hopefully help other companies put an end to people who make gross and unsubstantiated claims against them,” he says.

And while justice seems to have been served, Farallon had to engage in a lengthy and involved process to see things through. It initially filed the suit in 2004 and has only achieved resolution six years later.

The long length of time was chalked up not only to the regular legal process, but also to some particulars of the case.

Most importantly, the company had to identify just who was posting the libellous remarks as the individuals were posting under the nicknames “BTaffy” and “mirash1.”

Whittington said Stockhouse.com was completely onside with the company once it was directed to the postings. Stockhouse agreed that the comments were unsubstantiated and libellous and removed them.

After that, once the proper legal requirements were met, Stockhouse also helped track the IP addresses which eventually led to the discovery of Robert Butler.

The other poster, “mirash1” has not been identified.

Butler himself did not appear in court — a fact, which begs the question as to whether Farallon will be able to collect on its damages.

“We don’t know where (Butler) is,” Whittington says, “But we will follow up on this as persistently and patiently as we did with the case itself. We’ve made a commitment to our shareholders at various conferences over the years on this issue and we will follow through.”

And while Whittington says the defamatory claims had little effect on the company’s large-scale and institutional investors, he wasn’t so sure about the others.

“Retail and individual investors don’t always have the time to delve into things as deeply as institutions do, so they can be influenced by things they read in various domains,” Whittington says. “In the sense that this now clarifies that what happened was inappropriate it will give comfort to people that we’ve always shot straight.”

In Toronto on April 22 — the day news of the court decision was released — Farallon’s shares were up a penny to 59¢ on 844,000 shares traded.