Imagine large corporations, and possibly the government, taking on bloggers and individuals who like to share their passion for a topic by writing articles or posting comments in forums. Imagine these same corporations telling you that you can't express your opinion because you are placing an unwanted spotlight on a certain company or situation. This is exactly what is happening in the ML-implode lawsuit.

Lawsuit Summary

• In response to a posting on Ml-implode.com (which was later removed the same day), Loan Center of California (LLC) filed a lawsuit against the website in May
• LLC alleges that Washington Mutual and Credit Suisse withdrew $4 million in funding as a result of the posting on Ml-implode.com
• LLC is seeking an unspecified sum in excess of $50,000
• The suit is a blatant attempt to silence Ml-Implode.com using the legal system, and poses a direct threat to the freedom of speech of bloggers and other online scribes

What is The Mortgage Lender Implode-O-Meter?

If you aren't familiar with The Mortgage Lender Implode-O-Meter, here is a little background:

Ml-implode.com was started by Aaron Krowne in December of 2006. Since that time, the site has kept track and posted information about mortgage lenders who are going bust, a.k.a. imploding.

The site has had millions of visitors, has been cited on Bloomberg, CNBC, Wall Street Journal, and eFinanceDirectory.com, and has publicized the implosion of 109 major U.S. lenders to date.

To learn more about The Mortgage Lender Implode-O-Meter, check out our exclusive housing finance breakdown interview with Ml-Implode.com's Aaron Krowne.

The Lawsuit

In May, Loan Center of California (LLC) filed a lawsuit against Ml-implode.com (Aaron Krowne and Krowne Concepts, Inc.) alleging that a post on Ml-implode.com resulted in a loss of funding from Washington Mutual and Credit Suisse.

Strangely enough, the post was merely an anonymous email that indicated LLC was having trouble with their business model. After confirming that LLC was indeed having trouble-in a mainstream media article, LCC CEO Eduardo Blanche himself said the company was having difficulty selling loans on the secondary market--Ml-implode.com posted the email on their website.

LLC claims that WaMu and Credit Suisse withdrew funding as a result, and demanded that the post be removed immediately. Ml-implode.com responded by asking LLC to provide a statement that could be released to the public to dispel claims against the lender.

LLC of course refused, and decided to file a lawsuit instead, requesting an unspecified amount in excess of $50,000 as compensation for alleged injuries to their business.

A motion to strike the suit was then filed by Ml-implode.com under California's Anti-SLAPP (Strategic Litigation Against Public Participation) statute. This statute protects small businesses from corporations who seek to use the legal system to silence discussions that are matters of public concern. While small businesses are supposed to be protected under the First Amendment, such lawsuits are enough to financially devastate a business.

Under California's Anti-SLAPP statute, an outright dismissal of LLC's suit is called for. Unfortunately, Judge Franklin R. Taft made the decision to issue a tentative denial of Ml-implode.com's motion for strike.

According to the judge, the posting did concern a public issue, but is not protected under the Federal Communications Decency Act as it was not an exact republication of a third party email and supposedly contained statements by the defendant.

Aaron Krowne of Ml-implode.com referred to the ruling as 'disappointing' and 'puzzling'-two words that sum up the situation up perfectly.

A Final Note

We believe that lenders with reckless lending practices should take responsibility for their actions rather than offloading blame onto independent websites.

What this lawsuit shows us is that any blog or website with an opinion could be at risk of becoming a scapegoat. If you have your own website or blog, and feel like this couldn't happen to you because you have a well-worded disclaimer somewhere on your site, think again. Since their inception, Ml-implode.com has had several disclaimers posted in multiple locations around their website. The disclaimers vary in wording, but basically all say the same thing:

We are a public forum, information on the site is provisional, and all readers are urged to verify information found on the site.

Unfortunately, the disclaimers were not enough to stop Loan Center of California's nefarious attempt to drain the limited resources of a valuable web resource. They were also not enough to convince the judge in this case to dismiss the suit under the Anti-SLAPP statute.

And the scary thing is that the same thing could happen to you and every blogger you know.

After all, the lawsuit against Ml-implode.com isn't about mortgages; it is about freedom of speech. If LLC wins, it opens the door for other lawsuits that are meant to stifle the whistleblower. You can bet everything that you hold dear that other corporations will be quick to follow suit. And unless an online scribe has the unlimited funds necessary to fight off a corporation in a lengthy legal battle, that aforementioned scribe will be silenced.

We at eFinanceDirectory.com strongly believe in the right to freedom of speech. We urge you to show your support for this right by passing on the word, and if you can afford it, donating to Ml-Implode.com's cause. Remember, their cause is everyone's cause.