The libel claim against eBay was initiated after Tim Neeley, who sells Hollywood memorabilia on the site, posted on eBay a feedback comment about Grace, who purchased several items from the seller: “Complaint: SHOULD BE BANNED FROM EBAY!!!! DISHONEST ALL THE WAY!!!!”
Grace, publisher of the Los Angeles Bulletin and the Metropolitan News-Enterprise, notified eBay that the seller’s comments were defamatory, but eBay refused to remove them.
Grace sued eBay and the seller, alleging counts against eBay for libel, specific performance of eBay’s user agreement with the seller, and violation of the unfair competition law. Grace withdrew the second count after eBay removed the challenged comments from its website.
Earlier this year, a state appeals court dismissed eBay from the suit. Grace appealed. In taking the case, the high court will likely decide whether Internet businesses can be held liable for defamatory website postings.