Circuit Court Affirms That Charter School Operator Must Comply with FOIA

A scandal ridden Chicago charter school operator must produce documents under the Illinois Freedom of Information Act (the “FOIA”).  The Circuit Court of Cook County ruled against UNO Charter School Network, Inc. (“UCSN”) and United Neighborhood Organization of Chicago (“UNO”), the private company that UCSN hired to manage its charter schools, and in favor of Chicago Sun-Times news reporter Dan Mihalopoulos, represented by FVLD.

The Chicago Sun-Times had published a series of investigative reports revealing politically connected UNO’s misuse of state funds to construct and manage local charter schools under a grant of $98 million awarded by the Illinois Department of Commerce and Economic Opportunity (“DCEO”) for charter school development.  The Chicago Sun-Times reporting led the President of UCSN and UNO to resign from both Boards and triggered an investigation by the United States Securities and Exchange Commission, which ultimately charged both organizations with misleading investors by concealing conflicts of interest.

UCSN had denied having responsive documents in its possession while UNO contended that it was a “private entity” beyond the FOIA’s reach.  The Attorney General’s Public Access Counselor disagreed, however, and issued a binding opinion that both entities are subject to the FOIA. Among other factors, the Attorney General found that UCSN’s delegations of responsibility to UNO under their management services agreement encompassed “virtually all of the governance of the charter school” and that records concerning “the use of public funds to design and build charter schools are public records” subject to the FOIA.

UCSN sued for administrative review but the court found that financial experts and even the DCEO had treated UCSN and UNO as a single entity, further noting that both entities had common Boards, offices, and record-keeping systems.  The decision, which favors transparency and accountability where local government delegate functions to private entities, should facilitate the public’s oversight of charter school operators.

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Litigation Regarding the Late Robin Williams’ Estate Highlights the Importance of Specificity in Estate Planning

Actor Robin Williams’ sudden death on August 11, 2014 shocked the world and left his family heartbroken.  Yet even heartbroken families may dispute a latent ambiguity in an estate plan when the stakes are high enough.  Williams left an estate of approximately $45 million to be divided among his heirs, who include his third wife, Susan Schneider Williams, and Williams’ three adult children from his two previous marriages.

Currently, Susan and the Williams children are embroiled in a legal battle over the interpretation of the several provisions of the Robin Williams Trust that have become equivocal in context.  In his Trust, Williams provided that his children are to receive all of his “clothing, jewelry, personal photos taken prior to his marriage to Susan” and his “memorabilia and awards in the entertainment industry.”  The Trust provides that Susan will be allowed to reside in the marital home in Tiburon, California for the rest of her life, and should receive the furniture, furnishings, some of the contents of the home, and a trust to pay for all expenses of the residence.  Seemingly clear directives, however, were muddied in this particular context by Williams’ penchant for storing his collections of Japanese anime figurines, watches, bicycles, books, coins, and other effects in the Tiburon home.

Although ordinarily interpretation of a trust would be handled by the trustee, Susan allegedly felt compelled to seek court intervention when the trustee requested access to the Tiburon house.  Susan believes that “memorabilia” should include only items related to Williams’ acting career, and that “memorabilia,” “clothing,” and “jewelry” should automatically exclude all items in the Tiburon house.  Her attorneys claim that “any other interpretation would lead to Mrs. Williams’ home being stripped while Mrs. Williams still lives there.” Viewing “memorabilia” as distinct from “awards in the entertainment industry” the Williams children claim that Williams’ collections in the Tiburon home qualify as “memorabilia” given to them under the terms of the Robin Williams Trust.  In their mind, Susan is trying to ignore the “plain language of his will and trust” after being married to the actor for “less than three years.”  Unfortunately, despite Williams’ efforts to create a clear estate plan, this decision will now be left to the courts.

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The New Miami Vice

Slate reports on a recent appellate case from Florida holding that the state’s anti-teen sexting statute is unworkable on its face.   Apparently, the law makes a teen’s first sexting offense a civil offense, but juveniles cannot be prosecuted for civil offenses under Florida law.  That means there can be no second-time offenders who, theoretically, would be prosecutable for criminal offenses and subject to harsher penalties.  Florida teens, of course, should still be careful to avoid sexting in the state’s already lawless movie theaters.

Illinois’ own anti-sexting law took effect in 2011 and, among other provisions, permits adjudication of teens who sext as minors in need of supervision.  Sexters may be subject to prosecution for other crimes in addition to violations of state anti-sexting statutes.

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The Tao of the Internet: FCC and FTC Getting Aggressive

Two federal government agencies issued consumer protection warnings last week in connection with trending Internet practices.  While the Federal Communications Commission (FCC) sought to facilitate personal connectivity, the Federal Trade Commission (FTC) expressed concerns over the risks of consumers meshing too deeply with the Internet.

First, the FCC issued an Enforcement Advisory stating that businesses cannot block consumers from using their own personal Wi-Fi hot spots on the businesses’ premises in order to force consumers to pay for Wi-Fi services.  The FCC noted that this was a “disturbing trend” and warned that it will be “protecting consumers by aggressively investigating and acting against such unlawful intentional interference.”

In October 2014, the FCC had investigated the Marriott for blocking hotel guests’ personal Wi-Fi hot spots.  Marriott eventually agreed to pay a $600,000 penalty to settle the case.  Although Marriott paid the fine, it subsequently petitioned the FCC to change its policy, arguing that Wi-Fi blocking was necessary to protect the reliability and security of its own networks.

The FCC’s new Enforcement Advisory rejects Marriott’s argument: “No hotel, convention center, or other commercial establishment or the network operator providing services at such establishments may intentionally block or disrupt personal Wi-Fi hot spots on such premises, including as part of an effort to force consumers to purchase access to the property owner’s Wi-Fi network.  Such action is illegal and violations could lead to the assessment of substantial monetary penalties.”

Second, the FTC released a report on the Internet of Things (IoT), which emphasizes protections for consumer privacy and security.  IoT is the ability of everyday objects to connect to the Internet and to send and receive data, e.g., Internet-connected cameras, health or fitness monitor bracelets, home security devices, connected cars, and home automation systems.  The FTC warned that IoT raises numerous risks, such as the unauthorized access and misuse of personal information, attacks on other systems, and risks to personal safety.

The detailed report outlines the FTC’s recommended best practices, including that companies should build security into devices at the outset by conducting a privacy or security risk assessment, minimizing the data they collect and retain, and testing security measures before launching their products.  The FTC also recommended that companies examine their data practices and business needs to develop policies and practices that impose reasonable limits on the collection of consumer data or obtain consumers’ consent for collecting additional categories of data.

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Small BREW Act – Potential Tax Breaks for Craft Breweries

Craft breweries have enjoyed growth in popularity in America over recent years, and Chicago features some of the finest.  Too often the very existence of craft breweries does not depend on quality hops and barley, rather it depends on whether a particular brewery can generate sufficient revenue to pay high federal excise taxes.

On January 8, 2015, Congressmen Erik Paulsen (MN-03) and Richard Neal (MA-01) re-introduced bipartisan legislation to reduce the tax burden on America’s craft breweries.  The “Small Brewer Reinvestment and Expanding Workforce Act” (Small BREW Act) would impose an excise tax rate of $3.50 per barrel on the first 60,000 barrels (half of the current excise tax) and $16 per barrel on the next 1,940,000 barrels (down a few dollars a barrel).

Glenn Rice, a member of our firm who represents the Illinois Craft Brewers Guild as well as several prominent brewers, tells us:  “Small brewers face significantly greater production costs than multi-national brewing conglomerates due to vast differences in economies of scale.  Passage of the Small BREW Act will both level the playing field for small craft brewers and enable them to add jobs and grow their businesses.”

Only time will tell whether the Small BREW Act gains traction in Congress.

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Court Finds Plausible Retaliation Claim For Support of Coworker [Plug or Perish]

As reported by the Chicago Daily Law Bulletin, Judge Edmond Chang of the Northern District of Illinois denied a defense summary judgment motion in a retaliation and wrongful discharge case brought by a former employee. (Truth in labeling: FVLD represented the successful plaintiff.) The court found that the plaintiff’s support for a co-worker who filed a charge of discrimination against the company constituted protected activity under the Civil Rights Act of 1964 even if the plaintiff did not actively participate in the investigation or formally testify. The court also found that, although 20 months passed between the protected activity and discharge, the “chain of negative job actions” was enough for a jury to conclude that the company retaliated because of protected activity.

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Plug or Perish

FVLD’s January Legal Update discusses significant new laws that will affect both individuals and businesses in Illinois this year.  In short, if your New Year’s Resolutions for 2015 included making surreptitious recordings of private conversations and posting revenge porn online, it looks like you may have picked the wrong year.  Click here to read the Update.

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Faculty Bloggers Sue University: Will the Real “Cyberbully” Please Stand Up?

Two professors who contribute to a blog called CSU Faculty Voice sued Chicago State University officials over CSU’s “Cyberbullying Policy,” which prohibits electronic communications that have an “adverse impact on the work environment of a CSU faculty member or employee.”  The bloggers seek an injunction against enforcement of various policies to silence the blog, arguing that enforcement would contravene Supreme Court precedent barring public employers from retaliating against employees for protected speech.  CSU countered that, although it had requested civility, it never stated that it would enforce its policies to stifle protected speech, and that the cease and desist letter it sent the bloggers primarily focused on claims of trademark infringement.

Denying the CSU defendants’ motion to dismiss, the court in Beverly v. Watson found that the faculty bloggers  claim was “ripe” because the University sent them the aforementioned letter demanding they take down the blog due to violations of “the University’s values and policies requiring civility and professionalism.”  Although federal suits seeking “advisory” opinions on hypothetical controversies generally must be dismissed, the court found that CSU’s letter could be read as a threat to enforce the policies against the bloggers and therefore was sufficient to show that there was a live dispute between the parties.

The Court also rejected CSU’s argument that the faculty bloggers did not specify what expressive speech was chilled:  “Here, the general tenor of the speech at issue is not speculative:  the plaintiffs clearly wish to continue to criticize CSU’s administration as they have done in the past.”  Finally, the CSU defendants contended that, because their cease and desist letter mainly threatened trademark claims — based on the blog’s use of CSU’s name and logo — a ruling on the policies would not impair the bloggers’ right to continue blogging.  The court, however, noted that the plaintiffs did not seek trademark-related relief.  Therefore, the trademark issues did not impact the redressability of the First Amendment complaint.  In any case, CSU’s trademark theory would face challenges because the blog used CSU’s marks in a critical context, not a commercial one likely to confuse readers into thinking that CSU endorsed the blog.

Although the Beverly case deals with First Amendment issues unique to public employers, similar policies adopted by private employers may run afoul of the National Labor Relations Act because they could dissuade employees from discussing working conditions.

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Court: Firing Up Doesn’t Send Unemployment Benefits Up in Smoke

With the Compassionate Use of Medical Cannabis Pilot Program Act, Illinois has joined a growing number of states that have legalized marijuana under various circumstances, although no dispensaries are up and running yet in Illinois. (For a comprehensive summary of the Act, please see our December 2013 Legal Update.) While no Illinois court has yet ruled on the new medical marijuana law in the employment context, the Illinois Appellate Court has recently issued a decision on an employee’s off-duty use of marijuana.

In Eastham v. Housing Authority of Jefferson County, the court ruled for an employee who challenged the denial of unemployment insurance benefits after he was fired for violating his employer’s drug- and alcohol-free workplace policy. While working for the Housing Authority of Jefferson County, William Eastham was required to submit to a random drug test pursuant to the Housing Authority’s drug- and alcohol-free workplace policy. Eastham told his supervisor that he had smoked marijuana twice during a recent vacation and that he believed he would fail the drug test. The Housing Authority discharged Eastham for violating its policy before his test results were available. (His drug test came back negative.)

Eastham then filed a claim for unemployment insurance benefits. The Illinois Department of Employment Security denied Eastham’s claim because he had violated his employer’s drug- and alcohol-free workplace policy and “his choice to use the drug represent[ed] willful misconduct.” Under the Illinois Unemployment Insurance Act, an employee discharged for misconduct is ineligible to receive unemployment benefits. The Housing Authority’s policy stated that the “possession, use, consumption or being under the influence of a controlled substance … while in the course of employment of the Housing Authority” violates the terms of employment. Eastham appealed, arguing that the policy should not apply because the phrase “while in the course of employment” should not include his vacation. In response, the Housing Authority argued that its policy was required in order to receive federal funding and must be interpreted to include even time away from work.

Ultimately, the Eastham court disagreed with the Housing Authority, holding, for purposes of contesting unemployment benefits, it was unreasonable for a policy to deem off-duty marijuana use as “misconduct” absent a positive drug test. The Court further found that eligibility for federal funding did not require the discharge of employees for off-duty marijuana use. The court also rejected the argument that Eastham violated the policy by coming to work when he believed that he was under the influence of marijuana, noting that even if Eastham believed there was marijuana in his system, he did not test positive for drugs.

The court emphasized, however, that its decision only addressed whether Eastham’s conduct would amount to “misconduct” that would disqualify him from receiving unemployment insurance benefits. It did not address whether the Housing Authority was entitled to fire Eastham for his admitted marijuana use. The Housing Authority has since asked the Illinois Supreme Court to review the decision.

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President Obama Signs Tax Extender Bill for 2014

Switching from Twitter to taxes, the belated passage of the Tax Increase Prevention Act of 2014 (“TIPA”) retroactively extends a package of “temporary” tax breaks for 2014.  See TIPA generally provides a 1-year extension for over 50 expired or expiring individual, business, and energy provisions.  The following is a summary of key provisions: Continue reading

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2014 Ends a Banner Year for Chicago Real Estate

Sales of downtown Chicago office properties increased by 13 percent above the full-year total for 2013, and the 2014 sales total of $3.68 billion to date is the highest since the 2008 crash.  Low interest rates and comparatively higher prices on both coasts combined with the lowest vacancy rate in five and a half years to push investment towards Chicago.

Several notable sales in the River North area have driven the average price per square foot for downtown office buildings to $302, an all-time high (paywall).  The 60-story tower at 300 N. LaSalle Street set records for total price and price per square foot at $850 million or $652 per square foot.  The 46-story building at 353 N. Clark went for $715 million – the fourth highest sale price and the second highest price per square foot in city history.  Other key sales include our own building located at 55 W. Monroe Street, which sold to a U.S. affiliate of Canadian insurer Manulife Financial for $244 million.

The downtown apartment market also broke records in 2014.  Heitman, a Chicago-based real estate investment management firm, is in the process of acquiring a 504 unit building on Wacker Drive for a record price of $331 million or $661,000 per unit.  After hitting an all-time high of $2.78 per square foot in the second quarter, the net effective rent for Class A downtown apartment buildings fell slightly but is still up 5.1 percent from 2013.

In sum, 2014 office buildings sales are already the third highest in Chicago history, and end-of-year deals could increase the final total to more than $4 billion.  With rising rental rates and construction costs, the increased demand for office buildings likely will continue.

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If Hackers Can Gag Sony, Can Sony Muffle Them?

Following the recent cyber-attack on Sony Pictures Entertainment, numerous media outlets received a threatening letter from David Boies, Sony’s lawyer, demanding that they not republish or otherwise use the hacked Sony documents and destroy any copies that they may have.  The letter warns that Sony “will have no choice but to hold you responsible” if the documents are “used or disseminated … in any manner.”  There is at least an element of consistency in Sony’s decision to capitulate to the hackers by self-censoring its film project while demanding similar deference from the press.

Not only would Sony find it extremely difficult to enjoin the press from reporting on the hacked Sony documents, but it also might not be able to recover monetary damages from leaks reported in the press.  The First Amendment allows the press to publish information that might otherwise be private if it is newsworthy, even when it is obtained unlawfully (or “stolen,” as Boies repeatedly claims).

In Bartnicki v. Vopper, the U.S. Supreme Court held that the First Amendment protects reports about a matter of public concern even if they disclose the contents of illegally obtained communications.  Bartnicki involved a radio station’s broadcast of parts of a private phone conversation discussing a labor dispute, which had been illegally intercepted by a third party.  Vopper, the radio commentator who had received and broadcast the recording, had reason to know that the conversation was unlawfully obtained.  Nevertheless, the Supreme Court found that the subject matter of the conversation was newsworthy, noting that the press had the right to publish information of “great public concern” obtained from documents stolen by a third party.

Moreover, U.S. courts are reluctant to second-guess journalists with respect to what information qualifies as newsworthy and instead defer to the editorial judgment of the press.  Today’s saturated social media environment only amplifies the difficulty in corralling “news” into traditional topics.

The Bartnicki Court did acknowledge, however, that some intrusions on privacy are qualitatively more offensive than others.  Leaks and scoops are a staple of Hollywood reporting but, according to Boies, some of the leaked information includes trade secrets and confidential information about Sony’s employees.  Some, like Aaron Sorkin, have taken a moralistic position that news outlets are “spectacularly dishonorable” for publishing Sony documents.  Others, like Andrew Wallenstein of Variety, have concluded that, despite potential journalistic ethical concerns, the Sony hack cannot be ignored and details should be reported because it is newsworthy.

Sony might have stronger footing for protecting truly private information.  The Seventh Circuit has observed that, despite “the modern Supreme Court’s expansive view of freedom of speech and of the press … the Court has not yet completely extinguished state-law protections … against publication of intimate details of people’s private lives.”  The federal appellate court reiterated that it has recognized a constitutional right to the privacy of medical, sexual, financial, and perhaps other categories of highly personal information.  If, for example, news outlets were to publish social security numbers, a court may find this “highly personal information” is not of “great public concern.” It is less likely that a consensus would form over protecting details of celebrity and film executive compensation.

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Mixed Results in Acquitted Rape Suspect’s Online Defamation Case

Rulings on an attorney’s complaint against online media outlets for reporting on sex charges against him present a mixed bag.  In Huon v. Breaking Media et al., a federal judge in Chicago dismissed the attorney’s claims against Gawker Media, publisher of the blog Jezebel, but allowed some of his claims against the legal blog Above the Law to survive.

The plaintiff attorney was charged in 2008 with sexually assaulting and abusing a woman he met through a craigslist ad purporting to recruit promotional models and he was subsequently accused of cyberstalking and witness harassment.  All charges, however, were disposed of by acquittal or dismissal.

Despite alleged discrepancies in the reports, the court determined that the defendants generally published “fair reports” of the charges and the attorney’s ensuing civil litigation against media and law enforcement.  Most jurisdictions allow the media to summarize public records and proceedings without having to fact check whether allegations made therein are true or false.  Moreover, to allow sufficient First Amendment “breathing space,” the report need only to capture the “gist” or “sting” of the allegations, even if it gets some details incorrect.

Of interest is the court’s ruling that the attorney could not recover for substituting the word “rape” for “sexual assault” because the two terms are interchangeable.  Earlier this year, an Illinois judge dismissed a similar case brought by a Northwestern philosophy professor against the Sun-Times (in the interests of full disclosure, FVLD represented the defendant).  The professor alleged he was defamed when a headline substituted “rape” for “sexual assault” to summarize allegations against him by a student.  The court however, not only found that the words were synonymous but also that the student’s allegations, including that the professor got the underage student intoxicated, refused to return her to campus, groped her in an elevator when she lost consciousness and “sexually assaulted” her in his apartment, amounted to rape in common parlance. The professor has appealed. Continue reading

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Google Maps Case Raises Section 230 Questions

Some courts have begun to question whether Congress could have anticipated the current scope of the Internet in 1996, when it immunized websites from liability for third party content regardless of whether the site makes any effort to monitor the content or ensure its accuracy.  Still, as discussed in FVLD’s recent Legal Update, courts have left the issue in the hands of Congress, leaving plaintiffs brave (or wealthy) enough to challenge Section 230 to seek workarounds.

One such recent lawsuit suggests that businesses concerned about their e-reputations may face problems other than Yelp reviews.  The plaintiff in Serbian Crown, Virginia, Inc. v. Google, Inc. blamed its restaurant’s closing on Google Maps users manipulating its listing, so that Serbs seeking specialties like lion and antelope meat believed the restaurant was closed weekends.  Although doubters may suggest that the restaurant failed because of its narrow niche or because unappetizing reviews prompted readers to venture elsewhere for emu, Serbian Crown had reportedly been in business for decades in an area with little foot traffic prior to the appearance of the erroneous Google Maps listing.  A Wired article about the lawsuit suggests that the allegations are consistent with numerous other instances of competitors sabotaging businesses’ Google Maps listings to gain an advantage.

Serbian Crown brought a negligence claim and a claim for false advertising under the federal Lanham Act.  It contended that Google uses its public listings as a “lead-in for purposes of selling advertising” to businesses, and that Google “knew or should have known” that allowing users to post false information regarding a restaurant’s hours “would pose a substantial danger of economic harm to” Serbian Crown.  Given that Yelp has survived allegations that it manipulated its ratings to reward advertisers at the expense of others, Google’s business motives are unlikely to affect the outcome for Section 230 purposes.

Predictably, Google filed a motion to dismiss the lawsuit, citing Section 230 with respect to the negligence claims and arguing that, among other things, Serbian Crown lacks standing to allege false advertising under the Lanham Act because Google was not Serbian Crown’s competitor.  Perhaps realizing that establishing negligence or even willful disregard by Google will likely not suffice under Section 230, Serbian Crown voluntarily dismissed its negligence claim.  Its response brief, however, correctly noted that the recent Supreme Court case, Lexmark International, Inc. v. Static Control Components, Inc., rejected Google’s argument that false advertising claims under the Lanham Act are only available to direct competitors.

Google’s reply brief apologizes for missing the Lexmark case but argues that Serbian Crown’s claim still must fail because it cannot show that the erroneous listing caused its damages, and because the listing is not actionable “commercial speech” under the federal Lanham Act since it did not advertise a product or service.  Google also argues that Section 230 bars the Lanham Act claim in addition to the negligence claim, although the court could ignore this argument since it was not raised in Google’s initial brief.  Section 230’s immunity does not extend to intellectual property claims, and the Lanham Act is an intellectual property (trademark) statute, but Google argues that Serbian Crown’s purported cause of action did not relate to intellectual property but rather deceptive advertising.

Although Serbian Crown still faces significant obstacles, especially establishing that the listing qualified as an advertisement, it will be interesting to see whether this court or others allow Lexmark to operate as a Section 230 workaround.  Until then, a business’s best option when it comes to Google Maps may be to simply claim its own listing, so that it can take control of the listed address, hours of operation, and so on.   A consultant for Serbian Crown (the owner did not own a computer and had never used Google) eventually tried this, but by that time it was allegedly too late, and the restaurant could not recover.

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New York’s Highest Court Strikes Anti-Cyberbullying Law

The New York Court of Appeals in People v. Marquan M. has struck down a local law that criminalized cyberbullying.  The court agreed with a high school student who had been charged under the law that the law was overbroad and therefore violated the First Amendment.  The student had been charged with cyberbullying after he created a Facebook page to anonymously post photos of his classmates with offensive and graphic sexual comments.

The Albany County law defined cyberbullying as “any act of communicating… by mechanical or electronic means… with no legitimate private, personal, or public purpose, with the intent to harass, annoy, threaten, abuse … or otherwise inflict significant emotional harm on another person.”  Even though the court assumed that the “First Amendment permits the prohibition of cyberbullying directed at children,” the court found that the law was overbroad because it criminalized types of constitutionally protected speech that went far beyond the cyberbullying of children.   The court stated that the law, as written, criminalized “any act of communicating … with no legitimate … purpose … with the intent to harass [or] annoy … another person.”  The court observed that this could include telephone conversations, ham radio transmissions, or even telegrams.  The court further stated that the law could criminalize speech such as an email disclosing private information about a corporation or a telephone conversation meant to annoy an adult. The court concluded that this would violate the First Amendment, which protects annoying and embarrassing speech.

Rather than holding all regulation of cyberbullying unconstitutional, the court found only that the specific Albany County law at issue was poorly written and overbroad.  According to the Cyberbullying Research Center, 20 states currently have cyberbullying laws, with others potentially in the works.  Illinois expanded its school bullying prevention law in 2010 to include communications made electronically (i.e., cyberbullying).  Effective June 26, 2014, the Illinois bullying prevention law also now includes a disclaimer that it is not intended to infringe upon First Amendment rights.  While Illinois’ cyberbullying statute is narrower in scope than the law struck down in Marquan M., another statute more generally regulating “harassment through electronic communications” of both children and adults prohibits, among other things “[m]aking any comment, request, suggestion, or proposal which is obscene with an intent to offend” or “harassing” someone under 13 years of age.  It remains to be seen whether other cyberbullying and e-harassment laws will withstand courts’ scrutiny.

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