Our last blog entry discussed the First Amendment shield that covers current and former employees who use anonymous or pseudonymous Internet postings to trash their employers. Today’s cautionary tale highlights the practical challenges employers face in court even when a current or former employee posts confidential records on the Web in violation of confidentiality agreements and laws.

Bank Julius Baer & Co., a Cayman Island subsidiary of a Swiss bank, fired a disgruntled vice president. On her way out, she took confidential documents she believed show that her former employer engaged in unlawful conduct. The next day, she posted those documents on a public website devoted to leaking confidential documents.

Instead of pursuing the disgruntled vice president, the Bank filed a lawsuit seeking to enjoin the leaking website, Wikileaks.org, and its domain name registrar, Dynadot. The Wikileaks website enables users to anonymously publish submissions, including alleged confidential corporate and government documents. The site aims to be an “untraceable version of Wikipedia for untraceable mass document leaking and analysis.” The site runs on modified MediaWiki software, similar to the software that runs Wikipedia.

Dynadot, a small company not interested in a protracted legal battle, stipulated to a permanent injunction that required it to shut down the website instead of fighting the Bank. Judge Jeffrey White of the federal district court in San Francisco signed the stipulated permanent injunction. The Bank dismissed its lawsuit against Dynadot with prejudice, and Dynadot shut down the website. The Bank appeared to have silenced its disgruntled vice-president, quickly, quietly and at minimal cost.

But the next day, Wikileaks was up and running through multiple mirror sites. Mirror sites use a similar domain name that is registered through a different domain name registrar. Wikileaks, for example, also used the domain name Wikileaks.cx through a domain registrar in the Christmas Islands. Wikileaks posted the Bank’s confidential documents on these mirror sites. 

Within the week, the New York Times, while neglecting to mention the agreement between the Bank and Dynadot, reported that Judge White’s approval of the stipulated permanent injunction “present[ed] a major test of First Amendment rights.” Also failing to mention the agreement between the parties, blogs buzzed about apparent constitutional violations. 

Not long after publication of the Times article, heavy hitters such as the ACLU, Project on Government Oversight, and the Electronic Frontier Foundation, came out with statements against the Bank. In response to their court papers, Judge White abnegated the agreement the Bank had negotiated with Dynadot, dissolved the permanent injunction, denied the Bank's request for a restraining order, noted the injunction may involve impermissible prior restraints, pondered whether an injunction would serve any purpose and questioned whether the Court had subject matter jurisdiction to hear the dispute. In the meantime, the Wikileaks site, complete with the Bank's stolen documents, is still up and running. On March 5, 2008, the Bank voluntarily dismissed its lawsuit, apparently concluding that litigation was no longer worth the cost.

Employers should view the Bank’s experience as a cautionary tale. What started as a quick agreement and apparent resolution literally, as the saying goes, ended up on the front page of the New York Times. The case also shows how quickly journalists will publicize a story that can be portrayed as “an attack on the First Amendment.” Sometimes filing suit is not the best way for an employer to protect its interest.