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 CUBBY, INC., a Corporation d/b/a Skuttlebut, and Robert G.
Blanchard,
                              Plaintiffs,
                                  v.
 COMPUSERVE INC., d/b/a Rumorville, and Don Fitzpatrick,
individually,
                              Defendants.
                        No. 90 Civ. 6571 (PKL).
                     United States District Court,
                            S.D. New York.
                            Oct. 29, 1991.


Kayser & Jaffe, New York City (Leo Kayser, of counsel), for
plaintiffs.

Jones, Day, Reavis & Pogue, New York City (Leslie Mullady, of
counsel), for defendants.



LEISURE, District Judge

This is a diversity action for libel, business disparagement, and
unfair competition, based on allegedly defamatory statements made
in a publication carried on a computerized database.  Defendant
CompuServe Inc. ("CompuServe") has moved for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure.  For
the reasons stated below, CompuServe's motion is granted in its
entirety.

                              Background

CompuServe develops and provides computer-related products and
services, including CompuServe Information Service ("CIS"), an
on-line general information service or "electronic library" that
subscribers may access from a personal computer or terminal.
Subscribers to CIS pay a membership fee and online time usage fees,
in return for which they have access to the thousands of
information sources available on CIS.  Subscribers may also obtain
access to over 150 special interest "forums," which are comprised
of electronic bulletin boards, interactive online conferences, and
topical databases.

One forum available is the Journalism Forum, which focuses on the
journalism industry.  Cameron Communications, Inc. ("CCI"), which
is independent of CompuServe, has contracted to "manage, review,
create, delete, edit and otherwise control the contents" of the
Journalism Forum "in accordance with editorial and technical
standards and conventions of style as established by CompuServe."
Affidavit of Jim Cameron, sworn to on April 4, 1991 ("Cameron
Aff."), Exhibit A.

One publication available as part of the Journalism Forum is
Rumorville USA ("Rumorville"), a daily newsletter that provides
reports about broadcast journalism and journalists.  Rumorville is
published by Don Fitzpatrick Associates of San Francisco ("DFA"),
which is headed by defendant Don Fitzpatrick.  CompuServe has no
employment, contractual, or other direct relationship with either
DFA or Fitzpatrick;  DFA provides Rumorville to the Journalism
Forum under a contract with CCI.  The contract between CCI and DFA
provides that DFA "accepts total responsibility for the contents"
of Rumorville.  Cameron Aff., Exhibit B.  The contract also
requires CCI to limit access to Rumorville to those CIS subscribers
who have previously made membership arrangements directly with DFA.

CompuServe has no opportunity to review Rumorville's contents
before DFA uploads it into CompuServe's computer banks, from which
it is immediately available to approved CIS subscribers.
CompuServe receives no part of any fees that DFA charges for access
to Rumorville, nor does CompuServe compensate DFA for providing
Rumorville to the Journalism Forum;  the compensation CompuServe
receives for making Rumorville available to its subscribers is the
standard online time usage and membership fees charged to all CIS
subscribers, regardless of the information services they use.
CompuServe maintains that, before this action was filed, it had no
notice of any complaints about the contents of the Rumorville
publication or about DFA.

In 1990, plaintiffs Cubby, Inc. ("Cubby") and Robert Blanchard
("Blanchard") (collectively, "plaintiffs") developed Skuttlebut, a
computer database designed to publish and distribute electronically
news and gossip in the television news and radio industries.
Plaintiffs intended to compete with Rumorville;  subscribers gained
access to Skuttlebut through their personal computers after
completing subscription agreements with plaintiffs.

Plaintiffs claim that, on separate occasions in April 1990,
Rumorville published false and defamatory statements relating to
Skuttlebut and Blanchard, and that CompuServe carried these
statements as part of the Journalism Forum. The allegedly
defamatory remarks included a suggestion that individuals at
Skuttlebut gained access to information first published by
Rumorville "through some back door";  a statement that Blanchard
was "bounced" from his previous employer, WABC;  and a description
of Skuttlebut as a "new start-up scam." Affidavit of Robert G.
Blanchard, sworn to on July 11, 1991 ("Blanchard Aff."), PP 5-9.

Plaintiffs have asserted claims against CompuServe and Fitzpatrick
under New York law for libel of Blanchard, business disparagement
of Skuttlebut, and unfair competition as to Skuttlebut, based
largely upon the allegedly defamatory statements contained in
Rumorville.  CompuServe has moved, pursuant to Fed.R.Civ.P. 56, for
summary judgment on all claims against it.  CompuServe does not
dispute, solely for the purposes of this motion, that the
statements relating to Skuttlebut and Blanchard were defamatory;
rather, it argues that it acted as a distributor, and not a
publisher, of the statements, and cannot be held liable for the
statements because it did not know and had no reason to know of the
statements.  Plaintiffs oppose CompuServe's motion for summary
judgment, claiming that genuine issues of material fact exist and
that little in the way of discovery has been undertaken thus far.

                              Discussion

I. Standard for Summary Judgment

Federal Rule of Civil Procedure 56(c) provides that summary
judgment "shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law."  Fed.R.Civ.P. 56(c);  see also
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552,
91 L.Ed.2d 265 (1986);  Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986).  "Summary
judgment is appropriate if, 'after drawing all reasonable
inferences in favor of the party against whom summary judgment is
sought, no reasonable trier of fact could find in favor of the
non-moving party.' "  United States v. All Right, Title & Interest
in Real Property, 901 F.2d 288, 290 (2d Cir.1990) (quoting Murray
v. National Broadcasting Co., 844 F.2d 988, 992 (2d Cir.), cert.
denied, 488 U.S. 955, 109 S.Ct. 391, 102 L.Ed.2d 380 (1988)).

The substantive law governing the case will identify those facts
that are material, and "[o]nly disputes over facts that might
affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment."  Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91
L.Ed.2d 202 (1986);  Herbert Construction Co. v. Continental
Insurance Co., 931 F.2d 989, 993 (2d Cir.1991).  "[T]he judge's
function is not himself to weigh the evidence and determine the
truth of the matter but to determine whether there does indeed
exist a genuine issue for trial." Anderson, 477 U.S. at 249, 106
S.Ct. at 2511;  see also R.C. Bigelow, Inc. v. Unilever N.V., 867
F.2d 102, 107 (2d Cir.), cert. denied, 493 U.S. 815, 110 S.Ct. 64,
107 L.Ed.2d 31 (1989).  The party seeking summary judgment "bears
the initial responsibility of informing the district court of the
basis for its motion," and identifying which materials "it believes
demonstrate the absence of a genuine issue of material fact."
Celotex, supra, 477 U.S. at 323, 106 S.Ct. at 2553;  see Binder v.
Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir.1991).

Once a motion for summary judgment is properly made, however, the
burden then shifts to the non-moving party, which " 'must set forth
specific facts showing that there is a genuine issue for trial.' "
Anderson, 477 U.S. at 250, 106 S.Ct. at 2511 (quoting Fed.R.Civ.P.
56(e)). "[T]he mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly supported
motion for summary judgment;  the requirement is that there be no
genuine issue of material fact."  Anderson, 477 U.S. at 247-48, 106
S.Ct. at 2509-10 (emphasis in original).  "Conclusory allegations
will not suffice to create a genuine issue.  There must be more
than a 'scintilla of evidence,' and more than 'some metaphysical
doubt as to the material facts.' "  Delaware & Hudson Railway Co.
v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir.1990)
(quoting Anderson, 477 U.S. at 252, 106 S.Ct. at 2512 and
Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S.
574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986));  see also
Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir.1991).  "The non-movant
cannot 'escape summary judgment merely by vaguely asserting the
existence of some unspecified disputed material facts,' or defeat
the motion through 'mere speculation or conjecture.' "  Western
World Insurance Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d
Cir.1990) (quoting Borthwick v. First Georgetown Securities, Inc.,
892 F.2d 178, 181 (2d Cir.1989) and Knight v. U.S. Fire Insurance
Co., 804 F.2d 9, 12 (2d Cir.1986), cert. denied, 480 U.S. 932, 107
S.Ct. 1570, 94 L.Ed.2d 762 (1987)).

II. Libel Claim

A. The Applicable Standard of Liability

Plaintiffs base their libel claim on the allegedly defamatory
statements contained in the Rumorville publication that CompuServe
carried as part of the Journalism Forum.  CompuServe argues that,
based on the undisputed facts, it was a distributor of Rumorville,
as opposed to a publisher of the Rumorville statements.  CompuServe
further contends that, as a distributor of Rumorville, it cannot be
held liable on the libel claim because it neither knew nor had
reason to know of the allegedly defamatory statements.  Plaintiffs,
on the other hand, argue that the Court should conclude that
CompuServe is a publisher of the statements and hold it to a higher
standard of liability.

 Ordinarily, " 'one who repeats or otherwise republishes defamatory
matter is subject to liability as if he had originally published
it.' " Cianci v. New Times Publishing Co., 639 F.2d 54, 61 (2d
Cir.1980) (Friendly, J.) (quoting Restatement (Second) of Torts s
578 (1977)).  With respect to entities such as news vendors, book
stores, and libraries, however, "New York courts have long held
that vendors and distributors of defamatory publications are not
liable if they neither know nor have reason to know of the
defamation."  Lerman v. Chuckleberry Publishing, Inc., 521 F.Supp.
228, 235 (S.D.N.Y.1981);  accord Macaluso v. Mondadori Publishing
Co., 527 F.Supp. 1017, 1019 (E.D.N.Y.1981).

  The requirement that a distributor must have knowledge of the
contents of a publication before liability can be imposed for
distributing that publication is deeply rooted in the First
Amendment, made applicable to the states through the Fourteenth
Amendment.  "[T]he constitutional guarantees of the freedom of
speech and of the press stand in the way of imposing" strict
liability on distributors for the contents of the reading materials
they carry.  Smith v. California, 361 U.S. 147, 152-53, 80 S.Ct.
215, 218-19, 4 L.Ed.2d 205 (1959).  In Smith, the Court struck down
an ordinance that imposed liability on a bookseller for possession
of an obscene book, regardless of whether the bookseller had
knowledge of the book's contents.  The Court reasoned that

 "Every bookseller would be placed under an obligation to make
himself aware
 of the contents of every book in his shop.  It would be altogether
unreasonable
 to demand so near an approach to omniscience."  And the
bookseller's burden
 would become the public's burden, for by restricting him the
public's access to
 reading matter would be restricted.  If the contents of bookshops
and periodical stands were restricted to material of which their
proprietors had made an inspection, they might be depleted indeed.

Id. at 153, 80 S.Ct. at 219 (citation and footnote omitted).
Although Smith involved criminal liability, the First Amendment's
guarantees are no less relevant to the instant action:  "What a
State may not constitutionally bring about by means of a criminal
statute is likewise beyond the reach of its civil law of libel.
The fear of damage awards ... may be markedly more inhibiting than
the fear of prosecution under a criminal statute."  New York Times
Co. v. Sullivan, 376 U.S. 254, 277, 84 S.Ct. 710, 724, 11 L.Ed.2d
686 (1964) (citation omitted).

CompuServe's CIS product is in essence an electronic, for-profit
library that carries a vast number of publications and collects
usage and membership fees from its subscribers in return for access
to the publications.  CompuServe and companies like it are at the
forefront of the information industry revolution.  High technology
has markedly increased the speed with which information is gathered
and processed;  it is now possible for an individual with a
personal computer, modem, and telephone line to have instantaneous
access to thousands of news publications from across the United
States and around the world.  While CompuServe may decline to carry
a given publication altogether, in reality, once it does decide to
carry a publication, it will have little or no editorial control
over that publication's contents.  This is especially so when
CompuServe carries the publication as part of a forum that is
managed by a company unrelated to CompuServe.

With respect to the Rumorville publication, the undisputed facts
are that DFA uploads the text of Rumorville into CompuServe's data
banks and makes it available to approved CIS subscribers
instantaneously. [FN1]  CompuServe has no more editorial control
over such a publication than does a public library, book store, or
newsstand, and it would be no more feasible for CompuServe to
examine every publication it carries for potentially defamatory
statements than it would be for any other distributor to do so.
"First Amendment guarantees have long been recognized as protecting
distributors of publications....  Obviously, the national
distributor of hundreds of periodicals has no duty to monitor each
issue of every periodical it distributes.  Such a rule would be an
impermissible burden on the First Amendment."  Lerman v. Flynt
Distributing Co., 745 F.2d 123, 139 (2d Cir.1984), cert. denied,
471 U.S. 1054, 105 S.Ct. 2114, 85 L.Ed.2d 479 (1985);  see also
Daniel v. Dow Jones & Co., 137 Misc.2d 94, 102, 520 N.Y.S.2d 334,
340 (N.Y.Civ.Ct.1987) (computerized database service "is one of the
modern, technologically interesting, alternative ways the public
may obtain up-to-the-minute news" and "is entitled to the same
protection as more established means of news distribution").

  Technology is rapidly transforming the information industry.  A
computerized database is the functional equivalent of a more
traditional news vendor, and the inconsistent application of a
lower standard of liability to an electronic news distributor such
as CompuServe than that which is applied to a public library, book
store, or newsstand would impose an undue burden on the free flow
of information.  Given the relevant First Amendment considerations,
the appropriate standard of liability to be applied to CompuServe
is whether it knew or had reason to know of the allegedly
defamatory Rumorville statements.

B. CompuServe's Liability as a Distributor CompuServe contends that
it is undisputed that it had neither knowledge nor reason to know
of the allegedly defamatory Rumorville statements, especially given
the large number of publications it carries and the speed with
which DFA uploads Rumorville into its computer banks and makes the
publication available to CIS subscribers.  Affidavit of Eben L.
Kent, sworn to on April 4, 1991 ("Kent Aff."), PP 7-9;  Cameron
Aff., PP 6-7.  The burden is thus shifted to plaintiffs, who "
'must set forth specific facts showing that there is a genuine
issue for trial.' "  Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986) (quoting
Fed.R.Civ.P. 56(e)). Plaintiffs have not set forth anything other
than conclusory allegations as to whether CompuServe knew or had
reason to know of the Rumorville statements, and have failed to
meet their burden on this issue.  Plaintiffs do contend that
CompuServe was informed that persons affiliated with Skuttlebut
might be "hacking" in order to obtain unauthorized access to
Rumorville, but that claim is wholly irrelevant to the issue of
whether CompuServe was put on notice that the Rumorville
publication contained statements accusing the Skuttlebut principals
of engaging in "hacking."

Plaintiffs have not set forth any specific facts showing that there
is a genuine issue as to whether CompuServe knew or had reason to
know of Rumorville's contents.  Because CompuServe, as a news
distributor, may not be held liable if it neither knew nor had
reason to know of the allegedly defamatory Rumorville statements,
summary judgment in favor of CompuServe on the libel claim is
granted.

III. Business Disparagement Claim

Plaintiffs base the claim for business disparagement of Skuttlebut
on statements published in Rumorville in April 1990.  Plaintiffs'
contention is that "defendants made statements intentionally
designed to discourage its [sic] own subscribers and others in the
news business from associating with Skuttlebut, thus disparaging
Skuttlebut's business."  Complaint, P 20.  These statements
include, inter alia, the allegedly defamatory remarks suggesting
that plaintiffs inappropriately accessed information from
Rumorville "through some back door" and describing Skuttlebut as a
"new start-up scam."  Blanchard Aff., PP 5, 8.

New York courts rarely use the term "business disparagement" and
have not articulated the elements of such a claim.  New York's
highest court, although not using the "business disparagement"
label, has recognized a cause of action for tortious conduct
similar to that alleged by plaintiffs.  See Ruder & Finn Inc. v.
Seaboard Surety Co., 52 N.Y.2d 663, 670-71, 422 N.E.2d 518, 522,
439 N.Y.S.2d 858, 862 (1981) ("[w]here a statement impugns the
basic integrity or creditworthiness of a business, an action for
defamation lies"). [FN2]  New York courts have applied other labels
to similar conduct:  "The tort of trade libel or injurious
falsehood consists of the knowing publication of false matter
derogatory to the plaintiff's business of a kind calculated to
prevent others from dealing with the business or otherwise
interfering with its relations with others, to its detriment."
Waste Distillation Technology, Inc. v. Blasland & Bouck Engineers,
P.C., 136 A.D.2d 633, 633, 523 N.Y.S.2d 875, 876 (2d Dep't 1988).

Regardless of the label used, the substance of plaintiffs'
"business disparagement" claim is similar to the action for
defamation recognized in Ruder & Finn, as well as the action for
trade libel or injurious falsehood recognized in Waste Distillation
Technology.  Under either formulation, plaintiffs would have to
prove that CompuServe had knowledge or reason to know of
Rumorville's publication of the allegedly disparaging statements in
order to hold CompuServe liable for business disparagement.  As
discussed with respect to the libel claim, supra, plaintiffs have
failed to meet their burden of setting forth specific facts showing
that there is a genuine issue as to whether CompuServe had
knowledge or reason to know of the April 1990 Rumorville
statements.  Summary judgment in favor of CompuServe on the
business disparagement claim is therefore granted. [FN3]

IV. Unfair Competition Claim

Plaintiffs base the unfair competition claim on the statements
concerning Skuttlebut that appeared in Rumorville in April 1990.
Plaintiffs' theory is that Rumorville launched a "campaign of
disparagement of Skuttlebut" in order to compete with Skuttlebut
and retain its subscribers without reducing its fee structure.
Complaint, PP 25-26.  "In order to state a claim for unfair
competition based on disparagement, [the plaintiff] must allege
some injurious falsehood intentionally uttered that caused the
plaintiff to suffer actual damage."  Brignoli v. Balch Hardy &
Scheinman, Inc., 645 F.Supp. 1201, 1208 (S.D.N.Y.1986) (citing
Diehl & Sons, Inc. v. International Harvester Co., 445 F.Supp. 282,
291-92 (E.D.N.Y.1978) (citing Penn-Ohio Steel Corp. v.
Allis-Chalmers Manufacturing Co., 7 A.D.2d 441, 184 N.Y.S.2d 58
(1st Dep't 1959))).  "Generally a statement is actionable only
where it is made intentionally to a third person and results in
direct financial loss to the party whose interest is disparaged."
Id. (citing Payrolls & Tabulating, Inc. v. Sperry Rand Corp., 22
A.D.2d 595, 597, 257 N.Y.S.2d 884, 886 (1st Dep't 1965) (citing
Restatement of Torts ss 630 et seq.)).

Because the utterance of a disparaging statement must be
intentional in order to give rise to an unfair competition claim
based on disparagement, CompuServe may not be held liable on
plaintiffs' unfair competition claim if it did not know or have
reason to know of the Rumorville statements.  As discussed with
respect to the libel claim, supra, plaintiffs have failed to meet
their burden of setting forth specific facts showing that there is
a genuine issue as to whether CompuServe had knowledge or reason to
know of the April 1990 Rumorville statements.  Summary judgment in
favor of CompuServe on the unfair competition claim is therefore
granted.

V. Vicarious Liability

Plaintiffs also argue that CompuServe may be held vicariously
liable for the allegedly defamatory Rumorville statements, based on
an agency relationship between CompuServe, CCI, and DFA.
CompuServe contends that the undisputed facts demonstrate that, at
most, DFA is an independent contractor of CCI and CCI is an
independent contractor of CompuServe, so that it may not be held
vicariously liable for the statements that appeared in Rumorville.

  "An essential characteristic of an agency relationship is that
the agent acts subject to the principal's direction and control."
In re Shulman Transport Enterprises, Inc., 744 F.2d 293, 295 (2d
Cir.1984).  In contrast, an independent contractor is " 'one who,
in exercising an independent employment, contracts to do certain
work according to his own methods, and without being subject to the
control of his employer, except as to the product or result of his
work.' "  Murray Hill Films, Inc. v. Martinair Holland, N.V., 1987
WL 14918, * 3, 1987 U.S. Dist. LEXIS 6500, * 7-* 8 (S.D.N.Y. July
17, 1987) (quoting Dorkin v. American Express Co., 74 Misc.2d 673,
675, 345 N.Y.S.2d 891, 894 (Sup.Ct.1973), aff'd, 43 A.D.2d 877, 351
N.Y.S.2d 190 (3d Dep't 1974));  accord Spiro v. Pence, 566 N.Y.S.2d
1010, 1012 (City Ct. Albany County 1991).  In order for an employer
to be held vicariously liable for the tort of an independent
contractor, the employer must have directed the act from which the
injury resulted or have taken an affirmative, active part in its
commission.  See Ramos v. State, 34 A.D.2d 1056, 1056, 312 N.Y.S.2d
185, 186 (3d Dep't 1970).

 Based on the undisputed facts, the Court concludes that neither
CCI nor DFA should be considered an agent of CompuServe.
CompuServe, CCI, and DFA are independent of one another.
CompuServe has simply contracted with CCI for CCI to manage the
Journalism Forum;  under the contract, CCI "agrees to manage,
review, create, delete, edit and otherwise control the contents of
the [Journalism Forum], in accordance with editorial and technical
standards and conventions of style as established by CompuServe."
Cameron Aff., Exhibit A. CompuServe has thereby delegated control
over the assembly of the contents of the Journalism Forum to CCI.
CompuServe's ultimate right under the contract to remove text from
its system for noncompliance with its standards merely constitutes
control over the result of CCI's independent work.  This level of
control over the Journalism Forum is insufficient to rise to the
level of an agency relationship.  Similarly, the contractual
provisions calling for CompuServe to provide CCI with training
necessary to manage the Journalism Forum and to indemnify CCI from
claims resulting from information appearing in the Journalism Forum
do not give CompuServe sufficient control over CCI and its
management of the Journalism Forum to render CCI an agent of
CompuServe.

As for DFA, the original publisher of Rumorville, CompuServe has no
direct contractual relationship with DFA;  DFA provides Rumorville
to the Journalism Forum under a contract with CCI.  The contract
between CCI and DFA provides that "DFA accepts total responsibility
for the contents of" Rumorville;  that DFA "agrees to maintain the
[Rumorville] files in a timely fashion including uploading and
merging into availability to the members of [Rumorville]";  and
that "DFA maintains total responsibility for communicating with its
members, billing them for any membership fees and collecting same."
Cameron Aff., Exhibit B.  DFA is therefore largely independent of
CompuServe in its publication of Rumorville, and the tenuous
relationship between DFA and CompuServe is, at most, that of an
independent contractor of an independent contractor.  The parties
cannot be seen as standing in any sort of agency relationship with
one another, and CompuServe may not be held liable for any of
plaintiffs' claims on a theory of vicarious liability.  Cf. McNally
v. Yarnall, 764 F.Supp. 838, 852-53 (S.D.N.Y.1991).

VI. Need for Additional Discovery

 Plaintiffs also suggest, in their memorandum of law in opposition
to CompuServe's summary judgment motion, that additional discovery
is needed and should preclude the grant of summary judgment.
Fed.R.Civ.P. 56(f) provides that when the party opposing a motion
for summary judgment cannot "present by affidavit facts essential
to justify the party's opposition, the court may refuse the
application for judgment or may order a continuance to permit ...
discovery to be had."  In order to persuade the Court to grant a
request for additional discovery, plaintiffs would have to "file an
affidavit explaining (1) what facts are sought and how they are to
be obtained, (2) how those facts are reasonably expected to create
a genuine issue of material fact, (3) what effort the affiant has
made to obtain them, and (4) why the affiant was unsuccessful in
those efforts."  Hudson River Sloop Clearwater, Inc. v. Department
of the Navy, 891 F.2d 414, 422 (2d Cir.1989) (citing Burlington
Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 926
(2d Cir.1985)).  The Court may reject a request for further
discovery pursuant to Rule 56(f) if no affidavit is filed or if the
request is based on pure speculation as to what would be
discovered.  Burlington Coat Factory, 769 F.2d at 926-927.

  In the instant action, plaintiffs have failed to fulfill the
requirements enumerated by the Second Circuit in Hudson River Sloop
Clearwater and Burlington Coat Factory.  Plaintiffs have simply
asserted, not in an affidavit but in their memorandum of law, that
"[l]ittle in the way of discovery has been undertaken" and that
"CompuServe has produced documents in response to the plaintiff's
First Document Request, but no depositions of the parties have
taken place."  Memorandum of Law in Opposition to Defendant
CompuServe's Motion for Summary Judgment at 2.  Plaintiffs have not
specified what facts they wish to discover through depositions or
other means and how these are to be obtained, how these are
reasonably expected to create a genuine issue of material fact,
what efforts they have made to obtain these facts, or why they have
been unsuccessful in their efforts.  Plaintiffs have therefore not
made a showing sufficient to persuade the Court to deny
CompuServe's motion for summary judgment or to order a continuance
to allow further discovery to take place.

                              Conclusion

For the reasons stated above, CompuServe's motion for summary
judgment pursuant to Fed.R.Civ.P. 56 is granted on all claims
asserted against it.

SO ORDERED


    Footnotes

 1. Civil Rule 3(g) of the Local Rules of this District requires
that a party moving for summary judgment provide a statement of the
material facts as to which it contends there is no genuine issue to
be tried.  Rule 3(g) further requires that the non-movant file a
statement of the material facts as to which it contends there is a
genuine issue to be tried, and provides that facts set forth in the
movant's 3(g) statement that are uncontroverted by the non-movant's
statement are deemed to be admitted.  CompuServe's 3(g) statement
contends that there is no genuine issue to be tried as to the fact
that "CompuServe has no opportunity to review Rumorville's contents
before DFA 'uploads' it into CompuServe's computer banks, from
which it is instantaneously available to approved CIS subscribers."
Plaintiffs do not, in their 3(g) statement or elsewhere, controvert
this material fact; therefore, it is deemed admitted pursuant to
Rule 3(g).  See General Electric Co. v. New York State Department
of Labor, 936 F.2d 1448, 1452 (2d Cir.1991);  Dusanenko v. Maloney,
726 F.2d 82, 84 (2d Cir.1984).

 2. The New York Court of Appeals distinguished this type of
defamation in the commercial context from "product disparagement,"
which involves a false statement that "is confined to denigrating
the quality of the business' goods or services" and requires that
malice and special damages be proven.  Ruder & Finn, 52 N.Y.2d at
670-71, 422 N.E.2d at 521-22, 439 N.Y.S.2d at 861-62.


3. Plaintiffs also contend, as part of the business disparagement
claim, that (unspecified) "defendants ... took affirmative action
to initiate telephone calls to other data base systems and inform
these systems that plaintiffs were 'computer hackers' and ran a
scam operation."  Complaint, P 19.  These alleged telephone calls
do not, however, have any bearing on CompuServe's liability for
statements contained in the Rumorville publication.  Moreover,
plaintiffs have not contested CompuServe's denial of any
involvement on the part of its agents or employees in the alleged
phone calls.  See Kent Aff., sworn to on April 4, 1991, P 9.
Therefore, even if some person or persons did make the alleged
phone calls, that fact does not prevent CompuServe from prevailing
on its summary judgment motion.