During a lively court hearing Friday that included fire alarm interruptions and discussions about a hired hit man, bank robbers and a Buddhist temple, lawyers presented arguments (listen here) about the application of fair housing law to online community site craigslist.org and the extent of federal protections available to the site through the U.S. Communications Decency Act.

A three-judge panel for the Seventh Circuit U.S. Court of Appeals is considering whether craigslist is protected from liability for online postings by site users that violate the Fair Housing Act.

The Chicago Lawyers’ Committee for Civil Rights Under Law Inc., a nonprofit group that advocates for affordable housing and compliance with fair housing law, among other issues, filed its appeal in January 2007 following a November ruling by a U.S. District Court judge who found that craigslist is an “interactive computer service” under federal law and is not considered a publisher.

As such, that court found that craigslist has protections from liability for third-party content posted at the site.

Stephen D. Libowsky, who is representing the Chicago lawyers’ group, argued that Congress passed the Communications Decency Act in 1996 “to encourage and incentivize Internet service providers to block and screen offensive material,” and that the law does not “totally immunize Internet service providers” for offensive content.

Meanwhile, Patrick Carome, a lawyer for craigslist, argued that Congress clearly provided protections in the communications act for sites like craigslist. “It is very clear … that Congress saw this burgeoning but still young industry coming up and it wanted to give it special protections. It saw what the risk of liability for all of the potentially unlawful content flowing through it could cause to entities like craigslist with their tiny staffs and their 30 million postings a month and it recognized that immunity from liability or protection from liability was a very important thing to allow this enterprise to get off the ground,” he said.

In its initial complaint, the lawyers’ group reported housing-related postings at the craigslist site that included discriminatory language such as “no minorities” and “no children.”

“Certainly many Web sites, many different entities use blocking and screening software, be it spam filters or other items or you can use drop-down menus to force people away from certain words,” he said during oral arguments presented to the panel of judges on Friday.

Judge Frank H. Easterbrook suggested during the court hearing that screening for particular language in a housing-related posting could go too far. “one of the ads that you objected to says this apartment is located near a Catholic church and a Buddhist temple. Are you going to say ‘screen the word Buddhist out?'” he asked.

Libowsky responded, “That’s certainly a possibility.”

Judge Diane P. Wood, said that the lawyers group is asking the court “to break ranks” with other courts that have already examined the language of the communications act as it applies to protections for the provider of an interactive computer service.

Those other courts have “basically said Congress is trying to tell us that providers of interactive computer services should be treated as something like a phone line. If I made a phone call to somebody — and I was even soliciting murder for hire … over the phone, it doesn’t make (the phone company) liable,” she said. “They just provided the phone.”

More traditional print media do have some liability for the content they facilitate, Wood also said during the oral arguments, and it’s important to discover the intent of Congress in the act relating to Internet-based communications.

Under the Fair Housing Act, it is illegal “to make, print or publish, or cause to be made, printed or published” discriminatory notices, statements or ads for rental and for-sale property. Libowsky said he believes that definition applies to craigslist. The site, he argues, does “more than just allow a place to have things posted. What we’re complaining about is they’ve set up a place for people to transact housing business, selling or renting, and in that way are they more like the telephone company or something else?”

Also, he argued that craigslist has not taken a completely neutral stance with respect to discriminatory housing language posted at the site. Craigslist allows users to flag objectionable content for possible removal, for example. And the site provides information to discourage discriminatory postings.

Judge Easterbrook said that it would be much different if craigslist was participating in posting discriminatory content, as that behavior would not be protected under the communications act. In some ways, he agreed with Judge Wood, craigslist is more like a phone company than a newspaper. “If AT&T slanders you AT&T is liable, but if AT&T just carries a call from two bank robbers arranging a bank robbery it’s not liable,” he said.

If craigslist was required to perform services such as screening or suppressing content and choosing which content to allow or disallow, “those are the quintessential acts of a publisher,” Carome said. He also said that the voluntary work that craigslist does engage in to discourage discriminatory posts by its users should not be punished. Congress, he said, “saw that holding online intermediaries liable for the unlawful content of others in fact creates a disincentive to doing what the market forces and their own corporate citizenship would do.”

Libowsky said after the hearing that it could be a matter of weeks or months before the judges issue an opinion in the case. If they affirm the lower court’s decision “that may well end the case,” he said, or the case could be remanded back to the U.S. District Court, or the decision could be challenged for the full body of Seventh Circuit judges to consider. He also noted that a separate legal case that is under consideration in the Ninth Circuit U.S. Court of Appeals, which relates to alleged fair housing act violations at the Roommates.com site, may have relevance to the craigslist case.

Representatives for craigslist could not be reached for comment on Monday.

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