• by Wendy Davis  @wendyndavis, May 20, 2009

Craigslist has filed a lawsuit against Henry McMaster, the South Carolina Attorney General who warned company officials that he would haul them into court on criminal charges unless the site blocked all prostitution ads.

In papers filed Wednesday, the listings site is asking a federal district court judge in Charleston to declare that the company and its executives are immune from liability for ads posted by users. Craigslist is also asking for a restraining order banning McMaster from continuing to threaten its executives with criminal prosecution.

"Craigslist and its management cannot, as a matter of applicable federal law, be prosecuted or held liable under state law for content that third parties post on its website," the company said in court papers.

McMaster issued a statement in which he characterized the lawsuit as "good news." "It shows that craigslist is taking the matter seriously for the first time," he stated.

He also took credit for the removal of the "erotic services" ads from the site -- although Craigslist announced last week that the section would be defunct by Tuesday.

Earlier this month, McMaster gave the site an ultimatum: Remove all "erotic services" ads and "pornographic" content by 5 p.m. on May 15 or face a criminal investigation and potential prosecution.

Instead, Craigslist shuttered the "erotic services" section and launched a new "adult" section where posts would be screened before going live. That decision came about in consultation with attorneys general from Missouri, Illinois and Connecticut. At the time, McMaster said he was not satisfied with the arrangement.

Craigslist originally intended for the erotic services section to house ads for services like phone sex and erotic dancing, but law enforcement authorities say many ads were obviously related to prostitution. Criticism had picked up in recent weeks, sparked by the murder of masseuse Julissa Brisman. She was allegedly killed last month by a Boston University student who answered an ad she had placed on Craigslist's "erotic services" section.

Late last week, McMaster repeated his threat to prosecute company executives. On Friday, he said in a statement that he intended to proceed with a criminal probe. The following day, McMaster confirmed to Fox News that he was investigating the company and that the "no. 1 defendant" was CEO Jim Buckmaster.

Legal experts say that state criminal charges against Craigslist management are not likely to succeed in court because the federal Communications Decency Act says sites are immune from liability based on material posted by users.

Some digital rights advocates praised Craigslist's decision to go on the offensive. "It's a savvy move and a good way of handling this crisis," says Sam Bayard, assistant director at the Citizen Media Law Project. "You've got the CEO and the head executive being threatened with criminal prosecution, and you've got this Attorney General who, as far as we can tell, is not basing his claims on the law," he says. "This gives them control over the situation again. They don't have to just sit back and wait to see what this guy does."

Separately, New York Attorney General Andrew Cuomo announced Wednesday that seven people who advertised on Craigslist had just been indicted for running a prostitution ring.