• by Wendy Davis  @wendyndavis, April 14, 2010

The financial newsletter TheFlyonthewall.com says that it's losing subscribers due to a court order banning it from posting early morning summaries of banks' stock recommendations.

"Defendant is presented with the day-to-day challenge to remain in business during the pendency of its appeal," the company writes in a motion asking U.S. District Court Judge Denise Cote in New York to stay her order while it pursues an appeal.

"Absent a stay, defendant will also suffer irreparable harm because it is at a competitive disadvantage in the online financial news industry," The Fly adds. The company says in its legal papers that some subscribers have already begun canceling their subscriptions as a result of the injunction, which Cote issued last month.

Cote ruled that The Fly had misappropriated banks' "hot news" -- that is, time-sensitive research and recommendations -- by summarizing and publishing research reports prepared by Barclays, Bank of America's Merrill Lynch and Morgan Stanley before their clients received it.

She ordered the site to refrain from posting write-ups of financial firms' reports until at least 10 a.m. -- although other publications, including Bloomberg and Dow Jones, summarize and post similar items earlier in the day. Cote ruled that those other publications might themselves be misappropriating the banks' "hot news." "The fact that others also engage in unlawful behavior does not excuse a party's own illegal conduct," she wrote in her original order.

Cote also gave the banks one year to take action against other publishers who summarize hot news, saying that she would consider revising the injunction if the banks don't do so.

The Fly now argues that Cote should revoke the injunction because the site has a First Amendment right to summarize stock advice. "Recommendations of Wall Street firms are legitimate news and highly significant to (the) public in general," the site argues.

The Fly alternatively is asking Cote to amend her order to allow the site to report recommendations that have already been published by news companies like Bloomberg, Thomson Reuters, Dow Jones, The New York Times, The Wall Street Journal and CNBC. "The public's interest is clearly implicated by the embargo of financial news relating to recommendations in the 'public domain,' "the site argues.

Some media law experts had criticized Cote's initial decision, saying that she did not appear to have taken into account the First Amendment implications of banning a company from summarizing news that has been publicly reported on other sites.

"It's regulation of speech to say, 'You must delay your publication of this news that's in the public domain, that's been publicly reported by others,'" Sam Bayard, assistant director of the Citizen Media Law Project, said when Cote first issued her ruling. "That raises a red flag that Judge Cote doesn't look at."