The singer has agreed to pay Dawn Simorangkir $430,000, plus interest, to settle a lawsuit the designer filed in March 2009 over comments Love made on Twitter and her MySpace blog.
While the case didn't go to a jury, First Amendment experts say it highlights the need for celebrities and average people to watch what they say online.
"People are getting in trouble for Twitter postings on an almost daily basis," said First Amendment Attorney Doug Mirell, a partner at Loeb and Loeb who did not handle the case.
"The laws controlling what is and isn't libelous are the same regardless of the medium in which the statements appear," he said.
Nancy Derwin-Weiss, an attorney who specializes in digital entertainment and advertising law, said the amount was sure to get the attention of stars and their handlers.
"I think it's just a wake up call," she said. "It's something that their advisers should talk to them about."
Simorangkir's attorney, Bryan J. Freedman, predicted the case would spark conversations between celebrities and their advisers.
"The fact is that this case shows that the forum upon which you communicate makes no difference in terms of potential legal exposure," Freedman said. "Disparaging someone on Twitter does not excuse one from liability."
Love's attorney, Jim Janowitz, said the settlement actually saved the rocker money. "This is a case where the economics of the case didn't make a lot of sense for either side," he said, noting that the costs of going to trial would have been large.
Janowitz said he would have argued that Love's statements were opinion and hyperbole, but not libelous, and that Simorangkir's sales rose after Love's tirades.
Derwin-Weiss, a partner at Wildman, Harrold, Allen & Dixon, said the settlement amount was significant.
"It's a number that's not trivial," she said. "It has some heft to it."
Twitter's popularity has skyrocketed in the past year, in part because celebrities interact with fans on a daily basis by posting candid photos, thoughts and even product endorsements.
The widow of grunge rocker Kurt Cobain, Love has gained a reputation on the microblogging service Twitter with her posts, which are occasionally profane and sometimes nonsensical messages on a variety of topics. Several posts have lashed out at attorneys and other individuals who have drawn the musician's ire, with her tweets coming in rapid succession and using every bit of the site's 140 character maximum per post.
Simorangkir sued over several postings written under Love's former Twitter account, courtneylover79, that accused the designer, who is known as Boudoir Queen, of theft and of having a criminal background.
Simorangkir's lawsuit claimed Love became angry with her after she completed five outfits for the singer and sent her a bill.
"Love mounted a malicious campaign to not only terrorize Simorangkir, but to ruin and destroy her reputation and livelihood," Freedman wrote in a May 2009 filing.
The case had been scheduled to go to trial in February, and was expected to be the first in which a jury decides whether a celebrity's Twitter posts could be considered libel.
Freedman confirmed that a settlement had been reached, and said Love's attorneys had hoped to keep it confidential. Love also settled another lawsuit filed by Simorangkir's husband over photos for a nominal amount, Janowitz said.
"In order to show the world the comments were derogatory and completely illegal, it was imperative to my client to have the settlement be public," Freedman said.
The attorney said a public statement will be issued next week, but the monetary settlement that Love is required to pay, reflects the seriousness of the case.
"Personally, I think $430,000 is an appropriate way to say she's sorry," Freedman said.
Mirell said stars need to be cautious about how and what they post online, especially when they're talking about others.
"When you start talking about someone other than yourself, you are beginning to get into dangerous territory," Mirell said.
Janowitz predicted other celebrities are likely to get into trouble over their social media musings.
"Undoubtedly there will be people who do it until it is better understood that this publication, just like anything else, is publication," he said.
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