Plaintiffs and appellants GetFugu, Inc. (GetFugu), Carl Freer (Freer) and Richard Jenkins (Jenkins) (collectively, Plaintiffs) appeal an order granting a special motion to strike (Code Civ. Proc., § 425.16) filed by defendants and respondents Patton Boggs LLP (Patton), Richard J. Oparil (Oparil), Cummins and White LLP (Cummins) and Iman Reza (Reza) (collectively, the Attorney Defendants).
The issues presented include whether the Attorney Defendants met their burden to show Plaintiffs' defamation claim arose from protected activity by the Attorney Defendants, and whether Plaintiffs, in resisting the special motion to strike, demonstrated their defamation claim had the requisite minimal merit to withstand the defense motion.
For the reasons discussed below, the order is partially reversed with respect to the cause of action for defamation by GetFugu and Freer against two of the Attorney Defendants, Patton and Oparil, and is otherwise affirmed.
In January 2010, Simon Davies and David Warnock filed a civil action under the federal Racketeer Influenced and Corrupt Organizations Act
The district court dismissed the state law claims in that action without prejudice, ruling it would not exercise supplemental jurisdiction to hear them. Davies and Warnock appealed the district court's order. They also filed a state court action pursuing the claims that were dismissed by the district court without prejudice. Thus, at the time of the instant lawsuit against the Attorney Defendants, the claims made by Davies and Warnock against GetFugu, Freer and Jenkins were ongoing.
Despite the voluminous record, at this juncture Plaintiffs/appellants are basing their defamation claim on only two items: a one-page press release by Oparil, dated March 22, 2010, and a three-line "Tweet" by Oparil, dated August 31, 2010.
On March 22, 2010, Oparil issued a press release captioned "FBI SAID TO BE INVESTIGATING GETFUGU'S CARL FREER." This press release, which is the main basis of the instant defamation action, stated in pertinent part:
"David Warnock and Simon Davies, the plaintiffs in the civil RICO case against Carl Freer and others involving GetFugu, Inc., said they were pleased about a report by the Copenhagen Post that the FBI and Danish authorities are investigating Freer's involvement in the Danish IT Factory scandal. The FBI's criminal investigation is separate from the civil suit.
"According to the article, the FBI is following what is said to be a complex international money trail that allegedly links GetFugu and Freer to several failed `pump and dump' investments, including the now defunct IT Factory. Warnock and Davies' RICO First Amended Complaint alleges that the Securities and Exchange Commission is already investigating GetFugu. According to a November 2, 2009, SEC filing, in October 2005, Mr. Freer was
"On March 26th, Mikael Ljungman a co-defendant in the civil RICO action and Freer's partner, was convicted on all nine counts in a Denmark-based fraud case. Prosecutors made their case that money was channeled through over a dozen `secret' companies that Ljungman established in tax havens around the world. The trial also produced evidence that Ljungman was laundering invested funds through the Los Angeles-based GetFugu, which is controlled by Swedish national Freer.
"Warnock said that `information from credible sources is streaming in from several countries. That added to the large number of documents and communications that we already have gathered will be used to support our original civil RICO action and new information [we] are currently gathering could be used to expand the scope of that case or spawn several independent legal actions in the coming weeks.' Warnock and Davies indicated that they would cooperate with any inquiry by the FBI or Danish investigators. Counsel for plaintiffs in the RICO case is Richard J. Oparil of Patton Boggs LLP in Washington.
"Investigative leads may be sent to CivilRICOtipline@hushmail.com. All tips will be held in the strictest of confidence."
On August 31, 2010, Oparil issued the following Tweet on his TwitLonger account: "GetFugu runs an organization for the benefit of its officers and directors, not shareholders and employees. The RICO suit was not frivolous. The 500K lawsuit is frivolous, however, so buyer be wary."
On August 26, 2010, the same day the district court dismissed the RICO complaint, Plaintiffs GetFugu and Freer filed the instant action.
On November 22, 2010, the Attorney Defendants filed a special motion to strike the first amended complaint. The moving papers asserted the complaint was subject to a special motion to strike because it was based upon petitioning activity and statements made by Oparil in anticipation of, or in connection with, an issue pending before an official proceeding. Further, because the anti-SLAPP statute was implicated, the burden shifted to Plaintiffs to demonstrate a probability of prevailing on their claims against the Attorney Defendants.
The Attorney Defendants contended Plaintiffs could not prevail because the alleged statements and writings were shielded by the litigation privilege. (Civ. Code, § 47, subd. (b).) The various statements or writings concerned the pending federal litigation and the SEC and FBI investigations, and were indisputably statements or writings made in the course of a matter pending before an official proceeding authorized by law, and therefore were absolutely privileged under Civil Code section 47, subdivision (b).
The moving papers further argued that even if the defamation claim against the Attorney Defendants were not barred by the litigation privilege, Plaintiffs could not prevail because the statements in issue were either truthful or consisted of nonactionable opinion.
Plaintiffs contended the litigation privilege did not shield the press release or the Tweet, because those publications to nonparticipants had no functional connection to the litigation.
Plaintiffs also disputed the Attorney Defendants' contention that the statements were true or were nonactionable opinion. In opposing the special motion to strike, Plaintiffs submitted numerous declarations and contended they demonstrated a prima facie case of defamation.
Freer's opposing declaration stated in pertinent part: "Neither I nor GetFugu are, nor have we ever been, under investigation by the FBI, the SEC, or any other government agency."
The opposing declaration of John C. Kirkland stated: "As counsel for GetFugu, I have repeatedly spoken with the staff at SEC regarding the company. After accusations were made that the SEC was investigating GetFugu or Carl Freer, I telephoned the SEC and asked if this were the case. I was assured that it was not. I was also assured that, as company counsel, I would be promptly advised if there were any such investigation. I have never been so advised."
Kirkland further stated, with respect to the statement in Oparil's press release that Davies and Warnock "were pleased about a report by the Copenhagen Post that the FBI and Danish authorities are investigating Freer's involvement in the Danish IT Factory scandal," as follows: "In March of 2010, an article appeared in the Copenhagen Post entitled `FBI Enters Stein Bagger Case,' making false accusations about Mr. Freer and GetFugu. I sent a letter to [the] paper explaining the defamatory nature of the article, a copy of my letter is attached hereto as Exhibit 3. The Copenhagen Post thereafter removed the article from the Internet."
Further, the declaration of Jenkins, a founder of GetFugu and its CEO, stated the Oparil press release "that GetFugu is being investigated by the FBI and the SEC, that Mikael Ljungman, a convicted felon, was laundering invested funds through GetFugu and that GetFugu and its officers and directors are involved in racketeering activities" was false.
On January 20, 2011, the matter came on for hearing. After taking the matter under submission, the trial court granted the Attorney Defendants'
"Defendants have demonstrated that the acts complained of by plaintiffs in their 1st Amended Complaint were taken in furtherance of defendants' right of petition or free speech under the [United States] or [California] Constitutions. (CCP 425.16(b)(l).) Additionally, statements made before or in connection [with] an issue pending before an official proceeding pursuant to CCP 425.16(e)(2) are subject to the anti-SLAPP statute and there is no further requirement that the statements concern an issue of public significance. [Citation.] However, `investment scams' are considered to be matters of public interest. As such, defendants could establish the `public interest' element of CCP 425.16(e)(3) & (4).
"Plaintiffs have been unable to demonstrate a probability of prevailing in the matter. The litigation privilege applies so long as the communication has `some relation' to the judicial proceedings. Here the alleged statements have some relation to the RICO action and are therefore subject to the privilege. [Citation.] Doubts as to whether the privilege applies are resolved in favor of its application. [Citation.] Further, the documents directly attributable to the moving defendants (plaintiffs' exhibit I & L) [(the press release and the Tweet)] are not defamatory but accurate notifications of RICO claims and a restatement of the allegations in general form."
Plaintiffs filed a timely notice of appeal from the order granting the special motion to strike.
Plaintiffs contend they established a probability they would prevail on their defamation claims based on the Oparil press release and the Tweet and the trial court abused its discretion is sustaining the Attorney Defendants' evidentiary objections to the declaration of Chris Sturm.
In other words, to defeat a special motion to strike, the plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89 [124 Cal.Rptr.2d 530, 52 P.3d 703].)
Review "of an order granting or denying a motion to strike under section 425.16 is de novo. [Citation.] We consider `the pleadings, and supporting and opposing affidavits ... upon which the liability or defense is based.' (§ 425.16, subd. (b)(2).) However, we neither `weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.' [Citation.]" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 [46 Cal.Rptr.3d 638, 139 P.3d 30].)
In seeking to overturn the trial court's ruling with respect to the defamation claim, the Plaintiffs/appellants have limited their arguments to two publications — the March 22 press release by Oparil of the Patton firm, and Oparil's subsequent Tweet.
As pointed out in the respondents' brief, none of the statements on which Plaintiffs rely is attributed to Reza or the Cummins firm. Therefore, the order granting the special motion to strike is summarily affirmed in favor of Reza and Cummins.
As used in section 425.16, "`act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue' includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." (§ 425.16, subd. (e), italics added.)
Obviously, not every act of fraud is a matter of public interest. Here, however, the alleged investment scam concerned GetFugu, a public company whose common stock was traded on the OTCBB (OTC Bulletin Board).
The press release, which is the essence of this case, asserted the FBI was conducting a criminal investigation of GetFugu's Freer, independent of the civil RICO suit.
For example, in Susan A., a psychologist interviewed a 14-year-old boy who was accused of attempted murder, and thereafter made statements about the boy to the press. The boy's parents sued. (Susan A., supra, 2 Cal.App.4th at pp. 92-93.) Susan A. held the challenged statements to the news media were not covered by the litigation privilege. (Id. at pp. 93-96.)
Guided by Costa, the court in Abraham v. Lancaster Community Hospital (1990) 217 Cal.App.3d 796 [266 Cal.Rptr. 360] (Abraham) held the alleged communication of monopoly and antitrust allegations against a hospital administrator "within the Antelope Valley and specifically within the medical community [were] privileged communications..... [T]he local medical community possessed `a substantial interest in the outcome of the pending litigation' and as such were `participants' therein. (Costa v. Superior Court, supra, 157 Cal.App.3d at p. 678.)" (Abraham, supra, at p. 823.)
Notwithstanding the expansion of the scope of the litigation privilege to extend to publication to nonparties with a substantial interest in the proceeding, "the expansion does not encompass publication to the general public through the press. Such an expansion would swallow up the general rule, which our Supreme Court ... reaffirmed, that [the litigation privilege] does not privilege `republications to nonparticipants in the action ....' (Silberg v. Anderson, supra, 50 Cal.3d at p. 219.)" (Susan A., supra, 2 Cal.App.4th at p. 94.)
This court reiterated that principle in Rothman v. Jackson (1996) 49 Cal.App.4th 1134 [57 Cal.Rptr.2d 284] (Rothman). In Rothman, an attorney sued a celebrity and the celebrity's attorney and investigator, following a press conference in which they asserted the attorney and his clients had made false accusations against the celebrity in order to extort money from him. (Id. at p. 1139.) The trial court sustained the defendants' demurrer as to all causes of action on the ground of the litigation privilege. (Id. at p. 1138.)
This court reversed, ruling the "challenged statements were made by the defendants in a press conference, and not in any context which the litigation privilege exists to protect." (Rothman, supra, 49 Cal.App.4th at p. 1138.) We further held "the litigation privilege should not be extended to `litigating in the press.' Such an extension would not serve the purposes of the privilege; indeed, it would serve no purpose but to provide immunity to those who would inflict upon our system of justice the damage which litigating in the press generally causes: poisoning of jury pools and bringing disrepute upon both the judiciary and the bar." (Id. at p. 1149.)
In the instant case, Oparil issued a press release and a Tweet to publicize the alleged misdeeds of GetFugu and Freer. The Attorney Defendants contend
The Attorney Defendants contend that assuming arguendo the press release is not shielded by the litigation privilege, the defamation claim is meritless because the statements in the press release are true.
The gist of the press release is that the FBI was conducting a criminal investigation of GetFugu's Freer, independent of the civil RICO suit ("The FBI's criminal investigation is separate from the civil suit.").
Although the Attorney Defendants assert the press release is true, the evidence is in conflict as to the existence of a criminal investigation by the FBI. As set forth above, the declarations filed in opposition to the special motion to strike disputed that either the FBI or the SEC were investigating Freer or GetFugu.
Specifically, Freer's opposing declaration stated in pertinent part: "Neither I nor GetFugu are, nor have we ever been, under investigation by the FBI, the SEC, or any other government agency."
Similarly, the declaration of Jenkins, a founder of GetFugu and its CEO, stated the Oparil press release "that GetFugu is being investigated by the FBI
Further, the declaration of Attorney Kirkland stated he had advised the Copenhagen Post that the newspaper article referring to an FBI investigation of Freer was false, and in response the newspaper removed the article from the Internet.
Unlike the press release, the Tweet is not actionable at all.
To ascertain whether the statements in question are provably false factual assertions, courts consider the totality of the circumstances. (Nygård, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1049 [72 Cal.Rptr.3d 210] (Nygård).) Whether challenged statements convey the requisite factual imputation is ordinarily a question of law for the court. (Ibid.)
For example, in Nygård, statements by a defendant/former employee that he "`"slaved ... without a break,"'" that the plaintiff/employer wanted the employee to work "`"round the clock"'" and that the employer "`"[a]pparently... hasn't heard about working hours"'" (Nygård, supra, 159 Cal.App.4th at p. 1047), amounted to nonactionable statements of opinion, rather than verifiable statements of fact. "No reasonable reader could understand the description of [the employee's] work experience with plaintiffs as `"horrible"' and a `"horror"' to mean that [the employee] was literally struck with horror while working for the company. Instead, `"horrible"' and a `"horror"' colorfully convey [the employee's] subjective belief that working for the company was unpleasant. His subjective reaction does not contain `provable facts,' and no reasonable reader could understand these words as statements of actual working conditions. [The employee's] statements that `"I was used!"' and `"I Felt Myself Used!"' also connote his subjective judgment that working for the company was unpleasant." (Id. at p. 1052.)
Here, the Tweet by Oparil, in its entirety, stated as follows: "GetFugu runs an organization for the benefit of its officers and directors, not shareholders and employees. The RICO suit was not frivolous. The 500K lawsuit is frivolous, however, so buyer be wary."
Further, insofar as the Tweet asserted "GetFugu runs an organization for the benefit of its officers and directors, not shareholders and employees," Oparil was stating his subjective opinion with respect to corporate governance at GetFugu. Accordingly, the Tweet is not actionable.
The Attorney Defendants seek judicial notice of a September 24, 2009 letter from a staff attorney at the SEC to one David Patch, stating "the enforcement staff of the U.S. Securities and Exchange Commission (`SEC') is conducting an inquiry in the above-referenced matter [(In the Matter of GetFugu, Inc. (MSF-3500))] to determine whether there have been violations of the federal securities laws." The motion contends the document is subject to judicial notice as an official act of an executive agency of the United States. (Evid. Code, § 452, subd. (c).)
The Attorney Defendants fail to show good cause why this letter was not presented in the court below. The movants contend the letter was not submitted previously because GetFugu "did not make the argument that there was no SEC investigation until its motion for reconsideration." The record is to the contrary. As set forth above, the opposing declarations of Kirkland and others, filed in opposition to the special motion to strike, denied the existence of an SEC investigation. The existence of an SEC investigation was disputed by Plaintiffs from the inception.
In any event, the SEC letter is unavailing to the Attorney Defendants at this juncture. The SEC letter has no bearing on whether the FBI was conducting a criminal investigation of GetFugu's Freer. Further, all the letter does is reiterate there is conflicting evidence with respect to whether the SEC was investigating GetFugu. However, the Attorney Defendants cannot rely on conflicting evidence to obtain early dismissal by way of a special motion to strike. (Grewal v. Jammu, supra, 191 Cal.App.4th at p. 989.)
In view of our determination that the order granting the special motion to strike must be reversed as to Oparil and the Patton firm, it is unnecessary to address Plaintiffs' contention the trial court erred in sustaining evidentiary objections to the Sturm declaration.
The order granting the special motion to strike is reversed solely with respect to the cause of action by GetFugu and Freer against Oparil and Patton for defamation based on the March 22, 2010 press release, in accordance with
Croskey, J., and Kitching, J., concurred.
All further statutory references are to the Code of Civil Procedure, unless otherwise specified.
The press release also states: "Warnock and Davies' RICO First Amended Complaint alleges that the Securities and Exchange Commission is already investigating GetFugu." This statement in the press release is consistent with paragraph 186 of the first amended RICO complaint, and therefore is protected as a fair and true report of the contents of the pleadings. (Civ. Code, § 47, subd. (d)(1); Abraham, supra, 217 Cal.App.3d at p. 823.)
