LASTER, Vice Chancellor.
On June 22, 2015, Preferred Communications Systems, Inc. ("PCSI" or the "Company") held an annual meeting of stockholders. The Preferred Investors Association (the "Association") opposed the reelection of the incumbent members of the Company's board of directors. In advance of the annual meeting, five members of the Association signed a letter that the Association distributed to the Company's investors (the "Fight Letter"). Three of the incumbent directors lost their seats.
The former directors brought a claim for defamation against the Association and the members who signed the Fight Letter. Their lawsuit has been consolidated with a plenary proceeding that involves a variety of claims and counterclaims in which various parties appear in multiple capacities. This decision addresses the defamation claim. It refers to the former directors as the "Libel Plaintiffs." It refers to the Association and the five signatories as the "Libel Defendants."
The Libel Defendants have moved to dismiss the defamation claim pursuant to Rule 12(b)(6) for failure to state a claim on which relief can be granted. They argue that the claim constitutes a Strategic Lawsuit Against Public Participation (a "SLAPP") within the meaning of Delaware's anti-SLAPP statute. 10 Del. C. §§ 8136-8138. The anti-SLAPP statute imposes additional burdens on a plaintiff who pursues a SLAPP at each stage of the litigation process, including a more onerous standard for surviving a motion to dismiss. This decision concludes that anti-SLAPP statute does not apply.
The Libel Defendants separately argue that the Libel Plaintiffs are limited-purpose public figures. If they are, then the Libel Plaintiffs bear the burden of proving that the statements in the Fight Letter were not true and were made with actual malice. This decision holds that the Libel Plaintiffs are limited-purpose public figures.
The Libel Defendants finally argue that based on the allegations in the complaint, it is not reasonably conceivable that the statements in the Fight Letter were defamatory and, to the extent they could be, were made with actual malice. This decision finds it reasonably conceivable that a subset of the statements was defamatory and made with actual malice. The motion to dismiss is denied as to these statements. Otherwise it is granted.
The facts are drawn from the Amended and Supplemental Complaint (the "Complaint") and the documents it incorporates by reference. For purposes of the motion to dismiss, the well-pled allegations of the Complaint are assumed to be true, and the Libel Plaintiffs receive the benefit of all reasonable inferences. This decision takes judicial notice of previous proceedings in related actions, including Judy v.
The Company was formed in 1998 as the vehicle for a scheme in which Pendleton Waugh, Charles Austin, Jay Bishop, and Charles Guskey planned to assemble a critical mass of specialized mobile radio licenses, then flip them to another company where Waugh was president. Because of how the Federal Communications Commission (the "FCC") historically distributed rights to wireless spectrum, the licenses were held by individuals having varying degrees of sophistication. Judy v. Preferred Comm'cn Sys. Inc., 2016 WL 4992687, at *2 (Del. Ch. Sep. 19, 2016).
Waugh and Bishop were convicted felons. Both had pled guilty to crimes involving fraud or dishonesty based on their activities in the cellular telephone industry. Austin previously worked to acquire licenses for one of Waugh's companies. Evidencing his own regard for legal compliance, Austin never bothered to file a state or federal income tax return between 1997 and 2010. Guskey had worked as one of Bishop's accountants at Continental Wireless Cable Television, Inc. ("Continental"), another company that acquired wireless licenses. In 1994, the SEC filed an enforcement action against Continental for defrauding investors, obtained a restraining order against Continental, seized its assets, and froze the bank accounts of the company and its principals.
Austin served as the front man for the Company. In the Judy Litigation, after trial, this court made the following finding of fact:
Judy Litigation, Dkt. 432, ¶ 4.
Beginning in 1998, the Company assembled a group of licenses in Puerto Rico and the U.S. Virgin Islands. The Company largely acquired them from individuals in return for packages of consideration that typically included securities in the Company. The Company also obtained a set of licenses predominantly clustered in Virginia and California. Judy, 2016 WL 4992687, at *3.
In 1999, the plan to flip the licenses foundered after Waugh encountered further legal difficulties. The FCC described them as follows:
With the assemble-and-flip strategy no longer viable, the four founders pivoted towards the more challenging task of turning the Company into a full-service wireless telecommunications provider.
Ostensibly to fund this plan, the Company raised money from outside investors by issuing a variety of poorly documented securities. In the Judy Litigation, this court made the following finding of fact after trial:
Judy Litigation, Dkt. 433, ¶ 5.
It is not clear what progress, if any, the Company made during this period toward becoming a full-service wireless telecommunications provider. Its primary business activity appears to have been inducing individuals to buy its securities.
In July 2007, after conducting a preliminary investigation, the FCC issued an Order to Show Cause to Waugh, Austin, Bishop, the Company, and the Company's wholly-owned subsidiary that owned the licenses. The FCC summarized its reasoning as follows:
Waugh, 22 F.C.C.R. at 13364.
The Order to Show Cause posed an existential threat to the Company. If the FCC revoked the licenses, then the Company no longer would have any valuable assets.
Waugh wanted to regain control of the Company. In furtherance of this goal, he formed a series of entities. To minimize the appearance of his own involvement, he nominally put others in charge. Id.
In December 2007, Waugh formed Smartcomm, LLC with Carole Downs (one of the Libel Plaintiffs). They met in June 2007 through Match.com. Downs was a successful real estate broker in Arizona. She had no experience in the wireless industry and knew nothing about it. Despite her lack of experience, Downs became President of Smartcomm. Waugh served as Vice President. Smartcomm became the new vehicle through which Waugh pursued his activities in the wireless industry. Id.
Waugh and Downs worked to organize the various investors who had purchased securities from the Company. Their strategy was to blame Austin for the Company's lack of progress, then use the investors' anger as the vector for regaining control. Id.
Their first investors' organization was the Association. Waugh recruited Michael Judy to serve as its public persona. In 1999, Judy became an investor in the Company after meeting with Waugh and attending a subsequent investor presentation. Waugh and his team convinced Judy about the Company's fantastic prospects, and Judy agreed to make a personally significant investment of $40,000, which he raised by maxing out his credit cards and borrowing from his father. Judy was not an expert in the wireless industry; his primary avocation was professional auto racing. His role was that of a passive investor until early 2007, when he became a finder for the Company and was compensated for bringing in other investors. Waugh convinced Judy that Austin was the source of the Company's problems. Id. at *6.
In November 2008, Judy, Waugh, and other investors agreed to form the Association, and they elected Judy as President. But Judy's tenure as head of the Association and its role as a vehicle for Waugh were both short-lived. Disagreements quickly arose between Waugh's faction and investors associated with Edward Trujillo (one of the Libel Defendants). Trujillo had served as a finder for the Company and brought in many of the individuals who purchased its securities. Judy resigned, and Trujillo became President. The Association eventually came to represent approximately eighty investors who collectively provided approximately $3.1 million in funding to the Company. Trujillo and the Association came to be the principal opponents of Waugh's efforts to regain control over the Company. Id.
Having lost control of the Association, Waugh needed to form a new organization. In January 2009, Judy, Waugh, and various supporters decided to form Preferred Spectrum Investments, LLC ("PSI"). In
PSI funded the Judy Litigation in an effort to retake control of the Company. PSI's strategy was to obtain a court-ordered meeting of stockholders at which Waugh and his allies could replace Austin and establish a new board majority. PSI itself was not a stockholder in the Company, so Judy served as the plaintiff. Id.
In June 2009, Judy filed an action for books and records pursuant to Section 220 of the Delaware General Corporate Law (the "DGCL"). See 8 Del. C. § 220. Among other materials, Judy sought information about the stockholders of the Company and a copy of the Company's stock ledger. Judy, 2016 WL 4992687, at *6.
In July 2009, Judy filed an action to compel the Company to hold its annual meeting of stockholders in accordance with Section 211 of the DGCL. See 8 Del. C. § 211. Since its founding in 1998, the Company had never held an annual meeting. Judy, 2016 WL 4992687, at *7.
On the same day that he filed the annual meeting action, Judy filed a plenary action that contended, among other things, that Austin had breached his fiduciary duties. The court consolidated the three lawsuits into the proceeding that this decision refers to as the "Judy Litigation." Id.
Judy moved for summary judgment on various aspects of his claims. By order dated September 29, 2009, as amended on October 13, the court granted summary judgment in Judy's favor on his claim for books and records. The court also granted summary judgment in favor of Judy on his request for an annual meeting. The order directed the Company hold an annual meeting of stockholders on December 9, and it appointed Richard L. Renck, Esq., to act as special master for purposes of overseeing the annual meeting. Judy, 2016 WL 4992687, at *8.
After the court's rulings, Waugh and his allies thought they were on their way to a court-ordered meeting in December 2009. But Austin failed to comply with the portion of the order that directed the Company to produce a list of its stockholders. Put simply, the Company's records were such a mess that Austin could not generate the list. Id. at *9.
After the Company failed to meet the court-ordered deadline for producing the list, Judy sought the appointment of a receiver who would take control of the Company for the limited purpose of providing it. By order dated December 23, 2009, the court appointed Renck to act as receiver for the Company (the "Receiver"). The order charged the Receiver with identifying the Company's stockholders, determining who could vote at the annual meeting, and then convening and conducting the meeting. Id.
Also in December 2009, the court permitted the Association to intervene in the Judy Litigation. Trujillo had perceived Waugh's strategy of using a court-ordered meeting to regain control of the Company. He also perceived that Waugh was using Judy as a front man to hide his involvement. Id.
On March 5, 2010, the Receiver filed his report. He made recommendations about the identity and holdings of the Company's stockholders. He also identified serious problems with the Company's capital structure. Several of the recommendations
Many of the Receiver's conclusions turned on assessments of incomplete and conflicting corporate records. The ensuing avalanche of objections and claims from Waugh's allies made it clear that a trial would be necessary to resolve the persistent factual disputes. The parties engaged in litigation over the objections in anticipation of a hearing to take place in July 2010, but the process faltered when the Receiver's fees went unpaid. In September 2010, the court confirmed that it would not hold a hearing until the Receiver was paid. Trial eventually was rescheduled for February 2011, then deferred pending mediation. After several more continuances, trial took place in December 2011. Id.
After trial, among other things, the court approved a final stock list for the Company. The court directed the Receiver to "schedule a Court-ordered meeting of stockholders for the election of a new board of directors, set the record date for the meeting, give notice of the meeting, convene and conduct the meeting, and determine those members of the board of directors who have been elected and qualified." Id. at *11.
PSI and the Association each sought to elect candidates to the board at the court-ordered meeting. PSI put forth a slate comprising Judy, Downs, Barclay Knapp, Roman Kikta, and Michael Scott (the "PSI Nominees"). Knapp and Kitka (like Downs) are Libel Plaintiffs. The Association put forth a slate comprising Trujillo, Joseph Washington, Rodney Agar, Rachel Coughlin, and William Callahan (the "Association Nominees"). Coughlin and Washington (like Trujillo) are Libel Defendants.
The election was hotly contested. Both sides sent fight letters to the Company's investors. The Association sent at least two letters; PSI sent at least one. Judy Litigation, Dkt. 453 Exs. A & C; id., Dkt. 459 Ex. D.
The annual meeting was held on January 23, 2013 (the "2013 Meeting"). Out of 172 separate stockholdings appearing on the stock list, 159 voted in person or by proxy. The vote count showed that the PSI Nominees narrowly prevailed.
The Association challenged the outcome. The court overruled the Association's objections, and by order dated March 18, 2013, approved the election of the PSI Nominees. Judy, 2016 WL 4992687, at *11. For simplicity, this decision refers to them post-election as the "PSI Directors."
In April 2013, the PSI Directors began taking action on behalf of the Company. They appointed Knapp as President and CEO and approved a compensation package for him that included a $450,000 salary, an incentive bonus equal to 100% of his salary, and stock options. Id.
On December 20, 2013, the Company reached an agreement to sell approximately 70% of its licenses for $60 million to Sprint (the "Sprint Transaction"). In June 2014, the Sprint Transaction closed. After receiving the $60 million in transaction proceeds, the PSI Directors authorized various payments by the Company. They included compensation payments to the directors and a special bonus to Knapp of $315,000. Id. at *12.
Despite losing the proxy context, the Association did not go away. In April 2014, over forty Company stockholders filed suit in this court against the Company, the PSI Directors, and several of their affiliates
In November 2014, Trujillo took a page from Judy's book and filed two lawsuits against the Company. The first sought to inspect books and records. Trujillo v. Preferred Commc'ns Sys., Inc., C.A. 10376-VCL (Del. Ch. Nov. 20, 2014) (the "Books and Records Action"). The second sought to compel the Company to hold its annual meeting of stockholders. Trujillo v. Preferred Commc'ns Sys., Inc., C.A. 10378-VCL (Del. Ch. Nov. 20, 2014) (the "Meeting Action"). When Trujillo filed the Meeting Action, the Company had not held an annual meeting since the 2013 Meeting, some twenty-one months earlier. The Company originally opposed both actions.
In the Books and Records Action, Trujillo moved for judgment on the pleadings. The court granted the motion in part and required the Company to produce the following categories of documents that the Company previously had indicated it would provide:
Books and Records Action, Dkt. 33.
In March 2015, less than two weeks before a scheduled trial in both actions, the parties agreed to a stipulated final order addressing both the Books and Records Action and the Meeting Action (together, the "Final Order"). The Final Order (i) required the Company to produce substantially all the books and records Trujillo had requested, (ii) scheduled the annual meeting for June 22, 2015, and (iii) required the Company to pay costs Trujillo incurred with both actions. See Books and Records Action, Dkt. 42.
After receiving the documents from the Books and Records Action, the stockholder plaintiffs filed an amended complaint in the Plenary Action. The original complaint had asserted twenty different causes of action; the amended complaint expanded to assert twenty-eight different causes of action.
In substance, the amended complaint alleged that the PSI Directors had "engaged in looting [the Company] to benefit themselves and their affiliates via a number of self-dealing, wasteful, and/or unapproved transactions." Dkt. 70, at 3. The allegations regarding misuse of Company resources included the following:
See id. at 15-21.
According to the amended complaint, documents obtained through the Books and Records Action showed that the PSI Directors were projecting that the $60 million received from Sprint Transaction would have dwindled to less than $7 million by the end of 2015. In making this allegation, the amended complaint relied on documents showing that as of March 10, 2015, the Company had approximately $39 million in cash on hand and had identified the following liabilities: (i) taxes payable of approximately $25 million, (ii) amounts due for Company notes and preferred stock redemption obligations of approximately $6.5 million, and (iii) monthly expenses totaling almost $1.35 million.
The Final Order required the Company to hold its annual meeting on June 22, 2015 (the "2015 Meeting"). In advance of the meeting, the Association sent the Fight Letter to a large number of the Company's investors.
Titled "Preferred Investors Association Update April 30, 2015," the Fight Letter urged stockholders not to support the PSI Directors. Compl., Ex. A. It opened by stating:
Id. at 1.
The Fight Letter described the Association's ongoing legal battles with the PSI Directors, including a lawsuit that members of the Association filed in Texas to collect on defaulted promissory notes. After discussing the funds generated by the Sprint Transaction, the Fight Letter summarized its central argument against the PSI Directors:
Id. (bold font omitted).
The body of the Fight Letter included a series of statements that accused the PSI Directors of acting to benefit themselves:
This decision refers to these statements as the "Looting Allegations."
The Fight Letter also included statements that accused the PSI Directors of trying to conceal their actions from the Company's investors.
This decision refers to these statements as the "Concealment Allegations."
Finally, the Fight Letter included statements that accused the PSI Directors of failing to make payments to its investors.
This decision refers to these statements as the "Payment Allegations."
The Fight Letter concluded with the following exhortation: "It is time to stop
On May 14, 2015, about two weeks after the Association sent the Fight Letter, the Company and the PSI Directors responded in two ways. First, the PSI Directors filed a complaint in Superior Court against the Libel Defendants that sought damages for libel and injurious falsehood based on statements in the Fight Letter. Second, they sent the Company's investors a responsive letter of their own.
The PSI Directors' offensive lawsuit fit a pattern of similar litigation filed by Waugh, Downs, and Smartcomm. In 2011, Smartcomm brought a claim for defamation against Grant Stousland for calling Smartcomm a "scam" that was "misleading" its investors, who were "suckers." Smartcomm alleged that, as a result of Stousland's comments, one of its representatives, Judy, had lost over $500,000 in client commitments, and that another of its representatives, Bart Caso, lost $5.7 million in client commitments.
The PSI Directors responded directly to the Fight Letter by sending a letter dated May 14, 2015, to the Company's investors. Dkt. 185 Ex. N (the "Response Letter"). Its first sentence stated, "By this letter we would like to update you on our plans for our upcoming shareholders meeting, and to respond to what we consider to be an egregious, libelous, and defamatory letter that was recently sent to most if not all of you by Edward Trujillo and his supporters (`the Trujillo Group')."
The Response Letter also called attention to the lawsuit that the PSI Directors had filed in Superior Court. The concluding paragraph of the Response Letter stated:
The Response Letter attached "[a] summary of [the PSI Directors] responses to the numerous false statements made by the Trujillo Group" as well as a copy of the complaint that the PSI Directors and the Company had filed. The allegations of the complaint provided additional detail as to why the PSI Directors believed that the statements in the Fight Letter were false and contrary to the record.
The PSI Directors and the Company originally filed their claims in Superior Court. Their initial complaint contained four counts:
By order dated July 31, 2015, the Superior Court transferred its case to this court, and the case was consolidated with the Plenary Action.
The Libel Defendants moved to dismiss the four counts of the original complaint. During briefing, the PSI Directors dropped their claim for injurious falsehood and the Company withdrew its claim for defamation. On November 8, 2015, the court heard argument on the Libel Defendants' motion.
While the motion was under submission, a change of control occurred at the Company. Shortly after the Superior Court action was filed, Judy switched sides and opposed the reelection of Knapp, Downs, and Kitka. In January 2016, holders of a majority of the Company's outstanding voting power delivered written consents that removed Downs, Knapp, and Kikta as directors and replaced them with Trujillo, Agar, and Kevin Shaffer. Scott and Judy remained in their positions. By letter dated January 19, 2016, Trujillo advised Knapp, Downs, and Kikta that they had been terminated from all of their positions with the Company.
The Libel Plaintiffs eventually filed the Complaint, which is the currently operative pleading. The Libel Defendants again moved to dismiss, the parties briefed the motion, and the court heard argument.
The Libel Defendants have moved to dismiss the Complaint pursuant to Rule 12(b)(6). When considering such a motion,
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (footnotes and internal quotation marks omitted).
To state a claim for defamation, a plaintiff must plead (i) the defendant made a defamatory statement, (ii) concerning the plaintiff, (iii) the statement was published, and (iv) a third party would understand the character of the communication as defamatory. Doe v. Cahill, 884 A.2d 451, 463 (Del. 2005). A communication is defamatory "if it tends to so harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." Spence v. Funk, 396 A.2d 967, 969 (Del. 1978) (quoting Restatement (Second) of Torts § 559 (Am. Law Inst. 1977)).
In support of their motion to dismiss, the Libel Defendants argue that this action is subject to Delaware's anti-SLAPP statute. 10 Del. C. §§ 8136-38. A SLAPP is "a suit brought by a developer, corporate executive, or elected official to stifle those who protest against some type of high-dollar initiative or who take an adverse position on a public-interest issue (often involving the environment)." SLAPP, Black's Law Dictionary (10th ed. 2014). Many states, including Delaware, have adopted anti-SLAPP statutes to "provide a quick remedy for those citizens targeted by frivolous lawsuits based on their government petitioning activities by allowing them to bring a special motion to dismiss or motion to strike." 71 C.J.S. Pleading § 675 (2016).
Classifying this action as a SLAPP would have meaningful consequences. Among them, Delaware's anti-SLAPP law imposes a heightened standard to survive a motion to dismiss:
10 Del. C. § 8137(a).
Delaware decisions provide little guidance about the scope of Delaware's anti-SLAPP statute. Only one Delaware case has touched on the issue. See Nichols v. Lewis, 2008 WL 2253192, at *6 (Del. Ch. May 29, 2008) (Strine, V.C.), aff'd sub nom., Arday v. Nichols, 956 A.2d 31, 2008 WL 3414069 (Del. 2008) (TABLE). Given the paucity of authority, this opinion starts by examining the concept of anti-SLAPP statutes generally, then assesses the scope of Delaware's anti-SLAPP statute against that background. The analysis indicates that the Libel Plaintiffs' claims do not fall within Delaware's anti-SLAPP statute.
"A SLAPP suit refers to a suit brought in response to efforts by individuals or groups to participate in the democratic process by some person or entity that claims to have been wronged through that participation." Rodney A. Smolla, 2 Law of Defamation § 9:107 (2d ed. 2016). "A SLAPP ... seeks to chill, dissuade, or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. In such suits, a tort claim, such as slander or libel, is typically brought with the goal of silencing dissent." 71 C.J.S. Pleading § 675 (footnote omitted). The suits operate "to intimidate individuals and organizations that speak out against corporate decisions, development projects, government actions or operations, or other activities that affect their financial interests." Carson Hilary Barylak, Reducing Uncertainty in Anti-SLAPP Protection, 71 Ohio St. L.J. 845, 846 (2010). In other words, "[t]he SLAP-Ping party seeks not to secure a favorable judgment, but rather to engage in a retaliatory legal battle to stifle speech and mire a defendant in costly litigation. Such suits, by definition, are meritless." Benjamin Ernst, Fighting Slapps in Federal Court: Erie, the Rules Enabling Act, and the Application of State Anti-SLAPP Laws in Federal Diversity Actions, 56 B.C. L. Rev. 1181, 1182 (2015) (footnote omitted).
An anti-SLAPP statute responds to the threat posed by a SLAPP. "The intent of an anti-SLAPP statute is to encourage the exercise of free speech ... [,] afford a procedural protection to acts of communication on public issues ... [,] and screen out meritless claims." 71 C.J.S. Pleading § 675.
More than half of the states have passed some form of anti-SLAPP legislation. Ernst, supra, at 1182-83. Their scope varies widely:
Smolla, supra, § 9:109. "Some states attempt to limit coverage by the identity of the `slapper,' so to speak. Only when the underlying SLAPP suit is brought by a particular type of person or entity may the anti-SLAPP law's protection be invoked." Id. "In this sense these states limit their laws to the very traditional SLAPP suit paradigm, such as a developer who files a SLAPP suit against citizens who opposed a proposed project before a zoning board or power commission." Id.
Delaware adopted its anti-SLAPP statute in 1992. The General Assembly modeled the statute on a substantively identical bill under consideration by the New York legislature. See 1992 N.Y. Sess. Laws Ch. 767 (McKinney), codified at N.Y. Civ. Rights Law § 76-a (McKinney 2015). The Delaware statute applies to an "action involving public petition and participation," which it defines as an "action, claim, cross-claim or counterclaim for damages that is brought by a public applicant or permittee, and is materially related to any efforts of the defendant to report on, rule on, challenge or oppose such application or permission." 10 Del. C. § 8136(a)(1). It defines "public applicant or permittee" as "any person who has applied for or obtained a permit, zoning change, lease, license, certificate or other entitlement for use or permission to act from any government body." Id. § 8136(a)(4).
When a defendant moves to classify a lawsuit as a SLAPP, the statute initially places the burden on the "moving party [to] demonstrate[] that the action, claim, cross-claim or counterclaim subject to the motion is an action involving public petition and participation as defined in § 8136." Id. § 8137(a). If the lawsuit falls within the statute, then the plaintiff faces an incremental burden at every stage of the litigation. As noted, Section 8137 imposes a higher burden to survive a motion to dismiss. Id. If the action states a claim, then recovery is only possible if "the plaintiff, in addition to all other necessary elements, shall have established by clear and convincing evidence that any communication which gives rise to the action was made with knowledge of its falsity or with reckless disregard of whether it was false, where the truth or falsity of such communication is material to the cause of action at issue." Id. § 8136(b). If the case is unsuccessful, then the statute authorizes a discretionary award of attorneys' fees and compensatory damages. Id. § 8138. The statute even contemplates punitive damages, but only "upon an additional demonstration that the action ... was commenced or continued for the purpose of harassing, intimidating, punishing or otherwise maliciously inhibiting the free exercise of speech, petition or association rights." Id. § 8138(a)(2).
The Libel Defendants contend that this action implicates Delaware's anti-SLAPP statute because it is "clearly designed to use the legal system and lawyers' fees as a club to deter free speech." Dkt. 197, at 14. They maintain that "[t]he suit was obviously designed to send a message[:] `If you interfere with us, it will cost you money and lawyers' fees.'" Id. at 14-15. Based on a combination of factors, including the timing and content of the suit and the Libel Plaintiffs' history of pursuing similar actions, it is reasonable to infer at this stage that the Libel Plaintiffs filed their claims with that intent. But under Delaware's anti-SLAPP statute, intent is not enough. The claims must meet the statutory requirements.
As their statutory hook, the Libel Defendants' posit that they are "public applicant[s] or permittee[s]" because they received three "entitlements for use or permission to act" from this court. The first claimed entitlement is the order that Judy obtained from this court scheduling the 2013 Meeting. The Libel Defendants contend that the Fight Letter reported on the ultimate results of that meeting. See Dkt. 185 at 31-32. The second claimed entitlement is the court order "specifically designating [the PSI Directors] as elected as directors of PCSI." Id. at 32. The Libel
The determinative issue is the meaning of "other entitlement for use or permission to act." Delaware's anti-SLAPP statute does not define these words. The parties have not cited, and this court has not found, any helpful cases. This decision relies on the plain language of the statute to construe them. This decision also looks to legislative history, which corroborates the plain language construction.
"The starting point in statutory construction is to determine the legislative intent from the language of the statute itself. The statutory words should be given the meaning intended by the lawmakers." 82 C.J.S. Statutes § 410 (footnote omitted); accord Kofron v. Amoco Chemicals Corp., 441 A.2d 226, 230 (Del. 1982). "Where a statute is ambiguous, it should be interpreted in a way that will promote its apparent purpose and harmonize it with the statutory scheme." Del. Bd. of Nursing v. Gillespie, 41 A.3d 423, 427 (Del. 2012) (internal quotations and citation omitted).
When interpreting statutory language, Delaware courts deploy well-established canons of statutory interpretation. Id. One relevant canon is ejusdem generis, which
Gillespie, 41 A.3d at 427-28 (internal quotations omitted). Another relevant canon is noscitur a sociis, which requires that words "be interpreted in the context of words surrounding them." Zimmerman v. Crothall, 2012 WL 707238, at *7 (Del. Ch. Mar. 27, 2012) (citing Gutierrez v. Ada, 528 U.S. 250, 255, 120 S.Ct. 740, 145 L.Ed.2d 747 (2000)).
Both statutory canons indicate that the three court orders are not "other entitlement[s] for use or permission[s] to act." The canon of ejusdem generis calls upon the court to consider the enumerated entitlements that precede the phrase in question, which are "permit, zoning change, lease, license, [and] certificate." 10 Del. C. § 8137(a)(4). All relate to land use. The canon indicates that the words "other entitlement for use or permission to act" also relate to land use. Id.
The canon of noscitur a sociis requires the court to interpret words as part of the larger phrase in which they appear. Here, the words appear as part of the definition of "public applicant or permittee," which is defined as "any person who has applied for or obtained a permit, zoning change, lease, license, certificate or other entitlement for use or permission to act from any government body." 10 Del. C. § 8136(a)(4). Read in context, the "other entitlement for use" is something that a "public applicant or permittee" obtains, and it is part of a catch-all phrase that includes "permission to act." These concepts resonate with the theme of land use, where a "public applicant or permittee" obtains an entitlement "for use" in developing property or the "permission to act" regarding property.
The words and phrases that the General Assembly chose indicate that the types of
The text of Delaware's anti-SLAPP statute does not suggest, as the Libel Defendants claim, that the General Assembly sought to create an expansive shield against any lawsuit brought with an intent to muzzle or inflict retribution for free speech. If the General Assembly had intended to follow a broader course, then it would have used more sweeping language. California's anti-SLAPP statute provides a model for that approach:
Cal. Civ. Proc. Code § 425.16(e) (West 2015). Rather than using an expansive model, the General Assembly followed New York's lead. Courts applying New York's substantially identical statute have interpreted it narrowly and held that it is "available in only relatively rare circumstances."
Although the plain language of Delaware's anti-SLAPP statute is dispositive, the legislative history helpfully confirms the narrow construction. It reveals that the General Assembly focused on traditional SLAPPs relating to land use. The General Assembly was not seeking to establish a broad legal protection against defamation claims.
The most prevalent source of legislative history for a Delaware statute is the synopsis, which the Delaware Supreme Court has held is "a proper source for ascertaining legislative intent." Bd. of Adjustment of Sussex Cnty. v. Verleysen, 36 A.3d 326, 332 (Del. 2012). The synopsis for the anti-SLAPP statute states that the law "provides that a plaintiff who has applied for or obtained a permit, zoning change or other such governmental approval from a government body must prove `actual malice' in a lawsuit that is based on the defendant's opposition to such application or approval." Del. S.B. 228 syn., 136th Gen. Assem. (1991) (emphasis added). The synopsis thus substitutes the phrase "other such government approval" in place of "other entitlement for use or permission to act." This substitution indicates that the drafters regarded the concepts of "other entitlement" and "permission for use" as "governmental approvals" akin to a "permit" or a "zoning change." The synopsis thus underscores the focus on land use disputes.
Delaware's anti-SLAPP statute is a rare instance where floor debates also are available. In the State House of Representatives, the debate lasted about four minutes, and the lawmakers focused exclusively on SLAPPs relating to land use. Representative Charles Hebner stated, "Often times when something is happening in the zoning area or other similar situations, we have individuals who are intimidated by the larger corporations involved." Dkt. 189, Ex. B3 (audio recording). Representative George Bunting explained that he had been
Id.
The debate in the State Senate lasted about twenty-one minutes. The participants again focused exclusively on land use. Senator David P. Sokola, the sponsor of the bill, provided a brief background after another senator expressed confusion as to the bill's purpose. He discussed the general concept of SLAPPs, then gave an example in which a citizen faced a lawsuit after she made public comments about the expansion of a landfill. He expressed his desire to see citizens protected from "this kind of litigation." Dkt. 189, Ex. B1 (audio recording).
The Libel Defendants stress the following exchange between Senate Attorney Connolly and Senator Harris B. McDowell III, which they say supports a broad reading:
Dkt. 189 Ex. B2 (audio recording). The Libel Defendants interpret this exchange as evidencing legislative "concern that the statute might be interpreted too narrowly" and an intent that "approval of the bill should not be interpreted as excluding similar cases from the statute's coverage." Dkt. 192 at 18.
These comments will not bear the weight that the Libel Defendants' place on them. The overall thrust of the exchange was to recognize that the bill was limited to "a specific area" and did not provide a broader remedy. Senator McDowell accepted the limited scope of the bill. He was not concerned about its narrow scope, but rather that there was no express language to that effect. He cited "an implication" that the bill did not extend to other areas, and he expressed concern that this was not sufficient. He proposed making the narrow scope of the law explicit.
Senator McDowell also referred the example of a citizen testifying about a bill before the General Assembly, which is another area where citizens could come into conflict with powerful interests who could respond with retributive lawsuits. As a matter of common law, the citizen's testimony in that situation would be privileged and not subject to a defamation claim. See Restatement (Second) of Torts, § 590A ("A witness is absolutely privileged to publish defamatory matters as part of a legislative proceeding in which he is testifying... if the matter has some relation to the proceeding."). Senator McDowell's comments
The legislative history supports the conclusion that Delaware's anti-SLAPP statute does not apply to the entitlements on which the Libel Defendants rely. Because the Libel Plaintiffs' claims do not meet the statutory definition, the Complaint is not a SLAPP for purposes of Delaware's anti-SLAPP statute.
Even if the Libel Plaintiffs' claims do not fall within Delaware's anti-SLAPP statute, a heightened pleading standard still governs the Complaint if the Libel Plaintiffs are public figures. This decision holds that the Libel Plaintiffs are public figures for the limited purpose of election-related communications among the Company's investors.
"The law of libel enjoys a constitutional grounding." Ramunno v. Cawley, 705 A.2d 1029, 1035 (Del. 1998). The United States Supreme Court has restricted defamation claims brought by public figures in order to provide "breathing space" for the exercise of First Amendment rights. New York Times v. Sullivan, 376 U.S. 254, 298, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Public figures must establish two additional elements to prevail on a defamation claim. First, they bear the burden of pleading (and later proving) that the statements are false, as opposed to the common law rule under which truth operates as an affirmative defense. Doe v. Cahill, 884 A.2d 451, 463 (Del. 2005) (citing Philadelphia Newspapers v. Hepps, 475 U.S. 767, 106 S.Ct. 1558, 89 L.Ed.2d 783 (1986)). Second, they must plead (and later prove) that the defamatory statements were made with "actual malice," a term of art meaning that the maker knew the statement was false or acted with reckless disregard for the truth. Id. (citing Sullivan, 376 U.S. 254, 84 S.Ct. 710).
The question of whether a plaintiff is a public figure is "one of law, not of fact." Restatement (Second) of Torts § 580A cmt. c. There are two types of public figures: all-purpose and limited-purpose.
Gertz v. Robert Welch, Inc., 418 U.S. 323, 351, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). "Determining public or private figure status is no exact science." Smolla, supra, § 2:55. The "line between public figures and private individuals" can be thin. Rosanova v. Playboy Enters., Inc., 411 F.Supp. 440,
The United States Supreme Court has explained that the "rationale for extending the [actual malice standard] to public figures was two-fold." Wolston v. Reader's Digest Ass'n, Inc., 443 U.S. 157, 164, 99 S.Ct. 2701, 61 L.Ed.2d 450 (1979). First, "public figures are less vulnerable to injury from defamatory statements" because of "greater access ... to channels of effective communication, which enable them through discussion to counter criticism and expose the falsehood and fallacies of defamatory statements." Id. Second, "public figures are less deserving of protection than private persons because public figures, like public officials, have voluntarily exposed themselves to increased risk of injury from defamatory falsehood concerning them." Id. (internal quotation marks and citations omitted).
When individuals seek to serve as directors of an organization, they meet the second rationale for public figure status. An instructive precedent is Korbar v. Hite, 43 Ill.App.3d 636, 2 Ill.Dec. 158, 357 N.E.2d 135 (1976). The plaintiff, William C. Korbar, recently had been elected president of a credit union that a company maintained for its employees. The defendant, Thomas Hite, served as president of a union local whose members worked for the company and were members of the credit union. Hite wrote to Korbar and asked for a meeting to discuss issues of importance to the employees. He also wanted the credit union to allow members to withdraw the standing proxies they had signed in favor of management. Korbar declined to meet and denied that the credit union had ever refused any member's request to have his proxy revoked.
Hite then wrote an article titled, "Is Your Credit Union Above Board?" that appeared in the union's newspaper. The first paragraph read as follows:
Id. 2 Ill.Dec. 158, 357 N.E.2d at 136-37. The article went on to describe the communications between Korbar and Hite and to express Hite's views on a series of issues. Id., 2 Ill.Dec. 158, 357 N.E.2d at 137.
Korbar sued Hite for defamation. The trial court dismissed the claim, and the Appellate Court of Illinois affirmed. The Appellate Court held that Korbar had "thrust himself into the forefront of the action by virtue of being elected president" of the credit union and that "[i]n so doing, he invited attention and comment on his official conduct and policies." Id. 2 Ill.Dec. 158, 357 N.E.2d at 139. The Appellate Court posited that Korbar "could be deemed a public figure for all purposes" but found it "clear that in this context [that Korbar] may not use the protection afforded a private individual to insulate himself from such comment." Id.
Other courts similarly have held that candidates who seek to be elected to lead organizations become limited public figures for purpose of communications related
Under these precedents, the Libel Plaintiffs were public figures for the limited purpose of electoral-related communications. By becoming directors of PCSI, the Libel Plaintiffs voluntarily assumed roles in which they knowingly ran "the risk of closer public scrutiny." Gertz, 418 U.S. at 344, 94 S.Ct. 2997. As Chief Justice Strine has observed (admittedly in the context of a public company), corporate officers "should expect to endure publicity." Hampshire Gp., Ltd. v. Kuttner, 2010 WL 2739995, at *49 (Del. Ch. July 12, 2010) (Strine, V.C.). "Although they may not have committed a breach of fiduciary duty by exposing themselves to responsibility in damages, they cannot avoid responsibility in the more colloquial sense for presiding in important ways over the functions of the corporation that were not carried out properly." Id.
At PCSI, corporate functions had not been carried out properly for many years. The Libel Plaintiffs chose to seek positions as directors, and they prevailed at the 2013 Meeting through a contested proxy contest. They knew that the Association opposed them and was not going away, and they knew that both the Association and PCSI's other investors would be monitoring their actions. By running for and taking office as directors of PCSI, the Libel
The first rationale for limited-purpose public figure status also applies to the Libel Plaintiffs. The United States Supreme Court cited "greater access ... to channels of effective communication, which enable them through discussion to counter criticism and expose the falsehood and fallacies of defamatory statements," as a basis for public figure status. Wolston, 443 U.S. at 164, 99 S.Ct. 2701. As directors of the Company, the Libel Plaintiffs had access to internal corporate information they could use to respond to any allegations of misconduct. They could instruct the Company's employees to develop rebuttals to the Association's contentions. They could deploy corporate funds to communicate with investors by multiple means. They also controlled the content of the corporation's proxy statement and the form of its proxy card. The Libel Plaintiffs in fact utilized these resources by sending out the Response Letter. They also caused the Company to join them in suing the Libel Defendants for defamation and injurious falsehood, although the Company later dropped its claims, and they distributed copies of their complaint to the Company's investors.
This decision therefore concludes that the Libel Plaintiffs were public figures for the limited purpose of election-related communications among the Company's investors. Further support for this conclusion comes from cases holding that individuals can be public figures for the limited purpose of communications to a circumscribed group. When the Illinois Appellate Court held in Korbar that the president of a credit union whose members were company employees was a limited-purpose public figure, the court took into account that the allegedly defamatory article "was published in a union newspaper by a member of the credit union concerning a matter of general interest to the membership." 2 Ill.Dec. 158, 357 N.E.2d at 162. New Jersey's intermediate appellate court similarly held that an individual was a public figure for the limited purpose of statements made within the more esoteric community of Corvette restoration hobbyists where the individual had established himself as a public figure on the limited issue of Corvette restoration fraud. MacKay v. CSK Publishing Company, 300 N.J.Super. 599, 693 A.2d 546, 614 (App. Div. 1997). In this case, within the limited community of the Company's investors, the Libel Plaintiffs were public figures.
Because the Libel Plaintiffs are limited-purpose public figures, the Complaint only can survive a motion to dismiss if it supports reasonably conceivable inferences that (i) one or more particular statements in the Fight Letter were false and (ii) the Libel Defendants made the statements with actual malice. This decision next examines the three categories of statements that appeared in the Fight Letter and which the Libel Plaintiffs contend meet the requisite pleading standard.
In their primary claim, the Libel Plaintiffs assert that the Fight Letter "explicitly
The First Amendment of the United States Constitution generally protects expressions of opinion. See Kanaga v. Gannett Co., 687 A.2d 173, 177 (Del. 1996). This does not mean that there is a "wholesale defamation exemption for anything that might be labeled opinion." Id. (quoting Milkovich v. Lorain Journal Co., 497 U.S. 1, 18, 110 S.Ct. 2695, 111 L.Ed.2d 1 (1990)). Rather, the touchstone is whether "an ordinary reader of the statement" would regard the statement as an expression of opinion. Riley v. Moyed, 529 A.2d 248, 251 (Del. 1987).
To distinguish between fact and opinion, the Delaware Supreme Court has adopted the influential four-part test that the United States Court of Appeals for the District of Columbia Circuit first articulated in Ollman v. Evans, 750 F.2d 970, 979 (D.C. Cir. 1984). Riley, 529 A.2d at 251-52. "First, the Court should analyze the common usage or meaning of the challenged language. Second, the Court should determine whether the statement can be objectively verified as true or false. Third, the Court should consider the full context of the statement. Fourth, the Court should consider the broader social context into which the statement fits." Id.
The first factor examines the common usage or meaning of the allegedly defamatory statements. The purpose of this factor is to determine if the statement has a precise meaning, because "[r]eaders are... considerably less likely to infer facts
"Looting is a word used in a variety of contexts. The law has never precisely defined it."
The second factor is whether the truth or falsity of the statement is objectively verifiable. Accusing someone of "looting" is objectively verifiable if the term contemplates criminality. But as noted above, the concept of corporate looting can convey only a personal moral judgment. As such, it is a subjective belief that could not be proven true or false. See Riley, 529 A.2d at 252. The Fight Letter involved allegations of corporate looting, which carry connotations of moral judgment. The second factor therefore favors the Libel Defendants.
The third factor is the context of the statements within the writing as a whole. The Fight Letter as a whole makes clear that the Libel Defendants were not accusing the PSI Directors of the crime of looting, i.e. physical robbery,
The Libel Plaintiffs alternatively argue that the word "looter" connotes a violation of civil law. The term is sometimes used to describe a director's breach of fiduciary duty.
The language of the Fight Letter as a whole does not support an inference that the Looting Allegations contemplated criminal or illegal conduct. Rather, the language conveyed the Libel Defendants' hyperbolic characterization of the behavior described in the Fight Letter. Like the Looting Allegations, much of the tone of the Fight Letter is exaggerated,
The fourth factor is the broader social context or setting in which the statement appears. The Delaware Supreme Court has recognized that certain forms of writing "by their very nature ... are not a source of facts or data upon which a reasonable person would rely."
When analyzing the fourth factor, courts also have considered whether an adversarial relationship exists between the parties described in the communication. The United States Supreme Court has twice held that statements connoting criminality were not factual when made during a heated public debate.
Here, investors reading the Fight Letter knew that the Libel Plaintiffs and the Libel Defendants were staunch adversaries engaged in a lengthy battle over the Company. They knew that the two sides were supporting competing slates. They also knew from the Fight Letter that the Libel Defendants had sued the Libel Plaintiffs, and they knew from the Response Letter that the Libel Plaintiffs had counter-sued the Libel Defendants. Many of the recipients had participated in the Judy Litigation and knew about the Association's opposition to the PSI Directors from that legal campaign. Other recipients were
On balance, the four factors strongly favor the Libel Defendants and defeat any reasonable inference that the average reader would regard the Looting Allegations as statements of fact. A stockholder reading the Fight Letter would anticipate exaggerated characterizations of the Libel Plaintiffs' tenure as directors given the contested election and the acrimonious relationship between the parties. It is not reasonably conceivable that a recipient of the Fight Letter would regard the Looting Allegations as anything other than an expression of the Libel Defendants' opinion.
The Libel Plaintiffs next contend that the Concealment Allegations were defamatory because they suggest that the Libel Plaintiffs were compelled to provide information and take other steps regarding the Company that they actually agreed to do voluntarily. They focus on the statements that this court "ordered" the Libel Plaintiffs to provide books and records, "forced" the Libel Plaintiffs to hold the annual meeting, and entered a "restraining order prohibiting [the Libel Plaintiffs] from distributing any funds to preferred and common stock holders until the lawsuit in Delaware resolves the complaints." Compl. Ex. A, at 1-2. While conceding that court orders addressed each point, the Libel Plaintiffs complain that the statements are misleading because the orders were not entered over their objection, but rather as stipulated orders. Dkt. 189, at 32-33.
At common law, truth is an affirmative defense to a defamation action. Barker v. Huang, 610 A.2d 1341, 1350 (Del. 1992). In Delaware, it is sufficient that the statement is "substantially true." Ramunno, 705 A.2d at 1035. In language seized upon by the Libel Plaintiffs, the Delaware Supreme Court has cautioned against dismissing claims on the pleadings based on the defense of substantial truth: "[G]iven the unavoidably inferential nature of this inquiry, it is a rare case that may be dismissed under Rule 12(b)(6) on the rationale that the statements complained of are substantially true." Id. at 1036. That statement applies to dismissal of a defamation claim brought by a private plaintiff, where the defendant has the burden of establishing truth. See id. The statement accords with the general rule that "dismissal of [a] complaint based upon an affirmative defense is inappropriate."
Here, the Libel Plaintiffs are limited-purpose public figures, so they bear the burden of pleading falsity, i.e. that it is reasonably conceivable that the statements are not substantially true.
Moreover, the Libel Defendants' characterization is even more accurate considering the Libel Plaintiffs' conduct in this litigation. The Libel Plaintiffs opposed the Books and Records Action and the Meeting Action from the outset, and they contended in each that the petitioners were not entitled to any relief. In the Books and Records Action, the Libel Plaintiffs resisted producing documents, opting instead to dribble out materials and prompting the court (namely me) to comment: "It looks like [the Libel Plaintiffs] are doing the minimum possible to give yourself a colorable basis to argue that you've complied. I feel like I'm dealing with a teenager who is coming up with excuses." Dkt. 43, at 11. Particularly in light of this conduct, it is not reasonably conceivable that the Libel Plaintiffs could establish that the Fight Letter's statements about the orders were not substantially true.
The Libel Plaintiffs also challenge the statement in the Fight Letter that "the Court admonished them that they had to pay the accrued dividends and liquidation preference on preferred stock in liquidation." Compl. ¶ 34. The parties agree that this statement refers to an April 2014 teleconference in the Plenary Action. The Libel Plaintiffs contend that this statement is false because, in that teleconference, they agreed that the preferred stockholders were entitled to these payments. See Dkt. 6, at 14. Although that is true, the court (again me) admonished the Libel Plaintiffs all the same. I regarded it as "pretty obvious" that the preferred stockholders were entitled to these payments and noted based on my involvement in prolonged litigation involving the parties that the Company had a tendency to disregard basic principles of corporate law. Accordingly, I told both sides that "[p]eople need to run this on the up-and-up." I warned the Company, which was controlled at the time by the Libel Plaintiffs, "you better be complying scrupulously with what is in your charter documents and what this Court previously ruled. You better not be fooling around and you better not be pushing the envelope." Id. at 9. This was an admonition to the Libel Plaintiffs to cooperate fully on all of the matters presented by the litigation, including paying the preferred stockholders. It is not reasonably conceivable that Libel Plaintiffs could prove that the statement in the Fight Letter about this teleconference was not substantially true.
Finally, the Libel Plaintiffs point to a passage in the Fight Letter about litigation in Texas between the Company and its noteholders. It reads: "[T]he Company was forced kicking and screaming to settle. This loss shocked them to then change their plans and forced them to make payment on all the notes." Compl. Ex. A, at 1. The Libel Plaintiffs claim that this passage contains false statements because one cannot be "forced kicking and screaming to settle," and the settlement was not a "loss" that "forced them to make payments." Compl. ¶ 40.
None of these statements are defamatory. The statement of being "forced kicking and screaming to settle" is indeed nonsensical, which is also why it would be understood by a reader as hyperbole and not literal truth. See Bresler, 398 U.S. at 14, 90 S.Ct. 1537; Riley, 529 A.2d at 252. Calling the settlement a "loss" for the Company is a subjective assessment and protected opinion. And, as with the court orders, even though the outcome came about through a voluntary agreement, the consequence was that the Libel Plaintiffs were
The Libel Plaintiffs thus fail to state a claim as to the Concealment Allegations. Given this ruling, this decision need not address the Libel Defendants' claim that the Concealment Allegations are nonactionable under the fair report privilege.
This leaves the Payment Allegations. The Libel Plaintiffs have stated a claim as to these statements.
The Payment Allegations encompass the statements in the Fight Letter to the effect that the Libel Plaintiffs would cause the Company to breach its contractual obligations. The following paragraph is illustrative:
Compl. Ex. A, at 1 (emphasis added). A reader could interpret these statements as factual assertions about what the Libel Plaintiffs had told the Libel Defendants or set forth in their documents. The Libel Plaintiffs deny this, and it is reasonably conceivable at this stage of the case that the statements were false. It is also reasonably conceivable that the Libel Defendants knew the statements were false and hence acted with actual malice if, for example, the Libel Plaintiffs did not say these things or if their documents did not contain similar statements.
The Payment Allegations also encompass a statement in the Fight Letter that the PSI Directors had "tentative plans to merge [the Company] with either PSI, Smartcomm, and/or M2M and prolong[ ] any distributions to you." Compl. ¶ 46. A transaction with PSI, Smartcomm, or M2M would have been a related-party transaction.
The Libel Defendants have argued that this statement is substantially true and have submitted two exhibits as evidence. First, in April 2013 the Company's Board approved a $450,000 bonus for Knapp "on sale of the company or cumulative financing transactions greater than or equal to $10 million." Dkt. 185, Ex. U. Second, in a "Restated Repurchase Offer" in March 2015 the Company told its investors that "[i]n the event the Company is acquired by merger the purchaser could potentially offer a premium over the liquidation preferences and accrued dividends of the Preferred Stock." Id., Ex. V. Assuming for the sake of argument that the court can consider these documents, they do not suggest that the Libel Plaintiffs were considering a related-party transaction or that the purpose of a transaction was to "prolong[ ] any distributions" to the Company's investors. It is reasonably conceivable at this stage of the case that the statement in the Fight Letter was false and that the Libel Defendants knew it was false or acted with reckless disregard for the truth.
The Libel Plaintiffs contend that the Association's individual members "may be sued and judgment may be taken against them through suit against [the Association]
Under Delaware law,
10 Del. C. § 3904. "The basic purpose of [the statute] is to permit a noncorporate entity to sue, and be sued, in the name it presents to the public without the necessity of joining the various individuals who comprise the association."
By statute, the Libel Plaintiffs are permitted to sue the Association under a common name. All members of the Association are potentially liable in the event the Libel Plaintiffs are entitled to recover.
Counts II and III of the Complaint seek to impose secondary liability for defamation on all defendants. Count II frames the basis for secondary liability in terms of civil conspiracy. Count III frames the basis for secondary liability in terms of aiding and abetting. The Libel Defendants moved to dismiss these counts only on one ground: they require an underlying tort, and the defamation claim could not survive a motion to dismiss. This decision has held that the Libel Plaintiffs stated a claim for defamation as to the Payment Allegations. Consequently, the theories of secondary liability survive the motion to dismiss as to those statements.
The Libel Plaintiffs' claims are not subject to Delaware's anti-SLAPP statute. The Libel Plaintiffs are, however, limited-purpose public figures. Many of the statements in the Fight Letter are not defamatory, either because they are substantially true or expressions of opinion. Nonetheless,