JOHN C. COUGHENOUR, District Judge.
This matter comes before the Court on Plaintiffs and Defendants' motions for partial summary judgment (Dkt. Nos. 296 & 304). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS summary judgment for Plaintiff Richard Klein on Defendant Gregory Demopulos' defamation counterclaim, except as to Klein's posting of a biotech article about Defendant Omeros Corporation on Yahoo! Finance's stock message board, and otherwise DENIES both parties' motions, for the reasons explained herein.
Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the opposing party must show that there is a genuine issue of fact for trial. Id. at 331-33 & n. 3, 106 S.Ct. 2548. The Court resolves reasonable doubts as to the existence of material facts against the moving party and draws inferences in the light most favorable to the opposing party. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir.2000).
Klein brought several qui tam claims under the False Claims Act ("FCA") against Omeros and Dr. Demopulos. The Court previously dismissed several of them. (Dkt. No. 242.) Two remain. The first alleges that Omeros is liable under 31 U.S.C. § 3729(a)(1)-(2) for false claims submitted to the United States by Nura, Inc., a company purchased by a subsidiary of Omeros in 2006. Nura certified that it
Omeros argues that Klein's SBIR eligibility claim is barred by the FCA's statute of limitations. That statute provides:
A civil action under section 3730 [for false claims] may not be brought—
31 U.S.C. § 3731(b). Omeros argues that the § 3731(b)(2) tolling provision is not available to Klein because he is not an "official of the United States," and so § 3731(b)(1) bars Klein's claim because he filed his complaint more than six years after the latest alleged violation occurred. In United States, ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir.1996), the Ninth Circuit held that the § 3731(b)(2) tolling provision is available not only to the United States but also to qui tam plaintiffs like Klein, and that "as to the qui tam plaintiff, the three-year extension of the statute of limitations begins to run once [the] qui tam plaintiff knows or reasonably should have known the facts material to his right of action." Id. at 1217-18. Omeros argues that the U.S. Supreme Court implicitly overruled Hyatt in United States, ex rel. Eisenstein v. City of New York, 556 U.S. 928, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009). In Eisenstein, the Supreme Court held that when the United States has declined to intervene in a privately-initiated FCA action, it is not a "party" to the litigation for purposes of Federal Rule of Appellate Procedure 4(a)(1) and 28 U.S.C. § 2107, which allow sixty days to file a notice of appeal (rather than the default thirty) if one of the "parties" to the lawsuit is the United States. Id. at 937, 129 S.Ct. 2230. This is so, it held, despite the fact that the United States is the "real party in interest" to a qui tam lawsuit in which it has declined to intervene. Id. at 935, 129 S.Ct. 2230.
Eisenstein did not implicitly overrule Hyatt. To implicitly overrule a case, "the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable." Miller v. Gammie, 335 F.3d 889, 900 (9th Cir.2003). The Hyatt court's determination that § 3731(b)(2)'s tolling provision is available to qui tam plaintiffs did not rely on the assumption that the United States is a party to an FCA suit in which it has declined to intervene, or that the qui tam plaintiff otherwise "stands in the shoes" of the United States. Instead, it relied on the statutory language and structure of the FCA:
91 F.3d at 1214. Thus, Eisenstein did not "undercut the theory or reasoning underlying" Hyatt. Miller, 335 F.3d at 900. Hyatt's holding that the statutory language of the FCA evinces Congress' intent that the tolling provision apply to qui tam plaintiffs is not irreconcilable with Eisenstein's holding that the United States is not a "party" under Rule 4(a)(1) and 28 U.S.C. § 2107 to a qui tam lawsuit in which it has declined to intervene. The statute of limitations does not bar Klein's SBIR eligibility claim.
Klein argues that Omeros is liable for Nura's alleged false certifications through the federal common law of successor liability, and that an expanded version of such liability — traditionally applied in cases involving violations of federal labor laws-applies.
"[F]ederal law governs questions involving the rights of the United States arising under nationwide federal programs" like the FCA. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). But whether, in giving content to that federal law where the statutory scheme is silent, the court should "adopt state law or [] fashion a nationwide federal rule is a matter of judicial policy." Id. at 728, 99 S.Ct. 1448. The court considers (1) whether the federal program, by its very nature, requires uniformity; (2) whether application of state law would frustrate specific objectives of the federal program; and (3) whether application of a uniform federal rule would disrupt existing commercial relationships based on state law. Id. at 728-29, 99 S.Ct. 1448. "[M]atters left unaddressed in [] a [federal statutory] scheme are presumably left subject to the disposition provided by state law." O'Melveny & Myers v. FDIC, 512 U.S. 79, 85, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994); see Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358, 362 (9th Cir. 1997) (acknowledging "the heavy burden that a party bears in proving the need for uniformity or proving that state rules conflict with federal policy"). Here, then, the first question is whether the federal common law, or Washington's law, of successor liability applies to Klein's qui tam SBIR eligibility claim.
Klein does not address this question; rather, he assumes that federal common law applies. Meanwhile, Omeros addresses only Klein's argument that the expanded version of the federal common law of successor liability applies, without first addressing the question of whether state or federal common law applies. Fortunately, the Court need not address this question. If federal common law applies, the traditional exceptions to successor non-liability — not the expanded exception advocated by Klein — apply (see infra), and the traditional exceptions under federal common law are identical to those under Washington law:
Under the National Labor Relations Act ("NLRA") and several other federal labor acts, courts have applied a federal common law exception to the general rule of successor non-liability that is broader than the four traditional exceptions discussed above: "[S]uccessor liability can attach when 1) the subsequent employer was a bona fide successor," i.e., there was a sufficient "degree of business continuity between the successor and predecessor"; and "2) the subsequent employer had notice of the potential liability." Steinbach v. Hubbard, 51 F.3d 843, 845-46 (9th Cir.1995); see E.E.O.C. v. G-K-G, Inc., 39 F.3d 740, 747-48 (7th Cir.1994). "The reason for this special federal common law doctrine of successor liability — this departure from the more limited approach of the common law generally — is a little elusive." G-K-G, 39 F.3d at 748. It was "originally adopted under the NLRA to avoid labor unrest and provide some protection for employees against the effects of a sudden change in the employment relationship" and has since been "extend[ded]... to other [labor] contexts ... in order to vindicate important statutory policies favoring employee protection." Hubbard, 51 F.3d at 845. Klein argues that (assuming federal common law applies) this broader exception to the general rule of successor non-liability applies to qui tam claims under the FCA. The Ninth Circuit rejected a similar argument in Atchison. There, the plaintiff in a Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") case asked the court to extend the "mere continuation' exception" to successor non-liability to include the broader notion of a "substantial continuation."' Atchison, 159 F.3d at 364. The court declined. It held that the "four traditional exceptions to non-liability of asset purchasers ... are adequate to protect CERCLA's goal of obtaining cleanup costs from responsible parties." Id.
So here. Klein points the Court to no clear expression of intent on the part of Congress for the four traditional exceptions to successor non-liability not to apply under the FCA. See, e.g., United States v. Bestfoods, 524 U.S. 51, 70, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) (rejecting a reading of CERCLA as creating a "relaxed, CERCLA-specific [corporate veil-piercing] rule of derivative liability that would banish traditional standards and expectations from the law of CERCLA liability" because "such a rule does not arise from congressional silence, and CERCLA's silence is dispositive"). Klein makes no argument for why the four traditional exceptions do not adequately protect the FCA's goal of preventing fraud on the government, beyond generically asserting that "the FCA is designed to serve a broad, remedial interest in preventing fraud against the federal government." (Dkt. No. 323 at 5.) But the same kind of generic assertion applies equally to CERCLA. "The remedy that Congress felt it needed in CERCLA is sweeping: everyone who is potentially responsible for hazardous-waste contamination may be forced to contribute to the costs of the environmental cleanup." City of Los Angeles v. San Pedro Boat Works, 635 F.3d 440, 443 (9th Cir.2011) (quoting Bestfoods, 524 U.S. at 56 n. 1, 118 S.Ct. 1876) (indications of alteration omitted). Congress' intent to capture every potential wrongdoer with CERCLA was not enough to convince the Supreme Court to relax the traditional standards required to pierce the corporate veil. Bestfoods, 524 U.S. at 70, 118 S.Ct. 1876. And it was not enough to convince the Ninth Circuit to broaden the exceptions to successor non-liability. Atchison,
Unfortunately, the parties' briefing does not adequately address whether any of these four exceptions to successor non-liability applies. Instead, they argue over whether the broader — and inapplicable — exception under federal labor statutes applies (and whether there is a genuine issue of material fact as to that exception's two elements), and whether in the alternative Omeros' corporate veil should be pierced (an inquiry distinct from the successor liability inquiry). The Court will not decide the parties' summary judgment motions on such misfired briefing. Klein's and Omeros' motions for summary judgment on Klein's qui tam SBIR eligibility claim are DENIED. Having so decided, the Court need not reach Klein's argument that there is no genuine issue of material fact as to the scienter element of this claim. And having not ruled out the possibility of Omeros' liability as a successor to Nura, the Court will not address Klein's alternative request for leave to add Nura as a defendant.
In his response to Defendants' motion, Klein agreed to dismiss his SBIR eligibility claim against Dr. Demopulos and his 31 U.S.C § 3729(a)(7) claim against both Defendants. (Dkt. No. 327 at 2 n. 1.) The Court therefore does not address Defendants' arguments for summary judgment on those claims.
In Klein's second remaining qui tam claim, he alleges that Dr. Demopulos instructed employees to falsely record time on the Anxiety Grant. Dr. Demopulos moves for summary judgment on this claim. He argues that the only evidence supporting the claim — Klein's testimony that another employee, Dr. Bergmann, told Klein that Dr. Demopulos told Dr. Bergmann to falsely record time spent on the grant — is inadmissible hearsay. Klein responds that the testimony is admissible under Federal Rule of Evidence 801(d)(2)(D). Rule 801(d)(2)(D) provides that a statement offered against an opposing party that was made by the party's agent or employee on a matter within the scope of that relationship and while it existed is not hearsay. "Under circumstances where an employee's superior has instructed the employee to act in furtherance of a fraudulent scheme, statements made by the employee relating to that scheme are admissible against the superior under Fed.R.Evid. 801(d)(2)(D)." In re Sunset Bay Assocs., 944 F.2d 1503, 1519 (9th Cir.1991) (citing United States v. Gibson, 690 F.2d 697, 701 (9th Cir.1982)). Dr. Demopulos responds that "[i]t cannot ... have been the intention of the [Sunset Bay ] court to make such a wholesale exception to Rule 801(d)(2)(D)['s]" requirement that the speaker be an "agent" or "employee." (Dkt. No. 340 at 7.) But Sunset Bay creates no such "wholesale exception." In the circumstances covered by the Sunset Bay rule, the superior is treating the speaker as the superior's agent for carrying out the superior's fraudulent scheme. See Gibson, 690 F.2d at 701; see, e.g., Sunset Bay, 944 F.2d at 1519 ("Since Nosaka was allegedly instructed by his superior Jamieson to cover up a diversion
Dr. Demopulos argues that, even if the evidence is admissible, it is so weak that summary judgment should still be granted for him. To the contrary, the evidence presents the classic he-said, she-said scenario: Klein will testify that Dr. Bergmann told him that Dr. Demopulos instructed him to falsify time records, and Drs. Bergmann and Demopulos will testify to the contrary. The jury may decide whom to believe. Summary judgment for Dr. Demopulos on Klein's qui tam timekeeping claim is DENIED.
Klein alleges four instances of protected activity he engaged in for which he claims Omeros discharged him in violation of public policy. The first three occurred in November 2008. First, he reported to Omeros' audit committee that Dr. Demopulos refused to institute Klein's recommended signatory authority policy, which would have required Klein (the CFO) to approve large expenditures of company funds. Second, he reported that Omeros' controller submitted two years' worth of claimed business expenses late, which Klein was concerned would require the restatement of prior financial reports. Third, he reported that he had just learned that Omeros owed the Washington State Department of Revenue an $85,000 fine that was six months overdue and had not been disclosed in the company's prior financial statements. Finally, in December 2008, he reported that Omeros senior management had instructed employees to falsely record their time to the Anxiety Grant. Omeros moves for summary judgment on these claims.
To satisfy the elements of a cause of action for wrongful discharge in violation of public policy, the "plaintiff must prove (1) the existence of a clear public policy (clarity element); (2) that discouraging the conduct in which he or she engaged would jeopardize the public policy (jeopardy element); and (3) that the public-policy-linked conduct caused the dismissal (causation element)." Korslund v. DynCorp Tri-Cities Servs., Inc., 156 Wn.2d 168, 125 P.3d 119, 125 (2005) (quotation marks and indications of alteration omitted). Omeros argues that Klein's claim of wrongful discharge on the basis of his false timekeeping report fails as a matter of law because the FCA provides adequate means to protect the public policy of discouraging fraud on the government. See Korslund, 125 P.3d at 126 (in order to establish jeopardy, plaintiff "must show that other means of promoting the public policy are inadequate"). In response, Klein argues that his termination on the alleged basis of his false timekeeping report jeopardized other public policies in addition to those served by the FCA: protecting the integrity of the securities markets and "protecting investors" — policies evidenced by the federal Securities Act of 1933 (the "1933 Act") and the Washington State Securities Act ("WSSA"). He also argues that the other three reports he made to the audit committee (in November 2008) jeopardized those same public policies. In response, Omeros argues that Klein has cast the public policies evidenced by the 1933 Act and WSSA too broadly: Those acts do not "clearly" evidence a public policy of "protecting the integrity of the securities markets and protecting investors"; rather, they merely "proscribe[] fraud in connection with the purchase or sale of securities." (Dkt. No. 340 at 9.) To the contrary, in the words of the Washington Supreme Court, "the purpose of federal securities laws is to maintain the integrity
Omeros replies that Klein "has not shown that the alleged misconduct in his four reports ... violated the letter or policy of either [the 1933 Act or the WSSA]." (Dkt. No. 340 at 10.) But Klein need not prove that. The jeopardy element requires the plaintiff to "prove that his or her dismissal violates [or jeopardizes] a clear mandate of public policy," not that the employer's alleged misconduct did. Hubbard v. Spokane County, 146 Wn.2d 699, 50 P.3d 602, 607 n. 16 (2002) (quotation marks omitted and emphasis added); see id. at 609-10. All of Omeros' arguments for summary judgment on Klein's unlawful discharge claim fail. Its motion as to this claim is DENIED.
Klein's complaint includes a claim for breach of a promise of specific treatment in a specific situation, based on alleged promises contained in Omeros' whistleblower policy. That policy requires its employees to report instances of "questionable accounting, internal accounting controls, or auditing matters, or the reporting of fraudulent financial information." (Dkt. No. 306 Ex. W at 2.) It further provides, "We strictly prohibit any discrimination, retaliation, or harassment against any person who reports" such incidents. (Id. Ex. W at 3.) Klein alleges that he relied on the policy's assurances against discrimination, retaliation, or harassment in making the four reports discussed above and in not securing alternative employment thereafter, and that Omeros breached those assurances when it terminated him and subjected him to other adverse employment actions in retaliation for his reports. To establish a claim for breach of promise of specific treatment in a specific situation, the plaintiff must show that (1) a statement or statements in an employee handbook or similar document create a promise of specific treatment in specific situations; (2) the employee justifiably relied on the promise; and (3) the promise was breached. Korslund, 125 P.3d at 128.
Omeros moves for summary judgment as to Klein's three November 2008 reports. First, Omeros argues that the purported wrong doing "Klein reported in November does not fall into the category of "questionable accounting, internal accounting controls, or auditing matters, or the reporting of fraudulent financial information." The Encyclopedia of Banking and Finance defines accounting controls" as follows:
Charles J. Woelfel, Encyclopedia of Banking & Finance 10 (10th ed.1994). The alleged activity Klein reported in November evidenced questionable internal accounting controls as defined above. The company's lack of an official dual-signature policy requiring the CFO to sign off on large funds transfers, and the controller's failure to timely disclose an $85,000 assessment Omeros owed the Department of Revenue and his late submission of expense reports (both of which Klein was concerned had not been timely disclosed in Omeros' financial statements) all implicate "procedures and records dealing with the broad objectives of safeguarding assets and improving the reliability of financial records required for the preparation of [Omeros'] financial statements," "systems of authorization and approval, "or controls over assets." Woelfel at 10. Omeros claims that Klein does not dispute that he knew at the time of his report that the [$85,000] assessment arose from a misdirected fax" — i.e., a simple mistake and not a questionable internal accounting control. (Dkt. No. 340 at 11.) But Klein was allegedly concerned that the controller "had been aware of the [overdue assessment] but had failed to bring it to Klein's attention." (Dkt. No. 327 at 26.) That is a concern about "procedures ... dealing with improving the reliability of financial records." Woelfel at 10.
Next, Omeros argues that Klein cannot show the justifiable reliance element because "the issues he was reporting were issues he was required to oversee and manage," and so as a matter of law "he cannot claim that he relied upon the Policy protections in doing so." (Dkt. No. 304 at 31.) But whether Klein relied on the policy protections is a question of fact. That he was the CFO does not preclude a jury finding that he relied on the policy protections in making the reports. Omeros also contends that Klein has presented no evidence that he in fact relied on the policy protections when he made the reports. But even if he did not rely on those protections when he made the reports, a reasonable jury could conclude he relied on the protections when he declined a job offer with another company and chose to remain with Omeros through the IPO. (Dkt. No. 329 Ex. D at 108:18-20.) Contrary to Omeros' assertions, given this evidence, there is a genuine issue of material fact as to whether Klein was, as Omeros claims, "planning for his departure from Omeros" (Dkt. No. 304 at 33) such that he cannot establish justifiable reliance.
Omeros next argues that it "effectively disclaimed any modification of the at-will relationship" in the employee handbook, which states:
(Dkt. No. 306 Ex. Y at 13.) Swanson v. Liquid Air Corp., 118 Wn.2d 512, 826 P.2d 664 (1992) forecloses Omeros' argument. The disclaimer at issue in that case, like the disclaimer here, "purport[ed] to conclusively establish that all employees are terminable at will ... and that nothing defendant ever has done or ever will do by way of promises to employees can constitute a binding obligation on its part...." Id. at 674. The court "reject[ed] the premise that this disclaimer can, as a matter of law, effectively serve as an eternal escape hatch for an employer who may then make whatever unenforceable promises of working conditions it is to its benefit to make" because "[a]n employer's inconsistent representations can negate the
Id. at 676. The jury must make that examination here.
Finally, Omeros argues that Klein cannot show that he was treated any differently after he made the reports. But Klein stated in his deposition that Dr. Demopulos became upset "with him for reporting the $85,000 assessment (Dkt. No. 306 Ex. H at 15:11) and that there just seemed to be constant retaliation" and significant hostility toward "him as a result of that report (Id. Ex. H at 15:20-16:1); that every single time" he reported an issue to the audit committee, "[Dr. Demopulos] was very upset with [Klein]" (Id. Ex. H at 19:6); and that by the second time "(when he reported the signature policy issue), Dr. Demopulos sort of screamed at [Klein]" (Id. Ex. H at 19:7-8) and yell[ed] in [his] face, "(Id. Ex. H at 20:7) and that the similar pattern" of the hostility and the exclusion "escalated over time from that time forward" (Id. Ex. H at 20:2 4-21:2). A reasonable jury could find that such treatment constituted "discrimination, retaliation, or harassment" under the whistleblower policy. A reasonable jury could also find that Klein's ultimate termination was retaliation for all four of his reports, including the three on which Omeros moves for summary judgment.
There are genuine issues of material fact as to each of the elements of the breach-ofpromise claim. Summary judgment for Omeros is DENIED.
Dr. Demopulos alleges that Klein published several defamatory statements about Dr. Demopulos on the Web and to third parties. Allegedly, Klein said that Dr. Demopulos told employees to falsely record time to the Anxiety grant, that Dr. Demopulos attempted to avoid paying income tax, and that he earned $6 million as CEO of Omeros in 2007, all of which are false. Dr. Demopulos further alleges that these statements were defamatory per se, i.e., actionable without proof of special damages, because they injured him in his business, trade, or profession.
Under Washington law, a plaintiff alleging defamation must prove falsity, an unprivileged communication, fault, and damages. Commodore v. Univ. Mech. Contractors, Inc., 120 Wn.2d 120, 839 P.2d 314, 320 (1992). The parties dispute what showing Dr. Demopulos must make to be entitled to a presumption of damages. Klein argues Dr. Demopulos must prove actual malice. Dr. Demopulos contends that the defamatory statements did not involve a matter of public concern and so "presumed damages ... without proof of actual malice may be available." (Dkt. No. 315 at 29 (citing Maison de France, Ltd. v. Mais Oui!, Inc., 126 Wn.App. 34, 108 P.3d 787, 798 (2005)).) Klein's statements involved a matter of public concern: executive pay and adherence to the tax laws, and the false recording of time on a grant from the U.S. government. See, e.g., Alpine Indus., Computers, Inc. v. Cowles Publ'g Co., 114 Wn.App. 371, 57 P.3d 1178, 1191 (2002) (holding that a "story relat[ing] to a court decision resolving an intellectual property dispute between a major software manufacturer and a local retailer" was a matter of public concern because, although, [v]iewed narrowly, the story pertains to a private dispute between two business entities[,]
Klein moves for summary judgment on all of the alleged defamatory statements. Dr. Demopulos moves for summary judgment on some of them, with respect to the falsity, privilege, and fault elements only.
Dr. Demopulos alleges that Klein posted the above statement, along with a URL at which the reader could access Klein's original complaint in this lawsuit, on Yahoo! Finance's stock message board. (Dkt. Nos. 312 at 27 ¶ 29, 306 Ex. Z at 50.) The statement contained in this post is a combination of (1) a true factual assertion (the ex-CFO did file the lawsuit) and (2) an unactionable opinion ("not a pretty picture"). See Paterson v. Little, Brown & Co., 502 F.Supp.2d 1124, 1133 (W.D.Wash. 2007) (opinions are not actionable as defamation, and whether a statement is an opinion is a question of law). To the extent Dr. Demopulos contends that this statement was an act of defamation, summary judgment for Klein on this counterclaim is GRANTED, and summary judgment for Dr. Demopulos DENIED.
The parties dispute whether Klein's providing a URL at which the reader could access the original complaint was an act of defamation. The allegedly defamatory statements in the complaint are that several Omeros employees told Klein that Dr. Demopulos instructed them to falsely record time on the Anxiety Grant, and that Dr. Demopulos attempted to avoid paying income tax. "Allegedly libelous statements, spoken or written by a party or counsel in the course of a judicial proceeding [including in pleadings], are absolutely privileged...." McNeal v. Allen, 95 Wn.2d 265, 621 P.2d 1285, 1286 (1980); see Demopolis v. Peoples Nat'l Bank of Wash., 59 Wn.App. 105, 796 P.2d 426, 429-30 (1990). Klein argues that providing the URL did not republish the material in the complaint:
In re Phila. Newspapers, LLC, 690 F.3d 161, 175 (3d Cir.2012) (citations omitted). Dr. Demopulos responds that Klein ignores relevant Washington law on point. He cites to Momah v. Bharti, 144 Wn.App. 731, 182 P.3d 455 (2008), review granted, 165 Wn.2d 1027, 203 P.3d 378 (2009), and LaMon v. City of Westport, 44 Wn.App. 664, 723 P.2d 470 (1986), for the proposition that providing the URL constituted republication of the pleadings
Another federal district court confronted with similar facts came to the same conclusion under Kentucky law. In Salyer v. Southern Poverty Law Center, Inc., 701 F.Supp.2d 912 (W.D.Ky.2009), the defendant had published a defamatory article about the plaintiff. The defendant later published more articles that referenced the original article and included hyperlinks to it. The question was whether the reference plus hyperlink constituted "republication" of the original article such that it was a separate act of defamation. The court held that it did not. It first observed that the new articles, like Klein's posting here, "made no specific mention of [the defamation] Plaintiff." Id. at 915. It then observed:
Id. at 916 (first emphasis added). The court went on to hold that the hyperlink was more analogous to a reference than to a separate publication: "[T]he hyperlink is simply a new means for accessing the referenced article. Making access to the referenced article easier does not appear to warrant a different conclusion from the analysis of a basic reference." Id. at 917; accord Sundance Image Tech., Inc. v. Cone Editions Press, Ltd., No. 02 CV 2258 JM (AJB), 2007 WL 935703, at *7 (S.D.Cal. Mar. 7, 2007) (in case applying California law, "Plaintiff cites no authority holding that providing links to statements already published on the Web, without more, republishes those statements"); Goforth v. Avemco Life Ins. Co., 368 F.2d 25, 29 n. 7 (4th Cir.1966) (under North Carolina law, "a mere reference to another writing which contains defamatory matter does not constitute an actionable repetition or republication of that libelous material").
The same "common thread" observed in Salyer runs through Washington republication law. See, e.g., Herron v. KING Broad. Co., 109 Wn.2d 514, 746 P.2d 295, 300 (1987) (adopting Restatement (Second) of Torts § 577A and holding that separate incident of publication occurred when broadcaster revised and read earlier-broadcasted defamatory report); see Momah, 182 P.3d at 467 ("the
Klein argues that the above statement, which he posted on the stock message board (Dkt. No. 312 at 28 ¶ 30), is an un-actionable opinion. The Court agrees. It expresses the author's personal view that the lawsuit is meritless and his "theory" that it is the cause of the depressed stock price. Summary judgment for Klein on this counterclaim is GRANTED.
Klein also posted on the stock message board the text of an article entitled, "Scandal Provides Another Reason Omeros Might Not Be the Best Biotech IPO Bellwether." Dr. Demopulos' counterclaim alleges that the following excerpt from the article was defamatory:
(Dkt. No. 312 at 28 ¶ 31.) Both Klein and Dr. Demopulos move for summary judgment on this defamation counterclaim.
Klein first argues that this statement is an un-actionable opinion by virtue of Klein's posting it on an internet chat board where "postings are filled with colorful language, typos and exaggerations." (Dkt. No. 296 at 25.) But Klein's post is not filled with such things. Klein further argues that the post is an un-actionable opinion because it does not imply undisclosed facts: The article specifically outlines the facts behind the author's contention that Omeros's public offering was not a "bellwether." (Id.; see Paterson, 502 F.Supp.2d at 1134 (whether a statement is an un-actionable opinion depends on the medium and context, the audience, and whether the statement implies undisclosed facts).) That may be true, but it also asserts the fact that Dr. Demopulos attempted to avoid paying taxes.
Klein next argues that the statement is true and thus not defamatory, because "Klein reasonably believed that Demopulos attempted to avoid paying taxes." (Dkt. No. 296 at 27.) Dr. Demopulos rightly responds that falsity does not depend on the speaker's reasonable belief. A statement is provably false if "it falsely describes the act, condition or event that comprises its subject matter." Schmalenberg v. Tacoma News, Inc., 87 Wn.App. 579, 943 P.2d 350, 357 (1997). If Dr. Demopulos
Klein next argues that the privilege for reporting on official actions and proceedings — traditionally afforded to media defendants — applies to the statement. See Herron v. Tribune Publ'g Co., Inc., 108 Wn.2d 162, 736 P.2d 249, 260-61 (1987); Mark v. Seattle Times, 96 Wn.2d 473, 635 P.2d 1081, 1089 (1981). But "[a] person cannot confer this privilege upon himself by making the original [privileged] defamatory publication himself and then reporting to other people what he had stated. This is true whether the original publication was privileged or not." Restatement (Second) of Torts § 611. Klein argues that this self-reporting exception to the reporting privilege applies "only if the defamer illegitimately fabricated or orchestrated events so as to appear in a privileged forum in the first place" and that "[t]here is no evidence that Klein put the statements in his Complaint merely to confer on himself a privilege for future publications." (Dkt. No. 323 at 13 (citing Rosenberg v. Helinski, 328 Md. 664, 616 A.2d 866, 876 (Ct.App.Md.1992)).) Klein cites to no Washington cases so limiting the Restatement § 611 exception. See Alpine Indus., 57 P.3d at 1185 (observing that "the more recent Washington opinions discussing the fair reporting privilege rely to some degree on Section 611 of Restatement (Second) of Torts"). The Court will not allow such a tenuous claim of privilege to prevent a jury from hearing the evidence on Dr. Demopulos' claim.
Klein argues that there is no genuine issue of fact as to whether Klein made the tax-evasion statement maliciously, which Dr. Demopulos needs to show to prove defamation per se. "`[A]ctual malice'... [means] not ill will or spite but rather the publisher's knowledge that his statements are false or his reckless disregard for their falsity." Tribune Publ'g, 736 P.2d at 255. "Reckless disregard"
In response to a thread beginning with "Lawsuit filed by ex-CFO," and in a separate thread under the subject line, "CEO paid $6 million!!!," Klein posted the following:
(Dkt. No. 312 at 29 ¶ 32.) Both parties move for summary judgment as to this allegedly defamatory statement. Klein argues that the statement is true — it is a verbatim excerpt from an SEC filing — and therefore not an act of defamation. Dr. Demopulos responds that it is false because it leaves out footnotes (1) and (3) in the SEC filing that clarify that about $5.3 million of the $6.3 million was the estimated value of non-cash stock and stock options awarded to Dr. Demopulos that year. (Dkt. No. 297 Ex. BB at 8.) In Washington,
Mohr v. Grant, 153 Wn.2d 812, 108 P.3d 768, 776 (2005). Here, Klein's statement about Dr. Demopulos' compensation does not leave a false impression that would be contradicted by the inclusion of the omitted footnotes. The statement leaves the impression that Dr. Demopulos was compensated to the tune of $6 million. The footnotes do not contradict that impression. They merely clarify that some of that compensation was not in the form of cash. Summary judgment for Klein on this counterclaim is GRANTED; summary judgment for Dr. Demopulos is DENIED.
Dr. Demopulos' defamation counterclaim contains the allegation that Klein defamed him by "repeat[ing] the false and malicious statements contained in his complaint to [] third parties," including to Richard Totorica. (Dkt. No. 312 at 29 ¶¶ 33-34.) Klein moves for summary judgment on this claim, arguing that it is impermissibly
(Dkt. No. 315 at 28-29.)
Dr. Demopulos' pleadings, taken together with this evidence, fail to state a claim for defamation, let alone create a genuine dispute of fact. "[W]here a plaintiff seeks damages for conduct which is prima facie protected by the First Amendment, the danger that the mere pendency of the action will chill the exercise of First Amendment rights requires more specific allegations than would otherwise be required." Flowers v. Carville, 310 F.3d 1118, 1130 (9th Cir.2002) (quotation marks and indications of alteration omitted); see, e.g., Harris v. City of Seattle, 315 F.Supp.2d 1112, 1123-24 (W.D.Wash.2004) (dismissing plaintiffs defamation claim because "Plaintiff does not specify specific statements by these Defendants that were defamatory"); Phillips v. World Publ'g Co., 822 F.Supp.2d 1114, 1118 (W.D.Wash. 2011) (dismissing defamation claim because "[n]owhere in the complaint has plaintiff alleged when or where such statements were made, or what statements were actually made by defendant," and concluding that "such scattershot and unsubstantiated allegations cannot withstand a motion to dismiss"). Here, all that Dr. Demopulos' pleadings, taken together with the evidence he has identified, show is that Klein "discussed" the "issue" of his "allegation that Dr. Demopulos directed the improper recording of time on the grant" with Totorica, and that he "discussed what was in the complaint" with a "lot of people." "Discussing" an allegation is not the same thing as republishing it. Dr. Demopulos has not shown that he can prove that Klein published to Totorica or others any specific allegedly defamatory statements. Instead, the pleadings and evidence identified above leave the jury to speculate as to whether Klein did in fact publish such statements, and if so, which ones, and to whom — let alone whether he published such statements with malice. See Flowers, 310 F.3d at 1131 ("Actual malice is a subjective standard that turns on the defendant's state of mind; it is typically proven by evidence beyond the defamatory publication itself."); British Airways Bd. v. The Boeing Co., 585 F.2d 946, 952 (9th Cir.1978) ("in opposing a motion for summary judgment, [a] mere scintilla of evidence will not do, for a jury is permitted to draw only those inferences of which the evidence is reasonably susceptible; it may not resort to speculation"). Summary judgment for Klein on these third-party defamation counterclaims is GRANTED.
For the foregoing reasons, the parties' cross-motions for summary judgment on Klein's qui tam SBIR eligibility claim against Omeros are DENIED; Dr. Demopulos' motion for summary judgment on Klein's qui tam false timekeeping claim is DENIED; Omeros' motion for summary judgment on Klein's claim of unlawful discharge in violation of public policy is DENIED;