Key Decisions

November 2013 – A Press Release Was Actionable

(filed under: Key Decisions | November 20, 2013)

A Press Release Was Actionable

GetFugu, Inc. v. Patton Boggs LLP
(Cal. Ct. of App., 2d Dist.), filed October 3, 2013, published October 3, 2013

KEY FACTS

Davies and Warnock filed a civil action under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) on behalf of themselves as well as GetFugu shareholders, alleging claims arising from RICO violations, breaches of fiduciary duty, fraud, breach of contract and conspiracy. Davies and Warnock were represented by Richard Oparil of the Patton Boggs law firm, and Iman Reza of the Cummins & White law firm.

The district court dismissed the state law claims without prejudice, ruling it would not exercise supplemental jurisdiction to hear them. Davies and Warnock appealed the district court’s order. They also filed a state court action pursuing the claims the district court dismissed without prejudice.

Oparil issued a press release implying that the FBI was investigating GetFugu and several of its officers in conjunction with an investment scam. Oparil also wrote a “tweet,” stating “GetFugu runs an organization for the benefit of its officers and directors, not shareholders and employees. The RICO suit was not frivolous. The 500K[sic] lawsuit is frivolous, however, so buyer be wary.”

GetFugu and several officers and directors sued Oparil, Patton Boggs, Reza and Cummins & White for defamation. They responded by filing an anti-SLAPP motion. The trial court granted the motion.

HOLDING & REASONING

The Court of Appeal affirmed as to Reza and Cummins & White, but reversed as to Oparil and Patton Boggs.

The Legislature enacted the anti-SLAPP statute to discourage lawsuits filed to chill public participation. It accomplished this by providing a means of quickly disposing of such lawsuits.

Acts in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue includes any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest.

Investment scams, involving publicly traded corporations, are matters of public interest. Oparil and Patton Boggs met their burden of showing the press release involved a matter of public interest. However, GetFugu satisfied its burden of showing its claims were potentially meritorious. It submitted evidence showing it was not being investigated.

The court rejected Oparil and Patton Boggs’ assertion that the press release was subject to the litigation privilege.

The usual formulation of the litigation privilege is that it “applies to any communication: (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” The principal purpose of the litigation privilege “is to afford litigants and witnesses citation the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions.” The litigation privilege “promotes the effectiveness of judicial proceedings by encouraging ‘open channels of communication and the presentation of evidence’ in judicial proceedings.” However, “republications to nonparticipants in the action are generally not privileged under [the litigation privilege], and are thus actionable unless privileged on some other basis.”

The republished press release was not protected by the litigation privilege.

The court noted:

The litigation privilege should not be extended to “litigating in the press.” Such an extension would not serve the purposes of the privilege; indeed, it would serve no purpose but to provide immunity to those who would inflict upon our system of justice the damage which litigating in the press generally causes: poisoning of jury pools and bringing disrepute upon both the judiciary and the bar.

Although the press release was actionable, the “tweet” was not. It was a nonactionable expression of opinion and could have been seen as nothing more.

ANALYSIS

This case offers an example of what can go wrong when parties “litigate in the press.” [InFlatley v. Mauro, 39 Cal.4th 299 (2006), a prospective plaintiff threatened to go to the press with defamatory claims. Her attorney was sued for civil extortion.] Here, Oparil didn’t threaten to go to the press; he just went to the press. He even framed the press release so it implied — but didn’t expressly say — there was an FBI investigation. Nonetheless, it was enough to create possible defamation liability.