Re: 11/15/01 - [USAV/CPXP] Opinion: Computer Express Inc. v. Lee Jackson et al. (part 2 of 3)
(2) Public interest
The remaining issue is whether defendants' statements on the Web sites were made ``in connection with an issue of public interest.'' (§ 425.16, subd. (e)(3).) Global Telemedia International, Inc. v. Doe, supra, 132 F.Supp.2d 1261 (Global Telemedia) involved closely analogous facts. The plaintiff, a publicly traded company, sued the defendants for trade libel and interference with prospective economic advantage based on messages the defendants posted on the Raging Bull bulletin boards. The messages criticized the plaintiff and its management.
The court held the messages concerned a public issue for purposes of section 425.16. It noted the plaintiff was a publicly traded company with as many as 18,000 investors and had inserted itself into the public arena by means of numerous press releases. (Global Telemedia, supra, 132 F.Supp.2d at p. 1264.) The court in Wollersheim similarly stated, albeit in dictum, that examples of matters of public interest may include activities of private entities that may impact the lives of many individuals, such as ``product liability suits, real estate or investment scams, etc.'' (Wollersheim, supra, 42 Cal.App.4th 628, 650.)
Here, like the plaintiff in Global Telemedia, ComputerXpress is a publicly traded company. Although the record does not appear to indicate how many shareholders it has, indications of the number of ComputerXpress shares outstanding vary from 12,000,000 to 24,000,000. ComputerXpress's allegation that it lost $10,000,000 as a result of failure of potential investors to purchase its stock due to defendants' conduct further suggests its public importance is at least comparable to that of the plaintiff in Global Telemedia. We also note ComputerXpress apparently made use of press releases in an effort to promote the company.
ComputerXpress argues that statements of one company regarding a competitor company do not fall within section 425.16, citing Globetrotter Software, Inc. v. Elan Computer Group, Inc. (N.D. Cal. 1999) 63 F.Supp.2d 1127. The court in Global Telemedia distinguished Globetrotter Software on the basis that the defendants in Global Telemedia were not in the plaintiff's business or a competing business and ``were speaking not as competitors, but simply as investors.'' (Global Telemedia, supra, 132 F.Supp.2d at p. 1266.) The same appears to be true here. Although defendants at one time contemplated a merger with ComputerXpress, the record does not indicate the defendants who published the Web site messages were in competition with ComputerXpress when they made the postings. Further, the tenor of the messages indicates defendants were speaking ``as investors'' rather than competitors (ibid.), as the comments in the messages appear to have been directed at existing or potential shareholders rather than potential customers. For these reasons, we conclude the record contains adequate prima facie evidence that defendants' Internet messages were made in connection with an issue of public interest.
b. SEC complaint
Defendants' papers in support of their motion to strike showed that on March 12, 2000, defendants Lee Jackson and Tom Mitchell sent to the SEC a letter of complaint against the corporate predecessor to ComputerXpress and its officers and directors. The complaint stated the company had issued press releases which allegedly distorted or exaggerated the facts, driving the stock prices up. The complaint also stated the company president had participated in Internet marketing letters that were much like chain letters and had publicly promoted a stock prior to the public release date. Finally, it stated the authors believed unrestricted stock had been issued to company principals without proper disclosure.
Defendants contend their filing of the complaint with the SEC, and subsequently posting the complaint on the Internet, fell within section 425.16, subdivision (e) as (1) a statement before an official proceeding, (2) a statement in connection with an issue under consideration in an official proceeding, (3) a statement in a public forum in connection with an issue of public interest, and/or (4) other conduct in furtherance of the right of petition or free speech in connection with an issue of public interest.
We have little difficulty concluding that the filing of the complaint qualified at least as a statement before an official proceeding. ComputerXpress contends defendants failed to show the subject of their complaint was ever ```under consideration or review by''' the SEC. However, the purpose of the complaint was to solicit an SEC investigation. In the analogous context of the privilege under Civil Code section 47 for a statement in an official proceeding, the California Supreme Court has observed that the term ``official proceeding'' ``has been interpreted broadly to protect communications to or from governmental officials which may precede the initiation of formal proceedings.'' (Slaughter v. Friedman (1982) 32 Cal.3d 149, 156, second italics added.) Thus, ```communication to an official administrative agency . . . designed to prompt action by that agency''' is ```as much a part of the ``official proceeding'' as a communication made after the proceedings had commenced.''' (Kim v. Walker (1989) 208 Cal.App.3d 375, 383; accord, Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 30.)
ComputerXpress notes that investigations and, in some cases, hearings conducted by the SEC are not public. However, in Braun v. Chronicle Publishing Co., supra, 52 Cal.App.4th 1036 the court held an investigative audit, conducted by the State Auditor, was an official proceeding for purposes of section 425.16 even though it was closed to the public. The court reasoned that the audit was ``an authorized, public proceeding'' because it was ``government-sponsored and provided for by statute.'' (Braun, supra, at p. 1049.) The same is true of SEC proceedings, whether or not they are public.
ComputerXpress contends that, even if the filing of the SEC complaint fell within section 425.16, the posting of it on the Internet was not connected to any official proceeding and therefore was not protected. For the reasons set forth in part II.B.2.a., ante, with respect to defendants' other Internet postings concerning ComputerXpress, we conclude the posting of the complaint amounted to a statement in a public forum in connection with an issue of public interest. ComputerXpress's possible securities law violations qualified as an issue of public interest to the investing public just as its management and performance did. The posting of the complaint therefore also fell within section 425.16.
C. Probability of Prevailing
As we have determined that the Internet postings and SEC complaint fell within section 425.16, ComputerXpress's fourth and sixth through ninth causes of action based on that conduct were subject to a motion to strike unless ComputerXpress showed a probability of prevailing on those claims. (§ 425.16, subd. (b)(1).) To show a probability of prevailing for purposes of section 425.16, a plaintiff must `````make a prima facie showing of facts which would, if proved at trial, support a judgment in plaintiff's favor.''''' (Kyle v. Carmon, supra, 71 Cal.App.4th 901, 907.) This standard is ``similar to the standard used in determining motions for nonsuit, directed verdict, or summary judgment,'' in that the court cannot weigh the evidence. (Id., at p. 907; accord, Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 827.) However, the plaintiff ``cannot simply rely on the allegations in the complaint'' (Paul for Council v. Hanyecz (2001) 85 Cal.App.4th 1356, 1364, fn. 5), but ``must provide the court with sufficient evidence to permit the court to determine whether `there is a probability that the plaintiff will prevail on the claim.''' (DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, 568, italics added.) We must determine whether the evidence submitted by ComputerXpress satisfied that standard. 3
1. Fourth cause of action --- trade libel
Trade libel is the publication of matter disparaging the quality of another's property, which the publisher should recognize is likely to cause pecuniary loss to the owner. (Leonardini v. Shell Oil Co. (1989) 216 Cal.App.3d 547, 572.) The tort encompasses ``all false statements concerning the quality of services or product of a business which are intended to cause that business financial harm and in fact do so.'' (Ibid.) To constitute trade libel, a statement must be false. (Leonardini v. Shell Oil Co., supra, 216 Cal.App.3d 547, 572.) Since mere opinions cannot by definition be false statements of fact, opinions will not support a cause of action for trade libel. (Hofmann Co. v. E. I. Du Pont De Nemours & Co. (1988) 202 Cal.App.3d 390, 397.)
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3 ComputerXpress filed two sets of papers presenting evidence in opposition to defendants' motion to strike. The court refused to consider the second set, which was filed late. We have reviewed the supplemental papers and conclude that, even considering the evidence there set forth, ComputerXpress failed to establish a probability of prevailing on its fourth and sixth through ninth causes of action. We therefore need not decide whether the trial court should have considered the papers.
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In most cases, whether a statement is fact or opinion is a question of law. (Hofmann Co. v. E. I. Du Pont de Nemours & Co., supra, 202 Cal.App.3d 390, 397.) To decide whether a statement is fact or opinion, a court must put itself in the place of an average reader and determine the natural and probable effect of the statement, considering both the language and the context. (Id., at p. 398.) However, where a statement is ambiguous or susceptible of an innocent meaning, it is incumbent upon the plaintiff to plead the facts showing its defamatory meaning. (Nichols v. Great American Ins. Companies (1985) 169 Cal.App.3d 766, 774.)
ComputerXpress failed to demonstrate how defendants' Internet postings, on which the fourth cause of action is based, were false or defamatory. In fact, it has not even identified which of the numerous postings included in the record it contends were actionable. Instead, ComputerXpress simply refers this court to the 131 pages of Internet postings contained in the record, apparently assuming it is the court's obligation to determine how they support ComputerXpress's position.
This is a wholly unacceptable method of appellate advocacy. Rule 15(a) of the California Rules of Court provides: ``The statement of any matter in the record shall be supported by appropriate reference to the record.'' It is not the duty of a reviewing court to search the record for evidence on a point raised by a party whose brief makes no reference to the pages where the evidence can be found. (Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1093; Metzenbaum v. Metzenbaum (1950) 96 Cal.App.2d 197, 199.)
Moreover, having reviewed them, we find nothing in the Internet postings which would satisfy the requirements for trade libel as discussed ante. The court in Global Telemedia, supra, 132 F.Supp.2d 1261 granted a motion to strike a trade libel claim pursuant to section 425.16 under closely analogous circumstances. The defendants posted allegedly libelous statements about the plaintiff, a publicly traded company, on the Raging Bull message boards. The court concluded the company had not shown a probability of prevailing, because ``the general tenor, the setting and the format'' of the postings strongly suggested they were opinion. The postings ``were part of an on-going, free-wheeling and highly animated exchange'' about the company and were ``full of hyperbole, invective, short-hand phrases and language not generally found in fact-based documents, such as corporate press releases or SEC filings.'' Therefore, they lacked ``the formality and polish typically found in documents in which a reader would expect to find facts.'' (Id., at p. 5.)
Among the postings the Global Telemedia court found not actionable were statements that: the company's public relations documents gave it the appearance of being ```high tech,''' but its products were ```slow or non-existent'''; the company was steering a ```sinking ship'''; investors were ```being manipulated by the company so that they can fly the coop again'''; shareholders had been ```screwed out of your hard earned money''' and it was ```time to talk about a lawsuit'''; and the principals of the company were guilty of ```blatant mismanagement''' and would hold shareholders' money and ```dictate after they lie how it will be used.''' (Global Telemedia, supra, 132 F.Supp.2d at pp. 1268-1269.) The court found these statements would be seen by a reasonable reader as mere invective of a disgruntled shareholder, ``probably not written by someone with authority or firm factual foundations for his beliefs.'' (Id., at p. 7.) Therefore, the statements could not have had the alleged defamatory effect of causing the company's stock to lose value.
The Internet postings in this case were comparable in tone and substance to those in Global Telemedia. Without citing any specific postings, the complaint alleged four defamatory statements: ``that the computer product featured on Plaintiff's own website was of inferior quality, that Plaintiff was merely a stock `scam' certain to be out of business within thirty days, that the officers and directors of Plaintiff were illegally conspiring with marketmakers for the company's stock to manipulate its value, that one of Plaintiff's officers or directors had filed bankruptcy, etc.'' Our own review of the postings indicates the following disparaging statements:
ComputerXpress's stock fluctuated dramatically because ``they never have real substance behind their news, IMO,'' 4 so that ``the suckers jump in before verifying anything'' and then ``jump out when they see it was more BS than PR.''
``[A]n officer/director (former?)'' of ComputerXpress had ``declared recent bankruptcy.'' Two days later, this statement was clarified to state that a corporation owned by the former president of ComputerXpress had ``filed for chapter 7 bankruptcy in October of 1999.''
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4 It is apparent from another posting that the abbreviation ``IMO,'' which appears in many other postings as well, stands for ``in my opinion.''
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Investors were ``either swallowing complete bull'' or ``participating in what I think is a fraud'' and should not be surprised if the ComputerXpress promoters ``try to continue this for another 30 days (the time they have to comply or revert to pink sheets) to suck out as much as they can . . . .''
The ComputerXpress promoters acted as they did because ``greed set in; and a belief that they cou[l]d `operate under the radar' and get away with whatever they wanted to because there was not enough official care to be concerned about. I firmly believe that they care nothing about generating a genuine business, and everything about selling the stock . . .
.''
When ComputerXpress announced the intended merger with defendants' businesses to the public, it had already filed a letter with the SEC promoting a different type of affiliate program not mentioned to the public until months later. ``[I]s that fraud?'' ``You guys really seem to think you can sucker a lot of people all the time!''
``When the people who have . . . been duped into this stock realize the scam they were coaxed into, my guess is there will be hell to pay.''
``[W]ill someone please tell me why ANYONE would believe ANYTHING these guys and their pump and dump supporters say?''
As is apparent from this recitation, while the postings certainly could be considered disparaging, their tone and content identified them as statements of opinion and not fact. Like the postings in Global Telemedia, they were hyperbolic, informal, and lacked the characteristics of typical fact-based documents. Moreover, they were replete with explicit statements of opinion, such as ``IMO [in my opinion],'' ``what I think is a fraud,'' ``I firmly believe,'' ``is that fraud?'' and ``my guess is.''
Other statements, such as the asserted inconsistency between ComputerXpress's public relations releases and its actual operations, or the assertion that its promoters only cared about selling stock and not about generating a genuine business, were too vague to be taken as fact by a reasonable reader. In the few instances in which the postings did contain apparent statements of facts --- such as the statement that a company owned by the former president had filed for bankruptcy, or that ComputerXpress had 30 days ``to comply or revert to pink sheets'' --- ComputerXpress failed to present evidence that the statements were false.
This court has observed that, because section 425.16's requirement that a plaintiff establish a probability of prevailing ``is intended to `provid[e] a fast and inexpensive unmasking and dismissal of SLAPP's,''' a more lenient standard would not be appropriate. (Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 16.) Although ComputerXpress's displeasure at the Internet postings involved here is understandable, despite two opportunities to demonstrate that the postings constituted false and defamatory statements of fact, ComputerXpress failed to do so. ComputerXpress therefore failed to establish a probability of prevailing on its cause of action for trade libel.
2. Sixth cause of action --- interference with prospective economic advantage
ComputerXpress's claim for interference with prospective economic advantage, like its claim for trade libel, was based on defendants' Internet postings. Like the tort of trade libel, interference with prospective economic advantage requires false statements of fact.
``A person cannot incur liability for interfering with contractual or economic relations by giving truthful information to a third party.'' (Savage v. Pacific Gas & Electric Co. (1993) 21 Cal.App.4th 434, 449-450.) Further, a plaintiff cannot state a cause of action for interference with prospective economic advantage based on ```loose, figurative, or hyperbolic language''' (Morningstar, Inc. v. Superior Court (1994) 23 Cal.App.4th 676, 697) or mere opinions, unless shown to be not genuinely held and advanced for the sole purpose of harming the plaintiff. (Hofmann Co. v. E. I. Du Pont de Nemours & Co., supra, 202 Cal.App.3d 390, 403.)
As we have concluded in part II.C.1., ante, that the Internet postings were not actionable trade libel, they also could not support a claim for interference with prospective economic advantage. ComputerXpress failed to establish a probability of prevailing on its sixth cause of action.
3. Seventh cause of action --- abuse of process
Abuse of process consists of ``[t]he use of the machinery of the legal system for an ulterior motive . . . .'' (Trear v. Sills (1999) 69 Cal.App.4th 1341, 1359, italics added.) Because the purpose of the tort is ``to preserve the integrity of the court,'' it ``requires misuse of a judicial process . . . .'' (Stolz v. Wong Communications Limited Partnership (1994) 25 Cal.App.4th 1811, 1822-1823.) The tort therefore does not extend to misuse of administrative proceedings, even those involving agencies with ```quasi-judicial' powers . . . .'' (Id., at p. 1823 [misuse of administrative process of Federal Communications Commission not abuse of process].)
ComputerXpress's seventh cause of action alleged defendants misused the legal process by posting the SEC complaint on the Internet. There was no allegation of any misuse of the judicial process. ComputerXpress failed to establish a probability of prevailing on its claim for abuse of process.
4. Eighth cause of action --- conspiracy
```A conspiracy cannot be alleged as a tort separate from the underlying wrong it is organized to achieve.''' (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 513.) Therefore, ``conspiracy to commit a tort is not a separate cause of action from the tort itself . . . .'' (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 845.)
ComputerXpress's conspiracy claim was based on the Internet postings and the filing of the SEC complaint. We have previously determined that the postings were not actionable under any tort theory pled in ComputerXpress's complaint. The filing of the SEC complaint clearly was absolutely privileged under Civil Code section 47, subdivision (b), which as stated ante protects ```communication to an official administrative agency . . . designed to prompt action by that agency . . . .''' (Kim v. Walker, supra, 208 Cal.App.3d 375, 383; accord, Slaughter v. Friedman, supra, 32 Cal.3d 149, 156; Edwards v. Centex Real Estate Corp., supra, 53 Cal.App.4th 15, 30.) It follows that ComputerXpress failed to establish a probability of prevailing on its conspiracy cause of action.
5. Ninth cause of action --- injunction
As ComputerXpress points out, injunctive relief is sometimes available as a remedy for trade libel. (Leonardini v. Shell Oil Co., supra, 216 Cal.App.3d 547, 579.) However, while such relief is available ``in the ordinary case involving private disputes,'' it is not available to restrain debate about public issues, even where false statements are involved. (Id., at pp. 578-579.) ```The concept that a statement on a public issue may be suppressed because it is believed by a court to be untrue is entirely inconsistent with constitutional guarantees and raises the spectre of censorship in a most pernicious form.''' (Id., at p. 578, quoting Wilson v. Superior Court (1975) 13 Cal.3d 652, 658-659.)
We have previously determined that the statements ComputerXpress sought to enjoin concerned a public issue, not a mere private dispute. Even if that were not the case, as discussed ante, the statements were not actionable as trade libel. Accordingly, ComputerXpress failed to establish a probability of prevailing on its injunction cause of action.
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