Message Board Post Highly Critical of Company is Opinion and Thus Not Defamatory

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An essential defense to a defamation claim is "pure opinion." In other words, if the defendant can show that the statements alleged to be defamatory are opinions protected under the relevant free speech laws, the defamation act will necessarily fail. However, distinguishing between actionable "assertions of fact," and protected remarks that constitute "pure opinion" has proven to be a formidable task for courts.

This conundrum recently played out in New York state court in the case of Nanoviricides, Inc. v. Seeking Alpha, Inc., No. 151908/2014, 2014 NY Slip Op 31681(U) (N.Y. Sup. Ct., N.Y. Co. June 26, 2014). The relevant facts are as follows. Nanoviricides (NNVC) is a pharmaceutical company that primarily focuses on research and development of antiviral drugs. In February 2014, an anonymous user of the investing and financial advice bulletin board SeekingAlpha employing the pseudonym "Pump Terminator" posted highly negative remarks about NNVC. "Pump Terminator" stated that NNVC (1) was a "House of Cards," and therefore its stock should be sold; (2) engaged in "the most egregious shareholder violations we are aware of in any NYSE company"; and (3) governed itself akin to a Chinese "[reverse takeover] fraud."  The relevant post also linked to a complaint filed against members of NNVC management by a disgruntled shareholder alleging serious misconduct by the aforementioned individuals.

NNVC thereafter brought an action against SeekingAlpha to obtain the true identity of "Pump Terminator" so as to bring libel claims against this user. Specifically, NNVC sought "pre-action" discovery, a form of relief granted only where "a petitioner demonstrated that it has a meritorious cause of action and that the information sought is material and necessary to the actionable wrong." Sandals Resorts Int'l Ltd. v. Google, Inc., 86 A.D.3d 32 (N.Y. App. Div. 2011). The cause of action of defamation arises in relevant part from a false statement that exposes the plaintiff to public contempt, ridicule or disgrace. Additionally, defamation requires the publication of the false statement without privilege or authorization to a third party.

As the court acknowledged in the instant case, determining whether a statement is based on assertion of fact, and thus actionable, or a non-actionable expression of opinion "has often proved a difficult task." The test for making such a determination is four-part: (1) "whether the statement has a precise meaning so as to give rise to clear factual implications"; (2) "the degree to which the statements are verifiable"; (3) "whether the full context of the communication in which the statement appears signals to the reader is nature as opinion"; and (4) "whether the broader context of the communication so signals the reader." Sandals, 86 A.D.3d at 39-40.

The court in the instant case analyzed the above principles and considered the article as a whole, and found that the statements attributed to "Pump Terminator" constituted protected opinion, and thus are not viable to sustain a defamation claim. For one, the article explicitly identified, via disclaimer, that the thoughts expressed therein were an expression of the author's own opinion. Second, the author proffered his opinion subsequent to a clear recitation of the "facts" undergirding the opinion. Indeed, "Pump Terminator" linked directly to the shareholder complaint alleging malfeasance by NNVC management.

In an argument of particular interest to the topics discussed on this blog, the court also held that the statements in question were protectable opinion in part because of the "unique context of the Internet." Specifically, since statements offered on the Internet are "often the repository of a wide range of casual, emotive, and imprecise speech," courts should not necessarily attribute the same imprimatur of credence to the statements that is likely accorded to statements made in other contexts. As applied to this case, the court noted that the "fact that the article appears on an internet [sic] message board [Seeking Alpha] also supports a finding that the article must be an expression of the author's opinion." This statement could be interpreted to conclude that a statement is more likely to be an opinion, and thus less likely to be actionable, if only because it appeared on the Internet, irrespective of any context or other facts. At the very least, this notion also comports with the idea of the Internet as the "Wild West," where the preponderance of speech is either hyperbolic or acerbic, and thus might never be prima facie considered as fact.

Topics:  Corporate Counsel, Defamation, First Amendment, Internet, Pharmaceutical, Social Networks, Statement of Facts

Published In: Communications & Media Updates, Constitutional Law Updates, Personal Injury Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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