Superior Court Holds That Suit Over Comments to WMAU Reporter Is a SLAPP

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According to a complaint filed in DC federal court last year, Sean Smith and Erin Wrona contracted with Federal Title & Escrow Company in May 2017 to perform closing services in connection with their house purchase. They alleged that Federal Title then sent them an email to wire $200,000 in earnest money to a designated account, and that they followed those instructions. They allegedly then received a second email with instructions to wire the remaining $1.57 million, and they followed those instructions. When they appeared for the closing, however, Federal Title’s founder (Todd Ewing) told them Federal Title had never received the $1.57 million and, instead, its email had been hacked and the $1.57 million had been diverted.

In their federal court complaint, Smith and Wrona alleged Federal Title, Ewing and others “created a scheme to defraud Plaintiffs for the purpose of obtaining money through fraudulent escrow accounts” and “acted in concert to commit an unlawful act – namely, the theft of Plaintiffs’ funds.”

In August 2017, a WAMU reporter quoted Smith and Wrona’s attorney (Michael Nadel of McDermott Will & Emery) as saying:

  • “Federal Title either caused our money to be stolen or stole it, and we need to get our money back.”
  • “We don’t have any evidence that it happened because of hackers other than Federal Title’s say-so.”
  • “Federal Title never called Sean Smith and said, ‘Bring your money to closing,’ and didn’t even bring it up until the middle of closing. So if they weren’t responsible for helping steal the money, it certainly seems like they knew well in advance of that closing that the money was gone. Their conduct shows that.”

Earlier this year, Federal Title and Ewing sued Smith, Wrona, Nadel, and McDermott Will & Emery for defamation, false light, and tortious interference with business relations. Plaintiffs alleged that Nadel’s statements were “categorically false” and caused the plaintiffs to suffer “actual financial losses and reputational harm.”

Smith and Wrona filed an anti-SLAPP special motion to dismiss. They argued the “subject matter of Smith’s and Wrona’s underlying lawsuit against Federal Title and Ewing (among others) concerns matters of great interest to the public that are discussed in the public forum daily: fraud, deception, cybersecurity, and malicious computer hacking,” thus establishing their prima facie burden. Smith and Wrona argued the plaintiffs could not show they were likely to prevail on the merits.

Nadel and McDermott filed a separate motion to dismiss which also argued the plaintiffs’ claims were fatally flawed. Nadel and McDermott argued that, in addition to dismissal under Rule 12(b)(6), the suit should be dismissed under the DC anti-SLAPP act. According to Nadel and McDermott, “the public interest in the subject about which Mr. Nadel spoke is virtually self-evident, as the underlying lawsuit related to title services in the District marketplace and the increasingly pervasive threat of cybercrime.” They argued the public interest in the suit was also demonstrated by the fact a WAMU reporter contacted Nadel for comment, and that the Federal Title/Ewing complaint pleaded the alleged hacking “‘incident should serve as a reminder to the public about the importance of cybercrime and awareness.’”

Plaintiffs’ opposition to the Smith and Wrona anti-SLAPP special motion to dismiss first argued this was not a SLAPP because it “does not relate to any political or public policy debate, nor are the parties on opposing sides of any political or public policy matter. It does not aim to chill or silence political speech, or any speech at all.” The plaintiffs also argued Smith/Wrona’s interpretation of the “public interest” definition was impermissibly broad and would make virtually any lawsuit a matter of public interest. Plaintiffs argued that, in any event, they were likely to prevail on the merits of their claims, or could make this showing if they were allowed discovery.

The plaintiffs made a similar argument in opposition to the Nadel/McDermott anti-SLAPP special motion to dismiss:

The underlying lawsuit is a private commercial dispute that does not relate to any political issue or public policy debate, and is therefore excluded from the Act. And even if the underlying lawsuit itself were an issue of public interest because it involves cybercrime, Nadel’s statements are still excluded because they are, on their face, expressly directed toward protecting his and his clients’ commercial interests. That Federal Title may have used the article as an opportunity to share information with the public does not transform Nadel’s statement that “Federal Title either caused our money to be stolen or stole it, and we need to get our money back” into a public service announcement.

The Smith and Wrona reply brief noted the statute defined “act in furtherance of the right of advocacy on issues of public interest” to include a written or oral statement made “in connection with an issue under consideration or review by a . . .  judicial body,” and that, at the time the challenged statements were made, their underlying suit was pending in DC federal court. They also argued the challenged statements were not subject to the private interest exception in the public interest definition:

The statute’s exclusion is tailored to carve out “statements directed primarily toward protecting the speaker’s commercial interests rather than toward commenting on or sharing information about a matter of public significance.” D.C. Code §16-5501(3) (emphasis added). The allegedly defamatory comments here fall within “commenting or sharing information about a matter of public significance” in that they relate directly to the underlying case and claims that Smith and Wrona asserted in their complaint before the federal court and are not primarily directed to any commercial interests . . .

Similarly, in response to the plaintiffs’ argument that the Smith/Wrona suit was “a private commercial dispute that does not relate to any political issue or public policy debate, and is therefore excluded from the Act,” Nadel and McDermott’s reply brief cited California decisions interpreting that state’s “commercial speech” exemption, and argued those decisions demonstrated why Nadel’s speech was not subject to the claimed exemption.

Shortly after Nadel/McDermott filed their reply brief, the Superior Court granted the defendants’ 12(b)(6) motions to dismiss and anti-SLAPP special motions to dismiss. The court agreed that, because none of the challenged statements was about Ewing in his personal capacity, the complaint failed to state a claim with respect to Ewing. Turning to Federal Title’s defamation claim, the court agreed with defendants that the challenged statements, in the context of the entire article, were not reasonably capable of conveying a false and defamatory message because they were simply expressing Nadel’s “theory and subjective view of the case.” The court added that the challenged statements were also protected by the fair report privilege. On the false light claim, the court agreed that a corporation “does not have a claim for false light for it does not have a right of privacy that can be invaded.” Finally, the court agreed the complaint failed to plead facts sufficient to sustain a claim for tortious interference.

The court additionally held the suit was subject to dismissal under the DC anti-SLAPP statute:

The action is clearly based on protected speech under the statute as it arises from the privileged statements made by Mr. Nadel to a WAMU reporter after the filing of the underlying federal lawsuit. The issue is included as one of public interest under the broad reading permitted by the statute, which relates to potential concerns regarding cybercrime. According to the article, even Federal Title themselves admit that this “incident should serve as a reminder to the public about the importance of cybercrime awareness and education.” Compl., Ex. A at 3. As a result, the burden shifts onto the Plaintiffs to demonstrate that their claims are likely to succeed on the merits. As discussed above, it is evidence that the claims are unable to succeed on the merits, therefore, the Anti-SLAPP statute dictates the dismissal of the Plaintiff’s Complaint.

My two cents: in their opening and reply briefs, Smith/Wrona and Nadel/McDermott noted the challenged statements were about the Smith/Wrona federal court suit that was pending at the time the statements were made. As such, they argued they satisfied their prima facie burden by showing the statements were made “[i]n connection with an issue under consideration or review by a . . . judicial body.” They additionally argued the challenged statements were in a public forum in connection with an issue of public interest.

The Federal Title/Ewing opposition brief strenuously argued the statements were not in connection with an issue of “public interest” because the Smith/Wrona suit was filed to recover their $1.6 million, and was thus designed to “protect their commercial interests.” Federal Title/Ewing thus argued the suit was subject to the “private interests” exception in the “public interest” definition.

But, as I’ve previously discussed, if the suit arises from statements made “[i]n connection with an issue under consideration or review by a . . . judicial body,” that should satisfy the definition of “an act in furtherance of the right of advocacy on issues of public interest” without getting into the “public interest” definition (and its “private interest” exemption). Although I agree with the Superior Court’s conclusion that Nadel’s statements were made in connection with an issue of public interest (and that the statements were not about private interests), I was hoping the Superior Court might instead address this aspect of the defendants’ arguments. While it did not, that issue is already teed up in the suit against Coca Cola. As always, stay tuned.

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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