Opinion
1:22-cv-00368-DJ-BAM
01-29-2024
MARKUS HEITKOETTER, et al., Plaintiffs, v. KARL DOMM, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO STRIKE AND MOTION TO DISMISS THIRD AMENDED COMPLAINT (DOC. 63)
BARBARA A. MCAULIFFE UNITED STATES MAGISTRATE JUDGE
This matter is before the Court on Defendant Karl Domm's (“Defendant”) Motion to Dismiss Under Rule 12(b)(6) and Special Motion to Strike Plaintiffs' Complaint. (Doc. 63.) Plaintiffs Markus Heitkoetter and Rockwell Trading Services, LLC (“Plaintiffs”) filed an opposition on July 10, 2023. (Doc. 67.) Defendant filed his reply on July 20, 2023. (Doc. 70.) Having carefully considered the briefing filed by all parties, and for the reasons detailed below, Defendant's Motion to Dismiss and Motion to Strike will be GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Plaintiffs filed this action on March 29, 2022. (Doc. 1.) On November 7, 2022, the Court issued an order denying Defendant's special motion to strike Plaintiffs' complaint under California's Anti-SLAPP Statute but granting Defendant's motion to dismiss the Complaint, finding that the allegations as to supposedly defamatory statements were too general and interpretative. (Doc. 20 at 13-15.)
Plaintiffs subsequently filed a First Amended Complaint on December 18, 2022. (Doc. 23.) Shortly thereafter, Plaintiffs brought an unopposed motion to amend the First Amended Complaint. (Docs. 26, 30.) That motion was granted on January 5, 2023, and Plaintiffs filed the Second Amended Complaint the same day. (Doc. 32-2.) The Second Amended Complaint alleged false light, defamation by implication, defamation (libel and libel per se), intentional interference with prospective economic advantage and deceptive trade practices based on videos and comments that Defendant allegedly posted to YouTube regarding Plaintiffs and their investment program. (Doc. 33.) Defendant filed a motion to dismiss certain claims (Doc. 36), which the Court granted as to the first cause of action for false light, but denied in all other respects. (Doc. 44.)
On February 16, 2023, the Court entered a Protective Order which stated in part: “No party, either personally or through their agents or attorneys, shall publish to the Internet any ‘Disclosure or Discovery Material,' a term which shall mean for purposes of this Order any documents or information that is generated, produced or disclosed in disclosures or discovery of this matter.” (Doc. 43 at 2.)
On April 6, 2023, Defendant and Counterclaimant Karl Domm filed a counterclaim against Plaintiffs and Counter-Defendants Markus Heitkoetter and Rockwell Trading Services, LLC alleging: (1) False Advertising pursuant to 15 U.S.C. 1125(a)(1)(B); and (2) Violation of California Unfair Competition Law pursuant to Cal. Bus. & Prof. Code Section 17200. (Doc. 46.) Counterclaimant Domm primarily alleged that Counter-Defendants made false statements in their YouTube advertisements. (Id.)
On April 16, 2023, Defendant Domm published a YouTube video entitled “Markus Heitkoetter/Rockwell Trading Sued for False Advertising: 7 Shocking Allegations” which included a link to Defendant's counterclaim. (Doc. 60 ¶ 59, Exh. B; Doc. 84, Counterclaim Video).In the Counterclaim Video, Defendant began by discussing his own services and process of reviewing other financial trading educational programs before noting that he was being sued in the instant matter and stated that “Markus used the legal system to keep his trading statements private.” (Doc. 84, Counterclaim Video at Timestamp 0:00-3:50.) Defendant then stated that in the legal proceedings, “the Judge ruled that [he is] allowed to discuss anything that is part of public record. With that in mind, I discovered some interesting information about Markus Heitkoetter.” (Id. at Timestamp 3:50-3:57.) Defendant then discussed documents found through discovery, including a federal tax lien, a mechanic's lien, and another complaint involving Plaintiff Heitkoetter, and asked viewers to inform him if they had any further information regarding these documents and to “make sure [he] didn't miss anything or was inaccurate in any way.” (Id. at Timestamp 3:57-5:49). Defendant subsequently discussed eight allegations from his counterclaim, reading from the counterclaim while showing either the counterclaim or related images. (Id. at Timestamp 5:50-20:05.)
For ease of reference, Defendant's April 16, 2023 YouTube video entitled “Markus Heitkoetter/Rockwell Trading Sued for False Advertising: 7 Shocking Allegations,” incorporated into Plaintiff's Third Amended Complaint as part of Exhibit B, is referred to as the “Counterclaim Video,” and lodged on January 25, 2024.
During this segment of the Counterclaim Video, while Defendant primarily read selected allegations directly from his counterclaim, Defendant also digressed to discuss a separate case involving Plaintiff Heitkoetter. (Id. at Timestamp 17:55-19:42.) After reading Paragraph 72 of his counterclaim, Defendant displayed the complaint in the separate case and provided brief background about that case, then asked “Were you aware of this? I'm going to say it's likely you were possibly not aware of this lawsuit.” (Id. at Timestamp 18:32-18:40.) Defendant discussed how Plaintiff Heitkoetter's name was spelled differently in the other action, and stated “Wow. Markus's last name is spelled differently in this lawsuit compared to this lawsuit. So make sure when you want to look up this lawsuit you spell his name differently... if you ever want to find this lawsuit.” (Id. at Timestamp 18:40-19:30.) Defendant continued, “it's interesting, isn't it? Did he spell his name differently? Did he just maybe make a mistake in court about how to spell his last name? I guess. I guess so.” (Id. at Timestamp 19:30-19:42.) Defendant then displayed his counterclaim again with annotated allegations and concluded the video by discussing his attorney's efforts in this matter. (Id. at Timestamp 19:43-21:54.)
On May 22, 2023, Plaintiffs subsequently filed the operative Third Amended Complaint. (Doc. 60.) In their Third Amended Complaint, Plaintiffs asserted: (1) defamation by implication; (2) libel and per se libel; (3) intentional interference with prospective economic advantage; (4) deceptive trade practices; and (5) abuse of process. (Id.)
On June 12, 2023, Defendant brought the instant motion to dismiss and special motion to strike Plaintiffs' complaint. (Doc. 63.) Defendant contends that Plaintiffs' Third Amended Complaint is insufficient, as: (1) Defendant's speech at issue is protected activity under California's Anti-SLAPP Statute; (2) the California litigation privilege and fair and true report privilege protect Defendant's speech and activity; (3) Plaintiffs' claim for defamation by implication regarding the intentional or mistaken spelling of Mr. Heitkoetter's last name in another defamation lawsuit is without merit because no reasonable person would deduce the implications Plaintiffs allege; (4) Plaintiffs cannot plead a cause of action related to their abuse of process claim; and (5) Plaintiffs have not adequately pled their defamation by implication and derivative causes of action. (Id.) Plaintiffs filed their opposition on July 10, 2023, disputing that these privileges applied, arguing that they had sufficiently pled their claims, and requesting the Court find Defendant's motion meritless and Plaintiffs were entitled to attorneys' fees. (Doc. 67.) On July 20, 2023, Defendant filed his reply. (Doc. 70.) The parties consented to Magistrate Judge jurisdiction for the limited purpose of deciding the pending motion to dismiss. (Doc. 65.) Defendant's motion was then referred to Magistrate Judge Barbara A. McAuliffe for a final order. (Doc. 66.)
II. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a claim, and dismissal is proper if there is a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quotation marks and citations omitted). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (quotation marks omitted); Conservation Force, 646 F.3d at 1242; Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. While the plausibility requirement is not akin to a probability requirement, it demands more than “a sheer possibility that a defendant has acted unlawfully.” Id. This plausibility inquiry is “a contextspecific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.
In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept as true the allegations of the complaint in question, Erickson v. Pardus, 551 U.S. 89, 94 (2007), and construe the pleading in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969); Meek v. Cty. of Riverside, 183 F.3d 962, 965 (9th Cir. 1999). However, the court need not credit “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” See Twombly, 550 U.S. at 555. The Court is “not required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Seven Arts Filmed Entm't, Ltd. v. Content Media Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013).
In ruling on a motion to dismiss, a court may only consider the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 F.Supp.2d 1035, 1042 (C.D. Cal. 1998).
If a complaint fails to state a plausible claim, “‘[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.'” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).
III. REQUEST FOR JUDICIAL NOTICE
In support of his motion to dismiss and motion to strike, Defendant asks the Court to take judicial notice of the following items: (1) the complaint described as Markus Heitkotter and Rockwell Trading Services, LLC v. John Does, Case No. D-1-GN-22-000779, filed in the District Court of Travis County, Texas, on February 15, 2022 (Doc. 63-2 at 4-20); (2) the complaint described as Markus Heitkoeter and Rockwell Trading Services, LLC v. Jacob Stuttgen and Breanna Stuttgen, Case No. 02-cv-23-787, filed February 15, 2023, in County of Anoka, State of Minnesota (Doc. 63-2 at 21-33); (3) a 2017 Warranty Deed with “Markus Heitkotter” listed as the grantee, and “Markus Heitkoetter” listed as the acting grantor, filed in Travis County, Texas (Doc. 63-2 at 34-39); (4) a Mechanic's Lien against “Markus Heitkotter” filed on June 15, 2022, filed in Travis County, Texas (Doc. 63-2 at 40-43); (5) A screen capture from the WayBack Machine, captured on May 4, 2012, from Rockwell Trading.com's website demonstrating Plaintiff Heitkoetter's brother Tobias was an employee and spells his last name as “Heitkotter” (Doc. 63-2 at 44-45); and (6) A portion of the YouTube.com comment section for Defendant's video entitled, “Markus Heitkoetter/Rockwell Trading Sued for False Advertising: 7 Shocking Allegations,” published April 16, 2023, available at https://www.youtube.com/watch?v=gfmkpNJE03A (Doc. 63-2 at 46-49). Plaintiffs do not oppose this request. (See Doc. 67.)
Requests for Judicial Notice Nos. 1-4 are complaints and court filings. (Doc. 63-2 at 443.) Court records are properly subject to judicial notice. See Fed.R.Evid. 201(b) (court may take judicial notice of fact that is not subject to reasonable dispute because it is (1) generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned); see also MGIC Indem. Co. v. Weisman, 803 F.2d 500, 504 (9th Cir.1986); United States v. Wilson, 631 F.2d 118, 119 (9th Cir.1980); Pierce v. Cantil-Sakauye, No. C 13-01295 JSW, 2013 WL 4382735, at *3 (N.D. Cal. Aug. 13, 2013), affd, 628 Fed.Appx. 548 (9th Cir. 2016) (“On a motion to dismiss pursuant to either Rule 12(b)(1) or Rule 12(b)(6), the Court may take judicial notice of court records in other cases.”). Accordingly, Defendant's Requests for Judicial Notice Nos. 1-4 are GRANTED.
Request for Judicial Notice No. 5 is a screen capture from the WayBack Machine, captured on May 4, 2012, from RockwellTrading.com's website. (Doc. 63-2 at 44-45.) Defendant contends that courts may take judicial notice of publications “solely as an indication of what information was in the public realm at the time.” Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010). However, this screenshot dates from May 2012 and the Court cannot conclude that the contents of this web page represent information that was in the public realm at the time or are “facts that can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” See Fed.R.Evid. 201(b); Lindsay v. Shree Enter., LLC, No. 221CV00299WBSCKD, 2021 WL 2711225, at *3 (E.D. Cal. July 1, 2021) (denying request for judicial notice of WayBack Machine screen captures related to a motion to dismiss). Accordingly, the court DENIES Defendant's Request for Judicial Notice No. 5.
Request for Judicial Notice No. 6 is a portion of the YouTube.com comment section for Defendant's video entitled, “Markus Heitkoetter/Rockwell Trading Sued for False Advertising: 7 Shocking Allegations,” published April 16, 2023, available at https://www.youtube.com/watch?v=gfmkpNJE03A. (Doc. 63-2 at 46-49.) Defendant similarly suggests in his Request for Judicial Notice that the Court may take judicial notice of these pages as an indication of information in the public realm. (Doc. 63-2 at 3.) However, Defendant uses this comment section in his motion to argue that he uses his video “as discovery and investigation by obtaining other witnesses and complainants who leave comments in the comment section- some of whom offered to provide funding to pay for legal fees.” (Doc. 63-1 at 14.) Defendant's use of this item does not offer an indication of what information was in the public realm at the time, but instead appears to be used to prove that there were offers to provide funding. As this cannot be accurately and readily determined from sources whose accuracy cannot reasonably be questioned, the Court DENIES Defendant's Request for Judicial Notice No. 6. See Fed.R.Evid. 201(b).
Finally, Defendant requests in a footnote that the Counterclaim Video be incorporated by reference for purposes of Defendant's motion. (Doc. 63-1 at 11 n.1.) Plaintiffs do not oppose this request. (See Doc. 67.) Exhibit B to Plaintiffs' Third Amended Complaint consists of the video and preserved copy of the loading page for Defendant's “Markus Heitkoetter/Rockwell Trading Sued for False Advertising: 7 Shocking Allegations” YouTube Counterclaim Video, published April 16, 2023, also available at https://www.youtube.com/watch?v=gfmkpNJE03A. (Doc. 60 ¶ 59) (“A preserved copy of the loading page for this new video is attached hereto as Exhibit B. The video will be produced lodged with the Court as part of Exhibit B.”); Doc. 84 (noting copy of Counterclaim Video has been lodged with the Court); Doc. 85 at 14-20 (preserved copy of the loading page for the Counterclaim Video). The Court is permitted to rely upon documents attached to the operative complaint in deciding a motion to dismiss. See, generally, Fed.R.Civ.P. 10(c)(“A statement in a pleading may be adopted by reference elsewhere in the same pleading or in any other pleading or motion. A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”); see also Gallagher v. Philipps, 563 F.Supp.3d 1048, 1071 (S.D. Cal. 2021) (Incorporating 31 articles written by defendant in evaluating defendant's motion to strike and motion to dismiss, as “Plaintiff relies on these articles to form the basis of his claims against Defendant, and therefore the Court concludes that it is appropriate to incorporate by reference those 31 articles.”). Because the Counterclaim Video and loading page copy are attached to the operative Third Amended Complaint, the Counterclaim Video and loading page are incorporated into the Third Amended Complaint. As to matters filed on the Court's docket, including exhibits to the Third Amended Complaint, the request for judicial notice is unnecessary and is DENIED as moot. See, e.g., McKeon v. Cent. Valley Cmty. Sports Found., No. 1:18-cv-00358-BAM, 2021 WL 5450276, at *1 n.1 (E.D. Cal. Nov. 22, 2021); Harris by & through Lester v. Cty. of Sacramento, No. 2:17-CV-02346- MCE-AC, 2018 WL 3752176, at *3 n.3 (E.D. Cal. Aug. 8, 2018) (finding request for judicial notice of a pleading on the court's own docket unnecessary).
IV. DISCUSSION
Defendant seeks dismissal of certain aspects of Plaintiffs' claims related to Defendant's counterclaim and Counterclaim Video statements. (Doc. 63-1.) Defendant argues that these claims should be dismissed because: (A) Defendant's Counterclaim Video statements and counterclaim are protected activity under California's Anti-SLAPP Statute; (B) Defendant's Counterclaim Video statements and counterclaim are protected by the litigation privilege pursuant to California Civil Code Section 47; (C) Defendant's Counterclaim Video statements and counterclaim are protected by the fair and true report privilege pursuant to California Civil Code Section 47; (D) no reasonable person would deduce the implications alleged by Plaintiffs related to the misspelling of Plaintiff Heitkoetter's name in Plaintiffs' defamation by implication claim; (E) Plaintiffs cannot plead an abuse of process claim; and (F) Plaintiffs have not pled their claims with adequate specificity. (Doc. 63-1.) Plaintiffs respond that Defendant's Counterclaim Video and Defendant's counterclaim fall within the Commercial Speech Exemption to the Anti-SLAPP Statute, the litigation privilege and fair and true report privilege do not shield Defendant's statements, and Plaintiffs have properly pled their defamation by implication, abuse of process, and derivative claims. (Doc. 67.) Plaintiffs further request that the Court find Defendant's motion meritless and find that Plaintiffs are entitled to reasonable attorneys' fees. (Id. at 23.)
A. The California Anti-SLAPP Statute
Defendant first argues that Plaintiffs' claims regarding Defendant's Counterclaim Video statements are barred by the California Anti-SLAPP Statute. (Doc. 63-1 at 7-13.) Defendant further “requests the Court award attorneys' fees and costs to Mr. Domm pursuant to California's anti-SLAPP statute's, attorneys' fees clause for prevailing defendants.” (Id. at 15.) Plaintiffs respond that Defendant's Counterclaim Video statements and Defendant's counterclaim itself fall within the Commercial Speech Exemption to the California Anti-SLAPP Statute. (Doc. 67 at 815.)
1. Legal Standard for California Anti-SLAPP Statute & Commercial Speech Exemption
Section 425.16 of the California Code of Civil Procedure “provides for the pre-trial dismissal of certain actions, known as Strategic Lawsuits Against Public Participation, or SLAPPs, that ‘masquerade as ordinary lawsuits' but are intended to deter ordinary people ‘from exercising their political or legal rights or to punish them for doing so.'” Makaeff v. Trump Univ., LLC, 715 F.3d 254, 261 (9th Cir. 2013) (quoting Batzel v. Smith, 333 F.3d 1018, 1024 (9th Cir. 2003) (some internal quotation marks omitted); see also Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir. 2001) (“The anti-SLAPP statute was enacted to allow early dismissal of meritless first amendment cases aimed at chilling expression through costly, time-consuming litigation.”)
Section 425.17 of the California Code of Civil Procedure sets forth exemptions from section 425.16, including a “commercial speech exemption,” which provides as follows:
(c) Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments, arising from any statement or conduct by that person if both of the following conditions exist:
(1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services.
(2) The intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer, or the statement or conduct arose out of or within the context of a regulatory approval process, proceeding, or investigation, except where the statement or conduct was made by a telephone corporation in the course of a proceeding before the California Public Utilities Commission and is the subject of a lawsuit brought by a competitor, notwithstanding that the conduct or statement concerns an important public issue.Cal. Code Civ. Proc. § 425.17(c).
“If a complaint satisfies the provisions of the [commercial speech exemption in section 425.17, subdivision (c)], it may not be attacked under the anti-SLAPP statute.” Xu v. Huang, 73 Cal.App. 5th 802, 813 (2021) (citing Club Members for an Honest Election v. Sierra Club, 45 Cal.4th 309, 316 (2008)). In other words, “[a] defendant who makes statements about a business competitor's goods or services to advance the defendant's business cannot use the anti-SLAPP statute against causes of action arising from those statements.” Id. (citations omitted).
The applicability of the commercial speech exemption is a “threshold issue” to be addressed “prior to examining the applicability of section 425.16,” and if the exemption is found to apply, the “special motion to strike should [be] denied without reaching the merits of the motion.” People ex rel. Strathmann v. Acacia Rsch. Corp., 210 Cal.App.4th 487, 498 (2012) (addressing the “public interest exception” in section 425.17(b)); Xu, 73 Cal.App. 5th at 813 (applying Strathmann in the context of the commercial speech exemption in section 425.17(c)).
A cause of action is exempt from anti-SLAPP law by virtue of the commercial speech exemption in section 425.17 when:
(1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services;
(2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person's or a business competitor's business operations, goods, or services;
(3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services or in the course of delivering the person's goods or services; and
(4) the intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer.Abrahamson v. Berkley, No. 1:16-cv-0348-AWI-BAM, 2016 WL 8673060, at *14 (E.D. Cal. Sept. 2, 2016) (Ishii, J.) (citing Simpson Strong-Tie Co. v. Gore, 49 Cal.4th 12, 30 (2010) and Hawran v. Hixson, 209 Cal.App.4th 256, 271 (2012)).
2. The Commercial Speech Exemption Applies to Defendant's Counterclaim Video Statements
Examining the first and fourth Abrahamson factors of the speaker and the audience, Plaintiffs' Third Amended Complaint alleges that Plaintiffs offer “education services and programs for anyone interested in investing and trading,” and that Defendant is “an options trader who markets and sells a course in options trading, similar to that offered by Plaintiffs.” (Doc. 60 ¶¶ 15, 17.) Similarly, Plaintiffs allege that “Defendant maintains a YouTube channel to market his services” and that “[p]art of Defendant[']s strategy to increase his exposure, and thus increase his sales, includes ‘reviewing' the services and strategies of other companies which are larger and more well-established than Defendant.” (Id. ¶ 18.) Plaintiffs further allege that by “‘reviewing' these other companies, Defendant's YouTube videos will appear as ‘suggestions' for viewers of the other companies.” (Id.) Defendant therefore satisfies the first and fourth prongs, as he is alleged to be engaged in the business of selling or leasing goods or services, and Defendant's audience is alleged to be potential customers of those other companies.
Examining the second and third Abrahamson factors, Plaintiffs allege that, in his Counterclaim Video, “Defendant framed Plaintiffs' request for a protective order as Plaintiffs' use of legal process to hide information from consumers that should be shared and uses that assertion as a segue to promote his own educational services.” (Id. ¶ 63.) Plaintiffs also allege that in the Counterclaim Video, Defendant falsely insinuates that Plaintiffs utilize deceptive litigation tactics when Defendant “alleges that Plaintiff Heitkoetter deceived his viewers because he did not disclose the additional deposit and suggests that Plaintiff Heitkoetter deposited more than $250,000 into that account,” and “suggests that Plaintiff Heitkoetter purposefully misspelled his name in the pleadings to avoid detection on the public docket.” (Id. ¶¶ 67-70.) Plaintiffs further allege that Defendant “wanted to continue to share this discovery information because it brings increased attention to his YouTube Channel and, thereby, the products and services which he sells” and “to gain further popularity and to continue to enrich himself through the besmirching of Plaintiffs' good name.” (Id. ¶¶ 76, 78.) Defendant's statements in the Counterclaim Video therefore satisfy the second and third Abrahamson factors, as he is alleged to have made representations of fact about a competitor's business operations to promote or secure sales of goods or services. Defendant's Counterclaim Video statements therefore satisfy the four factors outlined in Abrahamson, and Plaintiffs' claims regarding the Counterclaim Video are thus exempt from the California Anti-SLAPP Statute by virtue of the commercial speech exemption.
Defendant argues that the commercial speech exemption does not apply because his statements are not comparative advertising. (Doc. 70 at 2-5.) Defendant contends that the speech in the Counterclaim Video is not comparative advertising or a business maneuver, and is instead the repetition of allegations in a publicly-filed complaint. (Id. at 2.) Plaintiffs, in turn, contend that Defendant's reviews and discussion of competitors “allows him to present himself as a ‘foil' or a superior alternative to the persons he reviews or discusses.” (Doc. 67 at 11.)
The California Supreme Court has held that “section 425.17, subdivision (c) and subsequent case law indicate that the provision exempts ‘only a subset of commercial speech'- specifically, comparative advertising.” FilmOn.com Inc. v. DoubleVerify Inc., 7 Cal. 5th 133, 147, 439 P.3d 1156, 1163 (2019) (citing All One God Faith, Inc. v. Organic & Sustainable Indus. Standards, Inc., 107 Cal.Rptr.3d 861, 886 (2010)). In a similar case where a district court discussed the application of the commercial speech exemption to the anti-SLAPP statute, the plaintiff sent its complaint to customer physicians and laboratories to promote the sale of its product and provide its opinion of the competitor defendant's product. Quidel Corp. v. Siemens Med. Sols. USA, Inc., No. 16-CV-3059-BAS-AGS, 2019 WL 4747671, at *7 (S.D. Cal. Sept. 27, 2019). In Quidel, the plaintiff informed customers of the complaint against the defendant, including allegations of false advertising regarding defendant's product. Id. The district court found that the “purpose of the letter was to encourage the clients not to carry or promote [defendant's product] and therefore to improve [plaintiff's] relationship and business with the clients.” Id. The district court accordingly held that plaintiffs republishing of the complaint and making “statements to non-participating third parties falls under the exception of section 425.17, and therefore does not fall under anti-SLAPP coverage.” Id.
Defendant's Counterclaim Video statements similarly fall under the commercial speech exemption and do not qualify for Anti-SLAPP Statute coverage. As with the parties in Quidel, Plaintiffs and Defendant in this matter are alleged to be offering similar trading services and programs. (Doc. 60 ¶¶ 15, 17.) And Defendant here is alleged to be disseminating his counterclaim against Plaintiffs to promote his own products and services. (Id. ¶¶ 63, 76-78.) Defendant's contentions that this is not comparative advertising, and that Defendant is acting as a litigant rather than competitor, are thus unavailing. Because Defendant is allegedly broadcasting his counterclaim for the purpose of promoting his own products and services in place of Plaintiffs' products and services, the commercial speech exemption applies, and Defendant's Counterclaim Video statements do not qualify for Anti-SLAPP coverage.
Accordingly, Defendant's motion to strike based upon Anti-SLAPP Statute protection is DENIED.
3. Defendant's Request for Attorney's Fees is Denied
Defendant “requests the Court award attorneys' fees and costs to Mr. Domm pursuant to California's anti-SLAPP statute's, attorneys' fees clause for prevailing defendants.” (Id. at 15.) However, as Defendant does not provide further authority or briefing on the issue of attorneys' fees, and the Anti-SLAPP Statute does not apply here, Defendant's request for attorneys' fees is DENIED.
B. The Litigation Privilege Applies to Portions of Defendant's Counterclaim Video
Defendant next argues that his counterclaim and Counterclaim Video are protected by the litigation privilege. (Doc. 63-1 at 13-15.) Plaintiffs, in turn, argue that the litigation privilege does not apply because Defendant's out-of-court statements were not made in judicial proceedings, nor made to the type of limited audience of interested parties that the litigation privilege embraces. (Doc. 67 at 15-18.)
California Civil Code Section 47(b) sets forth the litigation privilege, and states that the privileged publication or broadcast is one made in any “judicial proceeding.” Cal. Civ. Code § 47(b)(2). “The usual formulation is that the privilege 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.” Silberg v. Anderson, 50 Cal.3d 205, 212 (1990), as modified (Mar. 12, 1990) (citations omitted). “The purposes of section 47, subdivision (b), are to afford litigants and witnesses free access to the courts without fear of being harassed subsequently by derivative tort actions, to encourage open channels of communication and zealous advocacy, to promote complete and truthful testimony, to give finality to judgments, and to avoid unending litigation.” Jacob B. v. Cnty. of Shasta, 40 Cal.4th 948, 955 (2007) (quoting Rusheen v. Cohen, 37 Cal.4th 1048, 1063, (2006)). “To further these purposes, the privilege has been broadly applied.” Id. “Although originally enacted with reference to defamation, the privilege is now held applicable to any communication, whether or not it amounts to a publication, and all torts except malicious prosecution.” Silberg, 50 Cal.3d at 212 (citations omitted).
As to the first and second Silberg prongs, Defendant's counterclaim is a statement made in judicial proceedings by a litigant. The California Supreme Court has held that the privilege applies not just to statements made during trial, but also “to any publication [required or permitted] by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is invoked.” Albertson v. Raboff, 46 Cal. 2d 375, 381 (1956); Castaline v. Aaron Mueller Arts, No. C09-02543 CRB, 2010 WL 583944, at *4 (N.D. Cal. Feb. 16, 2010) (finding plaintiffs sending of a complaint to distributors satisfied the first Silberg prong “because the Complaint relates to a judicial proceeding even though it was not made in the proceeding per se”); Quidel, 612 F.Supp.3d at 1140-41 (finding first Silberg prong satisfied because plaintiffs “acts of notifying potential customers that it believes [defendant's product] is falsely advertised serves the ‘objects of the litigation' of preventing the sale of falsely advertised products.”). As with the complaint in Quidel, Defendant's counterclaim is a publication permitted by law in judicial proceedings, satisfying the first prong. (Doc. 46.) Additionally, Defendant is a litigant in this matter, satisfying the second prong. The first two Silberg prongs are thus satisfied.
Regarding the third and fourth Silberg prongs, the “requirement that the communication be in furtherance of the objects of the litigation is, in essence, simply part of the requirement that the communication be connected with, or have some logical relation to, the action, i.e., that it not be extraneous to the action.” Silberg, 50 Cal.3d at 219-20. In other words, the third prong is simply part of the fourth prong. Quidel, 612 F.Supp.3d at 1141. The California Supreme Court has noted that a “good example of an application of the principle is found in the cases holding that a statement made in a judicial proceeding is not privileged unless it has some reasonable relevancy to the subject matter of the action.” Silberg, 50 Cal.3d at 220.
In examining the third and fourth prong when parties have disclosed litigation-related information to non-parties, courts have examined the non-participants' interest in the litigation. The Ninth Circuit has noted that the litigation privilege “extends to communications regarding such judicial proceedings made to people with ‘a substantial interest in the outcome of the pending litigation.'” Youngevity Int'l Corp. v. Andreoli, 749 Fed.Appx. 634, 635 (9th Cir. 2019). In Youngevity, where the plaintiff had republished the Verified Complaint and summarized the substance of the Verified Complaint in a press release, the Ninth Circuit held that “republication of the Verified Complaint and the dissemination of the Youngevity press release to its distributors and the marketing community (which had such a substantial interest) constitute protected speech,” and defendant therefore could not prevail on counterclaims relating to that dissemination. Id.
In Quidel, the plaintiff sent its complaint to customers to promote the sale of its product and provide its opinion of the competitor defendant's product. Quidel, 612 F.Supp.3d at 1142. There, the district court noted that because plaintiff alleged false advertising of defendant's products, the purchasers of defendant's products would have a substantial interest in the litigation. Id. Because the non-parties had a substantial interest in the litigation and the other Silberg prongs were met, the district court granted plaintiff's motion for summary judgment as to defendant's abuse of process counterclaim. Id.; see also Epistar Corp. v. Philips Lumileds Lighting Co., LLC, No. C 07-5194 CW, 2008 WL 3930030, at *2, *6 (N.D. Cal. Aug. 26, 2008) (finding the litigation privilege applied and plaintiff's customers had a substantial interest where defendant sent allegedly false and misleading letters regarding International Trade Commission infringement findings to plaintiff's existing and potential customers who had purchased plaintiff's products, incorporated them into their own products, and intended to import them to the United States); Tri-Star Elecs. Int'l, Inc. v. Preci-Dip Durtal SA, No. CV0804226GAFAJWX, 2011 WL 13176071, at *8 (C.D. Cal. May 27, 2011) (dismissing defendant's counterclaims where plaintiff sent a letter to defendant's non-litigant customers and distributors because “they could also ‘be exposed to potential liability for patent ... infringement depending on the outcome of the pending litigation,' [and therefore] they have a substantial interest in the outcome of the pending litigation.”).
Here, Defendant's dissemination of counterclaims in the Counterclaim Video to interested parties who are potential customers of Plaintiffs is connected to the action and serves the objects of litigation. Plaintiffs allege that in reviewing other companies, “Defendant's YouTube videos will appear as ‘suggestions' for viewers of the other companies.” (Doc. 60 ¶ 18.) Defendant's counterclaims allege false advertising and violations of California Unfair Competition Law. (Doc. 46.) As with the distribution of false advertising allegations in Quidel, Defendant's counterclaim and portions of Defendant's Counterclaim Video explain Defendant's false advertising allegations to people who are interested in Plaintiffs' products. Reading Plaintiffs' Third Amended Complaint in context, Plaintiffs allege that Defendant's Counterclaim Video was aimed at Plaintiffs' customers or potential customers and was intended to apprise them of Defendant's false advertising allegations. (See Doc. 60 ¶¶ 4, 18.) Furthermore, when Defendant discusses his counterclaim in the Counterclaim Video, he largely reads the claims verbatim. (Doc. 84, Counterclaim Video at Timestamp 5:50-17:55.) This reading and commenting upon the counterclaim is sufficiently connected to this action to be protected by the litigation privilege. See Silberg, 50 Cal.3d at 220 (“a statement made in a judicial proceeding is not privileged unless it has some reasonable relevancy to the subject matter of the action.”). Because Defendant's statements regarding his counterclaim in the Counterclaim Video were aimed at non-participants with a substantial interest in the litigation and had a reasonable relevance to the action, the third and fourth Silberg prongs are met. Therefore, Defendant's statements regarding his counterclaim (Doc. 84, Counterclaim Video at Timestamp 5:50-17:55) are protected by the litigation privilege.
However, Defendant's Counterclaim Video does not solely consist of Defendant discussing the allegations in his Counterclaim, but also includes Defendant's commentary on other matters. The California Supreme Court has held that a “statement made in a judicial proceeding is not privileged unless it has some reasonable relevancy to the subject matter of the action.” Silberg, 50 Cal.3d at 220. The portions of the video in which Defendant discusses his own services; discusses his reviews of other financial trading educational programs; discusses documents “in the public record” obtained through discovery; discusses another case in which Plaintiff Heitkoetter's name is spelled differently; and discusses his attorney's efforts and principles of speech are insufficiently connected to this action and to the non-participants' substantial interest. (See Doc. 84, Counterclaim Video at Timestamp 0:00-5:49, 17:55-19:42, 19:43-21:54). The speech in these portions of the Counterclaim Video is therefore not protected by the litigation privilege.
In sum, as the Silberg prongs are met as to Defendant's discussion of his counterclaim in the Counterclaim Video, the litigation privilege applies to Defendant's statements explaining his counterclaim in the Counterclaim Video. (Doc. 84, Counterclaim Video at Timestamp 5:5017:55.) However, the remainder of Defendant's statements in the video, in which Defendant discusses his own services; discusses his reviews of other financial trading educational programs; discusses documents “in the public record” obtained during discovery; discusses another case in which Plaintiff Heitkoetter's name is spelled differently; and discusses his attorney's efforts in this matter (Id. at Timestamp 0:00-5:49, 17:55-19:42, 19:43-21:54) are not protected by the litigation privilege.
C. The Fair and True Report Privilege Applies to Portions of Defendant's Counterclaim Video
Defendant contends that the fair and true report privilege applies here, as the Counterclaim Video is a fair and true report of public documents. (Doc. 63-1 at 14-15.) Plaintiffs respond that the fair report privilege should not apply to the Counterclaim Video because Defendant provides commentary in addition to reading the counterclaim verbatim; the fair and true report privilege only protects statements to the extent a reasonable viewer would understand them as communications about the legal proceedings themselves, and Defendant fails to meet his burden of establishing that his YouTube Channel, is a “public journal.” (Doc. 67 at 18-20.)
California Civil Code Section 47(d) sets forth the fair and true report privilege. Cal. Civ. Code § 47(d). “The fair report privilege ‘confers an absolute privilege on any fair and true report in, or a communication to, a public journal of a judicial proceeding, or anything said in the course thereof.'” Healthsmart Pac., Inc. v. Kabateck, 7 Cal.App. 5th 416, 431, as modified (Jan. 10, 2017) (citing Sipple v. Foundation For Nat. Progress 71 Cal.App.4th 226, 240 (1999)). “The privilege applies to fair and true reports ‘of anything said in the course' of a ‘judicial ... proceeding.'” Id. at 432, as modified (Jan. 10, 2017) (citing Cal. Civ. Code, § 47(d).) “California courts have construed the phrase, “judicial proceeding,” broadly to include the filing of a complaint.” Id. (citations omitted). “‘Fair and true' in this context does not refer to the truth or accuracy of the matters asserted in the judicial proceedings, but rather to the accuracy of the challenged statements with respect to what occurred in the judicial proceedings.” Id. at 434. Id. at 434. The Ninth Circuit has clarified that a “report is ‘fair and true' if it reflects ‘the substance, the gist, the sting of the libelous charge.'” Crane v. Arizona Republic, 972 F.2d 1511, 1519 (9th Cir. 1992); see Argentieri v. Zuckerberg, 8 Cal.App. 5th 768, 787-88 (2017) (“The defendant is entitled to a certain degree of flexibility/literary license... such that the privilege will apply even if there is a slight inaccuracy in details”). “The news article need not track verbatim the underlying proceeding. Only if the deviation is of such a ‘substantial character' that it ‘produce[s] a different effect' on the reader will the privilege be suspended.” Carver v. Bonds, 135 Cal.App.4th 328, 351, 37 Cal.Rptr.3d 480, 499 (2005) (citing Crane, 972 F.2d at 1519).
First, Defendant's counterclaim constitutes a judicial proceeding. Healthsmart, 7 Cal.App. 5th at 432 (“California courts have construed the phrase, “judicial proceeding,” broadly to include the filing of a complaint.”). Second, the portions of Defendant's Counterclaim Video discussing Defendant's counterclaim (Doc. 84, Counterclaim Video at Timestamp 5:50-17:55) constitute “fair and true” reporting, as Defendant primarily reads from his counterclaim with minimal additional commentary and notes that these are allegations. See Healthsmart, 7 Cal.App. 5th at 435 (holding that attorney defendants “are protected from liability under the fair report privilege in informing the news media” of allegations, but “are not protected if they informed the media that such facts were true.”); Crane, 972 F.2d at 1519; see Argentieri, 8 Cal.App. 5th at 787-88;
Third, the privilege only covers the portions of the Counterclaim Video that represent news coverage. California courts have noted that news articles “need not track verbatim the underlying proceeding,” but the privilege is suspended where the “deviation is of such a ‘substantial character' that it ‘produce[s] a different effect.” Carver, 135 Cal.App.4th at 351 (citing Crane, 972 F.2d at 1519). Defendant argues that the “entire Counterclaim Video is a fair and true report of public documents and nothing more.” (Doc. 63-1 at 15.) However, Defendant's Counterclaim Video consists of several segments that move between reports and tangential commentary. For instance, Defendant's opening discussion regarding his own services and reviews, Defendant's discussion of documents related to Plaintiff Heitkoetter, discussion of another case in which Plaintiff Heitkoetter's name is spelled differently, and discussion of his attorney's efforts do not constitute reporting on his counterclaim. (Doc. 84, Counterclaim Video at Timestamp 0:00-5:49, 17:55-19:42, 19:43-21:54.) These portions deviate substantially from reporting and produce a different effect, which suspended the fair and true report privilege. Carver, 135 Cal.App.4th at 351. Nevertheless, the segment in which Defendant primarily reads from his counterclaim, offers minimal other commentary, and continually notes that these are allegations qualifies as fair and true reporting of his counterclaim. (Doc. 84, Counterclaim Video at Timestamp 5:50-17:55.) Accordingly, Defendant's statements in his Counterclaim Video are privileged under the fair and true report privilege solely for the duration of Defendant's discussion of eight allegations from his counterclaim (Doc. 84, Counterclaim Video at Timestamp 5:50-17:55), in which he read from his Counterclaim while showing either the Counterclaim or related images.
Plaintiffs argue that the litigation privilege should not apply because Defendant offers commentary and subjective discussion rather than objective coverage. (Doc. 67 at 19.) However, courts have noted that the “defendant is entitled to a certain degree of flexibility/literary license ... such that the privilege will apply even if there is a slight inaccuracy in details.” Argentieri, 8 Cal. 5th at 787-88; Carver, 135 Cal.App.4th at 351 (coverage “need not track verbatim the underlying proceeding” for the privilege to apply”). Furthermore, the Court notes that the fair and true report privilege applies only to the portions of the Counterclaim Video in which Defendant did not substantially deviate from ordinary coverage of his counterclaim.
Plaintiffs further argue that the litigation privilege should not apply because Defendant fails to meet the burden of establishing that his YouTube Channel is a “public journal.” (Doc. 67 at 19.) Defendant argues that Defendant's YouTube Channel should be treated as a “public journal,” as “facts, commentary, and news are obtained more and more from YouTube.com channels and creators as less people rely on the local news for information.” (Doc. 70 at 8.) Neither Plaintiffs nor Defendant locate authority defining what constitutes a “public journal,” and Defendant states that “caselaw regarding what is or is not a ‘public journal' is virtually nonexistent from counsel for defendant's research.” (Id.) Given the lack of authority clarifying that a YouTube channel does not constitute a “public journal,” the Court cannot conclude that Defendant's YouTube channel fails to constitute a “public journal” for the purposes of the fair and true report privilege.
Plaintiffs also argue that because reasonable minds could differ regarding Defendant's comments on the allegations, the fair and true report privilege should not be applied at the motion to strike stage. (Doc. 67 at 19.) “In general, whether a privileged occasion exists within the meaning of Civil Code section 47, subdivision (d), is for the court to decide; whether the report of the official proceedings itself is ‘fair and true,' provided reasonable minds could disagree as to the effect of the communication on the average reader or listener, is a question of fact for the jury.” J-M Mfg. Co. v. Phillips & Cohen LLP, 247 Cal.App.4th 87, 98 (2016) (reviewing a summary judgment motion). California Courts have also noted that “this decision is one of law when... there is no dispute as to what occurred in the judicial proceeding reported upon or as to what was contained in the report.” McClatchy Newspapers, Inc. v. Superior Ct., 189 Cal.App.3d 961, 976 (Ct. App. 1987) (reviewing anti-SLAPP motion to strike). In deciding whether the fair and true report applies at the motion to strike or motion to dismiss stage, courts must therefore examine whether there is any dispute regarding the underlying judicial proceeding or report. In a recent case, a district court examined whether the fair and true report privilege applied on an anti-SLAPP motion to strike and motion to dismiss, and applied the fair and true report privilege where report statements were undisputed and the underlying charge sheets were undisputed. Gallagher, 563 F.Supp.3d at 1089 (“It is undisputed that Plaintiff was charged with shooting an unarmed girl and at least one witness made this claim; therefore, the fair and true report privilege bars this claim.”); see also Blatt v. Pambakian, No. 20-55084, 2021 WL 4352329, at *1 (9th Cir. Sept. 24, 2021) (Ninth Circuit concluding that a district court erred in not applying the fair and true report privilege in evaluating an anti-SLAPP motion and noting that “the ‘average person [reading] the report in its entirety would reasonably understand that [defendant] was referring' to the allegations in the Valuation Complaint.”).
Here, the parties do not dispute as to what is contained in Defendant's Counterclaim. (Doc. 46.) Furthermore, while the parties characterize the Counterclaim Video differently, there is no dispute as to the contents of Defendant's Counterclaim Video, as it is cited by Defendant in his briefing and was incorporated into Plaintiffs' operative Third Amended Complaint as part of Exhibit B. (Doc. 60 ¶ 59; Doc. 63-1 at 11; Doc. 84, Exhibit B, Counterclaim Video.) Because there is no dispute as to the judicial proceeding or as to what was contained in the report, the question of whether to apply the privilege is a matter of law. McClatchy, 189 Cal.App.3d at 976 (citing Kilgore v. Younger, 30 Cal.3d 770, 777, 640 P.2d 793, 797 (1982)). Accordingly, Plaintiffs' suggestion that the fair and true report privilege may not be applied in deciding this motion is incorrect.
Plaintiffs further argue that the fair and true report privilege “only protects statements to the extent a reasonable viewer would understand them as communications about the legal proceedings themselves,” citing Healthsmart, and contend that no reasonable viewer would believe Defendant is communicating mere allegations. (Doc. 67 at 19.) However, Defendant's frequent reminders in his Counterclaim Video that these are the allegations from his counterclaim and display of the counterclaim align with the attorney defendants' actions in Healthsmart. In Healthsmart, an attorney described allegations while the complaint was shown on a television program and a reporter continued to note that these were allegations. Healthsmart, 7 Cal.App. 5th at 422. The court noted that although some individual statements might be misunderstood as facts rather than allegations, when viewed in their entirety, the only reasonable conclusion the audience could draw was that these were the attorney's allegations. Id. at 436. As in Healthsmart, the reasonable conclusion to be drawn from Defendant's recurrent statements in the Counterclaim Video that he is discussing allegations from his counterclaim is that Defendant is describing allegations from his counterclaim. (See Doc. 84, Counterclaim Video at Timestamp 5:50-17:55.) Plaintiffs' argument is therefore unavailing, and the fair and true report privilege applies to Defendant's reporting on his counterclaim.
In total, Defendant's statements regarding his counterclaim in the Counterclaim Video are privileged under the litigation privilege and fair and true report privilege when they principally discuss his counterclaim (e.g., Doc. 84, Counterclaim Video at Timestamp 5:50-17:55). These absolute privileges protect that portion of Defendant's speech from Plaintiffs' claims.
Accordingly, the Court GRANTS Defendant's motion to dismiss as to Plaintiffs' claims regarding Defendant's explanation of his counterclaim in the Counterclaim Video (e.g., Doc. 84, Counterclaim Video at Timestamp 5:50-17:55) without leave to amend.
D. Plaintiffs Allege a Plausible Defamation by Implication Claim
Defendant next argues that Plaintiffs' claim for defamation by implication as to the misspelling of Plaintiff Heitkoetter's name should be dismissed. (Doc. 63-1 at 15-16.) Plaintiffs' Third Amended Complaint alleges that, “at the 18:37 timestamp [in the Counterclaim Video], Defendant discusses a lawsuit filed by Plaintiffs in Texas and suggests that Plaintiff Heitkoetter purposefully misspelled his name in the pleadings to avoid detection on the public docket.” (Doc. 60 ¶ 68.) Plaintiffs further allege that the “insinuation is demonstrably false, as the misspelling was made in error, and Plaintiff Rockwell Trading Services, LLC is also a Plaintiff in that action,” but was made to insinuate “that Plaintiff employs deceptive litigation tactics.” (Id. ¶ 7071.)
Defendant argues that no reasonable person would deduce the implications Plaintiffs allege. (Doc. 63-1 at 15-16.) Plaintiffs, in turn, contend that Defendant mischaracterizes the statement in the Counterclaim Video and that a reasonable person would view Defendant's statement as alleging that Plaintiff Heitkoetter was the one to cause the misspelling and allegedly intended concealment of his involvement in the lawsuit. (Doc. 67 at 20-21.)
To state a claim for defamation by implication under California law, a plaintiff must make allegations showing that: “(1) his or her interpretation of [a] statement is reasonable; (2) the implication or implications to be drawn convey defamatory facts, not opinions; (3) the challenged implications are not ‘substantially true'; and (4) the identified reasonable implications could also be reasonably deemed defamatory.” Issa v. Applegate, 31 Cal.App. 5th 689, 707-08 (2019) (quoting Heller v. NBCUniversal, Inc., No. CV-15-09631-MWF-KS, 2016 WL 6583048, at *3-4 (C.D. Cal. June 29, 2016) (some internal quotation marks omitted).
Here, Defendant's statements in context invite an interpretation that Plaintiff Heitkoetter is attempting to hide information. During this portion of the Counterclaim Video, Defendant diverges from recital of allegations in Defendant's counterclaim to comment upon parallel litigation. (See Doc. 46; Doc. 60; Doc. 84, Counterclaim Video at Timestamp 17:55-19:42.) Defendant displayed the complaint in the separate case and provided brief background about that case, then asked “Were you aware of this? I'm going to say it's likely you were possibly not aware of this lawsuit.” (Doc. 84, Counterclaim Video at Timestamp 18:32-18:40.) Defendant discussed how Plaintiff Heitkoetter's name was spelled differently in the other action, and stated “Wow. Markus's last name is spelled differently in this lawsuit compared to this lawsuit. So make sure when you want to look up this lawsuit you spell his name differently... if you ever want to find this lawsuit.” (Id. at Timestamp 18:40-19:30.) Defendant continued, “it's interesting, isn't it? Did he spell his name differently? Did he just maybe make a mistake in court about how to spell his last name? I guess. I guess so.” (Id. at Timestamp 19:30-19:42.) Combined with the Counterclaim Video title, “Markus Heitkoetter / Rockwell Trading Sued for False Advertising: 7 Shocking Allegations!”, these statements invite a reasonable, factual inference that Plaintiff Heitkoetter is attempting to hide information related to his business. Such an implication is defamatory in that it impugns Plaintiff Heitkoetter's truthfulness in business dealings. Melaleuca, Inc. v. Clark, 66 Cal.App.4th 1344, 1364 (1998) (“if the imputation fairly implied that the plaintiff is dishonest or lacking in integrity or that he is perpetrating a fraud upon the public by selling something that he knows to be defective, the personal defamation may be found”) (citing Restatement (Second) of Torts § 623A, comment g). Defendant has not attempted to establish that the implications are truthful. (See Doc. 63-1 at 15-16; Doc. 70 at 9-10.) Plaintiffs have therefore stated a plausible claim for defamation by implication.
Accordingly, the Court DENIES Defendant's motion to dismiss as to Plaintiffs' defamation by implication claim related to the misspelling of Plaintiff Heitkoetter's name.
E. Plaintiffs Allege a Plausible Abuse of Process Claim
Defendant contends that Plaintiffs' abuse of process claim should be dismissed, as filing a complaint is not grounds for an abuse of process claim; Defendant's counterclaim is protected under the California Anti-SLAPP Statute and Litigation Privilege; and Defendant's counterclaim was not filed for improper purposes. (Doc. 63-1 at 16-20; Doc. 70 at 10-11.) Plaintiffs, in turn, contend that “the purpose of the Counterclaim Video, and the Counterclaim itself, is to try and circumvent this Court's January 6, 2023 Order and the final February 16, 2023 Protective Order, by reframing the protected discovery information as operative facts supporting the Counterclaim and, thereafter, discussing ‘the Counterclaim' in the Counterclaim Video.” (Doc. 60 ¶ 72; Doc. 67 at 21-23.)
“To succeed in an action for abuse of process, a litigant must establish that the defendant (1) contemplated an ulterior motive in using the process, and (2) committed a willful act in the use of the process not proper in the regular conduct of the proceedings.” JSJ Ltd. Partnership v. Mehrban, 205 Cal.App.4th 1512, 1523 (2012) (citing Rusheen, 37 Cal.4th at 1057). “The relevant California authorities establish, however, that while a defendant's act of improperly instituting or maintaining an action may, in an appropriate case, give rise to a cause of action for malicious prosecution, the mere filing or maintenance of a lawsuit-even for an improper purpose-is not a proper basis for an abuse of process action.” Id. “Abuse of process extends to procedures ‘incident to litigation,' such as the abuse of the powers a litigant derives from the taking of a deposition as part of litigation-sanctioned discovery or other misuse of ‘the tools the law affords litigants once they are in a lawsuit.'” Rassamni v. Fresno Auto Spa, Inc., No. 1:18-cv-00738-LJO-EPG, 2019 WL 2415316, at *2 (E.D. Cal. June 7, 2019) (citations omitted).
In this instance, Plaintiffs have alleged that Defendant is using the discovery process and filing of a counterclaim to circumvent the Court's protective order, which specifies that “[n]o party, either personally or through their agents or attorneys, shall publish to the Internet any ‘Disclosure or Discovery Material,' a term which shall mean for purposes of this Order any documents or information that is generated, produced or disclosed in disclosures or discovery of this matter.” (Doc. 43). For the first abuse of process element, Plaintiffs allege an ulterior motive in using the litigation process for a collateral goal, namely that “Defendant wanted to continue to share this discovery information because it brings increased attention to his YouTube Channel and, thereby, the products and services which he sells.” (Doc. 60 ¶ 75.) For the second abuse of process element, Plaintiffs allege that Defendant uses his counterclaim and Counterclaim Video to “circumvent this Court's January 6, 2023 Order and the final February 16, 2023 Protective Order, by reframing the protected discovery information as operative facts supporting the Counterclaim and, thereafter, discussing ‘the Counterclaim' in the Counterclaim Video.” (Doc. 60 ¶ 72.) Plaintiffs have therefore stated a plausible abuse of process claim.
Defendant argues that filing a counterclaim alone does not give rise to an abuse of process claim. However, Defendant's alleged actions go beyond the mere filing of a counterclaim -Plaintiffs allege that Defendant is utilizing the tools of discovery and counterclaim to further his separate goal of increasing his profile and own business. (Doc. 60 ¶¶ 72, 75.) These alleged actions demonstrate the misuse of “the tools the law affords litigants” contemplated in abuse of process claims, and Defendant's characterization of his actions is therefore unavailing. See Rassamni, No. 1:18-cv-00738-LJO-EPG, 2019 WL 2415316, at *2.
Defendant further argues that the Anti-SLAPP Statute and litigation privilege protects his counterclaim and Counterclaim Video statements. However, as discussed supra, the commercial speech exemption to the Anti-SLAPP statute applies here. Additionally, the litigation privilege solely protects the portion of Defendant's video in which Defendant discusses his counterclaim allegations and does not encompass the portion of the video in which Defendant is discussing documents related to Plaintiffs. (Compare Doc. 84, Counterclaim Video at Timestamp 3:57-5:49; 5:50-17:55.) Defendant's arguments regarding the application of these privileges to this claim are therefore unavailing.
Accordingly, Defendant's motion to dismiss Plaintiffs' abuse of process claim is DENIED.
F. Plaintiffs Sufficiently Pled Defamation by Implication and Derivative Causes of Action
Defendant contends that Plaintiffs have not adequately identified the underlying defamatory statements and have therefore insufficiently pled their defamation by implication claim and derivative causes of action. (Doc. 63-1 at 20-21; Doc. 70 at 11.) Plaintiffs respond that the underlying statements were identified in Paragraphs 67, 69-71, and 79 of their Third Amended Complaint and Defendant does not address why these identified statements merit dismissal. (Doc. 67 at 23.)
Under California pleading standards, the words of a defamatory statement “must be specifically identified, if not pleaded verbatim, in the complaint.” Gilbert v. Sykes, 147 Cal.App.4th 13, 53 (2007). Pleading the “substance of the defamatory statement” is also adequate to state a claim. Okun v. Superior Ct., 29 Cal.3d 442, 458 (1981). “Even under liberal federal pleading standards, ‘general allegations of the defamatory statements' which do not identify the substance of what was said are insufficient.” Jacobson v. Schwarzenegger, 357 F.Supp.2d 1198, 1216 (C.D. Cal. 2004) (quoting Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F.Supp. 1303, 1314 (N.D. Cal. 1997)); see also Qualls v. Regents of Univ. of California, No. 1:13-cv-00649-LJO, 2013 WL 4828587, at *8 (E.D. Cal. Sept. 6, 2013).
Here, Plaintiffs' Third Amended Complaint specifies that there is a false statement at the 11:29 timestamp in Defendant's Counterclaim Video, alleging that “Defendant alleges that Plaintiff Heitkoetter deceived his viewers because he did not disclose the additional deposit and suggests that Plaintiff Heitkoetter deposited more than $250,000 into that account.” (Doc. 60 ¶ 67.) Plaintiffs further allege that “Defendant conveniently fails to mention that Plaintiff Heitkoetter had withdrawn significant sums of money from that account prior to any margin call being issued.” (Id.) Plaintiffs also allege that “Plaintiff had achieved his goal of withdrawing money from that account on a monthly basis until June of 2021, and in fact had not deposited more than $250,000 into that account. This statement is provably false by the very data being ‘analyzed' by Defendant in this video.” (Id.) Plaintiffs' Third Amended Complaint further specifies another false statement at the 18:37 timestamp, alleging that Defendant “suggests that Plaintiff Heitkoetter purposefully misspelled his name in the pleadings to avoid detection on the public docket,” which is “demonstrably false, as the misspelling was made in error, and Plaintiff Rockwell Trading Services, LLC is also a Plaintiff in that action.” (Doc. 60 ¶¶ 68-69.) While Plaintiffs do not quote Defendant's allegedly defamatory speech verbatim, Plaintiffs sufficiently paraphrase and identify the location of the allegedly defamatory speech. Plaintiffs have therefore sufficiently pled the underlying cause of action in their Third Amended Complaint.
Defendant cites state and federal cases to demonstrate that greater specificity is needed. See Titan Glob. LLC v. Organo GoldInt'l, Inc., No. 12-cv-2104-LHK, 2012 WL 6019285 (N.D. Cal. Dec. 2, 2012); Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F.Supp. 1303 (N.D. Cal. 1997); Jacobson v. Schwarzenegger, 357 F.Supp.2d 1198 (C.D. Cal. 2004). However, in Titan Global, the court found the allegedly defamatory statements too general where plaintiff only alleged “false and defamatory statements of fact about the character and business acumen of [defendant's owner,] labeling him as an incompetent and dishonest business leader” and that “[plaintiff's owner] is an incompetent and dishonest leader who will not reveal to his group the elements necessary to be successful.” Titan Glob. LLC, No. 12-CV-2104-LHK, 2012 WL 6019285, at *11. In Jacobson, the plaintiff argued “that he should not be required to plead the alleged defamatory statement” and only offered to file the alleged defamatory statement under seal. Jacobson, 357 F.Supp.2d at 1216. In Silicon Knights, the plaintiff broadly alleged that defendants made “false and defamatory statements to several of [plaintiff's] customers, prospective customers, industry associates and the public regarding: (a) the quality and reliability of [plaintiff's] products, (b) the competence and ability of [plaintiff's] employees, and (c) [plaintiff's] cooperation and ability to work with customers, suppliers, or other persons in the software industry.” Silicon Knights, 983 F.Supp. At 1313-14. The allegedly defamatory statements found to be overly broad or general in those cases are distinguishable from the allegations in this matter. Plaintiffs' Third Amended Complaint identified two statements that Plaintiffs allege are false and defamatory based upon information relating to a specific margin call and different spelling of Plaintiff Heitkoetter's name in other litigation. (Doc. 60 ¶¶ 67-69.) Plaintiffs further provided the locations of those statements within Defendant's Counterclaim Video. (Id.) Defendant's reliance on those cases is therefore inapposite.
Accordingly, Defendant's motion to dismiss Plaintiff's defamation by implication and derivative causes of action for insufficiently pled claims is DENIED.
G. Plaintiffs' Request for Attorneys' Fees is Denied
In their opposition, Plaintiffs request that the Court find Defendant's “Motion is meritless such that Plaintiffs are entitled to recover their reasonable attorney's fees in responding to said Motion.” (Doc. 67 at 23.) However, as Plaintiffs have not provided further authority or briefing demonstrating they are entitled to attorneys' fees, this request is DENIED.
V. CONCLUSION AND ORDER
For the reasons stated, Defendant's motion to strike and motion to dismiss are GRANTED IN PART and DENIED IN PART as follows:
1. Defendant's motion to strike based on the California Anti-SLAPP Statute is DENIED;
2. Defendant's request for attorneys' fees based upon the California Anti-SLAPP Statute is DENIED;
3. Defendant's motion to dismiss based upon the litigation privilege and fair and true report privilege is GRANTED with respect to Defendant's statements regarding his counterclaim in the Counterclaim Video (e.g., Doc. 84, Counterclaim Video at Timestamp 5:50-17:55) without leave to amend.
4. Defendant's motion to dismiss Plaintiffs' defamation by implication claim related to the misspelling of Plaintiff Heitkoetter's name is DENIED;
5. Defendant's motion to dismiss Plaintiffs' abuse of process claim is DENIED;
6. Defendant's motion to dismiss to dismiss for Plaintiffs' failure to insufficiently plead defamation by implication and derivative causes of action is DENIED.
Furthermore, Plaintiffs' request in their Opposition to Defendant's Motion to Strike and Motion to Dismiss that the Court find Defendant's motion meritless and that Plaintiffs are entitled to attorneys' fees (Doc. 67 at 23) is DENIED.
IT IS SO ORDERED.