Friedman v. Bloomberg L.P., No. 16-1335 (2d Cir. 2018)
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Connecticut General Statute 52‐59b, which provides for long‐arm jurisdiction over certain out‐of‐state defendants except in defamation actions, does not violate plaintiff's First or Fourteenth Amendment rights. This case arose out of a news article published by Bloomberg News, reporting a lawsuit filed by plaintiff against his former employer, Palladyne International Asset Management, and others. The Second Circuit affirmed the district court's dismissal of plaintiff's defamation action as to the out-of-state defendants. In regard to allegedly defamatory statements made by the remaining defendants, the court affirmed the district court's dismissal of plaintiff's defamation claim based on the "as much as $500 million" statement, and reversed the district court's dismissal of the defamation claim based on the "repeatedly tried to extort" statement, pursuant to New York Civil Rights Law 74.
This opinion or order relates to an opinion or order originally issued on September 12, 2017.
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16 1335 cv Friedman v. Bloomberg L.P., et al. 1 2 In the 3 United States Court of Appeals 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 For the Second Circuit ________ AUGUST TERM, 2016 ARGUED: OCTOBER 31, 2016 DECIDED: SEPTEMBER 12, 2017 AMENDED: MARCH 1, 2018 No. 16 1335 cv DAN FRIEDMAN, Plaintiff Appellant v. BLOOMBERG L.P., CHRISTOPHER DOLMETSCH, ERIK LARSEN, MICHAEL HYTHA, ANDREW DUNN, MILLTOWN PARTNERS, PATRICK HARVERSEN, D.J. COLLINS, OLIVER RICKMAN, PALLADYNE INTERNATIONAL ASSET MANAGEMENT B.V., ISMAEL ABUDHER, LILY YEO, Defendants Appellees. ________ Appeal from the United States District Court for the District of Connecticut. No. 15 Civ. 43 – Alvin W. Thompson, Judge. ________ Before: WALKER, HALL, and CHIN, Circuit Judges. ________ 2 No. 16 1335 cv 1 Plaintiff appellant Dan Friedman appeals from a decision of 2 the United States District Court for the District of Connecticut (Alvin 3 W. Thompson, J.) dismissing his defamation action and entering 4 judgment in favor of the defendants appellees. At issue in this case is 5 whether Connecticut General Statute § 52 59b—which provides for 6 long arm jurisdiction over certain out of state defendants except in 7 defamation actions—violates Friedman’s First or Fourteenth 8 Amendment rights. We conclude that it does not and AFFIRM the 9 district court’s dismissal of this action as to the out of state 10 defendants. We also consider whether the allegedly defamatory 11 statements at issue in this case, which were reported and published 12 by the remaining defendants, are privileged under New York Civil 13 Rights Law § 74 as a fair and true report of judicial proceedings or are 14 protected expressions of opinion. We AFFIRM in part and REVERSE 15 in part the district court’s determinations regarding these statements 16 and REMAND this action for proceedings against the remaining 17 defendants consistent with this opinion. 18 19 ________ 3 No. 16 1335 cv 1 2 3 4 ALAN H. KAUFMAN, Kaufman PLLC, New York, NY (Stephen G. Grygiel, Silverman, Thompson, Slutkin & White, LLC, Baltimore, MD, on the brief) for Plaintiff Appellant. 5 6 7 8 9 SHARON L. SCHNEIER (Yonatan S. Berkovits, on the brief), Davis Wright Tremaine LLP, New York, NY, for Defendants Appellees Bloomberg L.P., Christopher Dolmetsch, Erik Larsen, Michael Hytha, and Andrew Dunn. 10 11 12 13 14 15 DEREK J.T. ADLER, Hughes Hubbard & Reed LLP, New York, NY, for Defendants Appellees Palladyne International Asset Management B.V., Ismael Abudher, Lily Yeo, Milltown Partners LLP, Patrick Haverson, David John Collins and Oliver Rickman. ________ 16 JOHN M. WALKER, JR., Circuit Judge: 17 Plaintiff appellant Dan Friedman appeals from a decision of 18 the United States District Court for the District of Connecticut (Alvin 19 W. Thompson, J.) dismissing his defamation action and entering 20 judgment in favor of the defendants appellees. At issue in this case is 21 whether Connecticut General Statute § 52 59b—which provides for 22 long arm jurisdiction over certain out of state defendants except in 23 defamation actions—violates Friedman’s First or Fourteenth 24 Amendment rights. We conclude that it does not and AFFIRM the 25 district court’s dismissal of this action as to the out of state 4 No. 16 1335 cv 1 defendants. We also consider whether the allegedly defamatory 2 statements at issue in this case, which were reported and published 3 by the remaining defendants, are privileged under New York Civil 4 Rights Law § 74 as a fair and true report of judicial proceedings or are 5 protected expressions of opinion. We AFFIRM in part and REVERSE 6 in part the district court’s determinations regarding these statements 7 and REMAND this action for proceedings against the remaining 8 defendants consistent with this opinion.1 BACKGROUND 9 10 This defamation action arises out of a news article published by 11 Bloomberg News that reported on a lawsuit Friedman filed against 12 his former employer, Palladyne International Asset Management, 13 and others. Friedman alleged in the lawsuit that Palladyne, a 14 purported hedge fund based in the Netherlands, fraudulently 15 induced him into working as its “head of risk” in order to create the After our initial disposition of this appeal, see Friedman v. Bloomberg L.P., 871 F.3d 185 (2d Cir. 2017), defendants appellees filed a petition for panel rehearing. We hereby GRANT the petition without the need for reargument, see Fed. R. App. P. 40(a)(4)(A), withdraw our opinion of September 12, 2017, and issue this amended opinion in its place. We also DENY as moot, pursuant to Fed. R. App. P. 29(b)(2), amici’s motion to file a brief in support of rehearing. 1 5 No. 16 1335 cv 1 appearance that it was a legitimate company. Friedman claimed that, 2 over the course of nearly eight months, Palladyne and an executive 3 recruiting firm made numerous misrepresentations to persuade him 4 to accept this position, including that Palladyne was “a diversified 5 investment company” with a “worldwide clientele” and “consistent, 6 optimized returns.” App’x at 15, 49, 61. 7 In November 2011, Friedman moved to the Netherlands and 8 began working for Palladyne. According to Friedman, he soon 9 discovered that Palladyne was a “kickback and money laundering 10 operation for the former dictatorial Ghaddafi [sic] regime in Libya,” 11 App’x at 39, and that Palladyne’s primary purpose was to channel 12 funds at the behest of the then head of Libya’s state run National Oil 13 Company, who was the father in law of Palladyne’s chief executive 14 officer. Friedman also learned that the United States Department of 15 Justice and the Securities and Exchange Commission were conducting 16 investigations that implicated Palladyne. In February 2012, after 17 Friedman voiced concerns to a colleague that Palladyne was not 18 engaging in legitimate investment activities and could face criminal 6 No. 16 1335 cv 1 exposure, he was “abruptly terminated with no legally cognizable 2 explanation.” App’x at 75. 3 On March 25, 2014, Friedman sued Palladyne and the firm that 4 had recruited him for the position, as well as several of their 5 employees. Friedman asserted seven counts in his complaint, 6 including fraudulent inducement, and sought monetary damages 7 totaling $499,401,000, plus interest, attorneys’ fees and costs. He also 8 sought, as additional punitive damages, two years of the employee 9 defendants’ salaries and bonuses. Friedman requested that “this 10 Court enter judgment on all Counts for the plaintiff.” App’x at 88. 11 On March 27, 2014, Bloomberg L.P. published online the article 12 at issue in this case. Entitled “Palladyne Accused in Suit of 13 Laundering Money for Qaddafi,” the article reported on Friedman’s 14 lawsuit. Friedman responded to this article by filing the instant 15 defamation action against (1) Bloomberg L.P. and the authors and 16 editors of the article (collectively, the “Bloomberg Defendants”); (2) 17 the Netherlands based Palladyne and two of its senior officers 18 (collectively, the “Palladyne Defendants”); and (3) Milltown Partners, 7 No. 16 1335 cv 1 LLP—a public relations company based in the United Kingdom that 2 worked for Palladyne and allegedly was a source of information for 3 the article—and several of its employees (collectively, the “Milltown 4 Defendants”). 5 6 Friedman alleged that the following statements in the article were false and caused him serious and irreparable harm: 7 8 9 10 11 12 13 (1) A statement that “[Palladyne] was sued in the U.S. for as much as $500 million.” (2) A quote from Palladyne that “[t]hese entirely untrue and ludicrous allegations [in Friedman’s earlier lawsuit] have been made by a former employee who has repeatedly tried to extort money from the company. . . . He worked with us for just two months before being dismissed for gross misconduct.” 14 App’x at 19, 37 38. Friedman further alleged that the Bloomberg 15 Defendants negligently published these statements without 16 contacting him for a response or otherwise verifying their accuracy, 17 and acted with reckless disregard by failing to correct or retract the 8 No. 16 1335 cv 1 statements even after his lawyer alerted several of the Bloomberg 2 Defendants to their inaccuracy.2 3 The Milltown and Palladyne Defendants moved to dismiss this 4 case pursuant to Federal Rules of Civil Procedure 12(b)(2) for lack of 5 personal jurisdiction and 12(b)(6) for failure to state a claim. In 6 granting the motion, the district court concluded that Conn. Gen. Stat. 7 § 52 59b, which provides for jurisdiction over non resident 8 individuals, foreign partnerships, and foreign voluntary associations 9 except in defamation cases, deprived it of personal jurisdiction over 10 the Milltown and Palladyne Defendants, all of which are foreign 11 entities. The district court further determined that even if 12 Palladyne—organized under the laws of the Netherlands as a besloten 13 vennootschap—were categorized as a corporation and not a foreign 14 partnership, Conn. Gen. Stat. § 33 929 would deprive it of personal 15 jurisdiction over Palladyne. There is an updated version of this article in the parties’ joint appendix that includes a response from Friedman’s lawyer. Because Friedman does not mention this version or attach it to his complaint, we do not consider it for purposes of this appeal. 2 9 No. 16 1335 cv 1 The Bloomberg Defendants also filed a motion to dismiss the 2 complaint pursuant to Rule 12(b)(6) for failure to state a claim, which 3 the district court granted. The district court held that the statement 4 that Friedman had sued Palladyne for “as much as $500 million” was 5 protected by N.Y. Civ. Rights Law § 74 because it was a fair and true 6 report of Friedman’s complaint and that the statement that Friedman 7 “has repeatedly tried to extort money from [Palladyne],” while not 8 covered by the same privilege, was a protected expression of opinion. 9 Friedman timely appealed the dismissal of his complaint. DISCUSSION 10 11 Friedman argues on appeal inter alia that (1) the district court 12 has personal jurisdiction over the individual Milltown and Palladyne 13 Defendants pursuant to Conn. Gen. Stat. § 52 59b because the 14 statute’s exclusion of defamation actions is unconstitutional3; (2) the 15 “for as much as $500 million” statement is defamatory because it fails 16 to clarify that he could not have been awarded this amount even if his Friedman also asserts that the lower court had jurisdiction over the corporate defendants under Conn. Gen. Stat. § 33 929. However, he fails to raise any arguments on this point and, therefore, we do not address the district court’s determination to the contrary. 3 10 No. 16 1335 cv 1 lawsuit were successful; and (3) the “repeatedly tried to extort 2 money” statement suggests that he engaged in criminal conduct and 3 implies undisclosed facts that are detrimental to his character. 4 I. 5 We review de novo an appeal from a district court’s dismissal 6 for lack of personal jurisdiction. Whitaker v. Am. Telecasting, Inc., 261 7 F.3d 196, 208 (2d Cir. 2001). The plaintiff bears the burden of 8 demonstrating that the court has personal jurisdiction over each 9 defendant. Id. In determining whether such jurisdiction exists, a 10 court “must look first to the long arm statute of the forum state. . . . If 11 the exercise of jurisdiction is appropriate under that statute, the court 12 must decide whether such exercise comports with the requisites of 13 due process.” Id. at 208 (citation omitted). The relevant long arm 14 statute, Conn. Gen. Stat. § 52 59b(a), provides: 15 16 17 18 19 20 21 Connecticut General Statute § 52 59b [A] court may exercise personal jurisdiction over any nonresident individual, foreign partnership or foreign voluntary association . . . who in person or through an agent . . . (2) commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; (3) commits a tortious act outside the state causing injury to person . . . within the state, except 11 No. 16 1335 cv 1 2 as to a cause of action for defamation of character arising from the act. 4 3 Based on the plain language of Conn. Gen. Stat. § 52 59b, the 4 district court did not have personal jurisdiction in this defamation 5 action over the individual Milltown and Palladyne Defendants, who 6 are not Connecticut residents. Friedman argues, however, that the 7 long arm statute’s exclusion of out of state defendants in defamation 8 actions violates his First Amendment right to petition and Fourteenth 9 Amendment right to equal protection. We disagree. 10 The First Amendment provides, in relevant part, that 11 “Congress shall make no law . . . abridging . . . the right of the people 12 . . . to petition the Government for a redress of grievances.” U.S. 13 CONST. amend. I. The right to petition, which applies to the states 14 through the Fourteenth Amendment, “extends to all departments of 15 the Government, including the courts.” City of N.Y. v. Beretta U.S.A. 16 Corp., 524 F.3d 384, 397 (2d Cir. 2008) (citation and internal quotation 17 marks omitted). A plaintiff’s “constitutional right of access to the Section 52 59b(a)(1) provides jurisdiction over certain out of state defendants who “[t]ransact[] any business within the state.” Friedman did not appeal the district court’s decision that this provision does not apply. 4 12 No. 16 1335 cv 1 courts is violated where government officials obstruct legitimate 2 efforts to seek judicial redress.” Id. (citation and brackets omitted); see 3 also Christopher v. Harbury, 536 U.S. 403, 413 (2002) (noting right of 4 access concerns are implicated when “systemic official action 5 frustrates a plaintiff or plaintiff class in preparing and filing suits at 6 the present time”); Bounds v. Smith, 430 U.S. 817, 828 (1977) (requiring 7 prison authorities to provide inmates with adequate law libraries or 8 legal assistance to permit meaningful litigation of appeals). 9 A plaintiff’s right of access to courts is not violated when, as 10 here, a state’s long arm statute does not provide for jurisdiction over 11 certain out of state defendants. Indeed, “[t]here is nothing to compel 12 a state to exercise jurisdiction over a foreign [defendant] unless it 13 chooses to do so, and the extent to which it so chooses is a matter for 14 the law of the state as made by its legislature.” Brown v. Lockheed 15 Martin Corp., 814 F.3d 619, 626 (2d Cir. 2016) (quoting Arrowsmith v. 16 United Press Int l, 320 F.2d 219, 222 (2d Cir. 1963) (en banc)). In 17 International Shoe Co. v. Washington, the Supreme Court held that, 18 under the Due Process Clause of the Fourteenth Amendment, state 13 No. 16 1335 cv 1 courts could exercise jurisdiction over out of state defendants if the 2 defendants had “certain minimum contacts with [the forum state] 3 such that the maintenance of the suit does not offend ‘traditional 4 notions of fair play and substantial justice.’” 326 U.S. 310, 316 (1945) 5 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Supreme 6 Court described the extent to which it would be constitutionally 7 permissible for state courts to exercise jurisdiction over these 8 defendants; it did not hold that state courts were required to exercise 9 such jurisdiction. See id. Relying on this principle, state legislatures 10 enacted long arm statutes setting forth the terms under which their 11 courts could exercise jurisdiction over out of state defendants. See 12 Robert D. Sack, Sack on Defamation: Libel, Slander, and Related Problems, 13 § 15.1.2A (5th ed. 2017). Although many states’ long arm statutes 14 provide for jurisdiction that is coextensive with the limits of the Due 15 Process Clause, some do not permit the exercise of jurisdiction to the 16 full extent allowed by the federal Constitution. Id.; see Best Van Lines, 17 Inc. v. Walker, 490 F.3d 239, 244 45 (2d Cir. 2007). 14 No. 16 1335 cv 1 The Connecticut long arm statute at issue here, which 2 precludes its courts from exercising jurisdiction over certain foreign 3 defendants in defamation actions,5 does not provide for jurisdiction 4 to the limits of due process. See Conn. Gen. Stat. § 52 59b; see also 5 International Shoe, 326 U.S. at 316. The statute’s limitation does not, 6 however, violate Friedman’s First Amendment right of access to 7 courts. As we have noted, “[t]here is nothing to compel a state to 8 exercise jurisdiction over a foreign [defendant] unless it chooses to do 9 so,” Brown, 814 F.3d at 626, and Friedman does not have any right to 10 assert a claim against a foreign entity in the absence of a long arm 11 statute that provides jurisdiction over such an entity. See Whitaker, 261 12 F.3d at 208; see also George v. Strick Corp., 496 F.2d 10, 12 (10th Cir. 1974) 13 (“[P]ertinent federal cases do not compel state courts to open their 14 doors to every suit which meets the minimum contacts requirements 15 of the due process clause of the federal constitution.”); Jennings v. 16 McCall Corp., 320 F.2d 64, 68 (8th Cir. 1963) (“[A] state court is free to We note that Conn. Gen. Stat. § 52 59b(a)(1) does permit jurisdiction over out of state defendants in defamation actions if the defendant “[t]ransacts any business within the state.” 5 15 No. 16 1335 cv 1 choose for itself the standards to be applied in determining the 2 circumstances under which a foreign [entity] would be amenable to 3 suit, assuming of course that minimum due process requirements are 4 met. . . . [It is] a state s privilege to impose its own jurisdictional 5 limitations.”). Friedman, therefore, has failed to show that this statute 6 violates his First Amendment right of access to courts.6 7 Conn. Gen. Stat. § 52 59b also does not violate Friedman’s equal 8 protection rights under the Fourteenth Amendment. Friedman 9 argues that, applying strict scrutiny, the statute violates the Equal 10 Protection Clause by “restricting the rights of defamation plaintiffs as 11 a class without utilizing the least restrictive means.” Appellant’s Br. 12 at 44 45. However, we apply strict scrutiny only when the challenged 13 statute either (1) burdens a fundamental right or (2) targets a suspect Friedman also states, without explanation, that the long arm statute’s exception for out of state defendants in defamation actions violates his due process rights. Federal due process, however, does not compel a state to provide for jurisdiction over out of state defendants. Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 440 (1952) (“The suggestion that federal due process compels the State to open its courts to such a case [against a foreign defendant] has no substance.”). Instead, the Due Process Clause limits the extent to which a state court may exercise jurisdiction over such defendants. See International Shoe, 326 U.S. at 316. 6 16 No. 16 1335 cv 1 class. See Heller v. Doe, 509 U.S. 312, 319 (1993). Friedman has not 2 shown that his claim falls within either category. As we have 3 discussed, a state is not required to extend its courts’ jurisdiction over 4 specific foreign defendants and, in the absence of a long arm statute 5 providing for such jurisdiction, a plaintiff does not have a 6 fundamental right to bring an action against those foreign defendants. 7 Further, Friedman does not argue that state residents defamed by out 8 of state entities are a suspect class. 9 Under rational basis review, which is applicable here, “we are 10 required to defer to the legislative choice, absent a showing that the 11 legislature acted arbitrarily or irrationally.” Gronne v. Abrams, 793 12 F.2d 74, 77 (2d Cir. 1986). The party challenging the law, therefore, 13 “must disprove every conceivable basis which might support it.” 14 Windsor v. United States, 699 F.3d 169, 180 (2d Cir. 2012) (citation and 15 internal quotation marks omitted), aff’d, 133 S. Ct. 2675 (2013). 16 Friedman argues that the statute’s legislative history does not state a 17 rational basis for excluding defamation actions. A legislature, 18 however, “need not actually articulate at any time the purpose or 17 No. 16 1335 cv 1 rationale supporting its classification. . . . Instead, a classification must 2 be upheld against [an] equal protection challenge if there is any 3 reasonably conceivable state of facts that could provide a rational 4 basis for the classification.” Heller, 509 U.S. at 320 (citations and 5 internal quotation marks omitted). 6 Conn. Gen. Stat. § 52 59b was modeled after a nearly identical 7 provision in New York state’s long arm statute. See N.Y. C.P.L.R. § 8 302; Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990). We have 9 previously noted, in the context of the New York statute, that one 10 rational basis for excluding defamation actions against out of state 11 defendants is “to avoid unnecessary inhibitions on freedom of 12 speech” and that “[t]hese important civil liberties are entitled to 13 special protections lest procedural burdens shackle them.” Best Van 14 Lines, 490 F.3d at 245 (quoting Legros v. Irving, 38 A.D.2d 53, 55 (N.Y. 15 App. Div. 1st Dep’t 1971)); see also SPCA of Upstate N.Y., Inc. v. Am. 16 Working Collie Ass n, 18 N.Y.3d 400, 404 (2012) (“Defamation claims 17 are accorded separate treatment to reflect the state s policy of 18 preventing disproportionate restrictions on freedom of expression.”). 18 No. 16 1335 cv 1 The New York state exception for defamation actions was initially 2 intended, at least in part, to ensure that “newspapers published in 3 other states [would not be forced] to defend themselves in states 4 where they had no substantial interests.” Best Van Lines, 490 F.3d at 5 245 (quoting Legros, 38 A.D.2d at 55). 6 For the first time in his reply brief on appeal, Friedman 7 challenges this rational basis by arguing that “[t]he internet . . . 8 dramatically changes the impact of the long arm defamation 9 exclusion” and “creates a wide defamation liability free zone for out 10 of state publishers,” such as Bloomberg L.P., if they publish 11 defamatory statements online. Appellant’s Reply Br. at 25 30. At 12 issue in this appeal, however, is the statute’s defamation exception 13 with respect to the individual Milltown and Palladyne Defendants, 14 who are the alleged sources for the challenged statements in the 15 Bloomberg article. As we described earlier, one conceivable basis for 16 affording special protection to out of state defendants in defamation 17 actions is to avoid any unnecessary inhibition on their freedom of 18 speech. See Best Van Lines, 490 F.3d at 245; see also Vincent C. 19 No. 16 1335 cv 1 Alexander, Practice Commentaries, N.Y. C.P.L.R. § 302, at C302:10 2 (McKinney 2008) (“The [New York State long arm statute’s] exclusion 3 . . . recognizes the ease with which a written or oral utterance may 4 occur in New York, thereby subjecting numerous individuals . . . to 5 suit in New York despite their potentially remote connection to the 6 state.”). Because Friedman fails to counter this rational basis, we 7 conclude that his equal protection argument is unavailing. See 8 Windsor, 699 F.3d at 180. 9 In sum, we agree with the district court that Conn. Gen. Stat. § 10 52 59b does not violate Friedman’s First or Fourteenth Amendment 11 rights. We therefore affirm the district court’s dismissal pursuant to 12 this statute of Friedman’s defamation claim against the Milltown and 13 Palladyne Defendants for lack of personal jurisdiction. II. 14 15 The Allegedly Defamatory Statements Because the parties do not dispute that we have personal 16 jurisdiction over the Bloomberg Defendants for their allegedly 17 defamatory statements, we turn to the district court’s dismissal of 18 Friedman’s claim against those defendants for failure to state a claim. 20 No. 16 1335 cv 1 We review de novo a district court’s grant of a motion to dismiss under 2 Rule 12(b)(6), accepting as true the factual allegations in the complaint 3 and drawing all inferences in the plaintiff s favor. Biro v. Conde Nast, 4 807 F.3d 541, 544 (2d Cir. 2015). 5 a. The “For As Much As $500 Million” Statement 6 We first address the Bloomberg Defendants’ argument that the 7 article’s statement that Friedman sued Palladyne “for as much as $500 8 million” is protected under N.Y. Civ. Rights Law § 74. This statute 9 provides that “[a] civil action cannot be maintained against any 10 person, firm or corporation, for the publication of a fair and true 11 report of any judicial proceeding.” N.Y. Civ. Rights Law § 74. New 12 York courts adopt a “liberal interpretation of the ‘fair and true report’ 13 standard of . . . § 74 so as to provide broad protection to news accounts 14 of judicial . . . proceedings.” Becher v. Troy Publ’g Co., 183 A.D.2d 230, 15 233 (N.Y. App. Div. 3d Dep’t 1992). A statement is deemed a fair and 16 true report if it is “substantially accurate,” that is “if, despite minor 17 inaccuracies, it does not produce a different effect on a reader than 21 No. 16 1335 cv 1 would a report containing the precise truth.” Karades v. Ackerley Grp. 2 Inc., 423 F.3d 107, 119 (2d Cir. 2005) (citations omitted). 3 Here, the Bloomberg Defendants’ statement that Friedman’s 4 suit was “for as much as $500 million” was a fair and true report of a 5 judicial proceeding. The statement was a description of the prayer for 6 relief in Friedman’s complaint, which requested that “the Court enter 7 judgment on all Counts for the plaintiff,” totaling $499,401,000, 8 exclusive of attorneys’ fees and costs. App’x at 89. Nowhere did the 9 complaint state that Friedman was pleading any counts in the 10 alternative or that the damages could not be aggregated. Even though 11 some of these damages would be barred as duplicative if Friedman 12 were successful in his lawsuit, it was not necessary for this 13 explanation to be included in the article. The Bloomberg Defendants’ 14 characterization of the damages sought was an accurate description 15 of what was written in the complaint. See Lacher v. Engel, 33 A.D.3d 16 10, 17 (N.Y. App. Div. 1st Dep t 2006) (“Comments that essentially 17 summarize or restate the allegations of a pleading filed in an action . 18 . . fall within § 74 s privilege.”). As the district court noted, “[t]o the 22 No. 16 1335 cv 1 extent there was an inaccuracy here, it is found in the language 2 [Friedman] used in the prayer for relief.” Special App’x at 31. 3 Friedman argues, however, that the statement was neither fair 4 nor substantially accurate because Bloomberg L.P. did not contact 5 him for a response and, as a sophisticated media company, it should 6 have known that Friedman would not have been able to recover as 7 much as $500 million. Friedman cites no case law in support of his 8 argument that the Bloomberg Defendants were compelled to seek his 9 response in order for an accurate report of the language of his 10 complaint to be “fair.” And the outcome that Friedman requests— 11 that we require “sophisticated” reporters to determine the legal 12 question of whether claims asserted in a complaint are duplicative 13 even if they are not pled in the alternative—would be excessively 14 burdensome for the media and would conflict with the general 15 purpose of § 74. Cf. Becher, 183 A.D.2d at 234 (“Newspapers cannot 16 be held to a standard of strict accountability for use of legal terms of 23 No. 16 1335 cv 1 art in a way that is not precisely or technically correct by every 2 possible definition.” (citation omitted)).7 3 Accordingly, because we find that § 74 applies, we affirm the 4 district court’s dismissal of Friedman’s defamation claim based on the 5 “as much as $500 million” statement. b. The “Repeatedly Tried to Extort” Statement 6 7 We next address Palladyne’s quote in the Bloomberg article 8 that Friedman “has repeatedly tried to extort money from the 9 company.” App’x at 38. Friedman argues that this statement is 10 reasonably susceptible to a defamatory meaning—that he engaged in 11 criminal conduct—and implies the existence of undisclosed facts that 12 are detrimental to his character. We agree that the district court erred 13 in dismissing Friedman’s claim based on this statement. Friedman further argues that he is entitled to discovery to determine the source of this statement. However, “once it is established that the publication is reporting on a judicial proceeding, how a reporter gathers his information concerning a judicial proceeding is immaterial provided his or her story is a fair and substantially accurate portrayal of the events in question.” See Cholowsky v. Civiletti, 69 A.D.3d 110, 115 (N.Y. App. Div. 2d Dep’t 2009) (citations and brackets omitted). We therefore find this argument unpersuasive. 7 24 No. 16 1335 cv 1 Contrary to our view that the “as much as $500 million” 2 statement is protected under New York Civil Rights Law § 74, we 3 conclude that § 74 does not protect Bloomberg against Friedman’s 4 claim as to the “repeatedly tried to extort” statement. Section 74 5 protects the reporting of a defendant’s publicly stated legal position 6 only where the report is “a substantially accurate description of 7 [defendant’s] position in the lawsuit.” Hudson v. Goldman Sachs & Co., 8 283 A.D.2d 246, 247 (1st Dep’t 2001); see also Hudson v. Goldman Sachs 9 & Co., 304 A.D.2d 315, 316 (1st Dep’t 2003) (applying the privilege 10 because defendant ultimately took its publicly stated position in the 11 lawsuit). This rule aligns with the initial impetus for the privilege, 12 which was so that the public, which “generally may not attend the 13 sittings of the courts, . . . may be kept informed by the press of what 14 goes on in the courts.” Williams v. Williams, 23 N.Y.2d 592, 597 (N.Y. 15 1969). 16 Consequently, even reading the privilege most broadly, the 17 privilege applies here only if Palladyne’s contention that Friedman 18 “repeatedly tried to extort” it is a description of a position Palladyne 25 No. 16 1335 cv 1 has asserted or might assert in litigation. But Bloomberg offers no 2 basis on which Palladyne might conceivably rely on Friedman’s 3 purported extortion attempts, as represented in the statement, to 4 assert a legal defense against Friedman’s claims or to make a 5 counterclaim. This is fatal to Bloomberg’s assertion of the § 74 6 privilege. 7 Bloomberg, relying on the Hudson cases, asserts that a litigant’s 8 publicly stated legal position need not be taken in a formal litigation 9 filing for the § 74 privilege to attach to reporting of that stated 10 position. Assuming arguendo that Bloomberg’s assertion is correct, 11 the § 74 privilege still requires that the published statement be a 12 “substantially accurate report” of the litigation. Hudson, 304 A.D.2d 13 at 316; see also Greenberg v. Spitzer, 155 A.D.3d 27, 50 (2d Dep’t 2017) 14 (reversing trial court’s application of the privilege as to statements 15 that “went beyond merely summarizing or restating the . . . 16 proceedings” because, “[w]hen viewed in context, we cannot say, as 17 a matter of law, that the statements provided substantially accurate 18 reporting of the . . . case”). As discussed, Palladyne’s accusation of 26 No. 16 1335 cv 1 Friedman’s repeated attempts at extortion is not an accurate report of 2 Friedman’s lawsuit against Palladyne. Stated differently, by 3 reporting the “repeatedly tried to extort” statement, Bloomberg was 4 in no way informing the public of what was “go[ing] on in the courts.” 5 Williams, 23 N.Y.2d at 597. The § 74 privilege does not apply. 6 Having rejected Bloomberg’s assertion of privilege, we turn to 7 the merits of Friedman’s claim. Under New York law, which the 8 parties do not dispute applies here, a plaintiff must establish the 9 following elements to recover a claim for libel: 10 11 12 13 14 (1) a written defamatory statement of fact concerning the plaintiff; (2) publication to a third party; (3) fault (either negligence or actual malice depending on the status of the libeled party); (4) falsity of the defamatory statement; and (5) special damages or per se actionability. 15 Celle v. Filipino Reporter Enters. Inc., 209 F.3d 163, 176 (2d Cir. 2000). 16 With respect to the first element of this cause of action, which is the 17 focus of this appeal, we must consider whether (1) “the challenged 18 statements reasonably imply the alleged defamatory meaning” and 19 (2) “if so, whether that defamatory meaning is capable of being 20 proven false.” See Flamm v. Am. Ass n of Univ. Women, 201 F.3d 144, 21 150 51 (2d Cir. 2000). A defendant is not liable for “statements that 27 No. 16 1335 cv 1 cannot reasonably be interpreted as stating actual facts about an 2 individual, including statements of imaginative expression or 3 rhetorical hyperbole.” Id. (citation and internal quotation marks 4 omitted). 5 Here, the district court found that, based on the context in 6 which Palladyne’s statement was made, a reasonable reader would 7 understand Palladyne’s use of the word “extort” to be “rhetorical 8 hyperbole, a vigorous epithet . . . reflect[ing] Palladyne’s belief that 9 an upset former employee had filed a frivolous lawsuit against 10 Palladyne in order to get money.” Special App’x at 44. In dismissing 11 Friedman’s claim, the district court relied in particular on Greenbelt 12 Coop. Publ’g Ass’n v. Bresler, 398 U.S. 6, 14 (1970). There, the Supreme 13 Court determined that statements in a newspaper, reporting that 14 attendees of city council meetings had characterized the plaintiff’s 15 negotiations with the city as “blackmail,” were merely “rhetorical 16 hyperbole” and were not actionable defamatory statements. Id. The 17 Court dismissed the defamation claim, concluding that: 18 19 It is simply impossible to believe that a reader who reached the word “blackmail” in either article would not have 28 1 2 3 4 5 6 7 8 9 10 No. 16 1335 cv understood exactly what was meant: it was [plaintiff’s] public and wholly legal negotiating proposals that were being criticized. No reader could have thought that either the speakers at the meetings or the newspaper articles reporting their words were charging [plaintiff] with the commission of a criminal offense. On the contrary, even the most careless reader must have perceived that the word was no more than rhetorical hyperbole, a vigorous epithet used by those who considered [plaintiff’s] negotiating position extremely unreasonable. 11 Id. (footnote omitted). On appeal, the Bloomberg Defendants also cite 12 to several New York state cases in which courts have held that, in 13 certain contexts, a defendant’s use of the term “extort” may be 14 “rhetorical hyperbole” that is not actionable. 15 In Melius v. Glacken, for example, the then mayor of Freeport 16 stated in a public debate that the plaintiff’s lawsuit against him and 17 other officials, alleging that they had conspired to take away the 18 plaintiff’s property, was an attempt to “extort money” because the 19 plaintiff was seeking an amount “far in excess of the appraised value” 20 of the property. 94 A.D.3d 959, 959 60 (N.Y. App. Div. 2d Dep’t 2012). 21 After the plaintiff sued the mayor for defamation, the court 22 determined that based on the context in which the challenged 23 statements were made—in response to a question about the plaintiff’s 29 No. 16 1335 cv 1 lawsuit and in a “heated” public debate—a reasonable listener would 2 have understood that the mayor was stating his opinion about the 3 merits of plaintiff’s lawsuit and not accusing the plaintiff of criminal 4 conduct. Id. at 960. The court held that the statement was not 5 actionable because the mayor had explained the factual basis for his 6 belief that the plaintiff was attempting to extort money—that the 7 plaintiff sought an amount “far in excess of the appraised value” of 8 the property—and therefore his statement did not imply the existence 9 of undisclosed facts that were detrimental to the plaintiff’s character. 10 Id. at 960 61; see also Sabharwal & Finkel, LLC v. Sorrell, 117 A.D.3d 437, 11 437 38 (N.Y. App. Div. 1st Dep’t 2014) (defendant’s statement that 12 plaintiff had broached topic of settlement “to ‘extort’ money” not 13 actionable because reasonable readers would understand it was an 14 “opinion[] about the merits of the lawsuit and the motivation of [the] 15 attorneys, rather than [a] statement[] of fact”); G&R Moojestic Treats, 16 Inc. v. Maggiemoo s Int l, LLC, No. 03 CIV.10027 (RWS), 2004 WL 17 1172762, at *1 2 (S.D.N.Y. May 27, 2004) (defendant’s quote in article 18 characterizing plaintiff’s lawsuit as “approaching extortion” not 30 No. 16 1335 cv 1 actionable because “no reasonable reader could understand [the] 2 statements as saying that plaintiff committed the criminal act of 3 extortion”); Trustco Bank of N.Y. v. Capital Newspaper Div. of Hearst 4 Corp., 213 A.D.2d 940, 942 (N.Y. App. Div. 3d Dep’t 1995) (defendant’s 5 use of the word “extortion” to describe lawsuit filed against him not 6 actionable). 7 Here, the Bloomberg article discussed Friedman’s lawsuit and 8 then included the following quote from Palladyne: “These entirely 9 untrue and ludicrous allegations have been made by a former 10 employee who has repeatedly tried to extort money from the 11 company. . . . He worked with us for just two months before being 12 dismissed for gross misconduct.” App’x at 38. As in the cases cited 13 by the district court and the Bloomberg Defendants, the article clearly 14 indicated that Palladyne made these statements in the context of a 15 “heated” dispute. See Melius, 94 A.D.3d at 959 60. The article 16 described Friedman’s allegations that Palladyne was “nothing more 17 than a façade created to conceal criminal transactions” and noted that 18 Friedman alleged that he had been fired by Palladyne with “no legally 31 No. 16 1335 cv 1 cognizable explanation” after voicing his concerns to a colleague 2 about the firm’s criminal exposure. App’x at 37 38. 3 However, unlike the cases cited by the district court and the 4 Bloomberg Defendants, a reasonable reader could interpret 5 Palladyne’s use of the word “extort” here as more than just “rhetorical 6 hyperbole” describing Palladyne’s belief that the lawsuit was 7 frivolous. See Flamm, 201 F.3d at 150 51. Palladyne did not simply 8 state that Friedman’s lawsuit was an attempt to extort money from the 9 company. Instead, Palladyne stated that Friedman “repeatedly” tried 10 to extort money from them. This statement can be read as something 11 other than a characterization of Friedman’s underlying lawsuit 12 against Palladyne and is reasonably susceptible to a defamatory 13 meaning—that Friedman actually committed the criminal act of 14 extortion—a statement that is capable of being proven false. Id. 15 This interpretation also is reasonable when the statement is 16 read in the context of Palladyne’s entire quote. After asserting that 17 Friedman had “repeatedly” tried to extort money from them, 18 Palladyne went on to state that Friedman was “dismissed for gross 32 No. 16 1335 cv 1 misconduct.” App’x at 38. Palladyne did not explain whether there 2 was a connection between these two statements. A reasonable reader, 3 therefore, could have believed that Friedman’s “gross misconduct” 4 consisted of multiple attempts to “extort” money and that Friedman 5 was fired for engaging in this criminal conduct. 6 Further, even if a reasonable reader could interpret the word 7 “extort” as hyperbolic language describing Friedman’s conduct, and 8 not an assertion that Friedman had committed the criminal act of 9 extortion, this statement still would be actionable. A statement of 10 opinion is actionable under New York law if it implies that “the 11 speaker knows certain facts, unknown to his audience, which support 12 his opinion and are detrimental to the person about whom he is 13 speaking.” Steinhilber v. Alphonse, 68 N.Y.2d 283, 290 (1986); see also 14 Hotchner v. Castillo Puche, 551 F.2d 910, 913 (2d Cir. 1977) (“Liability 15 for libel may attach . . . when a negative characterization of a person 16 is coupled with a clear but false implication that the author is privy to 17 facts about the person that are unknown to the general reader.”). 18 Here, Palladyne’s statement can be read to imply the existence of 33 No. 16 1335 cv 1 undisclosed facts that would be detrimental to Friedman’s character. 2 See Hotchner, 551 F.2d at 913. Palladyne indicated that Friedman had 3 taken prior actions that were attempts to “extort” money from the 4 company, but Palladyne did not explain what those prior acts were or 5 provide any details that would shed light on its use of the word 6 “extort,” whether outside of the context of Friedman’s lawsuit or as a 7 reference to it. See Melius, 94 A.D.3d at 961. 8 The Bloomberg Defendants argue that the article makes clear 9 that Palladyne’s statement refers to the fact that Friedman voiced 10 concerns about the firm’s criminal exposure and then filed this 11 lawsuit in an attempt to extract money from Palladyne. We disagree 12 that it is clear. Although the article stated that Friedman was fired 13 after “relating his concerns about the firm’s criminal exposure to a 14 colleague,” App’x at 37, a reasonable inference remains, based on 15 Palladyne’s statement that Friedman had “repeatedly” attempted to 16 extort the company, that there were multiple acts that Friedman had 17 taken which rose to the level of “extortion.” 34 No. 16 1335 cv 1 Thus, even if Palladyne was asserting an opinion about 2 Friedman’s prior conduct, Palladyne’s statement can still be read as 3 conveying a negative characterization of Friedman without stating 4 sufficient facts to provide the context for that characterization. Under 5 New York law, such a statement is actionable. See Hotchner, 551 F.2d 6 at 913. We therefore reverse the district court’s dismissal of 7 Friedman’s defamation claim based on this statement. 8 On remand, it will be up to the jury to decide both (1) whether 9 readers understood Palladyne’s statement—“repeatedly tried to 10 extort”—to mean that Friedman engaged in criminal conduct and 11 (2) whether that statement in fact defamed Friedman. See Sack on 12 Defamation § 2:4:16 (“Once the judge has determined that the words 13 complained of are capable of a defamatory meaning, that is, are not 14 nondefamatory as a matter of law, it is for the jury to determine 15 whether they were so understood and whether they in fact defamed 16 the plaintiff.”) (footnotes omitted)). We express no view as to how 17 those issues should be decided by the fact finder. 35 No. 16 1335 cv CONCLUSION 1 2 For the reasons stated above, we AFFIRM the district court’s 3 dismissal of Friedman’s claims against the Milltown and Palladyne 4 Defendants, and AFFIRM in part and REVERSE in part the dismissal 5 of his claims against the Bloomberg Defendants. We REMAND the 6 case to the district court for further proceedings consistent with this 7 opinion.
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