Thursday, October 04, 2018

Defamation, but not false advertising, claim survives against niche publisher that added wrong info about allegations of wrongdoing

MiMedx Group, Inc. v. DBW Partners LLC, No. 17-1925 (JDB), 2018 WL 4681005 (D.D.C. Sept. 28, 2018)

MiMedx, a seller of medical products, sued DBW, which offers business and regulatory analysis to paid subscribers, for libel, slander, defamation, false light invasion of privacy, tortious interference with business relations, and false advertising under the Lanham Act after defendants published articles that questioned MiMedx’s sales practices.  One article, “MiMedx: Channel Stuffing Accusations Resurface in Recent Counterclaim; Former Employees Corroborate Allegations; A Close Look at Potential Risk,” outlined allegations MiMedx’s former employees made in court filings against MiMedx claiming that the company had artificially inflated its sales and revenue figures by distributing more products to retailers than the retailers could sell. An email described the article: “we detail channel stuffing allegations and recent counterclaims which may pose as a regulatory risk for the company. The article examines the allegations made by customers & former employees, the company’s response to these claims, and the potential legal risks for MiMedx” and ended with an invitation to “schedule a call” with DBW for more information. DBW now acknowledges that the reference to “customers” was a mistake.

As part of its “ongoing examination of allegations of channel stuffing made by former MiMedx employees,” DBW also submitted a FOIA request to the Department of Veterans Affairs, Office of the Inspector General (OIG), and dermined that an OIG investigation “involve[d] documents related to MiMedx.” MiMedx allegedly informed DBW “off-the-record that MiMedx had initiated contact with the OIG, that MiMedx was voluntarily working with the OIG, and that MiMedx was specifically not a target of the investigation.” DBW published another article titled “VA Office of Inspector General Confirms Investigation Involving MiMedx Documents,” relaying DBW’s conclusions from its FOIA request, and also promoted the article via email. Both emails reached at least some MiMedx shareholders.

DBW allegedly served “as a ‘shill’ for bearish traders in MiMedx stock” including “friends, family, affiliates, and/or even ... [DBW] themselves.” MiMedx’s stock price declined after the two articles were published.

Libel, slander, defamation: DBW argued that falsity wasn’t pled; the single word “customers” wasn’t defamatory in that it didn’t render the first email substantially false and it didn’t cause any incremental harm compared to the unchallenged bulk of the publication. MiMedx argued that “the use of the word ‘customers’ ... substantively changed the meaning of the entire communication” because “there is a significant difference between allegations by a company’s customers and its disgruntled former employees” and further because it “made it appear that the article contained new or additional allegations that might corroborate the former employees’ allegations.”

The court concluded that adding “customers” was at least “capable of defamatory meaning” under DC law and allegations of wrongful commercial practice would “tend[ ] to injure” MiMedx’s “trade, profession or community standing.” Under Georgia law, whether the statement was defamatory was ambiguous, when construed in context of the entire publication as required.  Either way, this survived a motion to dismiss.  DBW argued, citing case law, that “[c]orporate plaintiffs are treated as public figures as a matter of law in defamation actions brought against mass media defendants involving matters of legitimate public interest,” but MiMedx argued that DBW wasn’t a mass media defendant and the court declined to judicially notice otherwise. MiMedx might be able to show facts indicating that it was a private figure for these purposes.

The court didn't specifically address the FOIA related allegations; it seems to me that those should have to go, as not reporting MiMedx's preferred interpretation of what seem like uncontested facts doesn't seem defamatory.

False light: a corporation has no personal right of privacy and therefore no cause of action for false light invasion of privacy.

Tortious interference: this requires allegations of specific lost business.  Pleading “customers, investors, and creditors” isn’t enough, so this claim was also dismissed.

Lanham Act false advertising: MiMedx failed to allege a competitive injury related to MiMedx’s commercial interests, such as customers withholding trade or lost revenue; it didn’t even allege that the misleading communications reached customers (as opposed to shareholders).

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