United States District Court, S.D. New York
October 15, 2004.
JERRY I. TREPPEL, Plaintiff,
BIOVAIL CORPORATION, EUGENE N. MELNYK, KENNETH C. CANCELLARA, MICHAEL S. SITRICK, and SITRICK AND COMPANY, INC., Defendants.
The opinion of the court was delivered by: PETER LEISURE, District Judge
OPINION AND ORDER
In this diversity action claiming defamation, defamation per
se, tortious interference with prospective economic advantage,
prima facie tort, and civil conspiracy, plaintiff alleges that
defendants' words and conduct ruined his reputation and career as
a successful securities research analyst covering the healthcare
and pharmaceutical industry. Defendants now move to dismiss the
complaint under Rule 12(b)(6) of the Federal Rules of Civil
Procedure for failure to state a claim upon which relief can be
granted, contending that the statements at issue are not
defamatory and the conduct at issue is not tortious. In addition,
defendants move to dismiss the complaint as to defendants Biovail
Corporation and Kenneth Cancellara for lack of personal
jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil
Procedure. For the reasons set forth below, the Court denies in
part and grants in part defendants' motion to dismiss the
I. Factual History
Since the Court must accept plaintiff's allegations as true for
purposes of a motion to dismiss, see Eternity Global Master
Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 175
(2d Cir. 2004), the relevant facts, taken from plaintiff's
Amended Complaint, are set forth below.
Plaintiff Jerry Treppel was a prominent securities research
analyst for Banc of America Securities ("BAS") at all times
relevant to this action. (Plaintiff's Amended Complaint
("Compl.") ¶ 13.) As an analyst, he covered the healthcare and pharmaceutical industry, focusing primarily on small and medium
size companies that manufactured brand and generic drugs. Id.
¶¶ 13-14. Among his duties as an analyst, plaintiff was
responsible for issuing research reports concerning the financial
health of the companies he followed and for making
recommendations regarding the investment value of the securities
of those companies. Id. ¶ 15.
Defendant Biovail Corporation ("Biovail") is a Canadian
corporation that manufactures pharmaceutical drugs and sells
those drugs throughout the United States. Id. ¶ 4. At all
relevant times, defendant Eugene Melnyk was the Chairman and
Chief Executive Officer of Biovail and defendant Kenneth
Cancellara was the General Counsel of Biovail. Id. ¶¶ 5, 6. In
addition, defendant Michael Sitrick was the Chief Executive
Officer of defendant Sitrick and Company, and was hired by Melnyk
and Cancellara to serve as a media contact and spokesperson for
Biovail. Id. ¶ 7.
B. Plaintiff's Coverage of Biovail and Andrx
As an analyst covering the healthcare and pharmaceutical
industry, plaintiff researched and analyzed Biovail and its
business strategy over the course of many years. Id. ¶ 14. In
addition to Biovail, plaintiff covered other companies in the
industry, including Andrx Corporation ("Andrx"), Biovail's
competitor. Id. In 1993, plaintiff acquired 24,000 shares of
Andrx stock. Id. ¶ 18. Plaintiff avers that at all relevant
times and in accordance with applicable securities laws and BAS
policies, he held the stock in a managed account at UBS Paine
Webber, which precluded him from controlling the trading of the
stock. Id. Further, he consistently disclosed his holdings when
required so as to avoid an apparent or actual conflict of
interest. Id. On three occasions, plaintiff downgraded his recommendation
concerning the value of Biovail's stock, resulting each time in a
significant decline in Biovail's stock price and market
capitalization. Id. ¶¶ 20, 24. On one of those occasions, April
29, 2002, plaintiff also publicly criticized Biovail and its
management. Id. ¶ 24. In the days that followed, Biovail's
stock price dropped by more than 21% and the company lost
approximately $2.4 billion in market capitalization. Id.
C. Defendants' Response to Plaintiff's Coverage
In an effort to counteract the negative media coverage of
Biovail, defendants Melnyk and Cancellara hired defendants
Sitrick and Sitrick and Company. Id. ¶ 21. After plaintiff's
negative appraisal of Biovail on April 29, 2002, defendants made
a series of public statements over the course of the following
two months regarding plaintiff's coverage of Biovail and his
investment in Andrx. The statements were incorporated into
articles that were published by print and wire media in the
United States and Canada.*fn1 Id. ¶¶ 29-31.
1. April 30, 2002 Statements
The day after plaintiff downgraded Biovail's stock to a "sell"
and criticized Biovail and its management, defendant Melnyk
remarked that plaintiff turned sour on Biovail because the patent
extension Biovail filed on Tiazac [a new hypertension drug] "hit one of his other recommendations hard," referring to Andrx
("Statement 29(a)").*fn2 Id. ¶ 29(a). He also stated that
plaintiff's sell recommendation was "more about his support for
Andrx than his negative view of Biovail" ("Statement 29(b)").
Id. ¶ 29(b).
On the same day, defendant Cancellara, in discussing Biovail's
patent infringement claim against Andrx, stated that "either
Jerry doesn't understand the complexity of the issue, or worse,
he understands it and chooses not to set the record straight"
("Statement 29(c)"). Id. ¶ 29(c).
2. May 15, 2002 Statement
BAS placed plaintiff on leave on May 13, 2002 because of his
public criticism of Biovail and its management at the time he
issued his April 29, 2002 sell recommendation. Id. ¶ 29(d). On
May 15, 2002, defendant Sitrick, as spokesperson for Biovail,
stated: "We believe that given the serious action taken by Bank
of America Securities that all of Mr. Treppel's comments about
Biovail, both written and oral, should be called into question"
("Statement 29(d)"). Id. ¶ 29(d).
3. May 16, 2002 Statements
On May 16, 2002, The Wall Street Journal published an article
based upon its review of plaintiff's account records, which
revealed plaintiff's ownership of Andrx securities and the
trading of options to buy and sell Andrx securities in
plaintiff's account. Id. ¶ 26. That day, Biovail issued a press
release that contained the company's reaction to the article.
Four statements within the release are at issue and they read as
follows: a. "After reviewing the trading records reported on
by The Wall Street Journal, it was clear that
Treppel held a substantial, previously undisclosed
equity interest in a direct competitor Andrx Group"
("Statement 30(a)"). Id. ¶ 30(a).
b. Plaintiff's account records "also showed
unsolicited buy and sell orders for options in Andrx
both prior and concurrently with Mr. Treppel issuing
his analyst reports on Andrx and Biovail" ("Statement
31(a)"). Id. ¶ 31(a).
c. "After reviewing the trading records reported on
by The Wall Street Journal, it was clear Mr.
Treppel had directed his broker to make buy and sell
orders on Andrx options prior to and concurrent with
issuing reports on Andrx and Biovail" ("Statement
31(b)"). Id. ¶ 31(b).
d. Plaintiff's investment in Andrx "calls into
question the objectivity of all reporting by Treppel"
("Statement 31(c)"). Id. ¶ 31(c).
In addition, within the news release, defendant Sitrick
provided the following quote: "The information made public today
is alarming and we believe calls into question the objectivity of
all reporting by Mr. Treppel" ("Statement 30(b)"). Id. ¶ 30(b).
Furthermore, he stated: "We have been concerned by the
contradictory coverage of both Andrx and Biovail" ("Statement
30(c)"). Id. ¶ 30(c).
4. June 22, 2002 Statement
According to the complaint, the final statement at issue was
uttered on June 22, 2002, more than one month after the other ten
statements. On that date, defendant Melnyk remarked: "What Jerry
Treppel did to us was illegal from a regulatory prospective [sic]" ("Statement 31(d)"), in reference to
plaintiff's alleged trading of Andrx options coinciding with his
sell recommendation on Biovail. Id. ¶ 31(d).
5. Defendants' Conduct
In addition to the allegedly defamatory statements, plaintiff
asserts that defendants committed additional acts intended to
harm plaintiff. These acts serve as the basis for plaintiff's
claims of tortious interference with prospective economic
advantage and prima facie tort, and include: (1) obtaining
plaintiff's account records listing his Andrx holdings through
"improper" non-party discovery of BAS in a patent infringement
lawsuit against Andrx in February 2002 (id. ¶ 19); (2)
providing The Wall Street Journal with those account records
and advising the newspaper that plaintiff was improperly
profiting from his research reports (id. ¶ 26); and (3)
pressuring BAS to investigate plaintiff and terminate its
relationship with him. Id. ¶ 34. Plaintiff contends that
defendants' conduct, in its entirety, amounts to a "smear
campaign . . . calculated to cast him in the same light as those
analysts who had allegedly engaged in securities fraud, market
manipulation, and other unlawful activity" at that time. Id. ¶
D. Events Following Defendants' Statements and Conduct
In the period that followed plaintiff's report on Biovail and
defendants' response, plaintiff avers that his conduct was
investigated by the New York State Attorney General's Office, the
Securities and Exchange Commission, the National Association of
Securities Dealers and other agencies. Id. ¶ 33. Moreover, on
June 15, 2002, plaintiff resigned from his position at BAS and
left the profession of securities research analyst. Id. ¶ 35. II. Procedural History
Plaintiff filed an amended complaint in August 2003 for
defamation, defamation per se, tortious interference with
prospective economic advantage, prima facie tort and civil
conspiracy, seeking compensatory and punitive damages in excess
of $100 million for injury to his reputation caused by
defendants' defamatory statements and tortious conduct. Id. ¶¶
36-55. He brings the action in this Court based upon diversity
jurisdiction under 28 U.S.C. § 1332, claiming that the "smear
campaign" launched by defendants has "subjected [him] to public
shame, criticism, contempt, ridicule and disgrace. . . ." Id.
¶¶ 26, 37. Defendants respond with the current motion to dismiss.
Defendants' motion raises a number of issues for the Court to
decide. Specifically, the Court must decide whether it has
personal jurisdiction over defendants Biovail and Cancellara,
whether the law of New York or New Jersey applies to each of
plaintiff's claims, and whether defendants' statements and
conduct support claims for defamation, defamation per se,
tortious interference with prospective economic advantage, prima
facie tort and civil conspiracy.
I. Personal Jurisdiction over Defendants Biovail and
As a threshold matter, the Court must determine whether it has
personal jurisdiction over defendants Biovail and Cancellara. On
a Rule 12(b)(2) motion to dismiss for lack of personal
jurisdiction, it is well established that "the plaintiff bears
the burden of showing that the court has jurisdiction over the
defendant." Bank Brussels Lambert v. Fiddler Gonzalez &
Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999); Metro. Life Ins.
Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996).
"Prior to discovery, a plaintiff may defeat a motion to dismiss based on legally
sufficient allegations of jurisdiction." Metro. Life,
84 F.3d at 566. "Eventually, personal jurisdiction must be established by
a preponderance of the evidence, either at an evidentiary hearing
or at trial. But where the issue is addressed on affidavits, all
allegations are construed in the light most favorable to the
plaintiff and doubts are resolved in the plaintiff's favor,
notwithstanding a controverting presentation by the moving
party." A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80
(2d Cir. 1993); see also United States Theatre Corp. v.
Gunwyn/Lansburgh Ltd. P'ship., 825 F.Supp. 594, 595 (S.D.N.Y.
The parties have submitted affidavits and supporting documents
supporting their jurisdictional arguments. The affidavits and
documents of the parties differ regarding a number of significant
facts, leading to divergent views on jurisdiction. Accordingly,
the Court will determine whether the facts, as alleged by
plaintiff, are legally sufficient to support personal
jurisdiction over defendants Biovail and Cancellara.
"Absent a specific grant of jurisdiction, the reach of a
federal district court's personal jurisdiction is coterminous
with that of the personal jurisdiction of a court of general
jurisdiction in the state in which the court sits." Geller Media
Mgmt., Inc. v. Beaudreault, 910 F.Supp. 135, 137 (S.D.N.Y. 1996)
(Leisure, J.) (citing Fed.R. Civ. P. 4(k)(1)(A)). Thus, "the
amenability of a foreign corporation to suit in a federal court
in a diversity action is determined in accordance with the law of
the state where the court sits, with `federal law' entering the
picture only for the purpose of deciding whether a state's
assertion of jurisdiction contravenes a constitutional
guarantee." Metro. Life, 84 F.3d at 567 (quoting Arrowsmith v.
United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc)). To determine whether it has personal jurisdiction over
Biovail, the Court engages in a two-part inquiry. First, it must
determine whether there is personal jurisdiction over Biovail
under New York state law; second, if New York law provides for
personal jurisdiction, the Court must determine whether the
assertion of jurisdiction comports with the constitutional
requirements of due process. Id.
Plaintiff contends that this Court has personal jurisdiction
over defendant Biovail pursuant to Sections 301 and 302 of the
New York Civil Practice Law and Rules ("CPLR"). Defendants
challenge this Court's jurisdiction over Biovail under Sections
301 and 302 but have not argued that Biovail's contacts with New
York State are so attenuated as to offend the "minimum contacts"
test of due process established in Int'l Shoe Co. v.
Washington, 326 U.S. 310 (1945). Thus, because defendants have
not raised any due process issue, the Court will only address
whether the statutory requirements for jurisdiction under New
York law have been met. See EEOC v. Plaza Operating Partners,
Ltd., 2004 U.S. Dist. LEXIS 15863, at *8 (S.D.N.Y. Aug. 13,
2004) (citation omitted).
Section 301 of the CPLR provides for the exercise of
"jurisdiction over such persons, property, or status as might
have been exercised heretofore." N.Y. CPLR § 301 (McKinney 2001).
The Section permits courts to exercise personal jurisdiction over
a foreign corporation that is "engaged in such a continuous and
systematic course of `doing business' in New York as to warrant a
finding of `presence'" in the state. Carell v. The Shubert Org.,
Inc., 104 F.Supp.2d 236, 268 (S.D.N.Y. 2000) (citation omitted).
To be found "doing business" in the state for Section 301
purposes, a corporation must be present in the state "not
occasionally or casually, but with a fair measure of permanence
and continuity." Landoil Res. v. Alexander & Alexander Servs.
Inc., 918 F.2d 1039, 1043 (2d Cir. 1990) (quoting McGowan v. Smith, 52 N.Y.2d 268,
272 (1981)). New York courts have traditionally considered the
following factors when making this determination: (1) the
existence of an office in New York; (2) the solicitation of
business in New York; (3) the presence of bank accounts or other
property in New York; and (4) the presence of employees or agents
in New York. Id.
The complaint in this action alleges that, "Biovail is in the
business of manufacturing pharmaceutical drugs and selling and
distributing those drugs throughout the United States, including
in the State of New York." (Compl. ¶ 4.) Plaintiff asserts that
Biovail maintains a website, which solicits business nationally
and internationally, including in New York and represents that
the company employs a significant number of sales representatives
in New York. (Plaintiff's Memorandum of Law In Opposition to
Defendants' Motion to Dismiss the Amended Complaint ("Pl.s Opp.")
at 34; Affidavit of Patrick V. DiDomenico ("DiDomenico Aff.") ¶¶
28, 30.) Further, plaintiff avers that Biovail is listed on the
New York Stock Exchange and obtained financing in New York with
the assistance of three New York based investment banking firms.
(DiDomenico Aff. ¶¶ 31, 35.) Defendants dispute plaintiff's
factual allegations, contending that it is only wholly owned
subsidiaries of Biovail that may be doing continuous and
systematic business in New York. (Reply Memorandum In Support of
Defendants' Motion to Dismiss Complaint ("Defs.' Rep.") at
16-17.) However, given the posture of the case, a defendant must
"assume the truth of the plaintiff's factual allegations for
the purposes of the motion" and be "content to challenge only
[their] sufficiency. . . ." Ball v. Metallurgie Hoboken
Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990). While
defendants may request an adjudication of jurisdictional facts
following discovery or during a trial on the merits, see id., prior to discovery,
plaintiff need only make a prima facie showing of jurisdiction to
withstand a Rule 12(b)(2) motion, notwithstanding a controverting
presentation by defendants. See A.I. Trade Fin., Inc.,
989 F.2d at 79-80.
The Court finds that plaintiff's factual allegations, liberally
construed, are sufficient to constitute a prima facie showing of
personal jurisdiction over Biovail pursuant to CPLR § 301. The
regular sale and distribution of products within the state
coupled with solicitation of business within the state clearly
constitute a continuous and systematic course of "doing business"
within the scope of CPLR § 301. Accordingly, to the extent that
defendants' motion seeks dismissal of Biovail pursuant to Rule
12(b)(2), it is denied.*fn3
Defendants maintain that the Court does not have personal
jurisdiction over defendant Cancellara because he lives and works
in Canada and he is not alleged to have committed any tortious
act in New York. (Memorandum In Support of Defendants' Motion to
Dismiss the Amended Complaint ("Defs.' Mem.") at 39; Defs.' Rep.
at 19.) Plaintiff contends that jurisdiction over Cancellara is
proper pursuant to CPLR §§ 302(a)(2) and 302(a)(3) based upon the
claims for tortious interference with prospective economic advantage, prima facie tort, and civil
conspiracy.*fn4 Because the Court finds that plaintiff has
not established a claim for prima facie tort, see infra Part
VI, and that civil conspiracy is a derivative, rather than
independent, cause of action, see infra Part VII,
jurisdiction over Cancellara hinges on the allegations relating
to tortious interference with prospective economic advantage. As
with Biovail, defendants have not raised a due process challenge
with respect to Cancellara under Int'l Shoe Co. and thus the
Court will focus only on whether the New York statutory
requirements have been satisfied.
Section 302(a)(2) provides for jurisdiction over a person who
"commits a tortious act within the state" unless that act is one
of defamation. CPLR § 302(a)(2). "To satisfy New York's long-arm
statute, the complaint must `adequately frame a cause of action
in tort arising from those acts.'" Pi, Inc., v. Quality Prods.,
Inc., 907 F. Supp. 752, 760 (S.D.N.Y. 1995) (citation omitted)
(alteration in original); accord Bank Brussels Lambert,
171 F.3d at 785. Moreover, the defendant must have been physically
present in New York while committing the tort to establish
jurisdiction under this section. See Feathers v. McLucas,
15 N.Y.2d 443, 459 (1965); see also Bensusan Rest. Corp. v.
King, 126 F.3d 25, 29 (2d Cir. 1997) (denying jurisdiction under
§ 302(a)(2) where acts were performed by persons physically
present in Missouri even though injury may have been suffered in
New York); Carlson v. Cuevas, 932 F. Supp. 76, 80 (S.D.N.Y.
1996) ("To subject non-residents to New York jurisdiction under §
302(a)(2), the defendant must commit the tort while he or she is
physically in New York state."). Assuming plaintiff's allegations to be true, the Court finds
that jurisdiction over Cancellara may obtain pursuant to Section
302(a)(2). The Court finds that plaintiff properly pled a cause
of action for tortious interference with prospective economic
advantage as to all defendants. See infra Part V. The claim
is based, in part, on defendants' tortious conduct, which
includes obtaining plaintiff's account records from BAS,
providing the records to The Wall Street Journal, and
pressuring BAS to suspend plaintiff.*fn5 In his opposition
papers, plaintiff asserts that Cancellara played a role in the
alleged tortious interference while present in New York. (Pl.'s
Opp. at 35-36) ("On information and belief, Cancellara also
committed or participated in the following alleged acts in New
York in furtherance of defendants' smear campaign and other
unlawful conduct against Treppel: (1) wrongfully obtained
Treppel's personal account records and records from BAS in New
York; (2) improperly provided those records and the false trading
information concerning Treppel to The Wall Street Journal in
New York; and (3) attended one or more meetings with BAS in New
York to call for an investigation of Treppel's alleged activities
and to pressure BAS into placing Treppel on leave and ultimately
forcing his resignation from the firm.") (internal citations
omitted).) Accordingly, plaintiff has satisfied his burden and
established a prima facie showing of jurisdiction over Cancellara
under Section 302(a)(2).*fn6 The Court notes, however, that, because of Section 302(a)(2)'s express exclusion of defamation
claims, the Court has jurisdiction over defendant Cancellara with
respect to the tortious interference with prospective economic
advantage claim only. Thus, with that caveat, defendants' motion
to dismiss with respect to defendant Cancellara is also denied.
II. Choice of Law
"A federal court sitting in diversity applies the choice of law
rules of the forum state," which in this case is New York. Lee
v. Bankers Trust Co., 166 F.3d 540, 545 (2d Cir. 1999). Under a
New York choice of law analysis, a court must first consider
"whether there is an actual conflict of laws." Curley v. AMR
Corp., 153 F.3d 5, 12 (2d Cir. 1998) (citing In re Alstate Ins.
Co. and Stolarz, 81 N.Y.2d 219 (1993)). An actual conflict is
one that could "have a significant possible effect on the outcome
of the trial." Id. In the absence of such a substantive
conflict, a New York court need not conduct a choice of law
analysis and may apply New York law. Id.
Here, without thoroughly addressing whether New York's laws of
defamation, defamation per se, tortious interference with
prospective economic advantage, prima facie tort, and civil
conspiracy actually conflict with those of New Jersey, the
parties analyzed plaintiff's claims under the laws of both
states. Defendants argue that New Jersey law applies because
plaintiff lives in New Jersey and New York courts typically apply
the law of plaintiff's residence in defamation cases. (Defs.'
Mem. at 15.) Nevertheless, defendants maintain that each of
plaintiff's claims fail even if New York law applies. (Defs.'
Mem. at 16.) Conversely, plaintiff asserts that New York law should apply
because plaintiff cultivated his professional reputation and
career in the financial and securities markets in New York City
and his state of employment, not his state of domicile, has a
more significant interest in the litigation. However, even if New
Jersey law applies, plaintiff contends that defendants' motion to
dismiss should be denied. (Pl.'s Opp. at 12.)
New York's law of defamation is sufficiently similar to its New
Jersey counterpart such that an actual conflict does not result
when each is applied to the instant claim. Compare Celle v.
Filipino Reporter Enters. Inc., 209 F.3d 163, 177 (2d Cir. 2000)
(applying New York law) ("The gravaman of an action alleging
defamation is an injury to reputation.") with Ruocchio v.
United Transp. Union, Local 60, 181 F.3d 376, 391 (3d Cir. 1999)
(applying New Jersey law) ("The law of defamation . . . imposes
liability for any statement . . . `which is damaging to
reputation.'") (citation omitted) and Feggans v. Billington,
291 N.J. Super. 382, 390-91 (App. Div. 1996). Further, the
doctrine of defamation per se is consistent between the states.
Compare Nichols v. Item Publishers, 309 N.Y. 596, 602 (1956)
(adjudging a statement defamation per se where it "disparage[s]
a person in the way of his office, profession or trade") with
Devries v. McNeil Consumer Prods. Co., 250 N.J. Super. 159,
166-67 (App. Div. 1991) (finding a statement "which ascribes to
another conduct, characteristics or a condition incompatible with
proper conduct of his lawful business, trade, or profession is
. . . slander per se").
With respect to tortious interference with prospective economic
advantage, the laws of New York and New Jersey are nearly
indistinguishable. Compare Gianni Versace, S.p.A v. Versace,
No. 01 Civ. 9645, 2003 WL 470340, at *2 (S.D.N.Y. Feb. 25, 2003)
(Leisure, J.) (stating that New York law requires four elements
to establish a claim for tortious interference with prospective economic advantage:
(1) a reasonable expectation of economic advantage; (2)
intentional and malicious interference with that advantage by
defendant; (3) loss of the anticipated advantage; and (4) damages
caused by defendant's conduct) with Printing Mart-Morristown
v. Sharp Elecs. Corp., 116 N.J. 739, 751 (N.J. 1989) (citing
substantially the same elements under New Jersey law); see
also G-I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233,
250 (S.D.N.Y. 2001) (finding no "material difference" between the
laws of New York and New Jersey in this area).
While New Jersey law recognizes an action for prima facie tort,
there is a dearth of case law on the subject. Defendants claim
that New Jersey has never recognized a claim for prima facie
tort. (Defs.' Mem. at 33.) However, the case defendants cite for
that proposition, Taylor v. Metzger, only declined to recognize
such a claim in that instance. 152 N.J. 490, 522 (N.J. 1998).
Indeed, the Taylor court's discussion of the prima facie tort
doctrine demonstrates its viability under New Jersey law. Id.
(citing to the Restatement (Second) of Torts and Freihofer v.
Hearst Corp., 65 N.Y.2d 135 (1985) in a general overview of
prima facie tort). Moreover, there are other instances where New
Jersey courts have considered prima facie tort claims, though
without extensive discussion. See Bishop v. Inacom, Inc., No.
99 Civ. 664, 1999 WL 1416919 (D.N.J. Dec. 1, 1999); Riggs v.
Schappell, 939 F. Supp. 321, 329 (D.N.J. 1996); Brody v. Albert
Lifson & Sons, 17 N.J. 383 (1955). As a result, the pleading
requirements for prima facie tort have not been clearly defined
under New Jersey law.*fn7 Consequently, New Jersey's jurisprudence in this area is not sufficiently developed to
create a conflict with the law of another jurisdiction.
Finally, defendants are correct that New York law does not
recognize an independent cause of action for civil conspiracy.
(Defs.' Mem. at 35-36) (citing Burdick v. Verizon
Communications, Inc., 758 N.Y.S.2d 877, 878 (App. Div. 2003).
However, "[i]f an underlying, actionable tort is established,
. . . plaintiff may plead the existence of a conspiracy in order
to demonstrate that each defendant's conduct was part of a common
scheme." Sepenuk v. Marshall, No. 98 Civ. 1569, 2000 WL
1808977, at *6 (S.D.N.Y. Dec. 8, 2000); see Arlinghaus v.
Ritenour, 622 F.2d 629 (2d Cir. 1980), cert. denied,
449 U.S. 1013 (1980). This allows defendants to be held jointly and
severally liable for any compensatory or punitive damages awarded
for the underlying torts. Id. In this regard, New York and New
Jersey do not conflict in that each requires plaintiff to
establish four elements in addition to the underlying tort.
Compare World Wrestling Fed'n Entm't., Inc. v. Bozell,
142 F. Supp. 2d 514, 532 (S.D.N.Y. 2001) (holding that plaintiff must
demonstrate (1) an agreement between two or more parties; (2) an
overt act in furtherance of the agreement; (3) the parties'
intentional participation in the furtherance of a plan or
purpose; and (4) resulting damage or injury) with Morgan v.
Union County Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364
(App. Div. 1993) (identifying substantially the same elements
under New Jersey law).
Thus, in the absence of an actual conflict between the laws of
New York and New Jersey, New York's choice of law rules dictate
that New York law should apply to each of plaintiff's claims.
See Curley, 153 F.3d at 12; see also G-I Holdings,
179 F. Supp. 2d at 250; Tronelone v. Lac d'Aminate du Quesbec, Ltee,
297 A.D.2d 528 (App. Div. 2002), aff'd 99 N.Y.2d 647 (2003) (affirming the application of
New York law where no "relevant conflict" existed between
substantive law of New York and Newfoundland).
III. Standard under Rule 12(b)(6)
In deciding a motion to dismiss under Rule 12(b)(6), a court
must construe all well-pleaded factual allegations in the
complaint in plaintiff's favor. See Allen v.
Westpoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). The
issue before the Court is not "whether a plaintiff will
ultimately prevail, but whether the claimant is entitled to offer
evidence to support the claims." Scheur v. Rhodes, 416 U.S. 232
(1974). Thus, a party is entitled to dismissal only if "it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief."
Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
The Court will now address in turn each of defendants' claimed
grounds for dismissal.
IV. Defamation and Defamation Per Se
To establish a cause of action based on defamation under New
York law, the plaintiff must establish four elements in order to
prevail: (1) a false and defamatory statement of fact; (2)
regarding the plaintiff; (3) published to a third party by the
defendant; and (4) resulting in injury to the plaintiff. See
Dellefave v. Access Temps., Inc., No. 99 Civ. 6098, 2001 WL
25745, at *4 (S.D.N.Y. Jan. 10, 2001) (citing Weldy v. Piedmont
Airlines, Inc., 985 F.2d 57, 61 (2d Cir. 1993)). A defamatory
statement is one that leaves an individual vulnerable to "public
hatred, shame, obloquy, contumely, odium, contempt, ridicule,
aversion, ostracism, degradation, or disgrace, or . . . [which] induce[s] an evil opinion of one in the minds of right-thinking
persons, and . . . deprives one of . . . confidence and friendly
intercourse in society." Celle, 209 F.3d at 177.
In addition to the aforementioned elements, the plaintiff in a
defamation action must also plead special damages,*fn8
unless the language at issue qualifies as defamation per se.
Defamation per se may be defined as a statement that casts
aspersions upon the basic character and integrity of an
individual or business. Thus, a statement "which tends to
disparage a person in the way of his office, profession or trade"
is defamatory per se and does not require proof of special
damages because injury is assumed. Davis v. Ross, 754 F.2d 80,
82 (2d Cir. 1985) (quoting Nichols, 309 N.Y. at 602). Although
a clear distinction between statements that are defamatory per
se and those that require proof of special damages remains
elusive, the following synopsis is useful:
[I]t is actionable without proof of damage to say of
a physician that he is a butcher . . ., of an
attorney that he is a shyster, of a school teacher
that he has been guilty of improper conduct as to his
pupils, of a clergyman that he is the subject of
scandalous rumors, of a chauffeur that he is
habitually drinking, of a merchant that his credit is
bad or that he sells adulterated goods, of a public
officer that he has accepted a bribe or has used his
office for corrupt purposes . . . since these things
discredit [one] in his chosen calling.
W. Page Keeton et al., Prosser and Keeton on the Law of Torts,
§ 112, at 791 (5th ed. 1984); see also Four Star Stage
Lighting, Inc. v. Merrick, 56 A.D.2d 767
, 768 (App. Div. 1977)
(holding that "words are libelous if they affect a person in his
profession, trade, or business by imputing to him any kind of fraud, dishonesty,
misconduct, incapacity, unfitness or want of any necessary
qualification in the exercise thereof").
At this stage of the proceeding, where the plaintiff's
allegations must be accepted as true and all reasonable
inferences must be drawn in his favor, see Conley,
355 U.S. at 46, the Court's task is clear: to determine whether the
statements at issue are "reasonably susceptible of a defamatory
meaning." Armstrong v. Simon & Schuster, Inc., 85 N.Y.2d 373,
380 (1985); see also Celle, 209 F.3d at 177 (observing that
whether particular words are defamatory is a legal question to be
decided by the court as a threshold matter); Kelly v.
Schmidberger, 806 F.2d 44, 46 (2d Cir. 1986) ("[O]n a motion to
dismiss or for summary judgment, the issue is not whether the
court regards the language as libelous, but whether it is
reasonably susceptible of such a construction."). If the Court
deems the statements to be reasonably susceptible to a defamatory
interpretation, then "it becomes the jury's function to say
whether that was the sense in which the words were likely to be
understood by the ordinary and average reader." James v. Gannett
Co., Inc., 40 N.Y.2d 415, 419 (1976) (citation omitted).
Furthermore, since the Court accepts plaintiff's allegations as
true, it assumes that defendants' statements are false and that
defendants were culpable in making the statements. See Lucking
v. Maier, No. 03 Civ. 1401, 2003 U.S. Dist. LEXIS 23060, at *8
n. 4 (S.D.N.Y. Dec. 23, 2003) ("The falsity of the accused
passage and defendants' fault are both presumed at this [motion
to dismiss] juncture."); Daniels v. Provident Life & Cas. Ins.
Co., No. 02 Civ. 0668, 2002 U.S. Dist. LEXIS 24704, at *15-16
(W.D.N.Y. Dec. 22, 2002) (denying defendant's motion to dismiss
due to a dispute as to the truth of alleged facts). To assist the trial court in interpreting allegedly defamatory
utterances, the Second Circuit relies upon certain principles
elucidated by the New York State Court of Appeals. First, the
Court "must give the disputed language a fair reading in the
context of the publication as a whole." Celle,
209 F.3d at 177 (alteration in original) (citation omitted). The material in
question should not be read in isolation, but "must be perused as
the average reader would against the `whole apparent scope and
intent' of the writing." Id. (quoting November v. Time Inc.,
13 N.Y.2d 175, 178 (1963)). "[T]he words are to be construed not
with the close precision expected from lawyers and judges but as
they would be read and understood by the public to which they
are addressed." Id. (alteration in original) (citation
omitted). Moreover, a fair reading of the text is necessary, not
one which "`strain[s]' to interpret [the material] `in [its]
mildest and most inoffensive sense to hold [it] nonlibelous.'"
Id. (citation omitted). Finally, if the statement in question
is reasonably susceptible to more than one interpretation, one of
which is not defamatory, "it is then for the trier of fact, not
for the court acting on the issue solely as a matter of law, to
determine in what sense the words were used and understood."
Davis v. Ross, 754 F.2d 80, 82 (2d Cir. 1985).
A. Protected Speech: Truth and Opinion
In assessing whether the statements at issue are reasonably
susceptible of a defamatory meaning, the Court is cognizant of
the fact that the law affords absolute protection to certain
types of speech. Defendants rely upon two types of protected
speech in challenging plaintiff's claims: truth and opinion.
Under New York law, "it is fundamental that truth is an
absolute, unqualified defense to a civil defamation action."
Guccione v. Hustler Magazine, Inc., 800 F.2d 298, 301 (2d Cir. 1986). Indeed, falsity is the sine qua non of an
action for defamation. See Rail Europe, Inc. v. Rail Pass
Express, Inc., No. 94 Civ. 1506, 1996 WL 157503, at *9 (S.D.N.Y.
Apr. 3, 1996) (Leisure, J.) (citation omitted); see also
Southridge Capital Mgmt., LLC v. Lowry, No. 01 Civ. 4880, 2003
WL 68041, at *2 (S.D.N.Y. Jan. 7, 2003) (dismissing a defamation
claim because statement was "literally true"); Contes v. City of
New York, No. 99 Civ. 1597, 1999 WL 500140, at *9 (S.D.N.Y. July
In addition, the New York Constitution, unlike the Federal
Constitution, provides for absolute protection of pure opinions.
See Flamm v. Am. Assoc. of Univ. Women, 201 F.3d 144, 147-48
(2d Cir. 2000); compare Milkovich v. Lorain Journal Co.,
497 U.S. 1, 21 (1990) (rejecting the argument that "an additional
separate constitutional privilege for `opinion' is required to
ensure the freedom of expression guaranteed by the First
Amendment") with Immuno AG. v. Moor-Jankowski, 77 N.Y.2d 235
(1991) (Kaye, C.J.) (holding that expressions of "pure" opinion
are afforded absolute protection under the New York
Constitution). In the realm of defamation, this constitutional
shield requires that assertions of fact, not opinion, form the
basis of a claim. See Brian v. Richardson, 87 N.Y.2d 46, 51
(1995) (citations omitted). Thus, the Court must decide as a
matter of law whether any of the statements at issue are
protected opinion and therefore not actionable. See Rinaldi v.
Holt, Rinehart & Winston, 42 N.Y.2d 369, 397 (1977) ("Whether a
particular statement constitutes fact or opinion is a question of
The Court's "essential task" in this inquiry is to determine
whether the allegedly defamatory statements "may be reasonably
understood as implying the assertion of undisclosed facts
justifying the opinion," when considering the statements in the
immediate context of the communication as a whole and the broader
context in which the statements were published. Steinhilber v. Alphonse,
68 N.Y.2d 283, 292 (1986); see also Brian, 87 N.Y.2d at 51; Immuno,
77 N.Y.2d at 254. If one of the statements may be viewed as
implying undisclosed facts, then it is not protected as opinion
under the New York Constitution. See Steinhilber,
68 N.Y.2d at 292. Notably, the Court should examine the material in
question from the perspective of an "ordinary reader." Mr. Chow
of New York v. Ste Jour S.A., 759 F.2d 219, 224 (2d Cir. 1985).
The New York Court of Appeals has considered the following
factors when distinguishing between assertions of fact and
non-actionable expressions of opinion:
(1) whether the specific language in issue has a
precise meaning which is readily understood; (2)
whether the statements are capable of being proven
true or false; and (3) whether either the full
context of the communication in which the statement
appears or the broader social context and surrounding
circumstances are such as to "signal . . . readers or
listeners that what is being read or heard is likely
to be opinion, not fact."
Gross v. N.Y. Times Co., 82 N.Y.2d 146, 153 (1993) (quoting
Steinhilber, 68 N.Y.2d at 292).
Finally, an opinion may be offered with such excessive language
that a reasonable audience may not fairly conclude that the
opinion has any basis in fact. In Milkovich v. Lorain Journal
Co., the Supreme Court afforded constitutional protection to the
type of speech often characterized as "rhetorical hyperbole,"
"parody," "loose," or "figurative." 497 U.S. at 16-17 (citing
Greenbelt Coop. Publ'g. Assn. v. Bresler, 398 U.S. 6 (1970))
(finding defendant's description of plaintiff's position as "a
slight case of blackmail" to be "rhetorical hyperbole" and "a
vigorous epithet"); Hustler Magazine v. Falwell, 485 U.S. 46
(1988) (defining constitutional protection of parody); Letter
Carriers v. Austin, 418 U.S. 264 (1974) (referring to statements
in question as being used "in a loose figurative sense"); Sack,
supra, § 2.4.7, at 2-41 (explaining that hyperbole is
protected, in part, because "[m]uch name-calling is an invective form of
opinion that is incapable of being proved false and is therefore
not ordinarily actionable"). This type of opinion can be so
"imprecise" and uttered in such an "unusual setting [that it]
would signal the reasonable observer that no actual facts were
being conveyed about an individual." Immuno, 77 N.Y.2d at 244.
B. Defendants' Statements
Defendants contend that three of the eleven statements at issue
are not defamatory because they are true and that the remaining
eight statements are non-actionable because they constitute
opinion or rhetorical hyperbole based on publicly disclosed
facts. Plaintiff's response is premised on the argument that each
of the statements contains express or implied false assertions of
fact and therefore, the claims for defamation and defamation per
se should be sustained.
The Court will first address the statements defendants claim
are true and then will turn to those claimed to be protected
Defendants assert that Statements 30(a), 31(a), and 31(b) are
non-actionable because they are true.
a. Statement 30(a) "After reviewing the trading records
reported on by The Wall Street Journal, it was clear that
Treppel held a substantial, previously undisclosed equity
interest in a direct competitor Andrx Group."
At this stage of the proceeding, it is not clear that this
statement is true. The parties dispute whether plaintiff properly
disclosed his interest in Andrx to defendants. Defendants allege
that neither plaintiff's equity interest in Andrx nor his trading
in Andrx options was ever disclosed in any of his research
reports on Biovail or Andrx. (Defs.' Mem. at 25.) Plaintiff maintains that he was not legally required
to disclose his specific interest in Andrx and each of his
research reports contained a general disclosure statement that
satisfied applicable securities laws and company rules.*fn9
(Pl.'s Opp. at 22). This is an issue of fact that cannot and
should not properly be decided at this juncture. When a
"plaintiff alleges that both the opinions and the facts are
false, a motion to dismiss should not be granted, and the
plaintiff may proceed against both the statements of fact and
opinion." Jewell v. NYP Holdings, 23 F.Supp.2d 348, 377
(S.D.N.Y. 1998) (citing Silsdorf v. Levine, 59 N.Y.2d 8
Furthermore, defendants' argument that the statement was not
made recklessly and thus, lacked actual malice is inapposite
because fault is presumed at this preliminary stage. See
Lucking, 2003 U.S. Dist. LEXIS 23060, at *8 n. 4. Consequently,
defendants' argument that this statement is non-actionable
because it is true is rejected. Statement 30(a) is reasonably
susceptible to a defamatory meaning because it asserts that
plaintiff did not previously disclose his interest in Andrx, a
fact alleged to be false. Moreover, because Statement 30(a) tends
to disparage plaintiff in his position as a securities analyst,
it may sustain a claim for defamation per se as well as for
b. Statement 31(a) Plaintiff's account records "also showed
unsolicited buy and sell orders for options in Andrx both prior
and concurrently with Mr. Treppel issuing his analyst reports on
Andrx and Biovail." As with Statement 30(a), the parties disagree as to the factual
accuracy of this statement. Relying on plaintiff's account
records, which are referenced in the complaint (Compl. ¶¶ 19, 26,
30-32) and which the Court may properly consider for purposes of
this motion,*fn10 defendants maintain that the statement is
true because the records in fact show that unsolicited trades
were made on Andrx options from plaintiff's account around the
time he issued reports on Andrx and Biovail. (Defs.' Mem. at 26.)
The Court finds it telling that plaintiff does not directly
challenge the accuracy of the statement. Rather, plaintiff
asserts that the statement falsely implies that he "illegally"
traded Andrx options during the relevant period. (Pl.'s Opp. at
21.) Nevertheless, plaintiff's own account records demonstrate
that Statement 31(a) is true. The records indicate that there
were unsolicited sales and purchases of Andrx options within
days, and even on the same day, of plaintiff's release of his
reports on Biovail and Andrx. Notwithstanding plaintiff's
argument that the statement implies that he acted illegally,
Statement 31(a), on its face, accurately points out that the
records show unsolicited trades were made from plaintiff's
account around the time he issued some of his reports. The
statement is silent as to who was responsible for making the
trades; it only makes the more limited observation that the
account records show unsolicited trades did occur in temporal
proximity to the issuance of plaintiff's reports. Accordingly,
given its literal truth, Statement 31(a) is non-actionable under
the theories of defamation and defamation per se. c. Statement 31(b) "After reviewing the trading records
reported on by The Wall Street Journal, it was clear Mr.
Treppel had directed his broker to make buy and sell orders on
Andrx options prior to and concurrent with issuing reports on
Andrx and Biovail."
Like Statement 30(a), the truth of this statement cannot be
verified based on the present record. Defendants believe that it
is a "fair inference" to conclude that plaintiff directed his
brokers to trade in the Andrx options because the account records
indicate that unsolicited orders were made. (Defs.' Mem. at 27.)
Needless to say, a fair inference need not always lead to the
truth. Defendants' conclusion is one possible explanation, but
there may be others. For present purposes, however, it is only
significant that plaintiff alleges that defendants' facts are
false by denying that he was able to make any investment
decisions related to his managed account. (Pl.'s Opp. at 24.)
Thus, the statement is reasonably susceptible to a defamatory
meaning to the extent that it concludes that plaintiff directed
his broker to trade in Andrx options. Further, like Statement
30(a), it may also substantiate a claim for defamation per se
because it may tarnish plaintiff in his profession.
2. Opinion and Rhetorical Hyperbole
The Court now turns to the eight statements that defendants
claim are constitutionally protected on the grounds that they are
opinion or rhetorical hyperbole.
The Court will consider Statements 29(a), 29(b), and 29(c)
collectively because they appeared in the same article in
Canada's The Daily Globe and Mail and plaintiff alleges that
each falsely states or implies that he was biased against Biovail
because of his investment in Andrx. (Pl.'s Opp. at 18.) a. Statement 29(a) Plaintiff turned sour on Biovail because
the patent extension Biovail filed on Tiazac "hit one of his
other recommendations [Andrx] hard."
b. Statement 29(b) Plaintiff's sell recommendation is "more
about his support for Andrx than his negative view of Biovail."
c. Statement 29(c) With respect to Biovail's patent
infringement claim against Andrx, "[e]ither Jerry doesn't
understand the complexity of the issue, or worse, he understands
it and chooses not to set the record straight."
In light of the factors set forth in Steinhilber, an
examination of the full context of these statements reveals that
they are pure opinion. See Steinhilber, 68 N.Y.2d at 292.
Neither Statement 29(a) nor 29(b) have a "precise meaning" and
neither are "capable of being objectively characterized as true
or false." Steinhilber, 68 N.Y.2d at 292. Each is a vague
comment on plaintiff's negative coverage of Biovail from the day
before. While Statement 29(c) may be a bit more focused, it too
is incapable of being proven true or false because it concerns
plaintiff's frame of mind and motivation. See Immuno AG,
74 N.Y.2d at 560 ("Speculations as to the motivations and potential
future consequences of proposed conduct generally are not readily
verifiable, and are therefore intrinsically unsuited as a
foundation for libel.").
Moreover, the Court finds that the reasonable reader of the
article could not interpret these statements as implying the
existence of undisclosed facts supporting the statement. The
article is entitled "Biovail Plunges on Downgrade Drug Developer
Blasts Analyst's Reasoning." Read in proper context, the
statements express the predictable frustration of company
executives the day after negative coverage cost their business
over $1 billion in market value. Further, the article references plaintiff's prior downgrades of Biovail, which
suggests that defendants may possess previously held views of
plaintiff. Thus, defendants statements may be based on their past
dealings with plaintiff and not certain undisclosed facts,
thereby "signal[ing] to readers that what was being read . . .
was likely to be opinion, not fact." Steinhilber,
68 N.Y.2d at 292. Rather than implying undisclosed facts, the statements
appear to be squarely based on the fact that plaintiff held a
favorable view of Andrx in the past, a fact publicly disclosed in
plaintiff's research reports and recommendations on Andrx.
Accordingly, the Court finds that Statements 29(a), 29(b), and
29(c) are protected opinion and cannot support claims for
defamation and defamation per se.*fn11
d. Statement 29(d) "We believe that given the serious
action taken by Bank of America Securities that all of Mr.
Treppel's comments about Biovail, both written and oral, should
be called into question."
The "serious action" referenced in Statement 29(d) was
Biovail's suspension of plaintiff on May 13, 2002 for his public
criticism of Biovail and its management on April 29, 2002. The
Court rejects plaintiff's contention that Statement 29(d), made
on May 16, 2002, falsely implies that BAS placed plaintiff on
leave three days earlier because it did not support his report
and recommendation on Biovail. (Pl.'s Opp. at 20.) Plaintiff's
argument overreaches and seeks to inject a false implication into
a statement clearly based on disclosed facts. It fails to
acknowledge that the statement is expressly based upon the
previously disclosed fact that BAS placed plaintiff on leave for
his unauthorized public criticism of Biovail. In light of the
fact that plaintiff's suspension flowed from conduct related to defendants, the ordinary reader would not be
surprised that defendants would choose to comment on such a
development. Furthermore, the statement cannot be objectively
characterized as true or false and the use of the indicator "we
believe" suggests to the audience that it is faced with an
opinion, not fact. See Steinhilber, 68 N.Y.2d at 292. Thus,
Statement 29(d), reflecting defendants' view of plaintiff's
suspension, is non-actionable opinion.
e. Statement 30(b) "The information made public today is
alarming and we believe calls into question the objectivity of
all reporting by Mr. Treppel."
Just as Statement 29(d) expressly relied on the publicly
disclosed facts surrounding plaintiff's suspension, Statement
30(b) was based upon the public disclosure of plaintiff's account
records. Simply put, an average reader could not have reasonably
understood this statement to imply the assertion of undisclosed
facts as it appeared in the context of The Wall Street
Journal's review of plaintiff's account records. Plaintiff's
argument that the statement imputes to plaintiff "dishonesty and
bias" is of no avail. (Pl.'s Opp. at 23.) The question is whether
the statement may imply the assertion of undisclosed facts;
determining plaintiff's level of honesty or bias is a subjective
inquiry, incapable of being proven true or false. In full
context, Statement 30(b) may be reasonably read only as opinion.
Thus, for the same reasons outlined for Statement 29(d), the
Court finds Statement 30(b) to be non-actionable.
f. Statement 30(c) "We have been concerned by the
contradictory coverage of both Andrx and Biovail."
In the context of the verbal jousting in which the plaintiff
and defendants have engaged, this statement may be the most
benign of them all. Following plaintiff's suspension for
unauthorized criticism of Biovail and public disclosure of
plaintiff's financial stake in one of Biovail's competitors, an ordinary
reader would not reasonably understand this statement as implying
any undisclosed facts. Rather, the statement may be reasonably
interpreted to mean that Biovail's concern may stem from the two
primary previously disclosed facts, plaintiff's public criticism
of Biovail and plaintiff's financial interest in Andrx. Further,
the statement is ambiguous and incapable of being proven true or
false. It is also phrased in a manner that makes clear this is
merely the view of the company on this topic, not the assertion
of a specific fact. See Steinhilber, 68 N.Y.2d at 292. As
such, the Court credits defendants' arguments regarding this
statement and finds it to be protected opinion.
g. Statement 31(c) Plaintiff's investment in Andrx "calls
into question the objectivity of all reporting by Treppel."
Statement 31(c) contains language identical to the latter
clause of Statement 30(b). Again, defendants are only offering
their view on the effect of plaintiff's publicly disclosed Andrx
holdings and are not implying any undisclosed facts. For the same
reasons as Statement 30(b), Statement 31(c) is protected opinion
h. Statement 31(d) "What Jerry Treppel did to us was
illegal from a regulatory prospective [sic]."
Defendants maintain that Statement 31(d), which refers to the
trading of Andrx options in plaintiff's account around the time
plaintiff issued reports on Andrx and Biovail, is a protected
rhetorical opinion because it is based on previously disclosed
facts. (Defs.' Mem. at 28-29.) Plaintiff counters that this
utterance amounts to an accusation of criminal conduct based on
the false factual assertion that plaintiff traded Andrx options
to profit from his research reports. (Pl.'s Opp. at 25.) Though
the parties debate whether the statement accuses plaintiff of
criminality or merely a regulatory violation, the key inquiry is once again whether the statement may be reasonably
understood by the ordinary reader as implying the assertion of an
undisclosed fact. The Court finds that it may be.
On its face, Statement 31(d) is a specific statement of fact
capable of being proven true or false either plaintiff's
conduct was illegal from a regulatory perspective or it was not.
It does not contain "loose" or "figurative" phrases but uses
precise language. See Mr. Chow of New York, 759 F.2d at 226.
Moreover, appearing five weeks after the numerous other
statements concerning plaintiff's alleged trading, it may be
interpreted as "the product of some deliberation," rather than a
"heat of [the] moment" exclamation in a war of words. Gross,
82 N.Y.2d at 153.
The statement contains the discernible implication that, at the
very least, plaintiff acted inconsistent with proper industry
practice and, more likely, that he committed a crime. Neither
plaintiff's suspension from BAS nor plaintiff's account records
nor any other publicly disclosed fact of which the Court is aware
supports such a conclusion. Plaintiff's account records show that
unsolicited trades were made in plaintiff's account but that does
not establish to the Court's satisfaction that plaintiff acted
improperly or illegally. Even if the Court were to accept
defendants' proposed interpretation and allow for two competing
interpretations, the statement may not be disposed of at this
juncture because it is for the trier of fact, not the Court
acting on the issue solely as a matter of law, to determine which
interpretation is more credible. See Davis, 754 F.2d at 82.
Finally, the statement clearly casts doubt upon plaintiff's
character and integrity as it accuses him of illegal conduct.
Thus, Statement 31(d) does not qualify as rhetorical hyperbole
and may substantiate claims for defamation and defamation per
se. In sum, the Court finds that Statements 30(a), 31(b), and 31(d)
are reasonably susceptible to a defamatory meaning and may
support plaintiff's claims for defamation and defamation per
se. The remaining eight statements are protected as truth or
pure opinion and will be dismissed from plaintiff's claims.
V. Tortious Interference with Prospective Economic Advantage
Plaintiff contends that defendants' defamatory statements and
conduct constitute tortious interference with prospective
economic advantage. Defendants move to dismiss the claim on the
ground that the complaint does not sufficiently allege that
defendants' conduct constituted "wrongful means" or caused the
claimed damages. The Court finds that defendants' arguments are
not persuasive and the claim may stand
To establish a claim for tortious interference with prospective
business advantage, plaintiff must prove that: (1) there was a
business relationship with a third party; (2) defendants knew of
that relationship and intentionally interfered with it; (3)
defendants either acted "solely out of malice" or used "wrongful
means;" and (4) defendants' interference caused injury to the
relationship with the third-party. See Carvel Corp. v.
Noonan, 350 F.3d 6, 17 (2d Cir. 2003); see also Lombard v.
Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002);
Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994); PPX
Enters., Inc. v. Autofidelity Enters., Inc., 818 F.2d 266, 269
(2d Cir. 1987); Riddell Sports Inc. v. Brooks, 872 F. Supp. 73,
78 n. 2 (S.D.N.Y. 1995) (Leisure, J.). This cause of action has a
"limited scope." Piccoli A/S v. Calvin Klein Jeanswear Co.,
19 F. Supp. 2d 157, 169 (S.D.N.Y. 1998).
A properly pleaded complaint for this tort must allege
relationships with specific third parties with which the
respondent interfered. See Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259, 2000 U.S. Dist. LEXIS 1221, at
*23-24 (S.D.N.Y. Feb. 9, 2000); Minnesota Mining & Mfg. Co. v.
Graham-Field, Inc., No. 96 Civ. 3839, 1997 WL 166497, at *7
(S.D.N.Y. Apr. 9, 1997) (Mukasey, J.); Winner Int'l v.
Kryptonite Corp., No. 95 Civ. 247, 1996 U.S. Dist. LEXIS 2182,
at *4 (S.D.N.Y. Feb. 27, 1996) ("As Winner does not allege that
Kryptonite's conduct interfered with its business relationship
with any specific party, it cannot establish the elements
necessary for this tort. . . ."). Furthermore, the relationship
must be in existence at the time of the interference. See
Huntington Dental & Med. Co., Inc. v. Minnesota Mining & Mfg.
Co., No. 95 Civ. 10959, 1998 U.S. Dist. LEXIS 1526, at *4
(S.D.N.Y. Feb. 13, 1998); Minnesota Mining, 1997 WL 166497, at
The complaint must also state how the defendant interfered in
those relationships. See Four Finger, 2000 WL 145466, at *7;
Envirosource, Inc. v. Horsehead Res. Dev. Co., No. 95 Civ.
5106, 1996 WL 363091, at *14 (S.D.N.Y. July 1, 1996). That
interference must be "direct interference with a third party,
that is, `the defendant must direct some activities towards the
third party and convince the third party not to enter into a
business relationship with the plaintiff.'" Black Radio Network,
Inc. v. NYNEX Corp., No. 96 Civ. 4138, 2000 WL 64874, at *4
(S.D.N.Y. Jan. 25, 2000) (quoting Fonar Corp. v. Magnetic
Resonance Plus, Inc., 957 F. Supp. 477, 482 (S.D.N.Y. 1997));
see also Piccoli, 19 F. Supp. 2d at 167-68.
Here, defendants first contend that plaintiff has failed to
establish the third element of the tort "wrongful means." The
New York Court of Appeals has defined "wrongful means" to include
"physical violence, fraud or misrepresentation, civil suits and
criminal prosecutions, and some degrees of economic
pressure. . . ." NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, Inc., 87 N.Y.2d 614, 624
(1996) (citation omitted). Defendants argue that "wrongful means"
have not been plead because their statements are not defamatory
and their conduct does not fall within the purview of the above
definition. (Defs.' Mem. at 32-33; Defs.' Rep.at 10-13.) However,
the Court has found that three of defendants' statements may
substantiate a claim for defamation. See supra Part IV. Thus,
if plaintiff can prove these statements are defamatory, he may
also be able to establish that defendants used wrongful means to
tortiously interfere with his business relations with BAS. See
McNally v. Yarnall, 764 F.Supp. 838, 853 (S.D.N.Y. 1991)
(finding that the defamation claims determine the tortious
Moreover, apart from the statements, the Court finds that
plaintiff has sufficiently pled wrongful means. See Compl. ¶ 19
("Biovail . . . obtained a copy of Treppel's personal account
records and documents through improper discovery of nonparty
BAS. . . ."); ¶ 26 ("[D]efendants secretly provided Treppel's
personal account records to The Wall Street Journal and falsely
advised the newspaper that he was trading Andrx options to
coincide with the issuance of his research reports and
recommendations concerning Biovail and Andrx. . . ."; ¶ 34
("[D]efendants also pressured BAS into placing Treppel on leave
and ultimately forced his resignation from the firm. . . ."). For
purposes of this motion where all inferences are construed in
plaintiff's favor, these allegations establish a level of conduct
that satisfies the definition of wrongful means. See, e.g.,
MDC Corp., Inc. v. John H. Harland Co., 228 F. Supp. 2d 387,
397-98 (S.D.N.Y. 2002) (finding allegation that defendant "acted
maliciously and used fraudulent or illegal means" was sufficient
pleading of wrongful means); Preferred Health Care, Ltd. v.
Empire Blue Cross & Blue Shield, No. 94 Civ. 9326, 1997 WL 160489, at *3
(S.D.N.Y. Apr. 7, 1997) (stating that the words "with malice"
Defendants next argue that plaintiff's alleged damages resulted
from his own misconduct, namely his public criticism of Biovail,
and not from any act of defendants. (Defs.' Mem. at 33.) This
claim is specious, as plaintiff has alleged that damages resulted
from the tortious conduct referenced above, which is sufficient
to sustain the claim at the pleadings stage.
Finally, the Court notes that plaintiff's claim is limited to
defendants' alleged interference with his business relationship
with BAS. In his opposition papers, plaintiff states that
defendants' statements and conduct tortiously interfered with
plaintiff's prospective economic advantage with "BAS and other
employers." (Pl.'s Opp. at 27.) Since the complaint does not
specifically identify a relationship with any employer other than
BAS, the claim may stand only as an allegation of interference
with plaintiff's relationship with BAS. See Four Finger, 2000
U.S. Dist. LEXIS 1221, at *23-24.
VI. Prima Facie Tort
Plaintiff alleges that defendants' conduct also renders them
liable for prima facie tort under New York law. The elements of
prima facie tort are: "(1) intentional infliction of harm; (2)
resulting in special damages; (3) without excuse or
justification; (4) by an act that would otherwise be lawful."
Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 571
(2d Cir. 1990) (citing Burns Jackson Miller Summit & Spitzer v.
Lindner, 59 N.Y.2d 314, 332 (1983)). The Second Circuit has held
that the "touchstone" of such a claim is "disinterested
malevolence," meaning that "the defendant's conduct was not only
harmful, but done with the sole intent to harm." Id. As a
result, evidence of motives other than disinterested malevolence, "such as profit,
self-interest, or business advantage" will defeat a claim of
prima facie tort. Marcella v. ARP Films, Inc., 778 F.2d 112,
119 (2d Cir. 1985).
Defendants claim that the complaint belies plaintiff's claim
for prima facie tort, and the Court agrees. Plaintiff avers that
"defendants' smear campaign and course of unlawful conduct
against Treppel were also calculated to divert attention from,
and chill any further scrutiny and criticism of, Biovail's
business and accounting problems and practices, and thereby
bolster or sustain Biovail's stock price." (Compl. ¶ 28.) Thus,
in his own words, plaintiff concedes that defendants' actions
were motivated, at least in part, by a self-serving desire to
protect their business, and not solely by disinterested
malevolence toward plaintiff. As a consequence, plaintiff's claim
for prima facie tort must be dismissed because plaintiff can
prove no set of facts consistent with the complaint that would
entitle him to relief.
VII. Civil Conspiracy
The final cause of action in the complaint alleges that,
through their defamatory statements and tortious conduct,
defendants engaged in a civil conspiracy to "harm [plaintiff] and
destroy his reputation and career." (Id. ¶¶ 53, 54.) New York
law only recognizes an action for civil conspiracy if it is
connected to a separate underlying tort. The New York Court of
Appeals has made it clear that "[a]llegations of conspiracy are
permitted only to connect the actions of separate defendants with
an otherwise actionable tort. . . ." Alexander & Alexander Inc.
v. Fritzen, 68 N.Y.2d 968, 969 (1986) (internal quotations and
citations omitted). Thus, "plaintiff may plead the existence of a
conspiracy . . . to demonstrate that each defendant's conduct was
part of a common scheme." World Wrestling Fed'n. Entm't., Inc. v. Bozell,
142 F. Supp. 2d 514, 532-533 (S.D.N.Y. 2001) (citation omitted). To
establish a claim of civil conspiracy, plaintiff must demonstrate
the underlying tort, plus the following four elements: (1) an
agreement between two or more parties; (2) an overt act in
furtherance of the agreement; (3) the parties' intentional
participation in the furtherance of a plan or purpose; and (4)
resulting damage or injury. Id.
The Court finds that the complaint alleges facts that are
legally sufficient to support a claim for civil conspiracy. As
discussed above, plaintiff has sufficiently pled the underlying
torts of defamation (premised on three of the eleven statements
at issue) and tortious interference with prospective economic
advantage. See supra Parts IV and V. In addition, plaintiff
has satisfied the additional four elements necessary for a civil
conspiracy claim. The complaint alleges that each of the
defendants Biovail, Melnyk, Cancellara, Sitrick, and Sitrick
and Company committed specific overt acts in furtherance of
their effort to defame plaintiff and tortiously interfere with
his relationship with his employer, BAS. Further, as a direct and
proximate result, plaintiff was harmed in that he "was forced to
resign from BAS and leave the profession of securities research
analyst. . . ." (Compl. ¶ 55.)
Accordingly, defendants' motion to dismiss the civil conspiracy
claim is denied.
For the reasons set forth above, the Court denies defendants'
motion to dismiss defendants Biovail and Cancellara pursuant to
Rule 12(b)(2) for lack of personal jurisdiction. The Court also
denies in part and grants in part defendants' motion to dismiss
the complaint pursuant to Rule 12(b)(6). The Court denies
defendants' motion with respect to the claims of defamation and defamation per se
based on Statements 30(a), 31(b), and 31(d). The Court grants
defendants' motion with respect to plaintiff's claims of
defamation and defamation per se based on Statements 29(a),
29(b), 29(c), 29(d), 30(b), 30(c), 31(a), and 31(c). The Court
denies defendants' motion with respect to the claim of tortious
interference with prospective economic advantage. The Court
grants defendants' motion with respect to the claim of prima
facie tort. Finally, the Court denies defendants' motion with
respect to the claim of civil conspiracy. The parties are ordered
to appear for a status conference on November 10, 2004 at 11:30
[EDITORS' NOTE: APPENDIX IS ELECTRONICALLY NON-TRANSFERRABLE.]