The opinion of the court was delivered by: PETER LEISURE, District Judge
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
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).
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 ...