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October 15, 2004.

JERRY I. TREPPEL, Plaintiff,

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 complaint.


  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.

  A. Parties

  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. ¶ 27.

  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 Cancellara

  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. 1993).

  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.

  A. Biovail

  "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 ...

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