Lemelson v. Bloomberg L.P. , 903 F.3d 19 ( 2018 )

United States Court of Appeals
For the First Circuit
No. 17-1620
REV. FR. EMMANUEL LEMELSON; LEMELSON CAPITAL MANAGEMENT, LLC,
Plaintiffs, Appellants,
v.
BLOOMBERG L.P.; MATTHEW ROBINSON, as an individual and as an
agent of Bloomberg L.P.; JESSE WESTBROOK, as an individual and
as an agent of Bloomberg L.P.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Torruella, Lynch, and Kayatta,
Circuit Judges.
Thomas R. Mason and Law Offices of Thomas Mason on brief for
appellants.
Robert A. Bertsche, Prince Lobel Tye LLP, Jeffrey B. Korn,
Jonathan D. Waisnor, and Willkie, Farr & Gallagher LLP, on brief
for appellees.
August 30, 2018
KAYATTA, Circuit Judge. In both an online article and
a subsequent TV interview, Bloomberg News reported that the
Securities and Exchange Commission had opened an investigation to
determine whether Emmanuel Lemelson, a priest and hedge fund
manager, had intentionally published false material about public
companies in whose stock he held a short position. Lemelson filed
suit against Bloomberg and the article's authors, claiming that
the report renders Bloomberg liable for several common-law torts,
including defamation. The district court disposed of Lemelson's
suit on defendants' motion to dismiss. It concluded that
Lemelson's activities made him at least a limited-purpose public
figure -- if not a full-fledged public figure -- thus requiring
Lemelson to allege facts making it plausible that Bloomberg acted
with actual malice in reporting about Lemelson. After concluding
that Lemelson had failed to allege such facts, the district court
dismissed his suit. Lemelson now appeals. For the following
reasons, we affirm.
I.
Because this suit comes to us on appeal from the district
court's dismissal for failure to state a claim, we draw the facts
from the complaint. See González v. Vélez, 864 F.3d 45, 48 (1st
Cir. 2017). In this posture, we also consider the "implications
from documents attached to or fairly incorporated into the
complaint," as well as "facts susceptible to judicial notice" and
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"concessions in plaintiff's response to the motion to dismiss."
Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55-56
(1st Cir. 2012) (internal quotation marks omitted).
According to his complaint, Emmanuel Lemelson is a
"world-renowned priest [and] religious leader" in the Greek
Orthodox Church. In his career outside of the church, Lemelson
manages a hedge fund. He has become a "financial expert,
philanthropist, humanitarian, and entrepreneur." Lemelson serves
as the Chief Investment Officer of Lemelson Capital, LLC -- a firm
that manages investment funds -- which, in turn, launched and
manages a fund called Amvona. Lemelson also authors a blog that
discusses, among other things, religion and finance. In his
capacity as a commentator, he "has been interviewed by many
international media outlets."
On March 17, 2016, Matthew Robinson, a reporter for
Bloomberg News, called Lemelson for an interview. Robinson related
to Lemelson the outline of a story he was writing: The SEC was
looking into whether Lemelson had bet against publicly traded
companies then published false statements in the hope of driving
down the stock price. Robinson sought Lemelson's comment.
Lemelson denied that he or his firm was the subject of an SEC
investigation, but did report knowing of an SEC investigation into
Ligand Pharmaceuticals, a publicly traded company about which
Lemelson had publicly written. As recited in the complaint,
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Robinson responded to Lemelson's denial by stating, "[W]ell, I'm
going to write that you are being investigated anyway."
Later that day, Robinson followed up with an email. He
laid out in more detail the elements of the story he planned to
write and the specific allegations against Lemelson, and again
asked for comment. The next morning, Robinson left a voicemail to
the same effect and also informed Lemelson that Bloomberg planned
to go to print imminently. Shortly thereafter, Robinson sent
another email, reiterating his request that Lemelson "please get
back to [him] as soon as possible." Beyond the first phone call,
Lemelson does not appear to have responded to any of Robinson's
communications.
On March 18, 2016, Bloomberg published the article.
Titled "Hedge Fund Priest's Trades Probed by Wall Street Cop," it
reported that the SEC was investigating Lemelson for stock
manipulation. According to the article, the SEC was examining
information Lemelson published about a variety of companies,
including Ligand Pharmaceuticals, World Wrestling Entertainment,
and Sketchers. The SEC sought to determine whether he had run
afoul of securities laws by knowingly publishing false information
about companies his firm had shorted. As we have previously
explained, "'[s]hort selling' is a transaction in which an investor
borrows shares of stock, sells them, and later buys an equivalent
amount of shares to return the borrowed shares." Howard v.
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Antilla, 294 F.3d 244, 246 (1st Cir. 2002). Thus, the "potential
for profit in short selling lies in the possibility that the stock
price will decline between the time the short seller sells the
borrowed stock and the time he must purchase replacement shares to
repay the borrowed stock." Id. In one instance, the article
reported, shares of Ligand Pharmaceuticals dropped seven percent
after Lemelson posted on his blog that demand for one of Ligand's
drugs was rapidly declining and that the company faced the imminent
risk of declaring bankruptcy. Lemelson does not dispute that his
firm held a short position in Ligand.
The article did not name a source, but attributed its
information to "people with knowledge of the matter," stating that
"Ryan White, an SEC spokesman, declined to comment." The article
also noted that Lemelson "hasn't been accused of wrongdoing" and
that the investigation was but a "preliminary step."
After publication, Lemelson requested that Bloomberg
retract its story. He sent Jesse Westbrook, Robinson's editor, a
press release denying the existence of an investigation or any
conduct that could be the basis of that investigation. Bloomberg
did not retract the article, but did update its content with a
quotation from Lemelson's press release. In a TV interview on
Bloomberg's news channel that aired later that day (after
Lemelson's request for retraction), Robinson repeated many of the
article's allegations.
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Lemelson filed a four-count complaint in Massachusetts
state court against Bloomberg, Robinson, and Westbrook, alleging:
defamation (count I); commercial disparagement (count II);
negligence (count III); and intentional interference with
prospective economic advantage (count IV). Defendants removed the
case to federal court on the basis of diversity jurisdiction. In
his complaint, Lemelson averred that the article's primary
contention -- that he was the subject of an SEC investigation --
was false. The SEC, Lemelson asserted, had informed his lawyers
that he and Lemelson Capital had never been the subject of any SEC
investigation. Lemelson claimed that Bloomberg published the
article knowing its falsity, or, at least, with reckless disregard
for its truth.
The district court concluded that Lemelson was required
to plausibly allege actual malice because he was at least a
limited-purpose public figure. Finding that he had failed to do
so, the district court granted defendants' motion to dismiss
counts I through III, and concluded that Lemelson failed to allege
sufficient facts to make out a claim under count IV. Lemelson now
appeals the dismissal of counts I, II, and IV.
II.
We review the decision to grant a Rule 12(b)(6) motion
to dismiss de novo. Schatz, 669 F.3d at 55. In conducting this
inquiry, "we accept as true all well-pleaded facts alleged in the
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complaint and draw all reasonable inferences therefrom in the
pleader's favor." Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d
49, 52-53 (1st Cir. 2013) (quoting Santiago v. Puerto Rico, 655
F.3d 61, 72 (1st Cir. 2011)). We do not credit, however, legal
labels or conclusions, or statements that merely rehash elements
of the cause of action. Schatz, 699 F.3d at 55. Training our
attention on the non-speculative, non-conclusory facts and
reasonable inferences implied by those facts, we ask whether it is
plausible, as opposed to merely possible, that plaintiff's
complaint narrates a claim for relief. Id.
A.
We begin with Lemelson's defamation claim. To get to
the crux of this appeal, we skip over the state-law elements of
defamation, and focus our attention on the issue of actual malice.
See Schatz, 669 F.3d at 56 (taking a similar approach).
Over fifty years ago, the Supreme Court held that the
First Amendment requires a public official advancing a defamation
claim to show by clear and convincing evidence that the defendant
acted with actual malice: that is, with knowledge of the
statement's falsity or reckless disregard for its truth. See N.Y.
Times v. Sullivan, 376 U.S. 254, 279-80 (1964); see also Harte-
Hanks Commc'ns, Inc. v. Connaughton, 491 U.S. 657, 659 (1989)
(noting that, to recover, the showing must be made by clear and
convincing proof). In the decades since, the Court has extended
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the requirement of actual malice beyond general public figures, to
an otherwise private figure who "voluntary injects himself or is
drawn into a particular public controversy," thus becoming a
limited-purpose public figure for that particular controversy.
Gertz v. Robert Welch, Inc., 418 U.S. 323, 351 (1974). Here, the
district court found that Lemelson qualified as at least a limited-
purpose public figure, if not a general public figure, and
therefore had to demonstrate actual malice in order to prevail in
this lawsuit. Lemelson does not challenge this finding on appeal,
and instead accepts that he must allege facts plausibly
establishing actual malice in order for his claim to survive. We
proceed accordingly.
Actual malice is a "wholly subjective" standard.
Levesque v. Doocy, 560 F.3d 82, 90 (1st Cir. 2009). Thus, a mere
deviation from reasonably prudent conduct will not suffice. Id.
Similarly, showing a departure from industry standards, alone, is
insufficient to allege actual malice, even if that departure is
"extreme." Connaughton, 491 U.S. at 665. Rather, to satisfy the
actual malice requirement, a plaintiff must point to "sufficient
evidence to permit the conclusion that the defendant in fact
entertained serious doubts as to the truth of his publication,"
St. Amant v. Thompson, 390 U.S. 727, 731 (1st Cir. 1968), or
"actually had a 'high degree of awareness of . . . probable
falsity," Connaughton, 491 U.S. at 688 (quoting Garrison v.
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Louisiana, 379 U.S. 64, 74 (1964)). Because direct evidence of
subjective belief rarely exists, a "court will typically infer
actual malice from objective facts." Bose Corp. v. Consumers Union
of U.S., Inc., 692 F.2d 189, 196 (1st Cir. 1982), aff'd, 466 U.S.
485 (1984); accord Levesque, 560 F.3d at 90. On a Rule 12(b)(6)
motion to dismiss, we do not concern ourselves with questions of
evidentiary sufficiency, see Evergreen Partnering Grp., Inc. v.
Pactiv Corp., 720 F.3d 33, 43 (1st Cir. 2013), but ask only whether
Lemelson "la[id] out enough facts from which malice might
reasonably be inferred," Schatz, 669 F.3d at 58. Said otherwise,
Lemelson's well-pleaded facts must "'nudge[]' his actual malice
claim 'across the line from conceivable to plausible.'" Id.
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
With this law in mind, we begin our analysis with several important
points of context.
First, the complaint alleges no plausible motive for
Bloomberg to have fabricated from whole cloth any story critical
of Lemelson. See Bose Corp., 692 F.2d at 196 (listing "motive" as
one of the facts on which a complaint "should provide evidence" to
allow an inference of actual malice). Nor does the complaint
contend that Bloomberg knowingly relied on a source who had a clear
motive to fabricate the story.
Second, the complaint and unchallenged portions of the
article itself point to undisputed facts that preclude us from
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inferring that the notion of an SEC investigation of Lemelson would
have seemed so implausible as to cast doubt on Bloomberg's belief
that it was true. Lemelson does not deny that he had indeed both
shorted the securities of Ligand and published statements critical
of Ligand, which were followed by a drop in Ligand's stock price.
While none of that information itself evidences any wrongdoing, it
certainly provided ample background against which the reports from
unnamed sources of an investigation of Lemelson hardly seemed
surprising.
Third, the complaint concedes that, before publishing
its story, Bloomberg reached out repeatedly to secure an interview
with Lemelson and to otherwise solicit his comment, and then
published his denial of the claim that he was under investigation.
That conduct tends to undercut any inference of actual malice.
Fourth, while the complaint alleges "on information and
belief" that Bloomberg did not contact the SEC, the article states
that "Ryan White, an SEC spokesman, declined to comment." The
complaint avoids taking any direct issue with this assertion. To
the contrary, Lemelson admitted in the district court that "the
SEC has a policy of not confirming or denying investigations of
particular individuals."
Collectively, these points cut strongly against drawing
any inference that the article was the product of malice. On
appeal, Lemelson's principal rejoinder to the force of these points
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is to assert that Bloomberg actually fabricated the story out of
whole cloth, without any source, much less the unnamed sources
cited in the article. Lemelson, however, never advanced such a
bold and frontal attack on the provenance of the article in his
complaint, perhaps because he had no basis for making such a claim
given the context in which this all played out. Nor did he develop
any such argument before the district court. These omissions
prevent him from relying on such an argument now. See Teamsters,
Chauffeurs, Warehousemen & Helpers Union, Local No. 59 v. Superline
Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is
settled in this circuit, it is that, absent the most extraordinary
circumstances, legal theories not raised squarely in the lower
court cannot be broached for the first time on appeal.").
Lemelson also contends that Bloomberg failed to fact-
check its story or test the accuracy of its information. Lemelson
did preserve this argument. Specifically, he alleged in his
complaint that Bloomberg published its story "without contacting
anyone at the SEC to verify whether or not Plaintiff was being
investigated." As we have already explained, though, the complaint
does not challenge the article's statement that the reporter did
try to get a comment from the SEC spokesman, whom it named.
Lemelson also concedes that it was not possible to get anyone at
the SEC to verify or refute the existence of an investigation.
And Lemelson admits that Bloomberg repeatedly reached out to him
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for his side of the story, and included his denial in the story
itself.
Moreover, "failure to investigate before publishing,
even when a reasonably prudent person would have done so, is not
sufficient to establish reckless disregard." Connaughton, 491
U.S. at 688. Not even an "extreme departure from professional
standards" can do the trick. Howard, 294 F.3d at 252 (quoting
Connaughton, 419 U.S. at 665). A fortiori, an investigation that
included an attempt to obtain SEC comment and repeated inquiries
of Lemelson trying to confirm or rebut facially plausible reports
from other sources raised no inference of reckless disregard.
That being said, "the purposeful avoidance of the truth
is in a different category." Connaughton, 491 U.S. at 692. Thus,
actual malice can be shown where the publisher is in possession of
information that seriously undermines the truth of its story, or
deliberately decides not to acquire information that would confirm
the probable falsity of its report. See id. at 692-93; Howard,
294 F.3d at 254-55. But Lemelson points to no such facts.
Lemelson does fault Bloomberg for not including in its
article two statements that Lemelson made to Robinson in their
phone call: that Lemelson knew of an SEC investigation into Ligand,
and that he had filed a whistleblower report concerning Ligand
with the SEC three months earlier. Lemelson contends that the
inclusion of these facts would have made for a more "balanced" and
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"fair account." This argument misses the mark. Only the omission
of information that could "confirm the probable falsity" of the
allegedly defamatory statements can give rise to an inference of
actual malice. Connaughton, 491 U.S. at 692. An investigation
into Ligand and Lemelson's participation in that investigation
bears too little on the inference Lemelson would have us draw --
that it was unlikely that the SEC was investigating Lemelson -- to
support a claim that failing to mention these facts implied malice.
To the contrary, Lemelson's report that the SEC was looking into
Ligand actually made it more plausible that he might be of interest
to the SEC as well. Nor does Lemelson point to any other fact
from which we could conclude that there were "obvious reason[s] to
doubt [the] veracity" of the source's information. Levesque, 560
F.3d at 90. Thus, absent more, Lemelson has not laid out
sufficient facts to push his allegation of actual malice "across
the line from conceivable to plausible." Schatz, 669 F.3d at 58
(quoting Twombly, 550 U.S. at 570). Therefore, his defamation
claim cannot survive.
B.
Lemelson's remaining two counts advanced in this appeal
fare no better. Lemelson concedes -- and we thus assume -- that
his commercial disparagement claim rises and falls with our
conclusion as to actual malice regarding defamation. It thus
falls. And, in his brief on appeal, Lemelson does little more
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than restate the elements of his count for "intentional
interference with prospective economic advantage." Such cursory
treatment does not preserve the issue for our review, and we deem
it waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.
1990) ("[I]ssues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are
deemed waived.").
III.
For the foregoing reasons, we affirm the dismissal of
Lemelson's complaint.
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