Greschner v. Becker et al

Filing 18

ORDER that Defendants' Motion to Dismiss (Doc. 6 ) is GRANTED in part and DENIED in part. Signed by Judge G Murray Snow on 2/18/2015.(KMG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Steven Greschner, No. CV-14-02352-PHX-GMS Plaintiff, 10 11 v. 12 ORDER Andrew Becker, et al., 13 Defendants. 14 15 Before the Court is Defendants’ Motion to Dismiss Plaintiff’s First Amended 16 Complaint. (Doc. 6.) For the following reasons, the Court grants the Motion in part and 17 denies it in part. 18 BACKGROUND 19 Plaintiff describes himself as a “software, networking, security, and technology 20 sales professional and executive.” (Doc 1, Ex. 1, at 4.) He is the chief executive of 21 Hummingbird Defense Systems, Inc., a Phoenix-based national security and technology 22 firm. On August 26, 2014, the Center for Investigative Reporting (“CIR”) and 23 ProPublica, two non-profit news organizations, published an article on a purported 24 security breach at an Arizona-based counterterrorism center by a computer programmer, 25 a Chinese national employed by Hummingbird who had been contracted by the Maricopa 26 County Sheriff’s Office to build a facial recognition system for the counterterrorism site. 27 The programmer had been originally hired by a woman with whom Plaintiff was 28 romantically involved, and whom federal authorities allegedly suspected of international 1 espionage. The article detailed the programmer’s flight to China in June 2007 with 2 computer equipment possibly containing sensitive data he enjoyed access to by virtue of 3 his employment—including the Arizona driver’s license database, arrest files from 4 county jails, and criminal history data—and an ensuing cover-up of the leak by local 5 government and law-enforcement officials. The article further connected the incident to 6 an ongoing immigration-fraud case involving Plaintiff’s girlfriend. Plaintiff was 7 interviewed by Defendants over the course of their investigation and publication of this 8 article. 9 On September 8, 2014, Plaintiff filed a defamation suit in the Superior Court of 10 Maricopa County. His First Amended Complaint (“FAC”) was filed on October 17, and 11 Defendants—the CIR, ProPublica, and various reporters and editors with those 12 organizations—subsequently removed the case to federal court pursuant to 28 U.S.C. 13 §§ 1441 and 1446.1 (Doc. 1.) They now move to dismiss the FAC for failure to state a 14 claim. 15 16 DISCUSSION I. Legal Standard for Motion to Dismiss 17 To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil 18 Procedure 12(b)(6), a complaint must contain more than Alabels and conclusions@ or a 19 Aformulaic recitation of the elements of a cause of action@; it must contain factual 20 allegations sufficient to Araise a right to relief above the speculative level.@ Bell Atl. Corp. 21 v. Twombly, 550 U.S. 544, 555 (2007). While Aa complaint need not contain detailed 22 factual allegations . . . it must plead >enough facts to state a claim to relief that is plausible 23 on its face.=@ Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) 24 (quoting Twombly, 550 U.S. at 570). When analyzing a complaint for failure to state a 25 1 26 27 28 Upon removal, the federal court takes the case as it finds it, treating “everything that occurred in the state court as if it had taken place in federal court.” Butner v. Neustadter, 324 F.2d 783, 785 (9th Cir. 1963). Thus, for the purposes of this Motion to Dismiss, the Court treats the FAC as though it had been amended in federal court and considers its sufficiency against the standard set forth in the Federal Rules. As a note, Plaintiff also attempted to file a Second Amended Complaint after the case was removed; it was stricken by Court Order. (Docs. 7, 13.) -2- 1 claim under Rule 12(b)(6), A[a]ll allegations of material fact are taken as true and 2 construed in the light most favorable to the nonmoving party.@ Smith v. Jackson, 84 F.3d 3 1213, 1217 (9th Cir. 1996). However, legal conclusions couched as factual allegations are 4 not given a presumption of truthfulness, and Aconclusory allegations of law and 5 unwarranted inferences are not sufficient to defeat a motion to dismiss.@ Pareto v. FDIC, 6 139 F.3d 696, 699 (9th Cir. 1998). 7 II. Application 8 To state a claim for defamation under Arizona law, a plaintiff must plead: (1) a 9 false and defamatory statement of and concerning the plaintiff; (2) an unprivileged 10 publication of that statement to a third party; and (3) fault amounting to at least 11 negligence on the part of the publisher or “actual malice,” depending on the status of the 12 plaintiff as a private or public figure and whether the statement at issue involves a matter 13 of public concern. Boswell v. Phoenix Newspapers, Inc., 152 Ariz. 1, 3, 730 P.2d 178, 14 180 (Ct. App. 1985) (citing Restatement (Second) of Torts § 558); see also Citizen 15 Publ’g Co. v. Miller, 210 Ariz. 513, 517, 115 P.3d 107, 111 (2005) (discussing 16 heightened protection for speech that touches on public issues). Defendants challenge the 17 sufficiency of Plaintiff’s pleading as to the first element. 18 A. 19 To be defamatory, “a publication must be false and must bring the defamed person 20 into disrepute, contempt, or ridicule, or must impeach plaintiff's honesty, integrity, virtue, 21 or reputation.” Godbehere v. Phoenix Newspapers, Inc., 162 Ariz. 335, 783 P.2d 781, 787 22 (1989). A publication that impeaches the integrity and reputation of a corporation may be 23 actionable by an individual if a reader of the article would understand it as referring to the 24 corporate entity as well as its executives. See Peagler v. Phoenix Newspapers, Inc., 114 25 Ariz. 309, 315, 560 P.2d 1216, 1222 (1977). In contrast, statements of opinion are 26 protected under the First Amendment, and are generally not actionable. Obsidian Fin. 27 Grp., 28 (quoting Partington v. Bugliosi, 56 F.3d 1147, 1153 (9th Cir. 1995)). In determining Defamatory Statement LLC v. Cox, 740 F.3d -3- 1284, 1293 (9th Cir. 2014) 1 whether a statement is a factual assertion capable of defamatory meaning or mere 2 opinion, consideration should be given to “(1) whether the general tenor of the entire 3 work negates the impression that the defendant was asserting an objective fact, (2) 4 whether the defendant used figurative or hyperbolic language that negates that 5 impression, and (3) whether the statement in question is susceptible of being proved true 6 or false.” Id. 7 Plaintiff asserts the article contained a number of defamatory statements. 8 Nevertheless, only a few of the statements identified in his amended pleading assail the 9 reputation of either Plaintiff or his company.2 10 For example, in one instance the article refers to Plaintiff’s technology company 11 as “dubious.” (Doc. 1, Ex. 1, at 26) This statement does not represent an assertion of 12 verifiable fact. See Obsidian Fin. Grp., 740 F.3d at 1293. It cannot fairly be characterized 13 as either true or false, since there is no objective benchmark with which to measure the 14 veracity of the Defendants’ description. As to the allegation that a contract with 15 Hummingbird to install security equipment at a Nevada Airport “ended in litigation,” 16 Plaintiff concedes that a lawsuit was initiated between his company and an electrician 17 they had hired that arose from that project. (Doc. 1, Ex. 1, at 27.) Plaintiff’s assertion that 18 the article implied the airport’s involvement in the lawsuit is, therefore, not fairly 19 supported by the facts. (See id.) 20 Other allegations also fail to suggest that the article specifically defamed Plaintiff. 21 For example, Plaintiff challenges Defendants’ characterization of former Chief Deputy 22 Hendershott’s relationship with him as a “benefactor” and “friend,” although he does not 23 deny that the two were associates. (Id. at 25, 27.) This statement, on its face, is 24 immaterial to Plaintiff’s reputation because the Complaint does not plausibly explain how 25 having Hendershott as a benefactor or a friend impugns his character. In the same vein, 26 2 27 28 The article appears, at least at times, to use Plaintiff’s name and the name of his company interchangeably. (See Doc. 17 at 12.) In context, statements that impeach the professional capabilities of Plaintiff, as Hummingbird’s chief executive, may also constitute defamation of Hummingbird and vice versa. See Peagler, 114 Ariz. at 315, 560 P.2d at 1222. -4- 1 Plaintiff asserts that several facts reported in the article are untrue, such as whether the 2 Chinese programmer linked to the potential data breach had access to the Arizona 3 Driver’s License database, the timing in which Plaintiff founded his companies or the 4 individual who introduced Plaintiff to the programmer. (Id. at 20–24, 26–29.) These 5 statements are not capable of a defamatory meaning because they do not impugn the 6 integrity of Plaintiff or his business, even if they are factually incorrect. On the other 7 hand, although the extent to which Hummingbird’s managerial decisions were delegated 8 to Chinese companies and his girlfriend may call into question the credibility of 9 Plaintiff’s corporation, Plaintiff has not sufficiently pleaded the falsity of the information. 10 Only a few statements, taken in the light most favorable to Plaintiff, may give rise 11 to liability for defamation. The article states that Hummingbird’s “technical capabilities 12 were lacking,” (id. at 26), and that “Hummingbird . . . struggled to get government 13 work.” (Id. at 27.) These statements are capable of defamatory meaning because they 14 have the potential to cast Plaintiff’s business competency, acumen and the viability of his 15 company in a negative light. Moreover, they are sufficiently factually based and their 16 falsity has been adequately alleged. With respect to Plaintiff’s girlfriend’s hiring of the 17 programmer, the article states that “Hummingbird, without vetting Fan further, sought his 18 work visa, Greschner said, adding that he assumed law enforcement or other government 19 officials took a closer look at the Chinese national.” (Id. at 29.) Plaintiff pleads that, to 20 the contrary, he investigated the programmer with Beijing police, the CIA, and the 21 Maricopa County Sheriff’s Office—who did a check with the FBI. (Id.) This statement is 22 also potentially defamatory because it reflects poorly on the credibility of Plaintiff and 23 Hummingbird as a security defense company by implying their employment vetting 24 practices were subpar and lead to a breach of sensitive data. 25 B. 26 Under Arizona law, a statement is defamatory only if it “reasonably relate[s] to 27 specific individuals.” Hansen v. Stoll, 130 Ariz. 454, 636 P.2d 1236, 1240 (Ct. App. 28 1981). “[L]ibel of a corporation will support an action by an owner-shareholder if Of and Concerning the Plaintiff -5- 1 reasonable readers would understand it to charge the individual with the same conduct as 2 the corporation.” Dombey v. Phoenix Newspapers, Inc., 150 Ariz. 476, 491, 724 P.2d 3 562, 577 (1986). 4 In this instance, some of the allegedly defamatory statements do not refer to 5 Plaintiff by name; rather, they describe acts or qualities of individuals wholly unrelated to 6 him. Plaintiff may not challenge accusations—even if defamatory—against Hendershott, 7 his ex-girlfriend, or the Chinese national programmer. (see Doc. 1, Ex. 1, at 26–29.) 8 Meanwhile, the majority of statements that do concern Plaintiff and Hummingbird are not 9 defamatory for the reasons stated above. Only the statements about Hummingbird’s 10 technical deficiencies, its struggle to get government work, and its deficient vetting of 11 Fan are adequately pleaded as both defamatory and sufficiently linked to Plaintiff to 12 sustain a claim for relief. Defendant’s Motion to Dismiss is denied as to these allegations. 13 CONCLUSION 14 For the foregoing reasons, the majority of Plaintiff’s allegations fail to state a 15 claim for defamation. He may pursue relief for the above specified statements only. All 16 other counts are dismissed under Rule 12(b)(6). 17 18 19 IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss (Doc. 6) is GRANTED in part and DENIED in part. Dated this 18th day of February, 2015. 20 21 22 Honorable G. Murray Snow United States District Judge 23 24 25 26 27 28 -6-

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