FinancialApps, LLC v. Envestnet, Inc. et al

Filing 648

MEMORANDUM ORDER: IT IS HEREBY ORDERED that Envestnet's objections to the Report and Recommendation (D.I. 591 ) are OVERRULED. The Report and Recommendation (D.I. 582 ) is ADOPTED. FinApps' Motion for Summary Judgment on Defamation Counterclaim (D.I. 452 ) is GRANTED. Signed by Judge Jennifer L. Hall on 9/26/2024. (ceg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
FINANCIALAPPS, LLC,
Plaintiff,
v.
ENVESTNET, INC. and YODLEE, INC.,
Defendants.

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C.A. No. 19-1337-JLH-CJB

MEMORANDUM ORDER
1.

Presently before the Court is a Report and Recommendation (D.I. 582) from U.S.

Magistrate Judge Christopher J. Burke, which recommends that the Court grant Plaintiff
FinancialApps, LLC’s (“FinApps’”) Motion for Summary Judgment on Defamation Counterclaim
(D.I. 452).

I have reviewed the objections by Defendant/Counterclaimant Envestnet, Inc.

(“Envestnet”) (D.I. 591) and Plaintiff’s response (D.I. 601). For the reasons set forth below, the
objections are overruled.
2.

Envestnet argues that Judge Burke erred in (1) misapplying Illinois’ innocent

construction rule by considering the context of the articles that the allegedly defamatory statements
appeared in (D.I. 591 at 2–5) and (2) failing to consider additional statements that were not
expressly pleaded in Defendants’ counterclaim (id. at 5–7). The Court reviews a magistrate
judge’s report and recommendation on a dispositive motion de novo. Fed. R. Civ. P. 72(b)(3); 28
U.S.C. § 636(b)(1). The Court must grant summary judgment “if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). Material facts are those “that could affect the outcome” of the
proceeding. Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011). “[A] dispute about a

material fact is genuine if the evidence is sufficient to permit a reasonable jury to return a verdict
for the nonmoving party.” Id. (internal quotation marks omitted).
3.

Envestnet first argues that the Magistrate Judge misapplied the Illinois Supreme

Court’s holding in Owen v. Carr, 497 N.E.2d 1145 (Ill. 1986), because (according to Envestnet)
the Illinois innocent construction rule does not apply to the article in which the allegedly
defamatory statements appear unless the author of the article is one of the defendants. (D.I. 591
at 2.) Having reviewed the cited authorities, the Court is unpersuaded that the Magistrate Judge
misapplied Owen. Moreover, the Court is persuaded that the Magistrate Judge correctly applied
the innocent construction rule to Mr. Kasowitz’s statements by considering the context of the
articles in which the statements appeared. 1
4.

Second, Envestnet argues that the Magistrate Judge should have considered

additional statements that were not expressly pleaded in the counterclaim. (D.I. 591 at 5–7.) The
parties do not dispute that, as a matter of Illinois substantive law, a defamation plaintiff is required
to plead with sufficient particularity the statements underlying its defamation claim. (D.I. 582 at
4 n.2.) See Green v. Rogers, 917 N.E.2d 450, 459 (Ill. 2009) (explaining that “although a
complaint for defamation per se need not set forth the allegedly defamatory words in haec verba,
the substance of the statement must be pled with sufficient precision and particularity so as to
permit initial judicial review of its defamatory content [and] so that the defendant may properly

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Envestnet cites other cases in its objection that it contends stand for the proposition that
the underlying statements must be analyzed separately from the articles. (D.I. 591 at 3–5.) Two
of the cases were not cited to the Magistrate Judge, which may be reason enough not to consider
them. Wilson Wolf Mfg. Corp. v. Sarepta Therapeutics, Inc., No. 19-2316-RGA, 2021 WL
7412302, at *1 (D. Del. Feb. 2, 2021) (“An Objection to the recommendation of a Magistrate Judge
is not the place to be making new arguments or providing new, although previously available,
authorities.”). Even so, the cited cases do not demonstrate that the Magistrate Judge employed the
wrong analysis.
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formulate an answer and identify any potential affirmative defenses”); DeVooght v. Unity Point
Health, No. 4:18-cv-04197, 2019 WL 13116342, at *3 (C.D. Ill. Aug. 9, 2019) (explaining that
“[f]ederal courts charged with evaluating defamation per se claims [under Illinois law] . . . require
plaintiffs to plead the allegedly defamatory statement with precision and particularity” because it
is “consider[ed] an aspect of substantive Illinois law, which federal courts sitting in diversity must
apply”). The parties do dispute whether Envestnet sufficiently pleaded the three additional
statements, even though they weren’t quoted in its counterclaim. I agree with the Magistrate Judge
that Envestnet did not. As the Magistrate Judge put it, the pleading “does not mention . . . nor
even hint at” the three additional statements. (D.I. 582 at 4 n.2.) Envestnet points out that courts
can look at evidence outside the pleadings at the summary judgment stage. (D.I. 591 at 6–7.) Of
course that’s true, but it’s beside the point. The pleading defines the scope of the defamation claim.
The three additional statements weren’t pleaded, so the Magistrate Judge did not err in declining
to consider them.
5.

Envestnet’s objections to the Report and Recommendation (D.I. 591) are

OVERRULED. The Report and Recommendation (D.I. 582) is ADOPTED. FinApps’ Motion
for Summary Judgment on Defamation Counterclaim (D.I. 452) is GRANTED.

September 26, 2024

________________________________________
JENNIFER L. HALL
UNITED STATES DISTRICT JUDGE

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