Hinkle v. St. Louis Post Dispatch et al

Filing 20

MEMORANDUM For the reasons stated above, the motion of defendants St. Louis Post Dispatch, www.stltoday.com, Lee Enterprises, and Matthew Hathaway for summary judgment (Doc. 8) is sustained. An appropriate judgement order is issued herewith. Signed by Magistrate Judge David D. Noce on 12/19/11. (KXS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ARMOD LEMANS HINKLE,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
ST. LOUIS POST DISPATCH, et al.,
Defendants.

No. 4:11 CV 1667 DDN

MEMORANDUM
This

action

is

before

the

court

on

the

unopposed

motion

of

defendants St. Louis Post Dispatch, www.stltoday.com, Lee Enterprises,
and Matthew Hathaway for summary judgment.

(Doc. 8.)

The parties have

consented to the exercise of plenary authority by the undersigned United
States Magistrate Judge pursuant to 28 U.S.C. § 636(c).
I.

(Doc. 19.)

BACKGROUND

On September 23, 2011, plaintiff Armond Lemans Hinkle, proceeding
pro se, commenced this action against defendants St. Louis Post Dispatch,
www.stltoday.com, Lee Enterprises, and Matthew Hathaway (collectively
“defendants”), alleging that on September 23, 2009, defendants knowingly
and/or recklessly published a false, libelous, malicious, and fraudulent
article

concerning

his

handling

of

investors’

money.1

(Doc.

1.)

Specifically, plaintiff identifies three statements as the basis for his
claim:
(1)

“The Hinkles allegedly raised more than $315,000, but did not use
the money to start the business”;

1

In his complaint, plaintiff asserts that the court has subject
matter jurisdiction over this action under 28 U.S.C. § 1391(a)(1).
§ 1391, however, directs the proper venue in which a civil action may be
commenced; § 1391 is not a basis for subject matter jurisdiction.
Construing plaintiff’s pro se complaint broadly, the court determines
that it has subject matter jurisdiction over the action pursuant to 28
U.S.C. § 1332 because according to the complaint, plaintiff is a resident
of South Carolina, all defendants are residents of Missouri, and
plaintiff seeks more than $75,000 in damages, exclusive of interest and
costs. (Doc. 1.)

(2)

“Additionally, the Hinkles failed to provide Securities Division
investigators with any information showing that steps were taken to
purchase inventory, licensing agreements, or client prospects”; and

(3)

“. . . and spending $178,000 of their investors’ money on personal
expenses.”

(Id. (omission in original).)
Plaintiff alleges that the article was read by millions of people,
hundreds of whom plaintiff knows, and that defendants would have learned
of the falsity of the facts asserted in the article had defendants used
reasonable due diligence to check the veracity of the information. (Id.)
Plaintiff alleges that he has suffered loss of reputation, shame, and
injury to his feelings, and that he is no longer able to attain
employment or pay bills.

(Id.)

Plaintiff seeks compensatory damages,

punitive damages, interest, and costs.

(Id.)

On October 24, 2011, defendants filed their motion for summary
judgment and related documents.

(Docs. 8-12.)

On November 3, 2011, the

court gave plaintiff until December 5, 2011 to file a written response
to defendants’ motion for summary judgment.

(Doc. 17.)

Plaintiff has

filed no response to the motion for summary judgment.

II.

MOTION FOR SUMMARY JUDGMENT

Defendants argue in their motion for summary judgment that they are
entitled to protection under the fair report privilege because the
challenged statements from the article were direct quotations from an
official press release issued by the Missouri Office of Secretary of
State on September 23, 2009 following a cease and desist order by the
Commissioner of the Securities Division of the Missouri Office of
Secretary

of

State

(“Commissioner”).

Defendants

also

argue

that

plaintiff Hinkle is estopped from challenging the veracity of the
complained-of statements because these statements were found to be true
in a judgment on the merits by the Commissioner.

(Docs. 8, 10.)

Plaintiff Hinkle has had a reasonable opportunity to respond to the
motion for summary judgment, but has not done so. Therefore, defendants’

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submitted statement of undisputed facts is deemed admitted by plaintiff
Hinkle for the purposes of the motion.

III.

See E.D.Mo. Local Rule 7-401(E).

STATEMENT OF UNDISPUTED FACTS
September 22, 2009 Order

On September 22, 2009, Matthew D. Kitzi, Commissioner of Securities
for the Missouri Office of Secretary of State, issued an Order to Cease
and Desist and Order to Show Cause Why Civil Penalties and Costs Should
Not Be Imposed (“Cease and Desist Order”) against plaintiff and his
mother, Gina M. Hinkle.

(Doc. 9 at ¶ 3.)

According to the Cease and

Desist Order, on September 3, 2009, the Enforcement Section of the
Securities Division of the Office of Secretary of State (“Securities
Division”), through its Chief Enforcement Counsel, Nathan Soenerk, had
filed a petition seeking the Cease and Desist Order.

(Doc. 9-1, Ex. A.)

In the Cease and Desist Order, the Commissioner made 38 findings of
fact.

(Doc. 9-1, Ex. A at ¶¶ 1-38.)

The Commissioner found that

plaintiff was the Senior Vice President and Chief Operating Officer of
Direcutec and that plaintiff’s mother was the President and Chief
Executive Officer of Direcutec.

(Id. at ¶¶ 2, 3.)

Direcutec was in the

business of developing, marketing, and selling handheld hardware devices
and software products to the law enforcement, health care, and restaurant
services industries.
plaintiff

and

his

(Id. at ¶ 5.)
mother

sold

From May, 2006 to February, 2007,

“membership

investors, which generated at least $315,000.

units”

to

at

least

(Id. at ¶¶ 6, 7.)

14

These

“membership units” were not registered under the Missouri Securities Act
of 2003, nor had the Hinkles registered to sell securities in Missouri
or filed notice that the “membership units” were federal securities.
(Id. at ¶ 8.)
The Commissioner also found that information obtained during the
Securities Division’s investigation showed that at least $315,000 in
investor funds were placed in four bank accounts at The Private Bank.
(Id. at ¶ 32.)

An analysis of The Private Bank’s records indicated that

at least $178,000 of investor funds was spent by plaintiff and his mother
on expenses unrelated to Direcutec’s purported business, including a
mortgage payment on plaintiff’s mothers private residence, Avon products,
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personal insurance, and unaccounted for cash withdrawals. (Id. at ¶ 33.)
Despite telling investors that Direcutec would sell hardware and software
products to third parties, plaintiff and his mother failed to provide
investors with any information showing that steps were taken to procure
inventory, licensing agreements, or client prospects.

(Id. at ¶ 37.)

In statements to the Securities Division, plaintiff and his mother
admitted that Direcutec funds were used for their personal expenses and
that they did not disclose this use to investors.

(Id. at ¶ 38.)

Based on these findings, the Commissioner concluded that plaintiff
and his mother had committed multiple violations of: offering or selling
an unregistered security, in violation of Mo. Rev. Stat. § 409.3-301;
transacting business as an unregistered agent, in violation of Mo. Rev.
Stat. § 409.4-402(a); making an untrue statement of a material fact in
connection with the sale of a security, in violation of Mo. Rev. Stat.
§ 409.5-501(2); omitting to state a material fact in connection with the
sale of a security, in violation of Mo. Rev. Stat. § 409.5-501(2); and
employing a device, scheme, or artifice to defraud, in violation of Mo.
Rev. Stat. § 409.5-501(1).

(Id. at ¶¶ 51-74.)

Based on these findings of fact and conclusions of law, the
Commissioner ordered plaintiff and his mother to refrain from violating
Missouri law by selling unregistered securities, selling securities as
an unregistered agent, or making false or misleading statements in the
connection of the sale of securities.
left

open

his

determination

of

(Id. at 9-10.)

whether

to

grant

The Commissioner
the

Securities

Department’s petitions for civil penalties and costs against plaintiff
and his mother.

(Id. at 10.)

Plaintiff and his mother were notified that they could request a
hearing before the Commissioner within 30 days of receiving the Cease and
Desist Order.

(Id. at 12.)

Any such hearing would occur within 15 days

after receipt of the request.

(Id.)

September 23, 2009 Press Release
On September 23, 2009, Missouri Secretary of State Robin Carnahan
issued an official press release detailing the Cease and Desist Order.
(Doc. 9 at ¶ 5; Doc. 9-2, Ex. B.)

The press release, titled “Carnahan

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Halts St. Louis Investment Scheme Operated by Mother and Son,” detailed
the findings, conclusions, and orders in the Commissioner’s Cease and
Desist Order.

(Doc. 9-2, Ex. B.)

The press release included the

following three statements:
(a)

Secretary of State Robin Carnahan today announced officials in
her office issued a Cease and Desist Order against a St. Louis
pair, Armod L. Hinkle and his mother, Gina M. Hinkle, for
selling unregistered investments and spending $178,000 of
their investors’ money on personal expenses.

(b)

The Hinkles allegedly raised more than $315,000, but did not
use the money to start the business.

and
(c)

Additionally, the Hinkles failed to provide Securities
Division investigators with any information showing that steps
were taken to purchase inventory, licensing agreements, or
client prospects.

(Id.)

The press release also quoted Missouri Secretary of State Robin

Carnahan as saying, “[i]nvestors should be extremely cautious if promised
unusually high returns” and that “[b]efore you invest, one call to the
Investor Protection Hotline can help protect your savings.”

(Id.)

September 23, 2009 Article
On September 23, 2009, defendants wrote and published an article on
www.stltoday.com.2

(Doc. 9 at ¶ 1.)

Among the statements made in the

article were:
(a)

The Hinkles allegedly raised more than $315,000, but did not
use the money to start the business.

(b)

Additionally, the Hinkles failed to provide Securities
Division investigators with any information showing that steps
were taken to purchase inventory, licensing agreements, or
client prospects.

and

2

In their statement of undisputed facts, defendants state only that
plaintiff alleges that on September 23, 2009, defendants published an
article containing the challenged statements. (Doc. 9 at ¶ 1.) For
purposes of the instant motion for summary judgment, the court considers
these facts of publication as undisputed.
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(c)

... and spending $178,000 of their investigators’ money on
personal expenses.

(Doc. 9 at ¶ 2 (ellipses in original).)
February 15, 2011 Hearing
On October 26, 2009, plaintiff requested a hearing regarding the
Cease and Desist Order.

(Doc. 9 at ¶ 8; Doc. 9-3, Ex. C at ¶ 3.)

After

plaintiff was given due and proper notice, the requested hearing on the
September Order was held on February 15, 2011.
Ex. C at ¶ 4.)

(Doc. 9 at ¶ 8; Doc. 9-3,

Neither plaintiff nor plaintiff’s counsel appeared or

requested a continuance.

(Doc. 9 at ¶ 8; Doc. 9-3, Ex. C at ¶ 4.)

June 29, 2011 Final Order
On June 29, 2011, the Commissioner issued a Final Order to Cease and
Desist

and

Order

Imposing

Civil

Penalties

Respondent Armod Hinkle (“Final Order”).
C.)

and

Awarding

Costs

to

(Doc. 9 at ¶ 10; Doc. 9-3, Ex.

The Final Order adopted and incorporated substantially all of the

findings of fact and conclusions of law from the Cease and Desist Order.
(Doc. 9-3, Ex. C at ¶¶ 12, 13.)

The Final Order also ordered plaintiff

to pay a total of $24,215 in civil penalties and costs.

(Doc. 9-3, Ex.

C at 3.)

IV.

MOTION FOR SUMMARY JUDGMENT STANDARD

Summary judgment must be granted when the pleadings and proffer of
evidence demonstrate that no genuine issue of material fact exists and
that the moving party is entitled to judgment as a matter of law.

Fed.

R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);
Devin v. Schwan’s Home Serv., Inc., 491 F.3d 778, 785 (8th Cir. 2007).
The court must view the evidence in the light most favorable to the
nonmoving party and accord it the benefit of all reasonable inferences.
Devin, 491 F.3d at 785.

A fact is “material” if it could affect the

ultimate disposition of the case, and a factual dispute is “genuine” if
there is substantial evidence to support a reasonable jury verdict in
favor of the nonmoving party.

Die-Cutting Diversified, Inc. v. United

Nat’l Ins. Co., 353 F. Supp. 2d 1053, 1054-55 (E.D. Mo. 2004).
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Initially, the moving party must demonstrate the absence of an issue
for trial.

Celotex, 477 U.S. at 323.

Once a motion is properly made and

supported, the nonmoving party may not rest upon the allegations in its
pleadings or general denials of the movant’s assertions, but must instead
proffer admissible evidence that demonstrates a genuine issue of material
Fed. R. Civ. P. 56(e); Howard v. Columbia Pub. Sch. Dist., 363

fact.

F.3d 797, 800 (8th Cir. 2004); Krein v. DBA Corp., 327 F.3d 723, 726 (8th
Cir. 2003); Essex Ins. Co. v. Stone, No. 1:09 cv 1 SNLJ, 2010 WL 330328,
at *2 (E.D. Mo. Jan. 21, 2010).

Plaintiff has not responded to the

motion for summary judgment.

V.

DISCUSSION

Defendants argue they are entitled to summary judgment because they
are protected by the fair report privilege and because plaintiff Hinkle
should

be

collaterally

estopped

from

claiming

the

complained-of

statements in the article are false.
A.

Fair Report Privilege
Under Missouri law, “[r]eports of legislative, judicial or executive

proceedings and the statements made therein, are subject to a qualified
privilege.”

Kenney v. Scripps Howard Broad. Co., 259 F.3d 922, 923 (8th

Cir. 2001).

This privilege exists to enable the press to publish

accounts of governmental proceedings or reports containing defamatory
statements without being exposed to liability.

Mitan v. Osborn, No. 10-

3207-CV-S-SWH, 2011 WL 4352550, at *4 (W.D. Mo. Sept. 16, 2011).
basis

of

this

information

privilege

made

is

available

the
to

interest

it

proceedings and public meetings.”

as

to

of

the

what

public

occurs

in

in

“The
having

official

Restatement (Second) of Torts § 611

cmt. a (1977).
Missouri courts have adopted this privilege, known as the fair
report privilege, as set forth in Restatement (Second) of Torts § 611
(1977):
The publication of defamatory matter concerning another in a
report of an official action or proceeding or of a meeting
open to the public that deals with a matter of public concern
is privileged if the report is accurate and complete or a fair
abridgment of the occurrence reported.
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Shafer v. Lamar Publ’g Co., 621 S.W.2d 709, 711 (Mo. Ct. App. 1981)
(adopting and quoting Restatement (Second) of Torts § 611 (1977)). Thus,
the privilege is limited to matters of public concern stated in a report
of an official action or proceeding or a public meeting.

To be entitled

to protection, the publication must be a fair and accurate report or
abridgment of the proceedings.

Kenney, 259 F.3d at 923-24.

Whether a

defendant is entitled to protection under the fair report privilege is
a question of law for the court.
The

first

inquiry

is

Id. at 924.

whether

the

subject

matter

reported

by

defendants was a matter of public concern.

Here, the article reported

on

potential

a

matter

potentially

of

public

fraudulent

concern:

warning

investment

scheme.

investors

According

to

the

of

a

press

release, plaintiff and his mother had sold unregistered investments and
had spent investors’ money on their own personal expenses rather than on
the purported business.
Robin

Carnahan

Protection

(Doc. 9-2, Ex. B.)

cautioned

Hotline

potential

before

investors

investing

promising unusually high returns.

Missouri Secretary of State

with

(Id.)

to

call

companies

the

or

Investor

individuals

There is no proffered evidence

that the article was published for any purpose other than conveying the
warning of Missouri Secretary of State Robin Carnahan, which was founded
on the findings and conclusions of the Commissioner, to the public.
Therefore, the subject matter of the article was a matter of public
concern for purposes of the fair report privilege.
The second issue is whether the article reflected the report of an
official action. Here, the article relied on Missouri Secretary of State
Robin Carnahan’s press release, which cautioned the public about a
possible fraudulent investment scheme.
official

governmental

protection

under

the

news
fair

release
report

may

A publication relying on an
be

privilege.

entitled
See,

to

e.g.,

qualified
Alsop

v.

Cincinnati Post, 24 F. App’x 296, 297-98 (6th Cir. 2001) (per curiam)
(holding the newspaper was entitled to rely upon a press release issued
by the United States Attorney); Stewart v. NYT Broad. Holdings, 240 P.3d
722, 724-25 (Okla. Ct. App. 2010) (holding the media outlet was entitled
to rely upon the police department’s press release and press conference);
Conterras v. Vill. of Woodridge, No. 93 C 7727, 1994 WL 174092, at *3
- 8 -

(N.D. Ill. May 5, 1994) (holding the newspaper was entitled to rely upon
the police department’s press release).

Because the press release was

an official report issued by the Missouri Secretary of State discussing
the

actions

of

the

Missouri

Securities

Division

and

findings

and

conclusions of the Commissioner, the press release was a report of an
official action upon which defendants could rely and receive qualified
protection under the fair report privilege.

See Lami v. Pulitzer Publ’g

Co., 723 S.W.2d 458, 458-60 (Mo. Ct. App. 1986) (holding the newspaper
was entitled to rely on a public computer printout report of the Missouri
Department of Revenue).
The third issue is whether the article was a fair and accurate
report

or

abridgment

of

the

press

release.

To

be

accurate,

the

publication need not be “exact in every immaterial detail” or “conform
to that precision demanded in technical or scientific reporting,” but
must convey “a substantially correct account of the proceedings” to the
reader.

Restatement (Second) of Torts § 611 cmt. f (1977).

To be fair,

the publication cannot edit a report so as “to convey an erroneous
impression to those who hear or read it.”

Id.

Here, the complained-of

statements were taken almost verbatim from the press release, and the
minor differences were not substantive. Compare (Doc. 1) with (Doc. 9-2,
Ex. B).

The article was a fair and accurate abridgment of the press

release, and thus entitled to protection under the fair report privilege.
Therefore, defendants are entitled to qualified immunity under the
fair report privilege.

Because summary judgment is appropriate on this

basis, the court need not determine whether plaintiff is collaterally
estopped

from

challenging

the

truthfulness

statements.

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of

the

complained-of

VI.

CONCLUSION

For the reasons stated above, the motion of defendants St. Louis
Post Dispatch, www.stltoday.com, Lee Enterprises, and Matthew Hathaway
for summary judgment (Doc. 8) is sustained.
An appropriate judgement order is issued herewith.

/S/
David D. Noce
UNITED STATES MAGISTRATE JUDGE
Signed on December 19, 2011.

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