Stamey et al v. Howell et al

Filing 15

ORDER denying 3 Motion to Dismiss for Failure to State a Claim; denying as moot 5 Motion to Amend/Correct; denying as moot 6 Motion to Dismiss for Failure to State a Claim; granting 13 Motion to Amend/Correct. Signed by Chief Judge Dana L. Christensen on 12/7/2016. (dle)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
RICHARD STAMEY and VALERIE
STAMEY,
Plaintiffs,

CV 16–23–M–DLC

ORDER
vs.
MICHAEL HOWELL, VICTORIA
HOWELL, and BITTERROOT STAR
INC.,
Defendants.
Before the Court is Defendants Michael Howell, Victoria Howell, and
Bitterroot Star, Inc.’s (collectively “Defendants”) motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6). Plaintiffs Richard Stamey and Valerie
Stamey (the “Stameys”) oppose the motion. For the reasons explained below, the
Court will deny Defendants’ motion.
However, before the Court discusses the motion on its merits, it must first
address two preliminary matters. First, there is a dispute amongst the parties as to
the documents the Court may consider in issuing its decision. Generally, courts
may only consider the allegations in the complaint when ruling on a motion to
dismiss. Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994), overruled on other
grounds, Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).
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However, if a complaint specifically refers to a document whose authenticity is not
questioned by the parties, a court may consider the document when ruling on the
motion. Branch,14 F.3d at 454.
Here, Defendants have attached two documents to their motion to dismiss:
(1) a February 12, 2014, newspaper article published by Defendant Bitterroot Star
Inc. (Doc. 4-1); and (2) a February 5, 2014, decision by Montana’s Commissioner
of Political Practices (Doc. 4-2). Both of these documents are referred to in the
Stamey’s Second Amended Complaint (Doc. 13-1 at 5, 7) and Defendants urge the
Court to consider them in ruling on the underlying motion. The Stameys do not
object to the Court considering the newspaper article but do object to the 2014
decision. The Stameys assert that the February 2014 decision is not relevant to the
Court’s decision. However, because the Stameys do not question the authenticity
of these documents, the Court will consider them. Further, as discussed below,
this decision is central to the Court’s analysis.
Additionally, after Defendants moved to dismiss the original Complaint
(Doc. 3), the Stameys filed an Amended Complaint pursuant to Federal Rule of
Civil Procedure 15(a)(1) (Doc. 5). In response and out of an abundance of
caution, Defendants filed a Second Motion to Dismiss (Doc. 6) in order to avoid
any procedural disputes. However, Defendants contend that the Second Motion to
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Dismiss is not necessary, and the Court could still rule on the original motion to
dismiss, because the Amended Complaint failed to cure the alleged defects in the
first Complaint. Before the Court could address this issue, the Stameys moved for
leave to file a Second Amended Complaint under Federal Rule of Civil Procedure
15(a)(2). Defendants do not oppose this motion but renew their argument that the
Court can still rule on the First Motion to Dismiss because the proposed Second
Amended Complaint did not cure the defects previously raised.
Because leave to file an amended complaint should be given freely, and
because Defendants do not oppose this motion, the Court will grant the motion
and permit the Stameys to file their Second Amended Complaint. See Fed. R. Civ.
P. 15(a)(2) (stating that a “court should freely give leave when justice so
requires”). Further, the Court agrees with Defendants that their original motion to
dismiss is unaffected by the filing of the subsequent complaints and will rule on
the first motion filed. Charles Alan Wright et al., Federal Practice and Procedure
vol. 6, § 1476, 638 (3d., West 2005) (stating that defendants are not required to
file a new motion to dismiss following an amended pleading if the “defects raised
in the original motion remain . . . . To hold otherwise would be to exalt form over
substance.”). Accordingly, the Court will deny Defendants’ Second Motion to
Dismiss as moot.
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BACKGROUND1
In February 2010, Plaintiff Richard Stamey (“Richard”) ran for Montana
House District 89 and filed as a Republican candidate. Plaintiff Valerie Stamey
(“Valerie”), Richard’s wife, was listed as his campaign treasurer. Just prior to the
June 2010 Republican primary, Valerie contacted Defendant Bitterroot Star Inc.
(“Bitterroot Star”), a weekly newspaper in Stevensville, Montana, and requested
publication of multiple advertisements highlighting Richard’s campaign. The first
advertisement was published on June 2, 2010. Following this publication, there is
considerable dispute as to what transpired next.
The Stameys maintain that the advertisement was defective and contacted
Victoria Howell (“Victoria”), the co-owner of the newspaper, on June 3, 2010, to
complain. It appears nothing was resolved following this initial complaint.
However, the Stameys state that Valerie contacted Victoria again in late June 2010
to discuss the advertisement. According to the Stameys, Victoria offered to credit
Valerie $162.75, the outstanding cost of the advertisement, against the balance

1

This section is derived from: (1) the Stameys’ Second Amended Complaint (Doc. 13-1);
(2) the February 12, 2014, newspaper article (Doc. 4-1); (3) the February 5, 2014, decision by the
Commissioner of Political Practices (Doc. 4-2); and (4) Defendants’ January 22, 2014, complaint
to the Commissioner of Political Practices (Doc. 9-1). Defendants complaint was referred to in
the Stameys’ Second Amended Complaint (Doc. 13-1 at 5) and attached to their response in
opposition to the motion to dismiss. The Court will consider this document when ruling on the
instant motion. Branch,14 F.3d at 454.

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remaining on the Bitterroot Star’s books. However, Defendants contend that this
debt was never forgiven and the Bitterroot Star continued to send a monthly
billing statement to the Stameys through 2011.
Despite this contention, on September 29, 2011, the Stameys listed this
“forgiven debt” as an in-kind donation to Richard’s political campaign on a
campaign finance report filed with Montana’s Commissioner of Political Practices
(the “Commissioner”). This report, known as a “closing report,” was in response
to an earlier decision issued by the Commissioner (Maclaren v. Stamey,
COPP-2011-CFP-12) which found that a previous campaign finance report filed
by Richard’s campaign failed to account for $162.00 in expenditures. In an
attempt to resolve this discrepancy, the Stameys filed the closing report which
stated that the Bitterroot Star gave Richard’s campaign a $125.00 in-kind credit on
September 1, 2011.2 The closing report was certified by Richard and signed by
Valerie.
On January 22, 2014, Victoria and the Bitterroot Star filed a complaint with
the Commissioner accusing the Stameys of filing a false campaign report in

2

In the September decision discussed infra, the Commissioner noted that the alleged
$125.00 credit did not resolve the full $162.00 that was unaccounted for in the Stameys’ previous
campaign finance report. However, the Commissioner accepted the closing report as signed and
filed by the Stameys. (Doc. 4-2 at 5.)

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violation of Montana law. Specifically, the complaint stated that the Bitterroot
Star never contributed anything to Richard’s campaign and alleged the closing
report violated two state laws: (1) Montana Code Annotated (“MCA”)
§ 13–37–231, which requires that all campaign reports be certified as true,
complete, and correct; and (2) MCA § 45–7–202, which prohibits false swearing,
i.e., knowingly making a false statement to purposely mislead a public servant.
After investigating the matter, the Commissioner issued a decision (Howell
v. Stamey, COPP-2014-CFP-003) finding that the closing report filed by the
Stamey campaign was false. In making this determination, the Commissioner
declined to find violations of MCA §§ 13–37–231 and 45–7–202, and, instead,
found that the Stameys had violated MCA § 13–35–207(3) (“Deceptive election
practices”), which prohibits a person from “ knowingly caus[ing] a false statement,
certificate, or return of any kind to be signed.”3 The Commissioner found that the
Stameys failed to provide any documents or evidence that the Bitterroot Star had
forgiven the debt and determined that the Stameys had filed the closing report for
the purpose of misleading the Commissioner’s staff. The Commissioner
concluded with a finding that monetary fines and possible jail time were

3

The Commissioner also concluded that the closing report violated MCA 13–37–230(f)
(2013) which requires disclosure of “the amount and nature of debts and obligations owed by
a . . . candidate in the form prescribed by the commissioner.”

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appropriate penalties for filing the false report.
Based upon this decision, on February 12, 2014, the Bitterroot Star
published an article entitled: “Stameys filed false campaign finance report.” (Doc.
4-1 at 1.) This article was written by Defendant Michael Howell (“Michael”),
Victoria’s husband and a reporter at the Bitterroot Star. The article discussed the
Commissioner’s determination that the Stameys had filed a false campaign finance
report in violation of Montana law and included this discussion in the second
paragraph:
The violation came to light when Bitterroot Star reporter Michael
Howell was investigating the Stameys’ political activities in Ravalli
County in relation to the recent events in the treasurer’s office. It was
discovered that the Stameys had falsely claimed an in-kind donation
from the Bitterroot Star as part of their closing campaign finance
report for the 2010 elections in which Richard Stamey ran against
Gary MacLaren in the primary.
(Id.) The article went on to summarize the Commissioner’s decision and included
a discussion about the June 2010 advertisement, the unpaid debt, and Victoria’s
assertion that the debt was never forgiven. This article, as well as the related
complaint to the Commissioner, serve as the basis for the Stameys’ litigation in
this Court.
In their Second Amended Complaint, the Stameys contend that they were
defamed by Defendants and bring four causes of action. First, Count I asserts a
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claim of libel against all Defendants and alleges that the Bitterroot Star’s article
improperly accused the Stameys of filing “a false campaign financial report
impliedly accusing them of the crime of false swearing.” (Doc. 13-1 at 8.) The
Stameys contend that “Count I is based on Mr. Howell’s own investigation of
campaign finance reports and impliedly of the records of thBitterroot [sic] Star as
shown in second paragraph of the article, in the title of the article.” (Id.) Next,
Count II, similar to Count I, asserts a libel claim and states that Defendants
“published the findings of the Montana Commissioner of Political Practices with
actual knowledge that those findings were false and that they falsely accused
Richard and Valerie Stamey of the crime of false swearing.” (Id. at 8–9.) Count
III (misidentified as Count II) is substantially similar to the previous counts except
that it is only brought against Michael and accuses him of maliciously publishing
the article with the actual knowledge or reckless disregard for the fact that its
contents were based on false accusations accusing the Stameys of the crime of
false swearing. Finally, Count IV (misidentified as Count III) is also similar to the
previous counts except that it is only brought against the Bitterroot Star and
asserts that the newspaper maliciously published the article with the actual
knowledge or reckless disregard for the fact that its contents were based on false
accusations accusing the Stameys of the crime of false swearing.
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STANDARD
The Federal Rules of Civil Procedure allow for dismissal when the
allegations in the pleading “fail[] to state a claim upon which relief can be
granted.” Fed. R. Civ. P. 12(b)(6). “All allegations of material fact are taken as
true and construed in the light most favorable to the plaintiff.” SmileCare Dental
Group v. Delta Dental Plan of California, Inc., 88 F.3d 780, 782–783 (9th Cir.
1996). Nonetheless, a court may dismiss a complaint if it lacks a cognizable legal
theory. Id. at 783. Thus, in order to survive a motion to dismiss, the “complaint
must contain sufficient factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citations and quotation marks omitted).
DISCUSSION
As discussed, the Stameys assert that they were defamed by Defendants’
newspaper article. Because this action is based on diversity jurisdiction, the Court
applies the substantive law of the state in which it sits. Zamani v. Carnes, 491
F.3d 990, 995 (9th Cir. 2007). Under Montana statutory law, defamation can be
effected by slander or, as alleged here, by libel. Mont. Code Ann. § 27–1–801.
“Libel is a false and unprivileged publication by writing . . . that exposes any
person to hatred, contempt, ridicule, or obloquy or causes a person to be shunned
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or avoided or that has a tendency to injure a person in the person’s occupation.”
Mont. Code Ann. § 27–1–802. Falsely accusing someone of committing a crime
can be an considered an actionable claim for defamation. Jonas v. Lake County
Leader, 953 F. Supp. 2d 1117, 1125 (D. Mont. 2013) (citing Spreadbury v.
Bitterroot Public Library, 856 F.Supp.2d 1195, 1199 (D. Mont. 2012) (“Under
Montana law, defamation per se exists when a private actor falsely accuses an
individual of committing a crime.”)).
The February 14, 2014 article was titled “Stameys filed false campaign
finance report.” (Doc. 4-1 at 1.) Further, as discussed above, the second
paragraph of the article described how “the Stameys had falsely claimed an in-kind
donation from the Bitterroot Star as part of their closing campaign finance report.”
(Id.) As found by the Commissioner, these actions constitute a violation of MCA
§ 13–35–207(3), and could subject the Stameys to incarceration and fines. As
discussed, the Stameys argue that these allegations are false. Taking the
allegations in the Second Amended Complaint as true, the Court finds that the
newspaper article accuses the Stameys of committing a crime and thus, for
purposes of the present motion, supports a claim for defamation.
However, a claim of libel only exists for unprivileged publications. McLeod
v. State ex rel. Dept. of Transp., 206 P.3d 956, 960 (Mont. 2009); see also Skinner
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v. Pistoria, 633 P.2d 672, 675 (Mont. 1981) (“One requisite of a defamation action
is that the communication must be unprivileged.”). “[T]he preliminary
determination of whether a publication is privileged is a question of law for the
court.” McLeod, 206 P.3d at 962. However, “this determination may [only] be
reached by the court when material facts are not in dispute.” Id.
Defendants argue that the February 12, 2014, article was privileged under
Montana law. Defendants cite MCA § 27–1–804(2) and (4) in support of their
argument. This statute states that:
A privileged publication is one made . . .
(2) in any legislative or judicial proceeding or in any other official
proceeding authorized by law; [or]
(4) by a fair and true report without malice of a judicial, legislative, or
other public official proceeding or of anything said in the course
thereof.
Mont. Code Ann. § 27–1–804. The Court will address subsection (2) first.
A. MCA § 27–1–804(2)
Defendants contend that the Bitterroot Star’s article is privileged under
subsection (2) because this provision “applies to a statement made in the course of
an official proceedings [sic] regardless of how it was communicated.” (Doc. 4 at
13.) Defendants cite to Skinner v. Pistoria, 633 P.2d 672 (Mont. 1981), in support
of their argument. Skinner, however, is distinguishable from the case at bar.

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There, the Montana Supreme Court found that slanderous statements made
at a Great Falls City Commission meeting were privileged under MCA
§ 27–1–804(2). Skinner, 633 P.2d at 676. The focus of the Court’s holding was
the meaning of “publication” and whether Skinner’s statements to the Great Falls
City Commission were subsequently “cloaked with absolute immunity.” Id. at
674. The Court found that they were and stated that “[w]e draw no distinctions
between the reading of the letter to the city commission, its distribution to the
press at the meeting, and its later treatment by the media.” Id. at 675. Defendants
now argue that this statement shows that the Skinner court interpreted subsection
(2) to bestow immunity upon on reports of defamatory statements. Defendants
read this statement too broadly.
When read in context, it is clear that the Montana Supreme Court was
discussing whether Skinner would lose his “cloak of immunity” under MCA
§ 27–1–804(2) if his statements were reported by the media, not whether the
media reports themselves would be privileged.4 Here, the plain language of the
statute mandates that the privileged publication must be “made in [the] legislative
or judicial proceeding.” Mont. Code. Ann. § 27–1–804(2). Accordingly,

4

The Court notes that, however, Victoria and the Bitterroot Star’s complaint to the
Commissioner would be privileged under MCA § 27–1–804(2).

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Defendants argument that the newspaper article is privileged under subsection (2)
must fail.
B. MCA § 27–1–804(4)
However, even if subsection (2) does not apply, Defendants contend that
their article is shielded from liability under MCA § 27–1–804(4). Defendants
argue that as long as their article was “a fair and true report” of the
Commissioner’s decision, i.e., the “public official proceeding,” then they are
immune from liability under MCA § 27–1–804(4). The Stameys counter that the
privilege afforded by this statute is conditional and can be lost if the report is made
with malice. The Stameys stress the plain language of this statute and argue that
the terms “without malice” create a factual question for the jury precluding
dismissal.
The Montana Supreme Court has yet to address MCA § 27–1–804(4) in this
context. However, this does not prevent the Court from forecasting how this
statute would be interpreted by Montana’s high court. Indeed, “where the state’s
highest court has not decided an issue, the task of the federal courts is to predict
how the state high court would resolve it.” Dimidowich v. Bell & Howell, 803
F.2d 1473, 1482 (9th Cir.1986), modified at 810 F.2d 1517 (9th Cir.1987). In
making this determination, a court should look to persuasive authorities, including
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treatises and decisions from other jurisdictions, for guidance. Strother v. Southern
California Permanente Medical Group, 79 F.3d 859, 865 (9th Cir. 1996).
Defendants argue that, contrary to the plain language of the statute, courts
dealing with similar issues have abandoned the requirement that a publication
reporting on an official proceeding must be made without malice to be privileged.
Defendants cite a string of cases in support of this argument, including Schiavone
v. Time, Inc., 569 F.Supp. 614, 619 (D.N.J. 1983), rev’d, 735 F.2d 94 (3d Cir.
1984).
In Schiavone, a federal district court applied New Jersey common law to
find that the fair report privilege is not lost even if the report was made with
malice. Schiavone, 569 F.Supp. at 619. The district came to this conclusion based
primarily on its analysis of the Restatement (Second) of Torts, which states that the
fair report privilege applies even if the report is “made solely for the purpose of
causing harm.” Id. (quoting Reporter’s Note, Restatement (Second) of Torts § 611
(1977). However, contrary to Defendants’ argument, the district court in
Schiavone was subsequently overruled by the Court of Appeals for the Third
Circuit. Schiavone Const. Co. v. Time, Inc., 735 F.2d 94, 97 (3d Cir. 1984). In
reversing the district court, the Third Circuit noted past decisions by the New
Jersey Supreme Court that found that a showing of malice could defeat the
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privilege and could not agree with the federal district court that “if faced with the
issue today, the highest court of New Jersey would decide that proof of malice
would not defeat the privilege of fair report.” Schiavone Const. Co., 735 F.2d at
97.
Additionally, the other cases cited by Defendants in support of their
argument are also distinguishable. For one, none of the cases cited by Defendants
discuss a court acting contrary to a state’s express statutory requirement that the
privilege only applies in the absence of malice. Indeed, the cases cited by
Defendants all interpret state common law or apply state statues that do not
address the issue of malice. See Nanji v. National Geographic Society, 403
F.Supp.2d 425 (D. Md. 2005) (interpreting privilege under Maryland common
law); Solaia Tech., LLC v. Specialty Pub. Co., 852 N.E.2d 825 (Ill. 2006)
(discussing privilege under Illinois common law); Daniel Goldreyer, Ltd. v. Van
De Wetering, 217 A.D.2d 434 (N.Y. App. Div. 1st Dept. 1995) (discussing a New
York state statute that does not condition privilege on the absence of malice).
Thus, Defendants’ authority is inapposite to the case at bar.
Further, when interpreting Montana law, “statutory language must be
construed according to its plain meaning and, if the language is clear and
unambiguous, no further interpretation is required.” Infinity Ins. Co. v. Dodson,
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14 P.3d 487, 496 (Mont. 2000). Here, MCA § 27–1–804(4)’s privilege is clearly
conditioned on the absence of malice. Under the present motion, the Court must
construe all allegations as true and in the light most favorable to the Stameys.
Because the Stameys allege that the newspaper article was published out of
malice, a factual dispute remains preventing dismissal at this point.5 The Court
will thus deny Defendants’ motion to dismiss.
Accordingly, IT IS ORDERED that:
(1) Defendants’ Motion to Dismiss for Failure to State a Claim (Doc. 3) is
DENIED.
(2) Plaintiffs’ First Motion to Amend/Correct the Complaint (Doc. 5) is
DENIED as moot.
(3) Defendants’ Second Motion to Dismiss for Failure to State a Claim
(Doc. 6) is DENIED as moot.
(4) Plaintiffs’ Motion for Leave to Filed Second Amended Complaint (Doc.
13) is GRANTED.
5

In their reply brief, for the first time, Defendants argue that the newspaper article was
substantially true and thus dismissal is appropriate because the truth is a complete defense to
defamation. (Doc. 10 at 12 (citing Jonas, 953 F. Supp. 2d at 1126).) However, because the
Court must assume for purpose of the present motion that the article was reporting on a
falsehood, the Court finds that this argument must await a motion for summary judgment. See
Citizens First Nat. Bank of Wolf Point v. Moe Motor Co., 813 P.2d 400, 404 (Mont. 1991)
(affirming district court’s order granting summary judgment after finding that the allegedly
defamatory statements were true).

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Dated this 7th day of December, 2016.

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