McCusker v. HIBU PLC et al

Filing 38

MEMORANDUM AND ORDER denying 28 Motion to Dismiss for Failure to State a Claim; For the reasons stated herein, Defendants' partial motion to dismiss Plaintiffs defamation claim is denied in its entirety. (Ordered by Judge Leonard D. Wexler on 2/11/2016.) (Fagan, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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JAMES MCCUSKER,
MEMORANDUM AND ORDER

cv 15-2659

Plaintiff,
-against-

(Wexler, J.)

HIBUPLC,
HIBUINC.,
MIKE POCOCK,
TONY BATES,
BOB WIGLEY,
ELIZABETH G. CHAMBERS,
JOHN COGHLAN,
TOBY COPPEL,
CARLOS ESPINOSA de los MONTEROS,
KATHLEEN FLAHRETY,
RICHARD HOOPER, and
BOB GREGERSON,

FILED
IN CLERK'S OFF,ICE
US DISTRICT COURf'E D NY

*

FEB 112016

*

LONG ISLAND OFFICE

Defendants.

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APPEARANCES:
HAINES & ASSOCIATES
BY: Clifford E. Haines, Esq.
Attorneys for Plaintiff
The Widener Building, 5th Floor
1339 Chestnut Street
Philadelphia, P A 19107
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.
BY: Bret A. Cohen, Esq.
Gauri P. Punjabi, Esq.
Attorneys for Defendants hibu PLC, hibu Inc. and Michael Pocock
One Financial Center
Boston, MA 02111

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MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.
BY: Terry McMahon, Esq.
Attorneys for Defendants hibu PLC, hibu Inc. and Michael Pocock
666 Third A venue
New York, New York 10017

WEXLER, District Judge:
Plaintiff commenced this action against his former employer in the Pennsylvania Court of
Common Pleas on September 2, 2014, alleging a violation of the Pennsylvania Wage Payment
and Collection Law, as well as defamation. Defendants removed the action to the United States
District Court for the Eastern District of Pennsylvania on October 3, 2014, on the basis of
diversity jurisdiction pursuant to 28 U.S.C. § 1332. Thereafter, Defendants moved to dismiss
Plaintiffs Complaint. The Pennsylvania federal court construed the motion to dismiss as a
motion to transfer venue, pursuant to 28 U.S.C. § 4104(a), and, on April 8, 2015, transferred the
action to this Court.
Before the Court is a motion for partial dismissal of Plaintiffs Complaint by Defendants
hibu plc, hibu Inc. and Michael Pocock, 1 seeking only to dismiss Plaintiffs defamation claim,
pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposes the motion. For the
following reasons, Defendants' motion to dismiss is denied.

1

While there are a number of other additional individual defendants named in the
Complaint, none have appeared thus far in this action. Moreover, it appears from the Notice of
Removal filed in the Pennsylvania federal court that only Defendants hibu PLC, hibu Inc. and
Michael Pocock have been served in this action. (Notice of Removal~ 2.)
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BACKGROUND
Defendant hibu PLC, is a publicly-traded company based in the United Kingdom that
supplies print and online advertising for small and medium-sized businesses. (Compl. ~ 16.)
Defendant hibu Inc., a wholly-owned subsidiary ofhibu PLC, is the publisher of the "Yellow
Book" print and online telephone and advertising directories in the United States. (Compl.

~~

17-18.) Hibu PLC and hibu Inc. are generally referred to as a singular "group" for purposes of
financial reporting and operations, (compl.

~

18), and will be referred to herein solely as "hibu."

Plaintiff, James McCusker ("McCusker" or "Plaintiff'), began his employment with hibu
Inc. in 1989 as a sales representative. (Compl.

~

21.) At that time, Joe Walsh ("Walsh") served

as hibu Inc.'s Chief Executive Officer ("CEO") and was a mentor to Plaintiff during his career
with hi bu. (Compl.

~~

19, 23.) Over the years, Plaintiff worked his way up through various

leadership positions within hibu Inc., eventually being named President and CEO. (Compl. ~
21.)
As a result of financial difficulties, in 2009, hibu PLC underwent a complete refinancing
and recapitalization, resulting in the business being funded primarily through bank loans.
(Compl.

~~

24-26.) When hibu PLC struggled to meet its obligations under those bank loans in

2010, the Chairman ofhibu's Board ofDirectors, Bob Wigley, instructed Walsh to look for
potential purchasers ofhibu's United States assets, including hibu Inc. (Compl. ~ 27.) In the Fall
of2010, Walsh, together with a private equity firm, submitted an offer to purchase hibu's United
States assets for nearly two billion dollars. (Compl.

~

28.) Walsh's offer was rejected in early

2011, shortly after Defendant Michael Pocock ("Pocock") was appointed CEO and to the Board
of Directors ofhibu PLC. (Compl.

~

29.) Walsh's employment with hibu was terminated on
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October 20, 2011. (Compl. ~ 37.) On Apri115, 2012, Plaintiff was appointed President and
CEO ofhibu, Inc. (Compl. ~ 22.)
As CEO ofhibu PLC, Pocock announced various changes in hibu's overall direction into
digital services, future strategic partnerships and acquisitions and its overall internal structure.
(Compl.

~

30.) Designed to be a four-year program, known as the "Transition Strategy,"

Pocock's plan would require significant changes in the company's budget and fmancial
projections. (Compl.

~

31.) Plaintiff voiced concerns to members of hibu' s upper management

that Pocock's Transition Strategy was not only failing, but was being fraudulently represented to
the company's lenders, investors and shareholders. (Compl.

~

46.) Plaintiff continued to voice

concerns regarding hibu's financial position and the Transition Strategy throughout 2012 and into
2013. (Compl.

~~

51-68.)

On March 6, 2013, hibu terminated Plaintiff for cause, citing his continuing contact with
Walsh, and for allegedly revealing confidential information to Walsh. (Compl.

~

69.) Plaintiff

denied that he had any improper contact with, or provided any confidential information to,
Walsh. (Compl.

~

70.)

That same day, Pocock sent an email (the "Email") concerning Plaintiffs termination to
"everyone in hibu US and the Senior Management Team," which included nearly 5,000 hibu
employees. (Compl.

~~

76-77.) The email advised hibu employees that Plaintiff and another

employee were "dismissed" that day "following a thorough investigation into conduct by them
that the Company considered to be disloyal and against the interests of its employees and other
stakeholders." (Compl.

~

78; Punjabi Aff. Ex. 1.) The Email further stated that hibu was

"considering what further action to take, including legal proceedings against the individuals
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involved, to protect its interests." (Compl. ~ 79; Punjabi Aff. Ex. 1.) The Email was
subsequently republished by hibu employees on blogs and forums across the Internet. (Compl.

~

85.)

DISCUSSION
I.

Legal Standard
"To survive a motion to dismiss, a 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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Facial
plausibility" is achieved when the "the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556
U.S. at 678 (citing Twombly, 550 U.S. at 556). As a general rule, the court is required to accept
as true all of the allegations contained in the complaint. See Iqbal, 556 U.S. at 678; Kassner v.
2nd Ave. Delicatessen. Inc., 496 F.3d 229, 237 (2d Cir. 2007).
However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements ... are not entitled to the assumption of truth." Iqbal, 556 U.S. at 678-79
(citation omitted); see also Twombly, 555 U.S. at 555 (stating that the Court is "not bound to
accept as true a legal conclusion couched as a factual allegation"). "While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations," which
state a claim for relief. Iqbal, 556 U.S. at 679. A complaint that "tenders 'naked assertion[s]'
devoid of 'further factual enhancement"' will not suffice. Iqbal, 556 U.S. at 678 (quoting
Twombly, 555 U.S. at 557).
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II.

Defamation
"Defamation is a communication which tends to harm an individual's reputation so as to

lower him or her in the estimation of the community or deter third persons from associating or
dealing with him or her." Moore v. Cobb-Nettleton, 889 A.2d 1262, 1267 (Pa. Super. Ct. 2004)
(quoting Elia v. Erie Ins. Exch., 634 A.2d 657, 660 (Pa. Super. Ct. 1993)). To state a claim for
defamation under Pennsylvania law, 2 Plaintiff must demonstrate the following: "(1) a defamatory
communication; (2) publication of the defamatory communication by the defendant; (3) the
communication's application to the plaintiff; (4) an understanding by the reader or listener of the
statement's defamatory meaning; and (5) an understanding by the reader or listener that the
statements refer to plaintiff." Devon Robotics v. Deviedma, No. 09-cv-3552, 2009 U.S. Dist.
LEXIS 112077, at *22-23 (E.D. Pa. Nov. 30, 2009) (citing Tucker v. Fischbein, 237 F.3d 275,
281 (3d Cir. 2001)); see also Bell v. Mayyiew State Hosp., 853 A.2d 1058, 1061 (Pa. Super. Ct.
2005).
The plaintiff has the burden of proving that the communication at issue is defamatory.
See Tucker v. Philadelphia Daily News, 848 A.2d 113, 123 (Pa. 2004) (citing 42 Pa. C.S.A §
8343(a)). "It is the function of the court to determine whether the challenged publication is
capable of a defamatory meaning. If the court determines that the challenged publication is not
capable of defamatory meaning, there is no basis for the matter to proceed to trial." Tucker, 848
A.2d at 123 (citing Thomas Merton Ctr. v. Rockwell Int'l Corp., 442 A.2d 213, 215-16 (Pa.
1981)). Conversely, "[i]fthe court determines that the statement is capable of defamatory
2

The parties agree that Pennsylvania law governs Plaintiffs defamation claim. For the
reasons stated by the parties in their briefs, the Court concurs. (Pl. Mem. of Law 5 n.3; Def.
Mem. ofLaw4 n.1.)
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meaning, it is for the jury to determine whether it was so understood by the recipient." Veno v.
Meredith, 515 A.2d 571, 575 (Pa. Super. Ct. 1986) (quoting Corabi v. Curtis Pub. Co., 273 A.2d
899,904 (Pa. 1971)).
"A communication is ... defamatory if it ascribes to another conduct, character or a
condition that would adversely affect his fitness for the proper conduct of his proper business,
trade or profession." Constantino v. Univ. of Pittsburgh, 766 A.2d 1265, 1270 (Pa. Super. Ct.
2001) (quoting Maierv. Maretti, 671 A.2d 701,704 (Pa. Super. Ct. 1995)). In determining
whether a communication is defamatory, the Court "must consider the effect the statement would
fairly produce, or the impression it would naturally engender, in the minds of the average persons
among whom it is intended to circulate." Maier, 671 A.2d at 704 (citation omitted). Judges and
juries must give the words contained in the communication "the same significance that other
people are likely to attribute to them." Id. (citing Livingston v. Murray, 612 A.2d 443 (Pa.
Super. Ct. 1992)). In addition, the "nature of the audience" to whom the communication is
directed is a "critical factor" in determining whether the communication is capable of defamatory
meaning. Maier, 671 A.2d at 704 (citations omitted). Finally, while "personal annoyance and
embarrassment ... are not the sorts of injury that will support a defamation claim," Parano v.
O'Connor, 641 A.2d 607,609 (Pa. Super. Ct. 1994) (citation omitted), "no demonstration of any
actual harm to reputation is necessary." Devon Robotics, 2009 U.S. Dist. LEXIS 112077, at *24
(citing Marcone v. Penthouse Int'l Magazine for Men, 754 F.2d 1072, 1081 (3d Cir. 1985)).
Here, the Email distributed to all ofhibu's employees stated that Plaintiff was terminated
for conduct "considered to be disloyal and against the interests of its employees and other
stakeholders." (Punjabi Aff. Ex. 1.) It went on to state that hibu was "[c]onsidering what further
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action to take, including legal proceedings." (Id.) The Court concludes that this communication
is capable of defamatory meaning, as understood by the average person reading it. Simply put,
the impression given by the challenged email is that Plaintiff engaged in some sort of unethical
conduct, possibly criminal in nature. While it will be for a jury to determine whether the email
actually constitutes defamation, at this point in the proceedings, the Court finds that it is capable
ofbeing defamatory. See Pasqualini v. Mortgageit. Inc., 498 F. Supp. 2d 659,671-72 (S.D.N.Y.
2007) (sustaining Plaintiffs defamation claim in response to a motion to dismiss where an email
sent regarding Plaintiffs termination described her as "disloyal and incompetent"); see also
Agriss v. Roadway Express. Inc., 483 A.2d 456 (Pa. Super. Ct. 1984) (finding statement
published to employee's supervisor and co-workers concerning plaintiffs opening of company
mail to be defamatory because it implied plaintiff had committed a crime).

II.

Defendant's Grounds for Dismissal
Defendant offers three arguments for why Plaintiffs defamation claim should be

dismissed: (1) that the Email was a privileged communication to hibu's employees; (2) that the
statements contained in the Email are true; and (3) that the statements contained in the Email are
permissible statements of opinion.
A.

Conditional Privilege
Defendants first argument in support of dismissal is that the Email to its

employees was a privileged communication. Under Pennsylvania law, "[l]iability for publication
of a defamatory matter may be defeated by a privilege to publish it." Valjet v. Wal-Mart, No. 061842, 2007 U.S. Dist. LEXIS 90845, at *27 (E.D. Pa. Dec. 11, 2007) (citing Momah v. Albert
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Einstein Med. Ctr., 978 F. Supp. 621, 634 (E.D. Pa. 1997)). While the burden lies with
Defendants to prove "the privileged character of the occasion on which it was published,"
Moore, 889 A.2d at 1267 (citing 42 Pa. C.S.A. § 8343(b)), it is Plaintiff's burden to plead and
prove abuse ofthat privilege. See Daywalt v. Montgomery Hosp., 573 A.2d 1116, 1119 (Pa.
Super. Ct. 1990) (citing 42 Pa. C.S.A. § 8343(b)).
"A publication is conditionally privileged if the publisher reasonably believes that the
recipient shares a common interest in the subject matter and is entitled to know." Daywalt, 573
A.2d at 1118 (citation omitted). "The conditional privilege applies to communications among
management-level personnel concerning an employee's job performance, discipline and
termination." Valiet, 2007 U.S. Dist. LEXIS 90845, at *27 (citing Furillo v. Dana Cor.p. Parish
Div., 866 F. Supp. 842, 848 (E.D. Pa. 1994)); Daywalt, 573 A.2d at 1118 ("This privilege applies
to private communications among employers regarding discharge and discipline.").
The conditional privilege can be forfeited, however, in a number of ways. Specifically,
abuse of the privilege can be demonstrated by proof that the publication was "(1) actuated by
malice or negligence; (2) made for a purpose other than that for which the privilege is given; (3)
made to a person not reasonably believed to be necessary for the accomplishment of the purpose
ofthe privilege; or (4) includes defamatory matter not reasonably believed to be necessary for the
accomplishment of the purpose of the privilege." Valjet, 2007 U.S. Dist. LEXIS 90845, at *28
(citing Elia v. Erie Ins. Exch., 634 A.2d 657,661 (Pa. Super. Ct. 1993)); see also Moore, 889
A.2d at 1269. While the application of a conditional privilege is a question of law for the Court,
whether that privilege has been abused is·a question of fact for a jury. See Valjet, 2007 U.S.
Dist. LEXIS 90845, at *29 (citing Agriss, 483 A.2d at 463).
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While it appears that Defendants' Email is, indeed, conditionally privileged, at this stage
of the proceedings, the Court finds that Plaintiff has stated enough to raise an issue as to whether
Defendants abused that privilege by publishing the Email to a115,000 hibu employees, some of
whom then republished it on the Internet. As stated supra, whether or not Defendants abused
their privilege is a question of fact, which is not something that can be resolved on a motion to
dismiss.
Accordingly, Defendants' motion to dismiss on the grounds of conditional privilege is
denied.
B.

Truth as a Defense
Defendants further argue that because the facts stated in the Email are true, there

can be no claim for defamation. Under Pennsylvania law, Defendants bear the burden of proving
the truth of the defamatory communication. See Fanelle v. LoJack Corp., 79 F. Supp. 2d 558,
562 (E.D. Pa. 2000) (citing 42 Pa. C.S.A. § 8343.)
"It is well established that truth is an absolute defense to defamation." Fanelle, 79 F.

Supp. 2d at 562 (citing Schnabel v. Meredith, 107 A.2d 860 (Pa. 1954)). However, '"the
resolution of the substantial truth of [D]efendant's [Email] is not appropriate' on a motion to
dismiss under Rule 12(b)(6) because it takes the Court beyond the pleadings." Fanelle, 79 F.
Supp. 2d at 562 (quoting RRZ Pub. Mkts .. Inc. v. The Bond Buyer, No. 94-1168, 1995 U.S. Dist.
LEXIS 604, at *8 (E.D. Pa. Jan. 17, 1995)). The question on a motion to dismiss is whether
Plaintiff has stated a claim for defamation, which the Court finds he has. "Any affirmative
defenses not appearing on the face of the complaint, including the defense of truth in a
defamation claim, are properly considered at another stage of the case." Fanelle, 79 F. Supp. 2d
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at 563.
Accordingly, Defendant's motion to dismiss is denied with respect to this ground.
C.

Permissible Statements of Opinion
Defendants' final argument in support of dismissal is that the statements

contained in the Email are opinions, which are not actionable as defamation. "Whether a
particular statement constitutes fact or opinion is a question oflaw." Veno, 515 A.2d at 92
(quoting Braig v. Field Commcn's, 456 A.2d 1366, 1372 (Pa. Super. Ct. 1983)); see also
Constantino, 766 A.2d at 1270 ("It is for the trial court to determine as a matter oflaw whether a
statement is one of fact or opinion .... ").
It is black-letter law that statements of opinion lack the capability of being defamatory.

See Kurowski v. Burroughs, 994 A.2d 611, 616 (Pa. Super. Ct. 2010). However, a statement in
the form of an opinion may be actionable if it "may reasonably be understood to imply the
existence of undisclosed defamatory facts justifying the opinion." V eno, 515 A.2d at 57 5
(citation omitted) (emphasis in original); see also Parana, 641 A.2d at 609 (same). "A simple
expression of opinion based on disclosed ... facts is not itself sufficient for an action of
defamation .... " Veno, 515 A.2d at 575 (quoting Braig, 456 A.2d at 1373).
Here, the Email announcing Plaintiffs termination stated that Plaintiff was dismissed
after a "thorough" investigation into conduct by Plaintiff that "the Company considered to be
disloyal." (Punjabi Aff. Ex. 1.) It further stated that hibu was "considering what further action to
take, including legal proceedings." (Id.) While Defendants argue that their characterizations of
the investigation as "thorough" and Plaintiffs conduct as "disloyal" are nothing more than mere
opinions, the Court disagrees. The reasonable person receiving the Email, which included every
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employee in the company, not just senior management, could interpret it as implying more than
what is simply stated. An objective reading of the Email implies that Plaintiff engaged in some
sort of unscrupulous or corrupt, and possibly illegal, behavior, and that there is more to the story
than what is being conveyed to employees. For these reasons, the Court finds as a matter oflaw
that the statements contained in the Email are not mere opinions.
Accordingly, Defendants' motion to dismiss on this ground is denied.

CONCLUSION
For the foregoing reasons, Defendants' partial motion to dismiss Plaintiffs defamation
claim is denied in its entirety.

SO ORDERED:
Dated: Central Islip, New York
February 11, 2016

Is/
LEONARD D. WEXLER
United States District Judge

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