Designer Skin LLC v. S & L Vitamins, Inc., et al.
Best Western International Inc. v. James Furber, et al.
No. CV-06-1537-PHX-DGC (D. Az., September 5, 2008)
Court in large part grants defendants’ motion for summary judgment, and dismisses claims arising out of defendants’ operation of a website on which third parties, and defendants themselves, posted a number of statements critical of plaintiff Best Western International Inc. Left unresolved by the Court’s motion were plaintiff’s claims that a number of additional posts authored by defendants were in fact defamatory.
Best Western is a non-profit member corporation, which assists its members in running their hotels. Defendants are members of Best Western who operate hotels, their spouses, and an individual who assisted in the creation of the website at issue. The member defendants are bound by the terms of membership agreements with plaintiff.
The Court held that the immunity granted defendants under the Communications Decency Act barred plaintiff from seeking to hold them liable for defamatory posts authored by third parties that appeared on defendants’ website. Defamation claims arising out of 50 posts defendants themselves authored failed because plaintiff did not present sufficient evidence to establish that defendants acted with the requisite degree of fault necessary to sustain a defamation claim. Thus, plaintiff failed to establish that defendants acted with either actual malice or negligence in making these statements, or with knowledge of their alleged falsity. In reaching this result the Court noted that possessing ill will toward plaintiff was insufficient to establish ether that defendants acted with the requisite degree of fault, or that they were guilty of defaming plaintiff.
The Court also rejected tortuous interference with contract or prospective advantage claims arising out of the posting on defendants’ site of statements urging plaintiff’s members to switch to a competitor’s organization. The Court held that plaintiff failed to prove either that such statements caused it any injury, or that defendants or the competitor acted improperly in making these posts. In reaching this result, the Court noted that plaintiff’s competitor is free to make posts that promote itself and its own economic interests.
Finally, the Court rejected various breach of contract claims advanced by plaintiff, asserting that defendants breached the parties’ membership agreement by making public confidential information, or failing to meet the membership agreement’s requirement to use their best efforts to maintain positive relationships with customers. As to the former, the Court held there were no such prohibitions in the parties’ agreement that bound defendants. As to the later, the Court held that the prohibitions applied to other aspects of defendants’ business, with which obligations defendants complied.
The Court did allow plaintiff Best Western to pursue breach of contract claims arising out of the use by the member defendants of Best Western’s trademark on the website at issue, which use purportedly violated the parties’ membership agreement.
Defendants Operate A Website On Which They And Others Post Statements Critical of Best Western
Best Western is a not-for-profit membership corporation which assists its members in running hotels. Defendant James Dial and Loren Unruh are members of Best Western who are bound by a membership agreement between the parties. Defendants Nidrah Dial and Gayle Unruh are their spouses. Also joined as a defendant was James Furber.
Plaintiff Best Western alleged that the Dial defendants and defendant Furber are responsible for the creation of a website known as Freewrites.net. Plaintiff further alleged that the Dial defendants and Defendant Loren Unruh posted in excess of 400 defamatory statements on that website. Also found on that website were a number of allegedly defamatory posts authored by third parties.
Upset with this conduct, plaintiff commenced suit. Initially, the suit was brought against John Doe defendants. When plaintiff discovered the identity of the defendants, it amended its complaint to name them as parties in lieu of the John Does. The complaint charged the defendants with defamation, tortuous interference with contract and prospective advantage, and breach of contract.
Defendants moved for summary judgment, seeking dismissal of a number of the claims asserted.
Communications Decency Act Shields Defendants From Liability For Posts Of Others
The Court held that the immunity granted defendants by operation of the Communications Decency Act (“CDA”) barred plaintiff from pursuing defamation claims arising out of the allegedly defamatory posts authored by third parties. The Court held that such immunity barred suit even if the defendants encouraged third parties to post such defamatory content. Said the Court:
The Court could not, however, determine if the immunity afforded by the CDA barred plaintiff from pursuing claims against Mrs. Dial as a result of her involvement in posting statements authored by her husband to the website. The Court, on the record before it, could not determine if Mrs. Dial was a mere scribner for her husband, or was actually involved in helping him decide if his allegedly defamatory statements should be posted. If these statements were a collaborative effort between the Dials, no immunity would be afforded by the CDA.
Absence Of Fault Bars Defamation Claims
The Court also granted so much of defendants’ motion which sought dismissal of defamation claims arising out of 50 statements posted on the Freewrites.net website. To sustain a defamation claim, the plaintiff must establish that defendant acted with the requisite degree of fault in making the statements at issue. The level of fault required can vary, depending, inter alia, on whether the plaintiff is viewed as a limited public figure. If plaintiff is a limited public figure, the plaintiff must show that defendant acted with ‘actual malice’ in making the allegedly defamatory statements. “Proof of actual malice requires clear and convincing evidence that the defendants published either with knowledge that the defamatory statements were false or with reckless disregard for whether the statements were true or false.” At a minimum, the plaintiff must show that defendants made the challenged statements negligently. “In the defamation context, negligence is the failure to act ‘reasonably in attempting to discovery the truth or falsity or the defamatory character of the publication.”
The Court held that whatever the applicable standard – be it actual malice or negligence – plaintiff failed to sustain its burden and its defamation claims accordingly failed. As to actual malice, the Court held that plaintiff failed to submit any evidence that demonstrated that defendants made the statements at issue either knowing they were false or with reckless disregard for their falsity. In this regard, the Court held that evidence that the defendants disliked one of plaintiff’s board members was insufficient to meet this burden. Said the Court:
Equally absent, held the Court, was any evidence that defendants acted negligently when making the allegedly defamatory statements. The Court accordingly granted so much of defendants’ motion which sought dismissal of the defamation claims arising out of the 50 statements at issue.
Common Interest Privilege
In reaching this result, the Court held that it could not determine, on the record before it, whether defendants were protected from suit by the common interest privilege. The common interest privilege “applies where an occasion arises in which ‘one is entitled to learn from his associates what is being done in a matter in which he has an interest in common with them.” In the context of a membership corporation such as the plaintiff, the privilege protects “communications among the members concerning the qualifications of the officers and members and their participation in the activities of the corporation.” The privilege can be lost, however, if the statements are published excessively to unprivileged recipients. Said the Court:
The privilege may be abused and its protection lost through excessive publication of the defamatory material. Abuse through excessive publication results from publication to an unprivileged recipient not reasonably necessary to protect the interest upon which the privilege is grounded.
The Court could not determine on the record before it whether the privilege was lost by excessive publication of the statements at issue on the Freewrites.net website. For at least six months, entry to this site was not restricted by password, thereby allowing both the public and interested Best Western members to access the statements at issue. If, as a result, the statements at issue were published to unprivileged recipients, the privilege would be lost.
Tortous Interference Claims Fail Due To Lack Of Improper Conduct
The Court also granted so much of defendants’ motion for summary judgment which sought dismissal of plaintiff’s tortuous interference with contract and business relations claims. Plaintiff grounded this claim on posts made on the Freewrites.net website which encouraged members to leave Best Western and join a competitor. Plaintiff alleged that such posts caused members to leave, and join this competitor organization.
According to the Court “to establish tortuous interference, [Best Western] must show a valid contractual relationship or business expectancy, knowledge of the relationship or expectancy on the part of the Defendants, intentional and improper interference with the relationship or expectancy causing a termination of the relationship or expectancy, and resulting damages.” The Court held that the publication by a competitor of statements encouraging Best Western’s members to join the competitor did not constitute the requisite improper interference with the relationship between those members and Best Western, and hence, did not give rise to a tortuous interference claim. Said the Court:
Breach of Contract Claims Dismissed
Finally, the Court dismissed various breach of contract claims advanced by plaintiff. Plaintiff claimed that defendants breached confidentiality provisions contained in the Membership agreement by disclosing what transpired at Best Western executive sessions. These claims failed because the agreement only obligated board members, and not defendants, to keep such material confidential. The Court also rejected plaintiff’s claim that, by making negative posts about Best Western, defendants breached their obligation under the Membership Agreement to use their best efforts to maintain positive relationships with Best Western Customers. Again, the Court found the agreement contained no such provisions. Instead, it obligated defendants to permit inspection of their hotels, and provide high quality service, obligations plaintiff failed to demonstrate defendants did not meet.
The Court did permit Best Western to proceed with breach of contract claims arising out of provisions of the Membership Agreement governing defendants’ use of plaintiff’s trademarks. The Court held that, on the record before it, it could not determine whether defendants’ use of plaintiff’s trademark on the Freewrites.net website violated such provisions of the Membership Agreement.