Computerized Thermal v. Bloomberg, L.P., No. 01-4140.

• Decision Date: 26 November 2002
• Docket Number: No. 01-4140.
• Citation: 312 F.3d 1292
• Parties: COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation, Plaintiff-Appellant, v. BLOOMBERG, L.P., a Delaware Limited Partnership, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

312 F.3d 1292

COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation, Plaintiff-Appellant, v. BLOOMBERG, L.P., a Delaware Limited Partnership, Defendant-Appellee.

No. 01-4140.

United States Court of Appeals, Tenth Circuit.

November 26, 2002.

COPYRIGHT MATERIAL OMITTED

Carl F. Schoeppl of Schoeppl, Burke & Kayton, P.A., Boca Raton, FL, (Andrew H. Kayton and Stuart A. Davidson of Schoeppl, Burke & Kayton, P.A., Boca Raton, FL; Robert R. Wallace of Plant, Wallace, Christensen & Kanell, Salt Lake City, UT, with him on the briefs), for Plaintiff-Appellant.

Randy L. Dryer of Parsons, Behle & Latimer, Salt Lake City, UT, (Richard L. Klein, Thomas H. Golden and Charles J. Glasser, Jr., of Willkie Farr, & Gallagher, New York, NY, with him on the brief), for Defendant-Appellee.

Before HARTZ, ALDISERT^* and PORFILIO, Circuit Judges.

JOHN C. PORFILIO, Senior Circuit Judge.

To propel a breast imaging technology from its development stage to the marketplace, Computerized Thermal Imaging, Inc. (CTI) sold stock in the venture, applied to the NASDAQ Stock Exchange for a national listing, and sought FDA pre-market approval. Bloomberg News reported the activity, fomenting the underlying lawsuit for libel. CTI now appeals the dismissal of that action, contending the district court erroneously interpreted Utah law and oppressively denied its motion to amend the pleadings. Computerized Thermal Imaging v. Bloomberg L.P., No. 1:00CV98K, 2001 WL 670927 (D.Utah March 26, 2001) (CTI). In spite of the absence of a clear line of Utah substantive law, the district court did not err in concluding CTI failed to state a claim for libel per se or libel per quod, the latter defeated by the absence of a proper plea for special damages which was not achieved in its motion for relief from judgment. We affirm.

I. Background

CTI, a Nevada corporation, is a development stage company, which promotes business ventures by selling stock to raise capital.¹ One of its products in development is a Breast Imaging System (the Project), which promised to provide higher resolution mammography to detect and treat breast cancer.

To fund the Project, CTI initiated a private placement of securities in December 1999, offering subscribers units of 13,123 shares of common stock and 13,123 warrants at a price determined on November 11, 1999. The private placement of these restricted securities included a typical discount of the market price of the stock at the commencement of the public offering as an incentive for investors, who would then bear the risk of future price volatility. CTI extended the offering until February 29, 2000, to generate more capital.

Representing it had raised $39.5 million, CTI then applied for a listing on NASDAQ and issued a press release. To shareholders meeting in June, it announced that NASDAQ approved the listing and the FDA had extended pre-market approval of the Project, driving its stock price up to $10.80 per share.

The day after the shareholders' meeting, however, NASDAQ inquired about an outstanding $25 million default judgment for racketeering and fraud against CTI's CEO, David Johnston, prompting the company to issue another press release to report NASDAQ had placed the listing on hold to investigate the matter. The following day, David Evans, a reporter for Bloomberg News, headlined his story, Computerized Thermal Raises Capital at 72% Discount to Market, and wrote that CTI "sold 11.1 million shares of its stock at an 80 percent discount to its market price in March, according to a filing it made with regulators last week." David Evans, Computerized Thermal Raises Capital at 72% Discount to Market, Bloomberg News, June 29, 2000. Mr. Evans proceeded to describe the private placement, quoting CTI's CFO, "it would have been nice for us to go out at 7 or 8 bucks" a share in the sale, instead of $2.81 but "that's not what happened." Id. John Coffee, a securities professor at Columbia Law School, commented for the piece, that "[r]aising capital from investors at such a large discount ... is a red flag.... The market price is well above what more informed parties think it should be." Id. Adding that "Computerized Thermal needs the money to fund money-losing operations," and that it had "struggled to sell its $500,000 breast imaging systems," selling only one to a hospital in Thailand in 1996, Mr. Evans included statements from a radiology professor and other doctors who questioned the accuracy and efficacy of the new technology. Id.

CTI demanded a retraction. Bloomberg News then published a second, substantially similar article in July, Computerized Thermal Imaging Raises Money at Discounted Price (Correct), Bloomberg News, July 18, 2000, in which Mr. Evans principally corrected the 80 percent discount rate to read "72 percent discount" to the market price and explained that CTI extended the offering because it had not "received the minimum amount it said it needed." Both Articles (the Articles) were available on the Internet.

A month later, CTI filed suit alleging the Articles "instantaneously published over BLOOMBERG's website" contained "malicious defamation" tending to impeach the honesty, integrity, virtue or reputation of its business, and, thus, constituted libel under Utah Code Ann. § 45-2-2. The Articles, CTI alleged, led to the loss of capitalization of the Project, cancellation of ongoing efforts to expand its business into Central and South America (CTII de Mexico), disruption of its NASDAQ listing, and derailing of FDA approval. CTI sought special damages in excess of $100 million as well as punitive damages.

Bloomberg moved to dismiss the complaint, countering that the alleged defamatory statements did not constitute libel per se or libel per quod under Utah law and, in any event, were protected expressions of opinion and non-actionable fair comment under Utah and federal law. The district court agreed, focusing its analysis on five alleged defamatory statements in the Articles,² which, it concluded, were not libelous per se under Baum v. Gillman, 667 P.2d 41, 43 (Utah 1983), an action for slander; nor libelous per quod, despite the falsity of two of the statements, because CTI neither properly pled nor proved special damages. The latter conclusion rested on Allred v. Cook, 590 P.2d 318 (Utah 1979), an action for slander, and Cox v. Hatch, 761 P.2d 556, 561 (Utah 1988), an action for libel.

II. Utah Defamation Law

Seeking de novo review of the district court's interpretation and application of Utah law, Fields v. Farmers Ins. Co., 18 F.3d 831, 833 (10th Cir.1994),³ CTI contends the court erred when it collapsed the separate causes of action for slander and libel into a single, undifferentiated claim and, then, dismissed its complaint solely alleging libel. To arrest the growth of this hydra, CTI offers us Seegmiller v. KSL, Inc., which, it insists, "expressly endorsed" the very distinctions between libel per se and slander per se it advances in this appeal. 626 P.2d 968 (Utah 1981).

Seegmiller, however, was an action to redress the alleged defamatory words spoken by an investigative television reporter, that is, slander, in which the Utah Supreme Court had to decide "the degree of fault which a `private figure' must prove in a defamation action against a media defendant and whether the defendant is entitled to the benefit of a conditional privilege permitting comment on a matter of public interest." Id. at 969. In that endeavor, the court quoted Utah Code Ann. § 45-2-10, the legislative directive for privileged broadcasts.<sup>4</sup> Id. at 977 n. 7. In the same footnote, the Seegmiller court wondered "what the Legislature had in mind when it used the words `libelous, slanderous or defamatory per se,'" and cited William Prosser, Law of Torts § 112 (4th ed. 1971), and a Colorado case to support its reminder that "[t]he concepts of slander per se and libel per se are distinct and the term `per se' has different meanings depending on context." Id. Thus, although Seegmiller has since provided the decisional ground for cases involving privilege, its utility here is marginal. See, e.g., Van Dyke v. KUTV, 663 P.2d 52, 56 (Utah 1983) (college official investigated for sexual harassment occupied a position "that invited public scrutiny," shielding the reporter's comments with a qualified privilege).

Instead, this case easily aligns with the progenitor of Utah's common law of libel, Nichols v. Daily Reporter Co., 30 Utah 74 83 P. 573 (1905).⁵ There, Mr. Nichols, a candidate for office in the Salt Lake City Typographical Union and delegate to the national convention, sued the Daily Reporter for printing and publishing a card which stated, on one side, "Vote for Honest Jake Bosch for Delegate," and, on the other, "Explanatory Mr. C.A. Nichols owes the Daily Reporter Co. a balance of $34.25 for printing done in 1894. Draw your own conclusions and vote for Mr. Nichols, if you think he is not able to pay this debt." Id. at 573. The meaning of these words, Mr. Nichols alleged, was clear: unable to pay his debts, unworthy of credit, this typographer was not to be trusted; all statements of "contempt and ridicule" which damaged him "in his reputation, good repute, and credit." Id. Because Mr. Nichols claimed the publication was false and defamatory on its face, he did not allege special damages.

Writing on a clean slate,⁶ the Utah Supreme Court stated:

It, of course, is conceded that written derogatory or disparaging words which impute to a person the commission of a crime, or degradation of character, or which have a tendency to injuriously affect him in his office or trust, profession, trade, calling or business, or which tend to degrade him in society, or expose him to public hatred, contempt, or ridicule, are libelous and actionable. It also is the well-recognized rule that when the words are libelous per se, it is not necessary to allege or prove special damages, for malice and damage are implied; but where they are...