3M Co. v. Boulter

• Decision Date: 02 February 2012
• Docket Number: Civil Action No. 11–cv–1527 (RLW).
• Citation: 842 F.Supp.2d 85,40 Media L. Rep. 1281
• Parties: 3M COMPANY, Plaintiff, v. BOULTER, et al., Defendants.
• Court: U.S. District Court — District of Columbia

842 F.Supp.2d 85

40 Media L. Rep. 1281

3M COMPANY, Plaintiff,

v.BOULTER, et al., Defendants.

Civil Action No. 11–cv–1527 (RLW).

United States District Court, District of Columbia.

Feb. 2, 2012.

David I. Ackerman, Kenneth John Pfaehler, SNR Denton U.S. LLP, Washington, DC, Alexander D. Widell, Bickel & Brewer, New York, NY, James S. Reynard, Michael J. Collins, Robert W. Gifford, Bickel & Brewer, Dallas, TX, for Plaintiff.

Raymond Gerard Mullady, Jr., Blank Rome, Washington, DC, for Defendants.

Christopher E. Duffy, Melissa B. Felder, Boies, Schiller & Flexner, LLP, Washington, DC, for Defendant Porton Capital, Inc.

MEMORANDUM OPINION

ROBERT L. WILKINS, District Judge.

Plaintiff 3M Company (“3M”) has sued Defendants Lanny J. Davis, Lanny J. Davis & Associates, PLLC, Davis–Block LLC (collectively the “Davis Defendants”), and Harvey Boulter, Porton Capital Technology Funds, Porton Capital, Inc. (collectively the “Porton Defendants”) for a number of claims, including commercial defamation, tortious interference with contract and prospective business relations, and civil conspiracy. See First Amended Complaint (“FAC”).

Before the Court are the following sets of preliminary motions: 1) Defendants' Special Motions to Dismiss under the D.C. Anti–SLAPP Act of 2010 (Dkt. Nos. 8, 55, 34 and 57); 2) 3M's Motion to Strike Defendants' Special Motions to Dismiss and Cross Motion for Discovery (Dkt. Nos. 16, 40); 3) the Davis Defendants' Rule 12(b)(6) Motions to Dismiss (Dkt. Nos. 30, 52); and 4) the Porton Defendants' Rule 12(b)(2) and 12(b)(6) Motions to Dismiss (Dkt. Nos. 31, 51). The District of Columbia (“District”) has intervened for the purpose of defending the validity of the D.C. Anti–SLAPP Act and to defend the Act's applicability in a federal court sitting in diversity. For the following reasons, Defendants' Special Motions to Dismiss are denied, 3M's Motion to Strike and Cross Motion for discovery are denied as moot, and Defendants' Rule 12 Motions to Dismiss are granted in part and denied in part.

FACTUAL SUMMARY

3M has brought claims against the Defendants for: Intimidation and Blackmail under United Kingdom (U.K.) law (Count I); Tortious Interference with Existing and Prospective Business Advantage (Count II); Tortious Interference with Contract (Count III); Commercial Defamation (Count IV); Injurious Falsehood and Business Disparagement (Count V); Breach of Fiduciary Duty (Count VI); Aiding and Abetting (Count VII); and Civil Conspiracy (Count VIII). 3M seeks compensatory and punitive damages from Defendants, as well as injunctive relief.

3M's factual allegations have been set forth fully in the First Amended Complaint, and have been repeated numerous times at length in the parties' briefs. Accordingly, the Court will not restate all the factual allegations here.

The Underlying Dispute: the BacLite Litigation in London

As part of its plan to expand into the global diagnostics market, 3M U.K. Holdings Limited (3M's wholly-owned subsidiary) acquired all of the outstanding shares of Acolyte Biomedica Limited (“Acolyte”), a company whose only commercially-available product at the time was BacLite. (FAC ¶ 42). BacLite is a test that screens for MRSA (Methicillin Resistant Staphylococcus aureus bacteria), commonly known as a “superbug.” (FAC ¶ 42). Because superbugs such as MRSA are resistant to conventional antibiotics, they are of “special concern to medical professionals.” (FAC ¶ 42).

Acolyte sold 3M on the potential that BacLite would fill a market void. (FAC ¶ 43). At the time, other screening tests for MRSA were either slower and cheaper ($2–3 per test with results in 48–72 hours) or much faster but more expensive (approximately $25 per test with results in 1–2 hours). (FAC ¶ 43). Acolyte representedto 3M that BacLite could produce results in 5 hours with a cost of $12–15 per test. (FAC ¶ 43). Acolyte also represented that BacLite was highly sensitive and accurate in clinical trials. (FAC ¶ 43).

3M entered into a Sales and Purchase Agreement (“SPA”) to purchase Acolyte. (FAC ¶ 45). Under the SPA, Acolyte's selling shareholders (the “vendors”) had the opportunity to receive conditional earn-out payments on net sales of BacLite through December 2009. (FAC ¶ 45). The vendors of Acolyte included the U.K. Ministry of Defense (“MoD”), which had been involved in the development of BacLite, and Defendant Porton Technology, an investment fund directed by Defendant Harvey Boulter.¹ (FAC ¶¶ 28–29). Boulter is also the Chief Executive Officer of Porton Capital, the investment manager of Boulter's funds. (FAC ¶ 28). According to 3M, Boulter had “developed significant relationships” within the U.K. government through his businesses. (FAC ¶ 30).

Although 3M actively marketed BacLite in many countries and began to seek regulatory approval for the product, it became apparent to 3M that BacLite performed much poorer in clinical trials than Acolyte had initially represented. (FAC ¶¶ 45–48). 3M ultimately determined that BacLite was not commercially viable for several reasons, including: 1) that BacLite was not “robust” because it was incapable of meeting its claimed performance in a real world environment; 2) that BacLite was overly complicated to use, thus increasing the chances for error in clinical environments; and 3) that the middle-market niche that 3M had hoped to fill with BacLite had “unexpectedly narrowed.” (FAC ¶ 49).

Having determined that BacLite would not be commercially viable in the U.S., Canada or Australia, 3M sought the vendors' consent (as required by the SPA) in July 2008 to stop marketing BacLite. (FAC ¶¶ 49–52). Under the SPA, the vendors could not unreasonably withhold such consent. (FAC ¶ 52). 3M offered the vendors $1.07 million, which was the amount that 3M had expected to receive from BacLite sales through December 2009. (FAC ¶ 52). The Boulter Defendants, however, were not satisfied and instead sought to “wring” tens of millions of dollars from 3M—an amount “much greater than that to which they were entitled.” (FAC ¶ 53). According to 3M, it was at approximately this time that Defendants began their “campaign of harassment and intimidation.” (FAC ¶ 53).

3M's Allegations of Intimidation, Coercion and Defamation

3M alleges that the Porton Defendants first sought to threaten 3M's CEO George Buckley (“Buckley”). (FAC ¶¶ 54–56). Boulter's friend informed Buckley via e-mail that he and Boulter had influence over several groups of 3M investors who owned material positions of 3M stock, that Boulter and his friend had informed the investors of 3M's position regarding Acolyte, and that the investors were threatening to sell their entire positions. (FAC ¶ 54). Through these e-mails, Boulter “threatened 3M with a crippling sell-off of 3M's stock, and commensurate damage to 3M's value” if 3M did not accede to his demands. (FAC ¶ 57). 3M does not allege that it or Buckley capitulated to those demands or that those investors sold their positions.

In December 2008, certain vendors, including the Porton Defendants, ultimately sued 3M in the U.K. High Court in London for breach of the SPA (the “BacLite Litigation”). (FAC ¶ 59). Although 3M does not specify this in its Complaint, the Court takes judicial notice of the fact that, besides the Porton Defendants, the other claimant in the BacLite Litigation was Ploughshare Innovations Limited, “an investment arm of the UK Ministry of Defence” and a subsequent shareholder in Acolyte. (Dkt. No. 28–1 at ¶ 8). Among other things, the claimants alleged that 3M breached the SPA because it failed to market BacLite actively and obtain regulatory approval in the United States. (FAC ¶ 59). Those claimants “repeatedly demanded” that 3M pay them nearly $66 million, the maximum potential amount of earn out payments under the SPA. (FAC ¶¶ 58–59).

3M alleges that, leading up to the U.K. trial in 2011, the Porton Defendants hired Washington, D.C. lawyer Lanny J. Davis and began a scheme to extract $30 million from 3M in two ways: 1) by launching “a comprehensive, international, and unrelenting bombardment of sensational and false accusations against 3M in the global media”; and 2) by attempting “to leverage access to the U.K. MoD.” (FAC ¶¶ 60–63). 3M claims that Davis became the “mastermind[ ][of] Defendants' scheme against 3M” and was the “spider in the web” of Defendants' alleged conspiracy.² (FAC ¶¶ 17, 61–62).

First, Davis began a “defamatory media blitz” against 3M. (FAC ¶¶ 64–65). That campaign focused on 3M's decision to withdraw its efforts to market and obtain regulatory approval for BacLite. (FAC ¶¶ 66–79). Some of the alleged defamatory conduct included:

• Publishing press releases which claimed that 3M had dropped BacLite out of “bad faith” and had dealt dishonestly with the FDA. (FAC ¶¶ 66, 74).

• Filing a “sham's citizen's petition” which Davis submitted to the FDA on behalf of the Porton Defendants. (FAC ¶¶ 66, 78–79). In the petition, Defendants request that the FDA investigate 3M and hold an evidentiary hearing to determine, among other things, whether 3M intentionally botched the BacLite clinical trial in order to promote 3M's own MRSA detection product. ( Id.).

• Making statements accusing 3M and Buckley of being responsible for the deaths of MRSA victims, including statements during an “international press conference” at which Davis claimed that “thousands and thousands and thousands of people who died [from MRSA] might be alive today had there been a BacLite....” (FAC ¶ 70).

• Davis' coordination of “fake public demonstrations” attended by “pretend protestors” purportedly affected by 3M's decision not to market BacLite. (FAC ¶¶ 66, 76).

• Davis' creation of a web site called www. MRSAINJUSTICE. com, in which Defendants republished false and defamatory allegations against 3M. (FAC ¶ 77).

3M alleges that Davis made such statements intentionally, maliciously, and with knowledge that the statements were false when they were made. (FAC ¶¶ 70–71, 75)....