Agora, Inc. v. Axxess, Inc., CIV. AMD 99-3162.

• Decision Date: 28 March 2000
• Docket Number: No. CIV. AMD 99-3162.,CIV. AMD 99-3162.
• Citation: 90 F.Supp.2d 697
• Parties: AGORA, INC., Plaintiff, v. AXXESS, INC., d/b/a Financial Web. Com, Inc. and Stock Detective.Com, Inc., Defendants.
• Court: U.S. District Court — District of Maryland

90 F.Supp.2d 697

AGORA, INC., Plaintiff, v. AXXESS, INC., d/b/a Financial Web. Com, Inc. and Stock Detective.Com, Inc., Defendants.

No. CIV. AMD 99-3162.

United States District Court, D. Maryland.

March 28, 2000.

Matthew J. Turner, Baltimore, MD, for plaintiff.

Christopher Schwartz, Holland & Knight, LLP, Washington, DC, for defendant.

MEMORANDUM

DAVIS, District Judge.

I. INTRODUCTION

Plaintiff, Agora, Inc. ("Agora"), a Maryland corporation with its principal offices in Baltimore, has brought this diversity action against defendants Financial-Web.com, Inc. ("F.com"), F.com's predecessor, Axxess, Inc., and its wholly-owned subsidiary, Stock Detective.com, Inc. The gravamen of Agora's claim is its allegation that F.com, in a collection of internet web pages found on the F.com website called "StockDetective.com" ("StockDetective"), published defamatory statements of and concerning Agora by characterizing an on-line financial newsletter published by Agora, Taipaonline, as an "unpaid promoter" of the securities on which Taipaonline reports. Pending before the court is F.com's motion to dismiss for lack of personal jurisdiction and for failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(2) and 12(b)(6).

No hearing is necessary. For the reasons set forth below, I am persuaded that Agora has failed to state a claim upon which relief may be granted. Because I will dismiss Agora's defamation claim, I need not finally determine the question of whether this court may properly exercise personal jurisdiction over F.com.¹

II. MOTION TO DISMISS STANDARD

A complaint should not be dismissed for failure to state a claim under Fed.R.Civ.P. 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); accord Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343(1975); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Motions to dismiss for failure to state a claim are "granted sparingly and with caution in order to make certain that plaintiff is not improperly denied a right to have his claim adjudicated on the merits." 5A Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure, Civil 2d § 1349 at 192-93 (1990).

Rule 8(a)(2) requires only that a complaint include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). A claimant is not required to "set out in detail the facts upon which he bases his claim" so long as the claim "will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley, 355 U.S. at 47, 78 S.Ct. 99. Moreover, all well-pleaded factual allegations are assumed to be true and are viewed in the light most favorable to the plaintiff. See Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). Only when the factual allegations in support of a claim are not well-pleaded (e.g., when they are "functionally illegible" or "baldly conclusory," Shuster v. Oppelman, 962 F.Supp. 394, 395 (S.D.N.Y. 1997)), should they not be accepted as true and the claim dismissed.

III. FACTS

As set forth in the Complaint, Taipaonline is the internet version of an investment newsletter, Taipan, which Agora has published for more than ten years. It has approximately 50,000 subscribers world-wide.

Since March 1997, F.com has published investment information in the nature of editorial content, stock quotes, financial charts and securities data on publicly-traded companies for its online readers free of charge. In July 1999, F.com began furnishing analyses of the disclosure policies of various securities analysts and stock pickers which, like Agora, publish financial and investment newsletters for the benefit of the investing public.

F.com's newsletter analyses are located within the StockDetective website on a webpage denominated "The List." A hyperlink to The List on the StockDetective² page asks the reader "[i]s that a real stock analysis or a paid promotion? Find out if a favorite stock source is merely paid puffery." Clicking on The List hyperlink transports the reader to The List itself, which is a webpage entitled "The Stock Detective Directory of Financial Information Sources Containing Paid Small-Cap Company `Analysis.'"

The introduction at the top of The List describes stock promoters as a "busy group ... constantly spinning new hype for the companies they promote." It further identifies what it views as the "latest trend ... toward promoters who claim no compensation from the companies they're writing about, but allude [sic] to unfettered trading in these companies' shares." Immediately preceding the table of publications named and the StockDetective's ratings of their disclosure policies is an instruction directing the reader to "[c]heck out the key at the bottom of The List for a complete explanation of the disclosure ratings."

Immediately preceding the key to the disclosure ratings referred to at the top of The List page, and found at the bottom, is the hyperlinked instruction, "Important: Please Read Stock Detective Guide to Pseudo-Research and Phony Financial Reports-first" ("the Guide"). When the reader activates the hyperlink to the Guide, the reader is advised that the disclosure rating policies of investment newsletters are critical because, inter alia, "[i]n today's information age discerning unbiased research from paid promotion is often difficult. The distinction is important. In order to make the most informed investment decisions, individuals need to know whether the information guiding their actions consists of real reporting and analysis or mere puffery." The Guide uses the disclosure policies of six publications to illustrate the level of varying kinds of disclosure policies. The Guide makes no direct or indirect reference to Taipaonline.

Upon returning to The List page, the reader finds Taipaonline named along with approximately seventy-five other publications.³ Taipaonline is listed as an online publication. Its disclosure rating is listed as follows: "unpaid promoter." According to the disclosure rating key provided by F.com, a rating as an "unpaid promoter" signifies "`analysts' or `stock pickers' who claim they are not paid by the companies for publishing reports, but acknowledge that they do or might trade in shares of the companies they're writing about."⁴

By clicking on the word "internet" in column two, immediately adjacent to the Taipaonline name on The List, the reader activates a hyperlink which transports the reader directly from the StockDetective website to the Taipaonline website. In the "Our Policy" section of the Taipaonline website, Agora explains that

[m]embers of the organization, its officers, directors, employees, and associated individuals may have positions in investments referred herein and may add to or dispose of the same.

But while we encourage our editors and analysts to put their own money where their mouth is, the editors, staff, and associates of the Taipan Group, as well as its directors, employees and associated individuals, are prohibited from trading on this information until after the information is published—i.e., at least 3 days after our publication has been mailed to our subscribers.

Agora alleges that it does not provide "paid small caps `analysis.'" Complaint at ¶¶ 17-20. Agora further contends that it does not engage in "pseudo-research" and "mere puffery," but engages in "real reporting and analysis" Id. Finally, Agora contends that it has never received any fees from stock issuers or their representatives to recommend a stock. See id. Agora singles out for particular attention F.com's use of the term "unpaid promoter" in association with Taipaonline. See id. at ¶ 18. Nevertheless, Agora does not contend that Taipaonline's disclosure policy, which Agora acknowledges is directly accessible by a StockDetective reader by way of a hyperlink to Taipaonline's website, is inconsistent with The List's definition of an "unpaid promoter."

IV. ANALYSIS

Under Maryland law (which the parties agree is applicable in this case), in order to make out a prima facie case of defamation the plaintiff must allege that (1) the defendant made a defamatory communication, i.e., that he communicated a statement tending to expose the plaintiff to public scorn, hatred, contempt, or ridicule to a third person who reasonably recognized the statement to be defamatory; (2) that the statement was false; (3) that the defendant was at fault in communicating the statement; and (4) that the plaintiff suffered harm. See Peroutka v. Streng, 116 Md.App. 301, 311, 695 A.2d 1287, 1293 (1997) (citing Shapiro v. Massengill, 105 Md.App. 743, 772, 661 A.2d 202, cert. denied, 341 Md. 28, 668 A.2d 36 (1995)).

Settled First Amendment doctrine establishes that the burden is on the plaintiff to prove a publication is false before liability may attach under state defamation laws, at least where a media defendant is involved. See Milkovich v. Lorain Journal Co., 497 U.S. 1, 16, 19-20 & n. 6, 110 S.Ct. 2695, 111 L.Ed.2d 1 (citing Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 776-78, 106 S.Ct. 1558, 89 L.Ed.2d 783 (1986)); Biospherics, Inc. v. Forbes, Inc., 151 F.3d 180, 183 (4th Cir.1998). The parties do not dispute the truism that F.com's website is entitled to the same level of First Amendment protection to which any hard-copy financial newsletter is entitled. See Lowe v. S.E.C., 472 U.S. 181 210 & n. 58, 105 S.Ct. 2557, 86 L.Ed.2d 130 (1985) ("To the extent that the chart service contains factual information about past transactions and market trends, and the newsletters contain commentary on general market conditions, there can be no doubt about the protected character of the communications ...."); Lovell v. City of Griffin, 303...