Biospherics, Inc. v. Forbes, Inc., Civ.A. DKC 97-2320.

• Decision Date: 16 December 1997
• Docket Number: No. Civ.A. DKC 97-2320.,Civ.A. DKC 97-2320.
• Citation: 989 F.Supp. 748
• Parties: BIOSPHERICS, INC. v. FORBES, INC., et al.
• Court: U.S. District Court — District of Maryland

989 F.Supp. 748

BIOSPHERICS, INC. v. FORBES, INC., et al.

No. Civ.A. DKC 97-2320.

United States District Court, D. Maryland.

December 16, 1997.

David J. McManus, Jr., Baxter, Baker, Sidle & Conn, P.A., David Bryan Applefeld, Smith, Somerville and Case, Baltimore, MD, Mark C. Harwell, Morris & Campbell, PH, Houston, TX, for Biospherics Incorporated, plaintiff.

MEMORANDUM OPINION

CHASANOW, District Judge.

This is a diversity action alleging libel. Plaintiff ("Biospherics") is a publicly held Delaware corporation with its principal place of business in Beltsville, Maryland. The stock of the company is traded on NASDAQ. Defendants are a New York corporation which publishes a national business magazine ("Forbes") and one of its writers, Caroline Waxler ("Ms.Waxler").

The gravamen of Biospherics' Complaint is that Defendants published false statements which caused a diminution in the "value" of Biospherics stock.¹ Defendants have moved to dismiss the Complaint pursuant to FED. R.CIV.P. 12(b)(6). The motion has been fully briefed and no hearing is deemed necessary. Local Rule 105.6.

I. Standard of Review

A motion to dismiss pursuant to FED. R.CIV.P. 12(b)(6) ought not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). On a motion to dismiss, the court must consider wellpled allegations in a complaint as true. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 1848-49, 23 L.Ed.2d 404 (1969). Allegations are to be construed in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

FED.R.CIV.P. 12(b) also provides that when "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Generally, then, when documents which were not appended to the Complaint are submitted to the court in connection with a Motion to Dismiss pursuant to Rule 12(b)(6), those documents either are not considered or the motion is converted to a summary judgment motion with proper notice to the parties. An exception to the general rule is made for documents which are referred to in the Complaint and upon which Plaintiff relies in bringing the action. See, Cortec Industries, Inc. v. Sum Holding, L.P., 949 F.2d 42, 46-48 (2d Cir.1991) cert. denied, 503 U.S. 960, 112 S.Ct. 1561, 118 L.Ed.2d 208 (1992). That exception has been recognized with favor and relied upon in this circuit and district. See, New Beckley Min. Corp. v. International Union, United Mine Workers of America, 18 F.3d 1161, 1164 (4th Cir.1994); In re Medimmune, Inc. Securities Litigation, 873 F.Supp. 953, 957 (D.Md.1995). Defendants have appended to their Motion to Dismiss a photocopy of the page from the magazine which contains the purportedly offending article. Biospherics raises no objection to the inclusion of the photocopy with Defendants' motion and, in fact, has appended to its response two exhibits, one of which is a retyped version of the same article. Accordingly, the court will consider the exhibits in ruling on the Motion to Dismiss.

II. Background

Biospherics states that it obtained a patent in 1988 on the use of a naturally occurring sugar, D-tagatose, as a low-calorie, nonfattening sweetener. It is sometimes referred to as "Sugaree." The company has been developing the product for use as a food additive since obtaining the patent. (Complaint, para.10-11).

Forbes, in its January 13, 1997 issue, published an article in "Money & Investments" section on a page captioned "Streetwalker." The page contains three short pieces regarding investment in the stock of three companies, one of which was Biospherics. The Biospherics article bears a downward arrow in the initial paragraph and the other two articles bear upward arrows. The Biospherics article carries the one-line headline "Sweet-talkin' guys". (Paper No. 7, Exhib. A).

Plaintiff claims that the following statements in the article are false and defamatory:

(a) "Sugaree isn't up to the company's claims",

(b) "the company's been developing [Sugaree] for 15 years", and

(c) "Biospherics shares are easy to borrow; the few independent analysts who follow the company think its stock is worth $2 a share on current business."

(Complaint, para.12-13).

III. Analysis

Defendants claim that neither the column as a whole, nor any of the statements considered separately, is susceptible of defamatory meaning and thus the complaint fails to state a claim. They also assert that the statements are, in any event, not provably false and thus not actionable. The court finds that the complained of language in the Forbes publication, taken in proper context, might be construed as defamatory, but nevertheless is constitutionally protected.² Accordingly, for the reasons set forth below, Defendants' Motion to Dismiss will be granted by separate order.

The court in Golden North Airways v. Tanana Publishing Company, 218 F.2d 612, 624 (9th Cir.1954) (citations omitted), aptly described the difference between individuals and corporations when it comes to defamatory meaning:

It is to be borne in mind that we are dealing with a corporation and not an individual. While it is true that a corporation may be libeled, by the very nature of things, what is libel against an individual may not necessarily be a libel against a corporation or an unincorporated company. Since a corporation has no character to be affected by libel and no feelings to be injured, an article to be libelous as to a corporation must have a tendency to directly affect its credit or property or cause it pecuniary injury. The matter must, in the language of the Restatement, tend `to prejudice it in the conduct of its trade or business or to deter third persons from dealing with it.'

The Forbes column meets that test.

Defendants' second argument, however, is substantial and requires dismissal of the complaint. The Supreme Court uttered the dictum that statements of opinion are protected by the First Amendment in Gertz v. Welch, 418 U.S. 323, 339-49, 94 S.Ct. 2997, 3006-11, 41 L.Ed.2d 789 (1974):

Under the First Amendment there is no such thing as a false idea. However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas. But there is no constitutional value in false statements of fact.

Relying upon Gertz and Ollman v. Evans, 750 F.2d 970, 979-84 (D.C.Cir.1984), cert. denied, 471 U.S. 1127, 105 S.Ct. 2662, 86 L.Ed.2d 278 (1985), this circuit, in Potomac Valve & Fitting, Inc. v. Crawford Fitting Co., 829 F.2d 1280 (4th Cir.1987), fashioned a test whereby "opinion" could be differentiated from "fact."³ The court wrote that the "minimum threshold issue" to be addressed in this determination is whether the statement in question is verifiable. "If the defendant's words cannot be described as either true or false, they are not actionable." Id. at 1288. The court then wrote of the second step in its test:

Even when a statement is subject to verification, however, it may still be protected if it can best be understood from its language and context to represent the personal view of the author or speaker who made it. Thus we reject the suggestion ... that any "question of fact" which can be decided by a jury can be actionable in defamation.

...

We hold that a verifiable statement ... nevertheless qualifies as an "Opinion" if it is clear from any of the three remaining Ollman factors, individually or in conjunction, that a reasonable reader or listener would recognize its weakly substantiated or subjective character — and discount it accordingly.

Id. The three remaining Ollman factors to be considered, once a statement is determined to be verifiable, are the author's choice of words; the context of the challenged statement within the writing as a whole; and the "broader social context into which the statement fits." Id. at 1287-88.

The Supreme Court in Milkovich v. Lorain Journal Co., 497 U.S. 1, 19-20, 110 S.Ct. 2695, 2705-2706, 111 L.Ed.2d 1 (1990), squarely disavowed an intent to create "an artificial dichotomy between `opinion' and fact" in which statements of opinion were absolutely protected by the First Amendment from liability under state defamation law. The Court made clear, nevertheless, that protection is extended to media defendants for statements on matters of public concern which are not provable as false or cannot be reasonably interpreted as stating fact. However, even statements of "opinion" move outside the protection of the constitutional shield when they imply the existence of false or defamatory facts. Id. at 19-20, 110 S.Ct. at 2705-06. Despite Milkovich, the parties agree that the test set forth in the Potomac Valve for separating protected from unprotected utterances retains its vitality. See, Henry v. National Ass'n of Air Traffic Specialists, Inc., 836 F.Supp. 1204 (D.Md. 1993), aff'd, 34 F.3d 1066 (4th Cir.1994); Chapin v. Greve, 787 F.Supp. 557 (E.D.Va. 1992), aff'd sub nom. Chapin v. Knight-Ridder, Inc., 993 F.2d 1087 (4th Cir.1993).

Defendants argue that none of the three statements is provably false, but all rather are subjective statements of opinion, opinions based on disclosed facts, or substantially true. Further, they argue that the context and the writer's choice of words makes the column protected.

The first alleged libel, "Sugaree isn't up to the company's claims," is part of the sentence:

Investors will sour on Biospherics when they realize that Sugaree isn't up to the company's claims.

The sentence is followed by an explanation:

Even if the FDA okays BINC to produce Sugaree...