Lemelson v. Bloomberg L.P.

• Decision Date: 30 August 2018
• Docket Number: No. 17-1620,17-1620
• Citation: 903 F.3d 19
• Parties: Rev. Fr. Emmanuel LEMELSON; Lemelson Capital Management, LLC, Plaintiffs, Appellants, v. BLOOMBERG L.P.; Matthew Robinson, as an individual and as an agent of Bloomberg L.P.; Jesse Westbrook, as an individual and as an agent of Bloomberg L.P., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

903 F.3d 19

Rev. Fr. Emmanuel LEMELSON; Lemelson Capital Management, LLC, Plaintiffs, Appellants,

v.BLOOMBERG L.P.; Matthew Robinson, as an individual and as an agent of Bloomberg L.P.; Jesse Westbrook, as an individual and as an agent of Bloomberg L.P., Defendants, Appellees.

No. 17-1620

United States Court of Appeals, First Circuit.

August 30, 2018

Thomas R. Mason and Law Offices of Thomas Mason on brief for appellants.

Robert A. Bertsche, Prince Lobel Tye LLP, Jeffrey B. Korn, Jonathan D. Waisnor, and Willkie, Farr & Gallagher LLP, on brief for appellees.

Before Torruella, Lynch, and Kayatta, Circuit Judges.

KAYATTA, Circuit Judge.

In both an online article and a subsequent TV interview, Bloomberg News reported that the Securities and Exchange Commission had opened an investigation to determine whether Emmanuel Lemelson, a priest and hedge fund manager, had intentionally published false material about public companies in whose stock he held a short position. Lemelson filed suit against Bloomberg and the article's authors, claiming that the report renders Bloomberg liable for several common-law torts, including defamation. The district court disposed of Lemelson's suit on defendants' motion to dismiss. It concluded that Lemelson's activities made him at least a limited-purpose public figure—if not a full-fledged public figure—thus requiring Lemelson to allege facts making it plausible that Bloomberg acted with actual malice in reporting about Lemelson. After concluding that Lemelson had failed to allege such facts, the district court dismissed his suit. Lemelson now appeals. For the following reasons, we affirm.

I.

Because this suit comes to us on appeal from the district court's dismissal for failure to state a claim, we draw the facts from the complaint. See González v. Vélez, 864 F.3d 45, 48 (1st Cir. 2017). In this posture, we also consider the "implications from documents attached to or fairly incorporated into the complaint," as well as "facts susceptible to judicial notice" and "concessions in plaintiff's response to the motion to dismiss." Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55-56 (1st Cir. 2012) (internal quotation marks omitted).

According to his complaint, Emmanuel Lemelson is a "world-renowned priest [and] religious leader" in the Greek Orthodox Church. In his career outside of the church, Lemelson manages a hedge fund. He has become a "financial expert, philanthropist, humanitarian, and entrepreneur." Lemelson serves as the Chief Investment Officer of Lemelson Capital, LLC—a firm that manages investment funds—which, in turn, launched and manages a fund called Amvona. Lemelson also authors a blog that discusses, among other things, religion and finance. In his capacity as a commentator, he "has been interviewed by many international media outlets."

On March 17, 2016, Matthew Robinson, a reporter for Bloomberg News, called Lemelson for an interview. Robinson related to Lemelson the outline of a story he was writing: The SEC was looking into whether Lemelson had bet against publicly traded companies then published false statements in the hope of driving down the stock price. Robinson sought Lemelson's comment. Lemelson denied that he or his firm was the subject of an SEC investigation, but did report knowing of an SEC investigation into Ligand Pharmaceuticals, a publicly traded company about which Lemelson had publicly written. As recited in the complaint, Robinson responded to Lemelson's denial by stating, "[W]ell, I'm going to write that you are being investigated anyway."

Later that day, Robinson followed up with an email. He laid out in more detail the elements of the story he planned to write and the specific allegations against Lemelson, and again asked for comment. The next morning, Robinson left a voicemail to the same effect and also informed Lemelson that Bloomberg planned to go to print imminently. Shortly thereafter, Robinson sent another email, reiterating his request that Lemelson "please get back to [him] as soon as possible." Beyond the first phone call, Lemelson does not appear to have responded to any of Robinson's communications.

On March 18, 2016, Bloomberg published the article. Titled "Hedge Fund Priest's Trades Probed by Wall Street Cop," it reported that the SEC was investigating Lemelson for stock manipulation. According to the article, the SEC was examining information Lemelson published about a variety of companies, including Ligand Pharmaceuticals, World Wrestling Entertainment, and Skechers. The SEC sought to determine whether he had run afoul of securities laws by knowingly publishing false information about companies his firm had shorted. As we have previously explained, " ‘[s]hort selling’ is a transaction in which an investor borrows shares of stock, sells them, and later buys an equivalent amount of shares to return the borrowed shares." Howard v. Antilla, 294 F.3d 244, 246 (1st Cir. 2002). Thus, the "potential for profit in short selling lies in the possibility that the stock price will decline between the time the short seller sells the borrowed stock and the time he must purchase replacement shares to repay the borrowed stock." Id. In one instance, the article reported, shares of Ligand Pharmaceuticals dropped seven percent after Lemelson posted on his blog that demand for one of Ligand's drugs was rapidly declining and that the company faced the imminent risk of declaring bankruptcy. Lemelson does not dispute that his firm held a short position in Ligand.

The article did not name a source, but attributed its information to "people with knowledge of the matter," stating that "Ryan White, an SEC spokesman, declined to comment." The article also noted that Lemelson "hasn't been accused of wrongdoing" and that the investigation was but a "preliminary step."

After publication, Lemelson requested that Bloomberg retract its story. He sent Jesse Westbrook, Robinson's editor, a press release denying the existence of an investigation or any conduct that could be the basis of that investigation. Bloomberg did not retract the article, but did update its content with a quotation from Lemelson's press release. In a TV interview on Bloomberg's news channel that aired later that day (after Lemelson's request for retraction), Robinson repeated many of the article's allegations.

Lemelson filed a four-count complaint in Massachusetts state court against Bloomberg, Robinson, and Westbrook, alleging: defamation (count I); commercial disparagement (count II); negligence (count III); and intentional interference with prospective economic advantage (count IV). Defendants removed the case to federal court on the basis of diversity jurisdiction. In his complaint, Lemelson averred that the article's primary contention—that he was the subject of an SEC investigation—was false. The SEC, Lemelson asserted, had informed his lawyers that he and Lemelson Capital had never been the subject of any SEC investigation. Lemelson claimed that Bloomberg published the article knowing its falsity, or, at least, with reckless disregard for its truth.

The district court concluded that Lemelson was required to plausibly allege actual malice because he was at least a limited-purpose public figure. Finding that he had failed to do so, the district court granted defendants' motion to dismiss counts I through III, and concluded that Lemelson failed to allege sufficient facts to make out a claim under count IV. Lemelson now appeals the dismissal of counts I, II, and IV.

II.

We review the decision to grant a Rule 12(b)(6) motion to dismiss de novo. Schatz, 669 F.3d at 55. In conducting this inquiry, "we accept as true all well-pleaded facts alleged in the complaint and draw all reasonable inferences therefrom in the pleader's favor." Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 52-53 (1st Cir. 2013) (quoting Santiago v. Puerto Rico, 655 F.3d 61, 72 (1st Cir. 2011) ). We do not credit, however, legal labels or conclusions, or statements that merely rehash elements of the cause of action. Schatz, 669 F.3d at 55. Training our attention on the non-speculative, non-conclusory facts and reasonable inferences implied by those facts, we ask whether it is plausible, as opposed to merely possible, that plaintiff's complaint narrates a claim for relief. Id.

A.

We begin with Lemelson's defamation claim. To get to the crux of this appeal, we skip over the state-law elements of defamation, and focus our attention on the issue of actual malice. See Schatz, 669 F.3d at 56 (taking a similar approach).

Over fifty years ago, the Supreme Court held that the First Amendment requires a public official advancing a defamation claim to show by clear and convincing evidence that the defendant acted with actual malice: that is, with knowledge of the statement's falsity or reckless disregard for its truth. See N.Y. Times v. Sullivan, 376 U.S. 254, 279-80, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964) ; see also Harte-Hanks Commc'ns, Inc. v. Connaughton, 491 U.S. 657, 659, 109 S.Ct. 2678, 105 L.Ed.2d 562 (1989) (noting that, to recover, the showing must be made by clear and convincing proof). In the decades since, the Court has extended the requirement of actual malice beyond general public figures, to an otherwise private figure who "voluntary injects himself or is drawn into a particular public controversy," thus becoming a limited-purpose public figure for that particular controversy. Gertz v. Robert Welch, Inc., 418 U.S. 323, 351, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). Here, the district court found that Lemelson qualified as at least a limited-purpose public figure, if not a general public figure, and therefore had to demonstrate actual malice in order to prevail in this lawsuit. Lemelson does not challenge this finding on appeal, and instead accepts that he must allege facts plausibly establishing actual malice in order for his claim to survive. We proceed accordingly.

Actual malice is a "wholly subjective" standard. Levesque v....