Med. Marijuana, Inc. v. ProjectCBD.com

• Decision Date: 21 November 2016
• Docket Number: D068523
• Citation: 6 Cal.App.5th 602,212 Cal.Rptr.3d 45
• Court: California Court of Appeals Court of Appeals
• Parties: MEDICAL MARIJUANA, INC., et al., Plaintiffs and Respondents, v. PROJECTCBD.COM et al., Defendants and Appellants.

6 Cal.App.5th 602

212 Cal.Rptr.3d 45

MEDICAL MARIJUANA, INC., et al., Plaintiffs and Respondents,

v.PROJECTCBD.COM et al., Defendants and Appellants.

D068523

Court of Appeal, Fourth District, Division 1, California.

Filed November 21, 2016

As Modified on Denial of Rehearing December 19, 2016

Greenberg Traurig and Tyler R. Andrews, Irvine, for Defendants and Appellants.

Procopio, Cory, Hargreaves & Savitch, Kendra J. Hall, San Diego; Phillip E. Koehnke and Phillip E. Koehnke for Plaintiffs and Respondents.

AARON, J.

I. INTRODUCTION

Defendants ProjectCBD.com (Project CBD), Martin Lee, and Aaron Cantu (jointly "the Project CBD defendants") appeal from the trial court's order denying their special motion to strike¹ counts 1 and 3, asserting causes of action for libel and false light, in the first amended complaint filed by plaintiffs Medical Marijuana, Inc. (MMI) and HempMeds PX, LLC (HempMeds) (jointly "the plaintiffs").

On appeal, the Project CBD defendants contend that the trial court incorrectly determined that the plaintiffs demonstrated a probability of prevailing on counts 1 and 3 against the Project CBD defendants. The Project CBD defendants also claim that the trial court erred in concluding that the plaintiffs are not limited public figures, meaning that the plaintiffs would not have to demonstrate that the Project CBD defendants acted with actual malice in publishing an article about the plaintiffs, and/or that the court erred in concluding in the alternative that the plaintiffs demonstrated that the Project CBD defendants acted with actual malice in publishing the article.

We conclude that the trial court's ruling with respect to the Project CBD defendants' anti-SLAPP motion directed at counts 1 and 3 was correct, albeit on grounds different from those relied on by the trial court. We therefore affirm the court's order and remand the matter for further proceedings.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual background²

1. The parties

Plaintiff MMI holds investments in numerous industrial hemp businesses, including plaintiff HempMeds. HempMeds manufactures and sells RSHO, a product containing cannabidiol (CBD) derived from the industrial hemp plant. MMI also holds interests in KannaLife Sciences, Inc.

According to the first amended complaint, Jason Cranford, another defendant, resigned from KannaLife's Board of Directors and then began competing with MMI and HempMeds by selling CBD products through his Colorado medical marijuana dispensary, Rifle Mountain, LLC (Rifle Mountain), which is also named as a defendant in the case.

Defendant Project CBD is a California nonprofit organization that identifies itself as an organization dedicated to promoting and publicizing research regarding CBD and other components of the cannabis plant. Defendant Martin Lee is Project CBD's founder and director. According to Lee, "Project CBD does not solicit customers anywhere. It sells no products whatsoever." However, a witness declaration presented with respect to the Project CBD defendants' anti-SLAPP motion states that the witness observed Lee promoting and selling a competing CBD product called " ‘Care By Design.’ " On this basis, the plaintiffs assert that "Lee is in the industrial hemp business and uses the auspices of his purported non-profit, Project CBD, for promoting his products in competition with MMI."

Defendant Aaron Cantu wrote an article about MMI, HempMeds, Kannaway and the RSHO product. The article, originally published on the Project CBD website on October 14, 2014, and "[u]pdated" on November 4, 2014, is titled " ‘Hemp Oil Hustlers-A Project CBD Special Report on Medical Marijuana Inc., HempMeds & Kannaway’ " (the Hemp Oil Hustlers Article). Also named as defendants in the case are CannLabs, Inc. (CannLabs); Genifer Murray, identified as the chief executive officer of CannLabs; and Stewart Environmental Consultants, LLC (Stewart Labs).

2. The factual allegations in the operative pleading giving rise to the lawsuit

According to the operative pleading, after Cranford resigned from the board of KannaLife, Cranford, through Rifle Mountain, began to sell CBD products in direct competition with RSHO. On or around April 26, 2014, Cranford posted on Facebook that he intended to have RSHO tested at a diagnostic lab. Cranford also allegedly posted that a child had become sickened after having a bad reaction to RSHO.

Rather than have the RSHO sample tested at the facility Cranford identified in his April 26, 2014 Facebook posting, Cranford took the sample to Stewart Labs to be tested for "volatile organic compounds (VOC) and heavy metal concentrations."

According to the pleading, in late May 2014, Stewart Labs released to Cranford a "preliminary report" regarding the RSHO sample. The plaintiffs allege that after receiving the preliminary report, Cranford immediately released copies of " ‘preliminary’ test results" on another individual's Facebook page, and posted on his own Facebook page information regarding where the results had been posted.

The plaintiffs further allege that on May 8, 2014, Murray "posted false statements about Plaintiffs and its RSHO on the internet." The plaintiffs incorporated into the operative pleading a quotation of Murray's alleged false statements. Plaintiffs allege that on May 19, 2014, another individual "re-posted" Murray's statements, with very minor alterations to the text. On May 26, 2014, another individual "who followed Cranford's story, posted [on Facebook] the photos of preliminary test results from Stewart [Labs] that Cranford had previously posted." According to the complaint, as a result of Murray and Cranford's Facebook "announcements," "people throughout the world have read and followed the story and re-posted it on their Facebook timelines, further publishing the false statements concerning Plaintiffs."

At some point after the "re-post[ing]" of Murray's statements, Cranford allegedly posted to Facebook a solicitation for contact from individuals who "had suffered negative reactions after taking Plaintiffs' RSHO product."

According to the operative complaint, on May 30, 2014, Stewart Labs published the final test results from its analysis of the RSHO sample that had been submitted to it by Cranford. The plaintiffs allege that "[t]he final results showed significant different reporting values, especially for heavy metals such as lead, molybdenum, nickel, selenium, and silver, among other metals." Despite being aware of the Stewart Labs final test results, on June 1, 2014, Cranford posted a link to a statement written on Facebook by " ‘Sarah Hadigan’ " who asserted in her statement that her " ‘daughter is dead because of this product [i.e., RSHO],’ " among other things.

The operative pleading does not allege further conduct by any of the defendants after June 1, 2014, until October 14, 2014, the date on which the plaintiffs allege that the Project CBD defendants "published" the Hemp Oil Hustlers Article on Project CBD's website. In the portion of the first amended complaint in which the plaintiffs set forth the general allegations on which they base their later enumerated claims for relief (i.e., in the general allegations of the pleading), they allege that the Hemp Oil Hustlers Article was written by Cantu and published by Project CBD on its website and then further published on other websites,³ and that in the Hemp Oil Hustlers Article, the Project CBD defendants "claimed to have evidence that RSHO was contaminated with heavy metals and solvents without verifying the accuracy of the results from Stewart Environmental," and "alleged that multiple people became ill after using RSHO due to heavy metals and other toxins based on Cranford's opinion."

According to the operative complaint, MMI's stock price "has plummeted" ever since the named defendants "made these announcements." Plaintiffs assert that they have been harmed by the defendants' actions "in excess of one hundred million dollars."

B. Procedural background

1. Trial court proceedings

On January 16, 2015, the plaintiffs filed their first amended complaint, the operative pleading for purposes of this appeal.⁴ The first amended complaint states five pleaded counts against all of the named defendants, including libel (count 1), trade libel (count 2), false light (count 3), negligence (count 4), and intentional infliction of emotional distress (count 5). Attached to the complaint are multiple exhibits.

The first amended complaint recites all of the factual allegations regarding the Project CBD defendants' conduct vis-à -vis the plaintiffs in three paragraphs (paragraphs 50, 51, and 52), which are included under the heading "FACTS COMMON TO ALL CLAIMS."⁵ These three paragraphs focus on the Project CBD defendants' publication of the Hemp Oil Hustlers Article.

The Project CBD defendants responded to the complaint by filing an anti-SLAPP motion pursuant to California's anti-SLAPP statute. In response to the anti-SLAPP motion, the trial court issued an order granting the motion in part and denying it in part. Specifically, the court determined that all of the counts alleged against the Project CBD defendants arose from protected activities under the anti-SLAPP statute. The court therefore proceeded to consider whether the plaintiffs had demonstrated a probability of prevailing on their claims against the Project CBD defendants. The trial court determined that the plaintiffs had not demonstrated a probability of prevailing on counts 2, 4 and 5 of the first amended complaint, but had demonstrated a probability of prevailing on counts 1 and 3.

In determining that the plaintiffs had demonstrated a probability of prevailing on counts 1 and 3, the trial court concluded that the "numerous purportedly false statements within the article, coupled with a failure to correctly cite information from sources is sufficient evidence of fault." In response to the Project CBD defendants' argument that the plaintiffs should be considered limited public figures...