Project44, Inc. v. FourKites, Inc., 1-21-0575

CourtUnited States Appellate Court of Illinois
Writing for the CourtELLIS, JUSTICE
Citation2022 IL App (1st) 210575
PartiesPROJECT44, INC., Plaintiff-Appellant, v. FOURKITES, INC., Defendant-Appellee.
Docket Number1-21-0575
Decision Date22 November 2022

2022 IL App (1st) 210575

PROJECT44, INC., Plaintiff-Appellant,
v.

FOURKITES, INC., Defendant-Appellee.

No. 1-21-0575

Court of Appeals of Illinois, First District, Second Division

November 22, 2022


Appeal from the Circuit Court of Cook County. 20-L-4183 Honorable James E. Snyder, Judge Presiding.

Douglas A. Albritton and Peter G. Hawkins, of Actuate Law, LLC, of Chicago, for appellant.

Scott M. Gilbert and Adam Weiss, of Polsinelli PC, of Chicago, for appellee.

JUSTICE ELLIS delivered the judgment of the court, with opinion. Justices Howse and Cobbs concurred in the judgment and opinion. [1]

OPINION

ELLIS, JUSTICE

¶ 1 This appeal concerns defamation, the making of a false statement (written or oral) about the plaintiff that injures the plaintiff's reputation. Because defamation is premised on reputational harm, it is not enough that the plaintiff, personally, heard or read the false statement; that statement must be transmitted to at least one other person besides the plaintiff. In legal vernacular, the false statement must be "published" to a "third party," meaning literally anyone else besides the plaintiff. So, for example, if Individual A falsely tells Individual B, and only

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Individual B, that Individual B does business with terrorists, no defamation has occurred, because only Individual B heard the false statement-it was not "published" to a third party. A private conversation like that would not be actionable defamation. But if another person-even one more person-heard the defamation, the defamation would be deemed "published."

¶ 2 This publication rule is a cornerstone of defamation law. But it becomes more complicated when the one being defamed is not an individual but a corporation-and when the "third parties" to whom the defamatory statement was "published" are officers or employees of that same corporation. Are directors, executives, officers, or employees of a corporation "third parties" when the entity being defamed is the very corporation they serve? Or are these people to be considered so much a part of the corporation as to constitute the corporation itself? That is the question before us here.

¶ 3 The two corporations at the center of this appeal-project44, Inc. (which intentionally styles itself by the lowercase), and FourKites, Inc.-compete against each other in the hotly contested field of shipping logistics, where they both track and monitor packages sent throughout the world. In 2019, two members of project44's board of directors received an email from an anonymous Gmail account that accused project44, among other things, of engaging in accounting fraud and being associated with the Chicago mafia. Shortly thereafter, project44's recently hired chief financial officer received a similar message from a different e-mail address.

¶ 4 Project44 tried to discover who sent the e-mails. Its investigation tied the e-mail accounts to computers associated with FourKites. Believing that its competitor was trying to sabotage its business, project44 sued FourKites and several unknown "Does" for defamation.

¶ 5 In the circuit court, FourKites argued that the defamatory messages were never published to a "third party," as required by defamation law. FourKites claimed that project44's board

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members and CFO were part and parcel of the corporation and inseparable from it-in other words, the people who received the messages were project44. And since you must publish a defamatory message to a third party for it to be harmful, there was no publication. The trial court agreed and dismissed the case on the basis that no publication occurred.

¶ 6 We do not agree. Our law has long recognized that a corporation can have its own reputation and identity, and if that reputation is attacked, it may use defamation actions to defend itself. And because a company's reputation can be separate and distinct from those who run it, even at an executive level, we reject the idea that the corporation is the same as the agents who oversee it. Since the allegedly defamatory messages targeted project44's reputation-not the reputation of the recipients-the defamatory messages were published to a third party. We thus reverse the judgment of dismissal and remand for further proceedings.

¶ 7 BACKGROUND

¶ 8 Because this case was dismissed for failure to state a claim, we accept all well-pleaded facts in the complaint as true and adopt all reasonable inferences in favor of the plaintiff. Kolegas v. Heftel Broadcasting Corp., 154 Ill.2d 1, 8-9 (1992); 735 ILCS 5/2-615 (West 2020).

¶ 9 Project44 and FourKites are shipping logistics companies who directly compete with one another for both customers and employees. Both are incorporated in Delaware but primarily operate out of Chicago.

¶ 10 Jim Baum and Kevin Dietsel are members of project44's board of directors but are not employees. On May 19, 2019, they received an e-mail from "Ken Adams," from a seemingly valid Gmail address. The e-mail's subject line read "Accounting improprieties at P44."

¶ 11 In the e-mail, Adams claimed to be a former project44 employee who recently left. He wrote that project44 used the threat of libel and defamation lawsuits to silence former

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employees, and that the family of one of project44's employees "used to be the book keeper [sic] for the Chicago Mafia and they are using that to silence folks." The message also accused project44 of "rampant accounting improprieties" and encouraged Baum and Dietsel to look at the company's contracts for malfeasance. The e-mail also alleged that "there is widespread discontent brewing and it's just a matter of time before people go public and another Theranos happen [sic] in Chicago."

¶ 12 For context, the complaint alleges that the reference to "Theranos" compared project44 to Theranos, Inc., a company that fraudulently claimed to create a revolutionary blood-testing device that later was determined to be bunk. See, e.g., In re Arizona Theranos, Inc., Litigation, 308 F.Supp.3d 1026, 1036-39 (D. Ariz. 2018). The company is now embroiled in extensive and well-publicized litigation, and two of its key leaders, Elizabeth Holmes and Ramesh Balwani, have been convicted of various counts of fraud.

¶ 13 On May 27, 2019, a sender from another Gmail address going by the name "Jason Short" sent Tim Bertrand, project44's chief financial officer (CFO), an e-mail. Jason congratulated Bertrand on joining project44 but added that he wanted to give Bertrand some information so he could "fled [sic] ASAP and go find another job." Referring to a social media post Bertrand made, Jason said "you mention people, investors etc. in your [post]. There is one ingredient you missed-a great product. At some point you have to stop selling [expletive] and start delivering."

¶ 14 Jason also claimed project44 was a Ponzi scheme and compared it to Theranos. He invited Bertrand to talk to the company's former CFO, other ex-employees, customers, prospects, and outside investors but said that Bertrand would be making "a mistake" if he forwarded the message to project44's current CEO. "I sincerely wish you the best," Jason said in closing. "You seem like a nice guy, you deserve better."

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¶ 15 Neither a "Ken Adams" or "Jason Short" ever worked at project44. On the assumption that both names were pseudonyms, project44 began investigating the source of the defamatory messages. Using petitions for discovery, project44 traced the Gmail accounts to computers associated with FourKites. Additionally, project44 was able to trace one of the accounts to an unknown internet protocol (IP) address operated by AT&T Mobility. Based on the investigation, project44 determined the messages came from someone associated with FourKites.

¶ 16 Coming up on the one-year limitations period, project44 filed a three-count suit against FourKites and various unknown "Does" who allegedly sent the messages. Counts I and II alleged that the May 19 and 26 e-mails were defamation per se against project44's reputation, while count III alleged that the parties engaged in a civil conspiracy to defame project44. Court filings indicate that project44 intended to continue trying to identify the anonymous "Does" and would presumably add them to the suit if their identities were discovered.

¶ 17 FourKites moved to dismiss the complaint, among other reasons, because the alleged defamatory statements were never "published" to a third party. In the eyes of FourKites, since Baum and Dietsel, the directors, and Bertrand, the CFO, were core members of project44's leadership, the defamatory messages were, in essence, communicated to the "person" being defamed. In other words, Baum, Dietsel, and Bertrand were project44, not third parties separate and distinct from the corporate entity.

¶ 18 The circuit court agreed and dismissed the case, finding that the messages were not published and, thus, the defamation claim failed as a matter of law. Since the defamation claims failed, the court also dismissed the claim for civil conspiracy to commit defamation.

¶ 19 ANALYSIS

¶ 20 We are presented with a question that might be seem easy, even obvious, if the defendant

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were a natural person and not a corporate form, but which becomes more complicated when we introduce the corporate entity: When a false statement about a corporation is transmitted only to the people who make up the leadership of that company, has that false statement been "published" to a third party for purposes of defamation law? Are the directors, officers, agents, and employees of a corporation sufficiently separate and distinct from the corporation as to qualify as "third parties" in that context?

¶ 21 We begin with the basics. To establish defamation, the plaintiff must show that (1) the defendant made a false statement about the plaintiff, (2) the defendant published that false statement to a third party, and (3) the published...

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