Peregrine Pharmaceuticals v. Gorman
Filed 2/5/13 Peregrine Pharmaceuticals v. Gorman CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
PEREGRINE PHARMACEUTICALS,
INC.,
Plaintiff and Respondent,
v.
MICHAEL GORMAN,
Defendant and Appellant.
D059655
(Super. Ct.
No.
37-2010-00087271-CU-DF-CTL)
APPEAL from
an order of the Superior Court
of
County, Randa Trapp, Judge.
Affirmed.
Defendant
Michael Gorman published statements that Eric Swartz, a member of the Board of
Directors of plaintiff Peregrine Pharmaceuticals, Inc. (Peregrine), had engaged
in insider stock trading, and that Peregrine took actions to cover up Swartz's
illegal activity. Peregrine filed an
action against Gorman pleading claims for defamation and trade libel. Gorman, after answering the complaint, moved
to dismiss the complaint pursuant to Code of Civil Procedure
section 425.16, commonly referred to as the anti-SLAPP (strategic lawsuit
against public participation) statute. (
(2002) 29 Cal.4th 53, 57.) The trial
court denied Gorman's motion and this appeal followed.
I
FACTUAL
BACKGROUND
A. The Parties
Peregrine
is a publicly traded biopharmaceutical company managed by a board of directors,
one of whom is Swartz. Peregrine's chief
financial officer (CFO) is Mr. Lytle, a certified public accountant who has
served as Peregrine's CFO since 2002.
Mr. Johnson, an attorney, is the chairman of Peregrine's board of
directors. Gorman is an individual
interested in a number of publicly traded companies, including Peregrine.
B. The Swartz Transactions
Swartz and
other members of Peregrine's board of directors periodically purchased shares
of Peregrine, and these transactions are public information available on
Peregrine's website as well as on NASDAQ.com.
Board members of a publicly held company are encouraged to purchase
stock in their company to boost shareholder confidence. Swartz periodically purchased shares in
Peregrine starting in 2006, before the alleged insider trading transactions,
and has continued to do so.
Peregrine
has a comprehensive policy prohibiting insider trading and to ensure it does
not occur. Before a board member may
acquire Peregrine stock, he or she must complete an "application and
approval" form reflecting an intention to buy shares. CFO Lytle then must evaluate the request,
confirm the applicant does not possess material nonpublic information, and
approve the purchase in advance. On January 6, 2010, Swartz submitted an
application to acquire additional stock in Peregrine. Lytle reviewed the application, discussed the
application with others (including Johnson), and approved Swartz's application
on January 6, 2010. Swartz then began acquiring stock in
Peregrine over the next few weeks, purchasing 100,000 shares of Peregrine stock
between January 7, 2010, and
February 18, 2010.
As of
January 2010 Peregrine had been in discussions with Stason Pharmaceuticals
(Stason) for approximately one year to negotiate an agreement for collaborating
on the rights to develop Peregrine's tumor necrosis therapy technologies in
Asia. A few days after Swartz's
application was approved and he had begun acquiring stock, Stason issued a
January 11, 2010, press release stating Stason and Peregrine had entered a
"non-binding agreement to pursue a collaboration" to develop
Peregrine's tumor necrosis therapy technologies in Asia.
nonbinding "term sheet" is not a " 'material'
transaction" under federal securities regulations that would require
either a press release or any "quiet period" for stock trading by
company insiders.
title="">[3]
Although
Swartz was generally aware of the discussions with Stason, those discussions
had no bearing on his decision to acquire additional stock in Peregrine. Instead, he decided to acquire additional
stock because the stock had been trading under $2 per share in the Spring of
2009 but had shown steady improvement, and Swartz had a high degree of
confidence in Peregrine.
C. The Defamatory Postings by Gorman
Starting on
January 21, 2010, Gorman (using the pseudonym "Ricardo Lacabeza")
began posting anonymous messages on an internet message board entitled
RagingBull.com.
title="">[4] Gorman posted the three following statements
on January 21, 2010:
"Peregrine Director Caught
in insider trading scandal!!!!"
"Peregrine cover-up of
Swartz felony!!!!!!!!!!"
"What would you expect from
a company that is covering up an insider trading scandal from one of its
Directors?"
The
following day, Gorman posted another statement on the same website, stating:
"After Director Swartz was
exposed trading on insider information Peregrine changed the title to 'Business
Opportunities' to make it appear that a deal was not yet complete."
On January
25, 2010, Gorman posted two more statements on the same website, stating:
" '. . . and
possible insider trading violations by Swartz last week.'
[¶] . . . [¶] You didn't mention Peregrine's attempted
cover-up of Swartz's illegal trades which were exposed here."
"I wonder who else Swartz
tipped off. You don't need to be an
insider to benefit from inside information."
Gorman
posted two more statements on the same website, stating (on January 31 and
February 2, respectively):
" 'After I exposed the
crime Peregrine changed the PR announcing the 'Strategic Partner' as a mere
"Business Opportunity" in an effort [to] protect Director
Swartz.' "
" 'Director Swartz was
just caught trading on privileged information' [¶] AND the company was caught
covering up for him."
II
PROCEDURAL
BACKGROUND
A. The Complaint
Peregrine's
complaint for defamation was based on Gorman's publications on
RagingBull.com. Peregrine asserted the
accusations were false and defamatory per se and sought damages.
B. The Anti-SLAPP Motion
Gorman
moved to dismiss the complaint under the anti-SLAPP statute, asserting the
gravamen of Peregrine's claims were based on
(1) speech in a public forum (the internet) within the meaning of section 425.16, subdivision (e)(3), and (2) speech concerning a public issue (a publicly held company)
within the meaning of section 425.16, subdivision
(e)(4). Gorman argued the burden
therefore shifted to Peregrine to show probable success on the merits, and
Peregrine could not meet the burden because the "gist" of the
protected speech was true.
Peregrine
opposed the anti-SLAPP motion. Peregrine
did not claim Gorman had not met his burden for initial coverage of the
anti-SLAPP statute. Instead, Peregrine
provided evidence to support its argument that it satisfied the second step of
the anti-SLAPP statute of showing probable success on the merits. Peregrine argued a prima facie case for
defamation had been shown because there was evidence the accusations of illegal
insider trading (as well as an alleged cover-up) were false and were statements
of opinion rather than fact. Peregrine
also argued the statements on which the lawsuit was based did not qualify for
the absolute privilege. Finally, it
argued there was evidence the statements did not fall within any qualified
privilege under Civil Code section 47, subdivision (c), or, alternatively,
there was evidence supporting a finding of malice to defeat the qualified
privilege provided by Civil Code section 47, subdivision (c).
The trial
court denied Gorman's motion to strike.
It first concluded Gorman met his initial burden of showing the
complained-of conduct was within the ambit of the anti-SLAPP statute as speech
in a public forum and concerning a public issue within the meaning of section 425.16, subdivisions (e)(3) and (e)(4). However, it also concluded Peregrine had
satisfied its burden of submitting sufficient competent evidence showing
probable success on the merits.
name="_ftnref5" title="">[5] Accordingly, the court denied the motion to
strike.
III
THE
ANTI-SLAPP LAW
The
anti-SLAPP law provides that "[a] cause of
action against a person arising from any act of that person in furtherance of
the person's right of petition or free speech under the United States or
California Constitution in connection with a public issue shall be subject to a
special motion to strike, unless the court determines that the plaintiff has
established that there is a probability that the plaintiff will prevail on the
claim." (§ 425.16, subd. (b)(1).) The purpose of the statute is to encourage participation
in matters of public significance by allowing a court to promptly dismiss
unmeritorious actions or claims brought to chill another's valid exercise of
the constitutional rights of freedom of speech and petition for the redress of
grievances. (Id., subd. (a).)
The
anti-SLAPP law involves a two-step process for determining whether a claim is
subject to being stricken. In the first
step, the defendant bringing an anti-SLAPP motion must make a prima
facie showing that the plaintiff's suit is subject to section 425.16 by showing
the defendant's challenged acts were taken in furtherance of his or her
constitutional rights of petition or free speech in connection with a public
issue, as defined by the statute. (
31 Cal.4th 728, 733.)
When
the defendant satisfies the first step, the
burden shifts to the plaintiff to demonstrate there is a reasonably probability
of prevailing on the merits at trial.
(§ 425.16, subd. (b)(1).) In
this phase, the plaintiff must show both that the claim is legally sufficient
and there is admissible evidence that, if credited, would be sufficient to
sustain a favorable judgment. (
Cal.App.4th 809, 823, disapproved on other grounds in
supra, 29 Cal.4th at p. 68, fn. 5.;
Cal.App.4th 347, 358.)
In making this assessment, the court must consider both the legal
sufficiency of, and the evidentiary support for, the pleaded claims, and must
also examine whether there are any constitutional or nonconstitutional defenses
to the pleaded claims and, if so, whether there is evidence to negate those
defenses. (Traditional Cat Assn., Inc. v. Gilbreath (2004) 118 Cal.App.4th
392, 398-399.)
In
considering whether a plaintiff has met his or her evidentiary burdens, the
court must consider the pleadings and evidence submitted by the parties. (§ 425.16, subd. (b)(1).) However, the court cannot weigh the evidence
(Looney v. Superior Court (1993) 16
Cal.App.4th 521, 537-538) but instead must simply determine whether the
plaintiff's evidence would, if credited, be sufficient to meet the
burden of proof. (Wilcox v. Superior Court, supra, 27 Cal.App.4th at pp. 823-825
[standard for assessing evidence is analogous to standard applicable to motions
for nonsuit or directed verdict].)
On
appeal, we review de novo the trial court's ruling on the motion to
strike. (Bernardo v. Planned Parenthood Federation of America (2004) 115
Cal.App.4th 322, 339.)
IV
ANALYSIS
Both
parties agree on appeal that Gorman satisfied the first step of showing the
alleged actionable conduct was within the parameters of section 425.16, subdivisions (e)(3) and (e)(4), and therefore the
burden shifted to Peregrine to show probable success on the merits. Gorman raises two arguments on appeal to
support his claim that the trial court erroneously concluded Peregrine had
satisfied its burden of showing probable success on the merits. First, Gorman claims Peregrine did not provide
evidence that, if credited, would have shown Gorman's statements were
false. Second, he asserts Peregrine did
not provide evidence that, if credited, would have shown Gorman's statements
did not qualify for the conditional privilege under Civil Code section 47,
subdivision (c), or that Gorman had forfeited the privilege because of malice.
A. Evidence of Falsity
Gorman
accused Swartz of acquiring Peregrine stock based on material inside
information, and accused Peregrine of covering up Swartz's illegal
activity. There was evidence that, if
credited, showed those statements were false.
There
was evidence below that, if credited, showed Gorman's first
accusation―that Swartz acquired Peregrine stock based on material inside
information―was false. Swartz's
declaration explained he was motivated to seek approval to purchase, and thereafter
to acquire, Peregrine stock during the relevant period because Peregrine's
stock had steadily improved in value since the spring of 2009 and he wanted to
demonstrate his confidence to shareholders that Peregrine stock would continue
to improve in value. Swartz was
generally aware of the discussions between Stason and Peregrine, but those
discussions (which had been ongoing for approximately one year) had no bearing
on his decision. Additionally, CFO
Lytle's declaration explained (1) he had reviewed Swartz's application for
approval and determined Swartz had no
material insider information prior to his purchases during the relevant period,
(2) a nonbinding term sheet is not a
material transaction requiring either a press release or a quiet period for
trading by company insiders, and (3) a binding
agreement was not signed with Stason until many months after Swartz's stock purchases were completed.
There
was also evidence that, if credited, would show Gorman's second
accusation--that Peregrine covered up Swartz's alleged criminal conduct--was
also false. Mr. Johnson, Peregrine's
Chairman of the Board, confirmed Peregrine made no effort to cover up Swartz's
stock purchases, but instead immediately filed the required documents with the
SEC and posted the information on Peregrine's website. The documentary evidence below confirmed
Swartz's purchases were fully and timely disclosed by Peregrine, and it appears
Gorman learned of the stock purchases from
these public filings. Although Gorman's
"cover-up" charge is based on Gorman's assertion that Peregrine (in
response to Gorman's inquiries and his internet charges of insider trading)
agreement from a "Strategic Partner[ship]" to a mere "business
opportunity" to "downplay the significance of the relationship
between Stason and Peregrine," the record is devoid of any evidence that
anyone (either Stason or Peregrine) ever described the agreement as a strategic
partnership, or that Peregrine had
any control over (or even input into) Stason's
January 2010 press release describing the negotiations as having resulted in a "non-binding
agreement to pursue a collaboration."
B. Evidence Negating the
Conditional Privilege
Gorman
alternatively asserts Peregrine did not show probable success on the merits
because there was no evidence showing Gorman's statements were not privileged
under Civil Code section 47, subdivision (c).
The Common Interest
Code section 47 provides:
"A privileged
publication or broadcast is one made: [¶] . . . [¶] (c) In
a communication, without malice, to a person interested therein, (1) by one who is also
interested, or (2) by one who stands in such a relation to the person
interested as to afford a reasonable ground for supposing the motive for the
communication to be innocent . . . ." The common interest privilege provides a
against defamatory statements made without
v. River Hills Wilsons, Inc. (2003) 113 Cal.App.4th 1363, 1368.) When malice is shown, the privilege is not merely
never arises. (Ibid.) However, if the
does arise, malice is a complete defense.
(Id. at p. 1369.)
the common interest privilege, although malice cannot be inferred solely from the fact the communication
was made (Civ. Code, § 48), malice may be inferred when the charge is
false, is libelous per se, and the defendant publishes it without having
reasonable cause for believing it to be true.
(Harris v. Curtis Publishing Co.
(1942) 49 Cal.App.2d 340, 349.) The
necessary to defeat the qualified "common
interest" privilege is
"actual malice." The requisite actual malice can be established by a showing
the publication was motivated by hatred or ill will toward the plaintiff or,
alternatively, by a showing that the defendant lacked reasonable grounds for
belief in the truth of the publication and therefore acted in reckless disregard of the
plaintiff's rights. (
Cal.3d 406, 413.) However, the lack of
reasonable grounds requires more than mere negligence. Malice
is shown only when the negligence amounts to a reckless or wanton disregard for
the truth, so as to imply a willful disregard for, or avoidance of,
accuracy. (Noel v. River Hills Wilsons, Inc., supra, 113 CalApp.4th at pp.
1370-1371.)
Analysis
argues that, because the subject statements were posted on an internet message
board "used by investors and other persons who tracked Peregrine
stock," the statements were made "to a person interested therein
. . . by one who is also interested" within the meaning of the
conditional privilege under Civil Code section 47,
subdivision (c)(1). However, the
"common interest" privilege is not a boundless privilege applying to
statements on matters of general concern to an undefined audience, because the
"word 'interested' as used in the statute refers to a more direct and
immediate concern. That concern is
something other than mere
of the general readership of newspapers and magazines." (Rancho
La Costa, Inc. v. Superior Court (1980) 106 Cal.App.3d 646, 664-665.) To the contrary, our Supreme Court explained
the common interest privilege under the common law was intended to extend the
privilege "to a narrow range of private interests. The interest protected
[is] private or pecuniary; the relationship between the parties [is] close,
e.g., a family, business, or organizational interest; and the request for
information must have been in the course of the relationship." (Brown
v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 727.) Brown
concluded the legislative history of Civil Code section 47, subdivision (c),
"indicates the Legislature intended to codify the narrow common law
privilege of common interest, not to create any broad news-media privilege." (Ibid.)
On this
record, there is evidence from which a jury could conclude an essential
precondition to the common interest privilege--that the statements were made by
a person interested to another person interested--is absent here. Although the messages were posted on an
internet site under the category of Peregrine, there was no evidence either
that Gorman had any private or pecuniary interest in Peregrine or in the
allegations of insider trading, or
that the audience for that site was limited
to persons having a private or pecuniary interest in Peregrine or in the
allegations of insider trading.
have had some general interest in Peregrine, a jury could infer such
"interest" did not extend beyond a "mere general or idle
curiosity of the general readership of [sources of information]" (Rancho
La Costa, Inc. v. Superior Court, supra, 106 Cal.App.3d at p. 665), which
is not the type of communication the common interest privilege is designed to
protect. (Brown v. Kelly Broadcasting Co., supra, 48 Cal.3d at p. 727;
accord, Mann v. Quality Old Time Service,
Inc. (2004) 120 Cal.App.4th 90, 108-109 [common interest privilege
inapplicable where no evidence defendant had any relationship with recipients
of defamatory communication or that recipients had requested the information].)
Moreover,
even were the predicate "interest" on behalf of the speaker and the
audience present, there was some evidence that, if credited, could support a
finding of malice justifying the denial of Gorman's anti-SLAPP motion. (Hailstone v. Martinez (2008) 169 Cal.App.4th 728, 739-741
[showing of minimal evidence of malice to defeat privilege is all that is
required to defeat an anti-SLAPP motion].)
Malice must often be inferred, and the trier of fact may
examine all of the facts and circumstances surrounding the communications (
such as the tenor of the statements (Brewer v. Second Baptist Church (1948) 32 Cal.2d 791, 799), or the
fact the defamatory remarks
could conclude the speaker acted recklessly because he or she lacked reasonable
grounds for believing the truth of the publication. (Cf. Noel v. River Hills Wilsons, Inc., supra,
113 Cal.App.4th at p. 1375.)
Here, Peregrine
submitted some evidence from which a jury could have inferred malice. The tenor of the allegations contained both
sensationalized punctuation and opprobrious allegations ("Peregrine
Director Caught in insider trading scandal!!!!"; "Peregrine
cover-up of Swartz felony!!!!!!!!!!"), and implied (by omission of
"felony") that authorities had been responsible for leveling these
charges, rather than " 'stat[ing]
fully and fairly' " (
v. California Teachers Assn., supra, 3 Cal.App.3d at p. 962) that it was Gorman who believed Swartz was engaged in illegal activity. Moreover, there was some evidence Gorman
acted recklessly, and lacked reasonable grounds for believing the truth of his
publications. The evidence showed that,
in early January 2010, Gorman specifically asked Peregrine about the Stason
"partnership agreement" and was told by Peregrine that it was
Peregrine's policy "not to comment on rumors" and it was Peregrine's
policy (as well as an SEC requirement) "to report all material news
promptly, so Peregrine would expect to announce any news concerning a
partnering agreement . . . within 24 hours of finalization," and
the only press release (from Stason) described it as a "
level these charges without any basis for believing such a nonbinding
information for purposes of insider trading.
Additionally, Gorman's penultimate charge--which stated that after he
had exposed the crime, "Peregrine
changed the PR announcing the 'Strategic Partner' as a mere 'Business
Opportunity' in an effort [to] protect Director Swartz" (italics
added)--appears untethered to any
factual predicates, because there is no evidence in this record that Peregrine
issued any press release, or that the only party who did issue a press release (Stason) ever changed the text of the announcement. (See fn. 2, ante.)
Because
Peregrine carried its burden of submitting some evidence from which a trier of
fact could conclude the communications did not qualify for the conditional
privilege, either because they were not statements by
a person to another person sufficiently closely connected and interested
to qualify under section 47, subdivision (c), or because there was evidence of
actual malice or reckless disregard for the truth of the statements, the court
correctly denied Gorman's anti-SLAPP motion.
DISPOSITION
The order
is affirmed. Plaintiffs are entitled to
costs on appeal.
McDONALD, J.
WE CONCUR:
NARES, Acting P. J.
O'ROURKE, J.
name="_ftn1" title="">[1] All
statutory references are to the Code of Civil Procedure unless otherwise
specified.
name="_ftn2" title="">[2] Gorman argues, apparently for the first time on appeal, that
the text of the Stason announcement described Peregrine as Stason's
"Strategic Partner," but Stason later altered the text (after Gorman
raised the insider trading allegations against Swartz) to describe the
relationship as a mere "business opportunity" to protect Swartz. Although Gorman
made these assertions in his internet
postings, the record is devoid of any competent evidence that press releases
from either Stason or Peregrine during January 2010 described the relationship
as a "strategic partnership."
The only press release in the record below was from Stason, and that release referred to a
"non-binding agreement to pursue a collaboration."
