Opinion
Index No. 155562/2023
09-05-2024
Patrick K.A. Verdonck, Plaintiff, v. Scott Howard, Defendant.
Bryan Cave Leighton Paisner LLP, New York, NY (Chris LaRocco and Laith J. Hamdan of counsel), for plaintiff. Whiteman Osterman & Hanna LLP, Albany, NY (Jon E. Crain and Jennifer Thomas Yetto of counsel), for defendant.
Unpublished Opinion
Bryan Cave Leighton Paisner LLP, New York, NY (Chris LaRocco and Laith J. Hamdan of counsel), for plaintiff.
Whiteman Osterman & Hanna LLP, Albany, NY (Jon E. Crain and Jennifer Thomas Yetto of counsel), for defendant.
Gerald Lebovits, J.
This action, brought by plaintiff, Patrick K.A.Verdonck, against defendant, Scott Howard, arises out of several statements Howard made about Verdonck in text messages and an email from Howard to Verdonck and some of their mutual business partners. Verdonck, alleging that those statements are defamatory, brought this action. Howard moves to dismiss. The motion is granted.
BACKGROUND
Verdonck and Howard were formerly in business together along with two other men (nonparties Gus Hadidi and Jonathan O'Hara), as equity partners in an LLC. Although the parties dispute why, it is common ground that the parties' relationship badly deteriorated. Howard represents (see NYSCEF No. 18 at 1), and Verdonck does not dispute, that in early 2023 they were negotiating to buy out Howard's interests in the business.
Technically, each of the four men controlled LLCs that themselves were members of the shared-business-venture LLC. (See NYSCEF No. 20 at 1.) The distinction is not material here.
Some of the parties' business-related disagreements are the subject of another action pending before the undersigned. (See Rhynland Energy Holdings LLC v Howard Advisors LLC, Index No. 652952/2023. This court denied Howard's motion to dismiss that action in January 2024. (See Index No. 652952/2023, NYSCEF No. 37.)
This action arises from five text messages Howard sent Hadidi in 2023 (four as part of a single conversation in March 2023, and the fifth in June 2023) (see NYSCEF Nos. 11-13, 15-16); and an email Howard sent to Verdonck, Hadidi, O'Hara, and others in June 2023 (see NYSCEF No. 14.)
The March 2023 Howard texts to Hadidi were all sent on the same evening, between 11:00 and 11:30 p.m. In the first message, Howard said that he was unwilling to "approve contractual practical changes and term sheets without ever seeing them or the underlying economic data," because doing so "would be giving [Verdonck] an opportunity [t]o take advantage of me as he has many times before." (NYSCEF No. 15.) A few minutes later, Howard said that Verdonck had acted wrongly by "asser[ting] that he is going to sign an agreement, which he fully knows he is not allowed to do without my approval," and that "[w]e could start there and I could keep typing for an hour." (NYSCEF No. 11.) Shortly after that, Howard added that Verdonck "does not honor our [LLC agreement]." (NYSCEF No. 12.) In the fourth message, Howard told Hadidi that "just please keep in mind that being screwed out of lots of money is extremely unpleasant" and "[e]very two months [Verdonck] tries to steal money from me." (NYSCEF No. 16.)
The remaining text message, and the email, were sent on the same day in early June 2023. In the email, which was sent first, Howard addressed a number of topics relating to the parties' disagreements, apparently in response to an earlier email from Verdonck. (See NYSCEF No. 14.) In the body of the email, Howard said first that "[b]efore even discussing the offer," he would "need[] to address violations of the [LLC agreement]," that there were "damages and this may take a long time, similar to the last 5 or 6." (Id. at 1.) In the text message to Hadidi, sent at 10:00 p.m. that evening, Howard said that he had "never seen a group of people act like this in my life"; that it was "sad but it's not going to make me sell my share," and that "[n]ext week" he would "pick up on recourse from the last few bre[a]ches of contract." (NYSCEF No. 13.)
Approximately two weeks later, in late June 2023, Verdonck brought this action. He alleged that the six communications quoted from above were defamatory false statements of objective fact, made with actual malice (in the technical sense of the term). Verdonck seeks compensatory damages in an amount to be determined, and $3 million in punitive damages. Verdonck later amended his complaint, adding more factual allegations and seeking the same relief. (Compare NYSCEF Nos. 1 and 10 [initial and amended complaint];
Howard now moves under CPLR 3211 (a) (7) to dismiss Verdonck's amended complaint. (See NYSCEF No. 17 [notice of motion].)
Howard previously moved to dismiss the original complaint (NYSCEF No. 5); that motion was withdrawn after Verdonck indicated that he was going to amend. (See NYSCEF No. 9 [withdrawal stipulation].) References to the complaint in the remainder of this decision are to the complaint as amended.
DISCUSSION
On a CPLR 3211 (a) (7), motion to dismiss, "the pleading is to be afforded a liberal construction and the court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." (Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994] [alteration omitted].)
I. Whether Howard's Statements are Matters of Fact or of Opinion
In seeking to dismiss the complaint, Howard argues that his statements are non-actionable opinion, rather than representations of objective fact. (See NYSCEF No. 18 at 13-18.) This court agrees.
The elements of a defamation claim are "(a) a false statement that tends to expose a person to public contempt, hatred, ridicule, aversion, or disgrace," that is "(b) published without privilege or authorization to a third party, (c) amounting to fault as judged by, at a minimum, a negligence standard," and "(d) either caus[es] special harm or constitut[es] defamation per se." (Greenberg v Spitzer, 155 A.D.3d 27, 41 [2d Dept 2017].) Only statements alleging matters of objective fact-as opposed to opinion-can support a defamation claim, because "only facts are capable of being proven false." (Gross v New York Times Co., 82 N.Y.2d 146, 153 [1993] [internal quotation marks omitted].)
In considering whether a given statement is properly characterized as one of fact or of opinion, courts must consider "(1) whether the specific language in issue has a precise meaning which is readily understood; (2) whether the statements are capable of being proven true or false; and (3) whether... the full context of the communication in which the statement appears" suggests to its audience that "what is being read or heard is likely to be opinion, not fact." (Gross, 82 N.Y.2d at 153 [internal quotation marks omitted].) In conducting this assessment, courts should not "sift[] through a communication for the purpose of isolating and identifying assertions of fact," but instead "look to the over-all context in which the assertions were made and determine on that basis whether the reasonable reader would have believed that the challenged statements were conveying facts about the... plaintiff." (Davis v Boeheim, 24 N.Y.3d 262, 270 [2014] [internal quotation marks omitted; second alteration in original].)
The statements at issue here concern Howard's apparent position that Verdonck (and potentially others) had breached (or were going to breach) the underlying LLC agreement, and that Verdonck had treated him unfairly in conducting the LLC's business affairs. (See NYSCEF No. 11; NYSCEF No. 12; NYSCEF No. 13; NYSCEF No. 14 at 1.) These statements are not precise; nor do they allege objective, verifiable facts.
That Howard believed (and told Hadidi) that Verdonck had repeatedly taken advantage of him merely expressed an opinion on which reasonable minds could differ-at least absent more details given by Howard about Verdonck's asserted conduct that might be provably true or false. Similarly, Howard's statements that Verdonck had breached different provisions of the LLC agreement were not accompanied by specifics about the alleged breaches that might be susceptible to an objective factual evaluation. Howard's statement that "every two months [Verdonck] tries to steal money from me" (NYSCEF No. 16) might in some circumstances be taken as an assertion of fact. (See Levy v Nissani, 179 A.D.3d 656, 659 [2d Dept 2020].) In the circumstances of the conversation in which the statement was made, however, it would appear to the reasonable reader to be merely a hyperbolic expression of Howard's opinion that Verdonck was "screw[ing] him out of lots of money" by treating him unfairly (NYSCEF No. 16), not a verifiable assertion of fact. (See Steinhilber v Alphonse, 68 N.Y.2d 283, 294 [1986] ["[E]ven apparent statements of fact may assume the character of statements of opinion, and thus be privileged, when made in public debate, heated labor dispute, or other circumstances in which an audience may anticipate [the use] of epithets, fiery rhetoric or hyperbole."] [internal quotation marks omitted; alteration in original].)
The context in which which Howard made the challenged statements is especially significant here. All six statements at issue were made during acrimonious and personally antagonistic negotiations arising from the breakdown of a business relationship. Five of the six occurred in two angry late-night text-message conversations with another partner in the business (Hadidi) about these negotiations; and the sixth was an email articulating Howard's negotiating position. These circumstances would suggest to the average reader that Howard was stating his opinions about how he was being (or had been) treated by Verdonck in their business dealings, rather than making objective assertions of fact. (See Frechtman v Gutterman, 115 A.D.3d 102, 106 [1st Dept 2014] ["While the use of words such as 'misconduct' and 'malpractice' may, viewed in isolation, seem to be assertions of provable fact, or claims supported by unstated facts, viewed in their context, these statements amount to the opinions and beliefs of dissatisfied clients about their attorney's work."].) Similarly, given the context of Howard and Hadidi's existing business relationship and Hadidi's evident efforts to mediate between Howard and Verdonck (see NYSCEF Nos. 12, 15), this court is unpersuaded by Verdonck's suggestion (see NYSCEF No. 20 at 8-9) that the statements implied that they rested on facts known to Howard but not Hadidi.
Because the six statements at issue are expressions of opinion rather than assertions of fact, they cannot support Verdonck's defamation claim.
II. Whether Howard's Statements are Privileged
Even if this court were to conclude that the statements were matters of fact rather than opinion, that would not be enough to resolve this motion in Verdonck's favor. The parties agree that Howard's statements are shielded by a qualified privilege, because they were made to an audience that shared a common interest with Howard in the operations and financial health of the joint business venture. (See NYSCEF No. 18 at 4-6 [mem. in support of mot.]; NYSCEF No. 20 at 10 [mem. in opp. to mot.].) Plaintiff argues, though, that the privilege was overcome because Howard made his statements out of malice. (See NYSCEF No. 20 at 12.) This argument is unpersuasive.
A plaintiff seeking to overcome the "common interest" qualified privilege must, at this stage of an action, sufficiently allege that the statement was made out of common-law, subjective malice (i.e., "spite or ill will"), or actual malice in the technical sense ("knowledge that the statement was false or made in reckless disregard of its truth or falsity"). (Frechtman, 115 A.D.3d at 108 [1st Dept 2014].)
Plaintiff's complaint does not show-even for pleading purposes-that Howard acted out of common-law/subjective malice. Plaintiff relies on (i) the asserted falsity of Howard's statements, and (ii) conclusory allegations, made on information and belief, that Howard acted solely out of animosity and a desire to harm Verdonck's reputation and control over the LLC. (See NYSCEF No. 10 at ¶¶ 22, 32, 38.) That is not sufficient to survive a CPLR 3211 (a) (7) motion based on the qualified privilege. (See Hanlin v Sternlicht, 6 A.D.3d 334, 334 [1st Dept 2004] [affirming CPLR 3211 (a) (7) dismissal on the ground that plaintiff's allegations "that defendant made the offending statements in order to get her job" are insufficient to overcome the qualified privilege because they "rest only on surmise and conjecture, not evidentiary facts"]; Sborgi v Green, 281 A.D.2d 230, 230 [1st Dept 2001] [affirming CPLR 3211 (a) (7) dismissal on the ground that standing alone, "neither falsity nor the existence of prior earlier disputes between the parties permit an inference of malice"]; accord Hame v Lawson, 70 A.D.3d 640, 641 [2d Dept 2010] [affirming CPLR 3211 (a) (7) dismissal on the ground that plaintiff's allegations are insufficient to overcome the qualified privilege because "plaintiff failed to allege any facts from which malice could be inferred and her conclusory allegations of malice were insufficient to overcome the privilege"] [internal quotation marks and alteration omitted].)
The allegations of the complaint are also insufficient to show actual malice. Plaintiff identifies two grounds for believing that Howard acted out of actual malice. First, the complaint alleges that a provision of the underlying LLC agreement "provides a mechanism for members of [the LLC] to resolve perceived violations of the LLC Agreement by Verdonck Partners, but Howard has never made any effort to invoke those mechanisms"-thereby "demonstrat[ing] his awareness that [his] accusations are false." (NYSCEF No. 10 at ¶¶ 20-21.) Plaintiff does not, however, provide a copy of the LLC agreement, nor even describe the agreement's "mechanism" for "resolving perceived violations of the LLC agreement" (id. at ¶ 20)-much less allege facts from which one could infer that the mechanism would have been available to address the asserted violations of which Howard was complaining to Hadidi.
Second, the complaint alleges that Howard failed to use information and documents available to him to investigate or corroborate his statements about Verdonck's asserted improper conduct. (See id. at ¶¶ 18-21.) But an alleged "failure to investigate the truth of the statements cannot, by itself, constitute actual malice." (Hoesten v Best, 34 A.D.3d 143, 157 [1st Dept 2006].) Rather, a plaintiff must allege facts indicating that the defendant is "aware that [a statement] is probably false," or "entertain[s] serious doubt about its truth," and then makes a "deliberate decision not to acquire knowledge of facts that might confirm the probable falsity" of the statement. (Sweeney v Prisoners' Legal Servs. of NY, 84 N.Y.2d 786, 793 [1995] [emphasis added].) The amended complaint here does not contain allegations of this kind.
To the extent that plaintiff contends that ¶¶ 21, 30, 31, and 37 of the amended complaint sufficiently allege, in effect, that Howard closed his eyes to the probable falsity of his statements (see NYSCEF No. 20 at 12), this court disagrees.
In opposing the motion to dismiss, plaintiff asserts that Sweeney is inapposite because it "did not discuss the sufficiency of allegations at the pleading stage," but rather addressed "a defendant's appeal of judgment entered upon a jury verdict, after the consideration of all available evidence." (NYSCEF No. 20 at 11.) This distinction is immaterial here. Sweeney's relevance to this action does not rest in its "holding about the level of evidence" required to establish actual malice, as plaintiff suggests (id.); instead, Sweeney matters because it describes the nature of the necessary factual showing. That is, for purposes of the current CPLR 3211 (a) (7) motion, it would be sufficient for Verdonck to allege the required facts in his complaint, as opposed to providing admissible evidence to prove those facts at summary judgment or trial. But the kind of factual allegations that must be present to show actual malice are absent from Verdonck's complaint.
Verdonck's complaint is thus subject to dismissal for the additional, independent reason that he has not pleaded facts sufficient to overcome the "common interest" qualified privilege.
Given the court's conclusions set forth above, the court does not reach whether Howard's statements would constitute defamation per se.
Accordingly, it is
ORDERED that Howard's motion to dismiss is granted, and the complaint is dismissed, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that Howard serve a copy of this order with notice of its entry on Verdonck and on the office of the County Clerk (by the means set forth in the court's e-filing protocol, available on the e-filing page of the court's website, https://ww2.nycourts.gov/ courts/1jd/supctmanh/E-Filing.shtml), which shall enter judgment accordingly.