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ZWEBNER v. COUGHLIN

United States District Court, S.D. California


October 5, 2005.

MICHAEL J. ZWEBNER, UNIVERSAL COMMUNICATIONS SYSTEMS, INC. and AIRWATER CORP., Plaintiffs,
v.
JAMES W. COUGHLIN a/k/a IRISHJIM44 and DOES 1-25, Defendants.

The opinion of the court was delivered by: JOHN HOUSTON, Magistrate Judge

ORDER GRANTING DEFENDANT'S MOTION TO STRIKE PLAINTIFFS' COMPLAINT PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE § 425.16
[DOC. # 5]
INTRODUCTION
Defendant James W. Coughlin a/k/a IRISHJIM 44 ("defendant") has filed a motion to strike the complaint filed by plaintiffs Michael Zwebner ("Zwebner"), Universal Communications Systems, Inc. ("Universal"), and Airwater Corp. ("Airwater") (collectively "plaintiffs"). A hearing was held on the motion, during which the parties presented extensive oral argument. After a thorough review of the pleadings, relevant exhibits submitted by both parties, the oral argument presented at the hearing, and for the reasons set forth below, this Court GRANTS defendant's motion to strike plaintiffs' complaint.

BACKGROUND

  Plaintiffs, on June 21, 2005, filed the instant complaint seeking damages for defamation and intentional infliction of emotional distress. See Compl. at 8. Jurisdiction is founded on diversity of citizenship. Id. ¶ 1. Zwebner previously acted as Chairman of Talk Visual Corporation, a publicly traded company with the trading symbol "TVCP", now "TVCE." Id. ¶ 2. Zwebner acts as Chairman of Universal, a publicly traded company with the trading symbol "UCSY." Id.

  Plaintiffs, in their complaint, allege that defendant posted messages on internet sites which "contained falsehoods, lies, [and] innuendoes." Compl. ¶ 10. Plaintiffs' claims arise out of the posting of certain comments by defendant on internet message boards*fn1 devoted to Universal, TVCP and TVCE, where various individuals with internet access may post and read messages concerning "stock talk." Id. ¶ 9, 10, 11. The internet contains many "stock talk" bulletin boards that permit the public to post messages anonymously. Id. at 9. Plaintiffs allege that defendant posted "false and libelous" messages about plaintiffs on message boards devoted to Universal, TVCP and TVCE. Id. ¶ 12. These message boards are very active; over 55,000 messages have been posted on the message board devoted to Universal and over 173,000 messages were posted on the message board devoted to TVCE. See Deft's Notice of Lodgment, Exhs. 14, 15. Posters to these message boards are advised:

DON'T BELIEVE EVERYTHING YOU READ
While reading the message boards you will find lots of opinions. Please be advised that some members may post information that is biased, misleading or false. When it comes right down to it, you are responsible for the decisions you make about your own money. Never trust a single information resource, whether a post on this Web site or a stock tip by the water cooler.
Id., Exh. 13.

  Plaintiffs' complaint points to the following messages allegedly posted by defendant:

ZWEBNER is like a Child Molester — UCSY post # 18291 ZWEBNER is the `devil' — TVCE post # 169782 ZWEBNER and his cronies make `death threats' UCSY post # 26165 ZWEBNER is a `thief' — TVCE post # 170374 ZWEBNER has `embezzled funds' — TVCE post # 170739 ZWEBNER has looted `companies and shareholders — UCSY post # 7326 ZWEBNER is an `unethical person & common criminal' — UCSY post # 7580 ZWEBNER is a `thief' — UCSY post # 7585 ZWEBNER is a `crook' — UCSY post # 8064 ZWEBNER, theft and fraud — UCSY post # 9501 ZWEBNER `has his offshore accounts, offshore companies and BATLINER to help him in his shorting' — UCSY post # 13984 ZWEBNER — No self respecting Jew would want a gift from ZWEBNER, knowing his background — UCSY post # 14447 ZWEBNER — `Maybe it is because of his `suspected' award that he received from the US Government that no one seems to be able to find out about' — UCSY post # 14909 ZWEBNER — `is that `lapdancing' os (sic) `wheelchair racing' for the mentally impaired' — UCSY post # 20977 ZWEBNER — `YAKC2 for 1 = ZWEBNER' — UCSY post # 25984 ZWEBNER — `Only ZWEBNER and his cronies make Death Threats' — UCSY post # 26165
Compl. ¶ 11.

  Defendant, on July 15, 2005, filed the instant motion to strike plaintiff's complaint, pursuant to Cal. Code Civ. P. § 425.16, which the Court set for hearing on September 22, 2005. On July 21, 2005, defendant filed an ex parte application seeking to advance the hearing date. This Court denied defendant's ex parte application on July 22, 2005. See Doc. # 11. Plaintiffs filed an opposition on September 7, 2005 and defendant filed a reply brief on September 15, 2005. This Court heard oral argument from the parties on September 22, 2005.

  DISCUSSION

  Defendant moves to strike plaintiff's complaint pursuant to California Code of Civil Procedure 425.16 "on the ground that [the complaint] is purely designed to suppress protected speech." Mot. at 1.

  1. Legal Standard

  California law disfavors certain lawsuits designed to chill free speech activities. Such suits are known as Strategic Litigation Against Public Participation, or "SLAPP," lawsuits. In 1992, the California State Legislature found that:

there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. The Legislature finds and declares that it is in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process. To this end, this section shall be construed broadly.
Cal. Code Civ. Proc. § 425.16(a). California Code of Civil Procedure section 425.16 ("section 425.16") permits a defendant to dismiss a lawsuit if the alleged bad acts arose from his or her exercise of free speech "in connection with a public issue" and if the plaintiff cannot show a probability of success on his or her claims. Cal. Code Civ. Proc. § 425.16(b)(1).

  In a special motion to strike under section 425.16, California's Anti-SLAPP statute, the defendant has the initial burden of making a prima facie showing that the plaintiffs claims are subject to section 425.16. Equilon Enterprises, LLC v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 (2002); ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 999 (2001). If the defendant makes that showing, the burden shifts to the plaintiff to establish a probability of prevailing, by making a prima facie showing of facts which would, if proved, support a judgment in the plaintiff's favor. ComputerXpress, 93 Cal. App. 4th at 999.

  2. Analysis

  a. Defendant's Prima Facie Showing

  Under Section 425.16 an act in furtherance of a person's right of petition or free speech includes: "(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest. Cal. Code Civ. Proc. § 425.16(e). In this case, the third and fourth definitions of an "act in furtherance" of a person's right to petition are at issue.

  Defendant bears the initial burden of making a prima facie showing that the plaintiff's claims are subject to section 425.16. ComputerXpress, 93 Cal. App. 4th at 999. Here, the conduct complained of in the complaint is defendant's postings relating to plaintiffs on an internet message board. The internet and internet message boards have become a popular method for members of the public to exchange opinions and ideas on a wide range of subjects. As the Supreme Court explained: From the publisher's point of view, it constitutes a vast platform from which to address and hear from a world-wide audience of millions of readers, viewers, researchers and buyers . . . Through the use of chat rooms, any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox. Through the use of Web pages, . . . the same individual can become a pamphleteer.

 Reno v. ACLU, 521 U.S. 844, 870 (1997). Courts addressing motions pursuant to section 425.16 have found messages posted on internet message boards that offer discussion regarding publicly traded companies fall within California's anti-SLAPP statute. See, e.g., Global Telemedia International, Inc. v. Doe 1, 132 F.Supp. 2d 1261, 1264-66 (N.D. Cal. 2001). In Global Telemedia, the Northern District of California found that messages posted on the "Raging Bull Message Boards," by two individual investors that were critical of the plaintiff fell within California's anti-SLAPP provision. Id. at 1264-66. In concluding that plaintiff (and plaintiff's stock) was a matter of public interest, the Global Telemedia court pointed to the plaintiff's use of press releases, it's large number of investors ("as many as 18,000"), and the fact plaintiff had been the subject of thousands of internet postings. Id. at 1265.

  Here, defendant has come forward with evidence demonstrating that plaintiffs are publicly traded companies. Deft's Notice of Lodgment, Exhs. 2, 3, 4. According to its most recent Annual Statement filed with the Securities and Exchange Commission, Universal had over 8,000 shareholders and over 255 million shares of common stock outstanding. Id., Exhs. 3, 4. Universal injected itself into the public arena by issuing press releases regarding it's business operations and litigation concerning internet posters. See id., Exh. 19. Universal also maintains a public website which encourages public comment and discourse between internet posters regarding its products. Coughlin Decl. ¶ 6; Deft's Notice of Lodgment, Exh. 2. Therefore, this Court finds plaintiffs, including Universal, Airwater (a wholly owned subsidiary of Universal), and Zwebner (Universal's Chairman), are matters of public interest.

  Because defendant's postings were made in connection with his participation in public discourse regarding a public issue, defendant has met his initial burden of demonstrating that plaintiffs' claims are subject to section 425.16. Accordingly, the burden shifts to plaintiffs who must establish a probability of success on the merits of their claims. b. Probability of Success on the Merits

  To show a probability of prevailing for purposes of section 425.16, a plaintiff must "`make a prima facie showing of facts which would, if proved at trial, support a judgment in plaintiff's favor.'" ComputerXpress, 93 Cal. App. 4th at 1010 (quoting Kyle v. Carmon, 71 Cal. App. 4th 901, 907 (1999)). "However, the plaintiff `cannot simply rely on the allegations in the complaint,' but `must provide the court with sufficient evidence to permit the court to determine whether there is a probability that the plaintiff will prevail on the claim.'" ComputerXpress, 93 Cal. App. 4th at 1010 (internal citations omitted). Plaintiffs assert claims for defamation and intentional infliction of emotional distress.

  1. Defamation

  Defendant contends*fn2 that plaintiffs cannot show a likelihood of success on the merits of plaintiffs' defamation claim because the claim is barred by California's one year statute of limitations for defamation claims. Mot. at 10. Defendant points out that the statements alleged in plaintiffs' complaint were posted between January 28, 2003 and January 4, 2004 but the complaint was not filed until June 21, 2005, seventeen months later. Thus, defendant argues plaintiffs' defamation claim was filed five months too late. Id. at 11.

  Plaintiffs, in opposition, contend that the applicable statute of limitations in this case is Florida's two year limitations period and, thus, their defamation claim is not barred. See Opp. at 5-6 (citing Fla. Stat. § 95.11). Plaintiffs urge the Court to apply Florida law in this diversity case in determining whether the complaint was timely filed. See id. (citing Rosenthal v. Jane Fonda, 862 F.2d 1398 (9th Cir. 1988)).*fn3 Plaintiffs claim that, based on a "`governmental interest' analysis," conflict of law rules require application of Florida's statute of limitations in this case, in that Florida's interest in the case is greater than California's because "[t]he defamatory statements were directed through the internet at two corporations with the principal place of business in Florida and one individual whose only U.S. residence is in Florida." Id. at 6. In addition, plaintiffs contend the damages in this case primarily incurred in Florida. Id.

  In reply, defendant notes, even though plaintiff seeks redress under California substantive law, plaintiffs claim Florida's procedural rules should apply. Reply at 2 (citing Opp. at 2, 5). According to defendants, in diversity actions, the applicability of a statute of limitations is a procedural issue, not substantive, and, thus, California's statute of limitations apply here. Id. at 2, 3 (citing Zellmer v. Acme Brewing Co., 184 F.2d 940, 942 (9th Cir. 1950)). Defendant also argues that, even if the "governmental interest" analysis is applied to the instant case, the outcome would not change. Id. at 4. Defendant explains that, under the facts here, the case would be considered as establishing a "false conflict" of law. Id. (citing Ashland Chemical Co. v. Provence, 129 Cal.App.3d 790 (1982). In Ashland, the California Supreme Court applied California's statute of limitations instead of Kentucky's where the plaintiff, a Kentucky corporation, sued a California corporation and two California residents over a promissory note executed in Kentucky. Ashland, 129 Cal.App.3d at 793-94. The Ashland court, characterizing the case as "the very paradigm of the false conflict," found California's interest paramount because there were no Kentucky defendants and Kentucky was not the forum. Id. at 794.*fn4 Defendant points out that, similarly here, plaintiffs, who are Florida corporations and residents, are suing a California resident*fn5 based on California substantive law in California. Reply at 5. According to defendant, the instant case is analogous to the Ashland case and, thus, California's interest in this case is paramount for the same reason presented there: because states have an interest in protecting their citizens. Id. Therefore, defendant contends that California's law must be applied.

  This Court agrees with defendant. The United States Supreme Court has clearly rejected the notion that a statute of limitations be applied as a substantive rule where there is a choice of law issue in a diversity action. See Sun Oil v. Wortman, 486 U.S. 717, 726-729 (1988); see also Alberding v. Brunzell, 601 F.2d 474, 476 (9th Cir. 1979) (observing that "statutes of limitations are a procedural matter governed by the law of the forum."). This Court notes that the California state court agrees. See Cossman v. Daimler-Chrysler Corp., 108 Cal.App.4th 370, 376 (2003).

  In addition, even when the "government interest" analysis is applied, this Court finds California's interest in protecting its citizens outweighs Florida's interest. This Court finds this case similar to the Ashland case, cited by defendant, in that this case involves Florida plaintiffs suing a California resident, thus, creating a "false conflict." See Ashland, 129 Cal.App.3d at 793-94. As in Ashland, because Florida is not the forum and there are no Florida defendants, Florida's interest is de minimus in comparison to California's interest in protecting its citizens. Accordingly, this Court finds California's statute of limitations on defamation claims apply in this case.

  In California, defamation actions are subject to a one-year statute of limitations. C.C.P. § 340(c); Shively v. Bozanich, 31 Cal.4th 1230, 1246 (2003). The statements at issue were posted over seventeen months prior to the filing of the instant case. Therefore, plaintiffs' defamation claims are time-barred.

  2. Intentional Infliction of Emotional Distress

  Defendant also contends that plaintiffs' intentional infliction of emotional distress claim fails because their defamation claim fails. See Mot. at 14-16. Defendant points out that, an intentional infliction of emotional distress claim based on defamatory speech cannot stand when the speech is found to be constitutionally permissible or where the defamation claim has been found insufficient. Id. at 15 (citing Reader's Digest Assoc., Inc. v. Superior Court, 37 Cal.3d 244, 265 (1984); Flynn v. Higham, 149 Cal.App.3d 677, 682 (1983); Lieberman v. Fieger, 338 F.3d 1076, 1082, n. 3 (9th Cir. 2003) ("Under California law, a plaintiff may not maintain an independent cause of action for the intentional infliction of emotional distress based on the same acts which were insufficient to support a cause of action for defamation."). Because plaintiffs' defamation claim is time-barred, plaintiffs' intentional infliction of emotional distress claim, based upon the same factual basis as the defamation claim, also fails as time-barred.

  Accordingly, because all of plaintiffs' claims are time-barred, plaintiffs have failed to demonstrate a likelihood of success on the merits by making a prima facie showing of facts which would, if proved, support a judgment in plaintiffs' favor. ComputerXpress, 93 Cal. App. 4th at 1010.

  CONCLUSION AND ORDER

  Based on the foregoing, this Court finds that defendant has met his initial burden of making a prima facie showing that plaintiffs' claims are subject to section 425.16 and that plaintiffs have failed to establish a probability of prevailing on the merits of their claims. Accordingly, defendant's motion to strike plaintiffs' complaint is GRANTED and plaintiffs' complaint is hereby STRICKEN pursuant to California Code of Civil Procedure § 425.16.

  Defendant also seeks an award of reasonable costs and attorneys fees incurred in bringing the instant motion and suggests the Court set a hearing date and briefing schedule for his motion. See Mot. at 18; Reply at 9. However, this Court sees no need to address defendant's costs and fees request any differently than any other motion. Therefore, defendant is directed to file his motion, if desired, in accordance with the Federal Rules of Civil Procedure and the Local Rules of this District.

20051005

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