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Getfugu, Inc. v. Patton Boggs LLP

California Court of Appeals, Second District, Third Division

October 3, 2013

GETFUGU, INC., et al., Plaintiffs and Appellants,
PATTON BOGGS LLP, et al., Defendants and Respondents.

APPEAL from an order of the Superior Court of Los Angeles County No. BC444530, David L. Minning Judge.

Luce, Forward, Hamilton & Scripps, McKenna Long & Aldridge, Charles A. Bird and Theona Zhordania for Plaintiffs and Appellants.

Robie & Matthai, Edith R. Matthai, Kyle Kveton and Natalie A. Kouyoumdjian for Defendants and Respondents.


Plaintiffs and appellants GetFugu, Inc. (GetFugu), Carl Freer (Freer) and Richard Jenkins (Jenkins) (collectively, Plaintiffs) appeal an order granting a special motion to strike (Code Civ. Proc., § 425.16) filed by defendants and respondents Patton Boggs LLP (Patton), Richard J. Oparil (Oparil), Cummins and White LLP (Cummins) and Iman Reza (Reza) (collectively, the Attorney Defendants).[1] [2]

The issues presented include whether the Attorney Defendants met their burden to show Plaintiffs’ defamation claim arose from protected activity by the Attorney Defendants, and whether Plaintiffs, in resisting the special motion to strike, demonstrated their defamation claim had the requisite minimal merit to withstand the defense motion.

For the reasons discussed below, the order is partially reversed with respect to the cause of action for defamation by GetFugu and Freer against two of the Attorney Defendants, Patton and Oparil, and is otherwise affirmed.


1. The earlier RICO action.

In January 2010, Davies and Warnock filed a civil action under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18 U.S.C. § 1961 et seq.) on behalf of themselves as well as GetFugu shareholders, alleging claims arising from RICO violations, breaches of fiduciary duty, fraud, breach of contract and conspiracy. Davies and Warnock were represented by Oparil, of the Patton firm, and Reza, of the Cummins firm.

The district court dismissed the state law claims in that action without prejudice, ruling it would not exercise supplemental jurisdiction to hear them. Davies and Warnock appealed the district court’s order. They also filed a state court action pursuing the claims that were dismissed by the district court without prejudice. Thus, at the time of the instant lawsuit against the Attorney Defendants, the claims made by Davies and Warnock against GetFugu, Freer and Jenkins were ongoing.[3]

2. Oparil’s two written statements which are the basis of the defamation claim.

Despite the voluminous record, at this juncture Plaintiffs/appellants are basing their defamation claim on only two items: a one-page press release by Oparil, dated March 22, 2010, and a three-line “Tweet” by Oparil, dated August 31, 2010. [4]

a. The March 22, 2010 press release

On March 22, 2010, Oparil issued a press release captioned “FBI SAID TO BE INVESTIGATING GETFUGU’S CARL FREER.” This press release, which is the main basis of the instant defamation action, stated in pertinent part:

“David Warnock and Simon Davies, the plaintiffs in the civil RICO case against Carl Freer and others involving GetFugu, Inc., said they were pleased about a report by the Copenhagen Post that the FBI and Danish authorities are investigating Freer’s involvement in the Danish IT Factory scandal. The FBI’s criminal investigation is separate from the civil suit.

“According to the article, the FBI is following what is said to be a complex international money trail that allegedly links GetFugu and Freer to several failed ‘pump and dump’ investments, including the now defunct IT Factory. Warnock and Davies’ RICO First Amended Complaint alleges that the Securities and Exchange Commission is already investigating GetFugu. According to a November 2, 2009, SEC filing, in October 2005, Mr. Freer was sentenced to probation and fined by a court in Germany for buying four luxury cars with a bad check.[5]

“On March 26th, Mikael Ljungman a co-defendant in the civil RICO action and Freer’s partner, was convicted on all nine counts in a Denmark-based fraud case. Prosecutors made their case that money was channeled through over a dozen ‘secret’ companies that Ljungman established in tax havens around the world. The trial also produced evidence that Ljungman was laundering invested funds through the Los Angeles-based GetFugu, which is controlled by Swedish national Freer.

“Warnock said that ‘information from credible sources is streaming in from several countries. That added to the large number of documents and communications that we already have gathered will be used to support our original civil RICO action and new information [we] are currently gathering could be used to expand the scope of that case or spawn several independent legal actions in the coming weeks.’ Warnock and Davies indicated that they would cooperate with any inquiry by the FBI or Danish investigators. Counsel for plaintiffs in the RICO case is Richard J. Oparil of Patton Boggs LLP in Washington.

“Investigative leads may be sent to All tips will be held in the strictest of confidence.”

b. The August 31, 2010 “Tweet” by Oparil.

On August 31, 2010, Oparil issued the following Tweet on his Twitlonger account:

“GetFugu runs an organization for the benefit of its officers and directors, not shareholders and employees. The RICO suit was not frivolous. The 500K lawsuit is frivolous, however, so buyer be wary.”

3. The instant lawsuit against the Attorney Defendants.

a. Pleadings.

On August 26, 2010, the same day the district court dismissed the RICO complaint, Plaintiffs GetFugu and Freer filed the instant action.

On September 20, 2010, Plaintiffs filed their operative first amended complaint. The pleading consisted of two unlabeled causes of action, captioned as “First Cause of Action” and “Second Cause of Action.”[6] As the trial court noted, it appears the operative complaint purported to set forth claims against the Attorney ...

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