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Argentieri v. Zuckerberg

California Court of Appeals, First District, Fifth Division

February 15, 2017

PAUL ARGENTIERI, Plaintiff and Appellant,
v.
MARK ELLIOT ZUCKERBERG et al., Defendants and Respondents.

         Superior Court of San Francisco County, No. CGC-15-548503, Joseph M. Quinn, Judge.

          Alioto Law Firm, Joseph M. Alioto; Law Offices of Jeffrey Perkins, Jeffrey Perkins; Messina Law Firm Gil D. Messina for Plaintiff and Appellant.

          Gibson, Dunn & Crutcher, Orin S. Snyder, Robert Gonzalez and Adam Yarian for Defendants and Respondents.

          NEEDHAM, J.

         Paul Argentieri appeals from an order granting the motion of respondents Mark Elliot Zuckerberg, Facebook, Inc., and Colin Stretch to strike Argentieri's complaint for defamation under the anti-Strategic Lawsuit Against Public Participation (SLAPP) statute (Code Civ. Proc., § 425.16).[1] Argentieri contends the court erred in concluding that he had not demonstrated a probability of prevailing on his defamation claim.

         We will affirm the order. Although the statement underlying Argentieri's defamation claim was not subject to the litigation privilege of Civil Code section 47, subdivision (b), it was subject to the fair and true reporting privilege of Civil Code section 47, subdivision (d). He therefore has no probability of prevailing on his claim.

         I. FACTS AND PROCEDURAL HISTORY

         Argentieri was an attorney for Paul Ceglia throughout Ceglia's lawsuit against Facebook, Inc. (Facebook) and its founder, Mark Elliott Zuckerberg (Zuckerberg). Ceglia's lawsuit was dismissed on the grounds that the lawsuit was a fraud on the court and Ceglia had spoliated evidence. Facebook and Zuckerberg then sued Argentieri and others for malicious prosecution and deceit, and Facebook's general counsel, Colin Stretch (Stretch), sent an email to members of the press stating that the law firms named in the malicious prosecution complaint, including Argentieri, “knew [Ceglia's lawsuit] was based on forged documents yet they pursued it anyway.” After a court found that the complaint did not state a claim for malicious prosecution against certain defendants, Argentieri sued Facebook, Zuckerberg, and Stretch in the matter now before us, alleging that he was defamed by Stretch's statement. The only issue in this appeal is the trial court's dismissal of Argentieri's lawsuit under the anti-SLAPP law.

         A. Ceglia's New York Lawsuit Against Facebook

         In June 2010, Ceglia filed a lawsuit against Zuckerberg and Facebook in New York state court. Argentieri signed the complaint, and Ceglia verified it. The complaint alleged that Ceglia and Zuckerberg had entered into a written contract in April 2003, by which Ceglia would acquire an interest in “The Face Book” in exchange for $1, 000 and certain other consideration. Pursuant to this contract, Ceglia allegedly became entitled to an 84 percent ownership interest in Facebook. Attached as an exhibit to the complaint was a document entitled “ ‘Work for Hire' Contract, ” purportedly signed by Ceglia and Zuckerberg on April 28, 2003 (Work for Hire Contract).

         Upon filing the complaint, Argentieri and Ceglia obtained an ex parte temporary restraining order that prevented Facebook from transferring or selling any assets or stock in the company for about 17 days. A few days after the complaint was filed, Argentieri contacted Facebook and suggested meetings to discuss settlement. In July 2010, the case was removed to federal district court for the Western District of New York.

         In 2011, Argentieri recruited other law firms to help represent Ceglia. Eventually, law firms including DLA Piper LLP (DLA Piper), Lippes Mathias Wexler Friedman LLP (Lippes), and Kasowitz Benson Torres & Friedman LLP (Kasowitz), along with Argentieri, represented Ceglia in his lawsuit against Zuckerberg and Facebook.

         1. Kasowitz Tells Argentieri The Contract Is Fraudulent

         On March 30, 2011, a forensic e-discovery consultant working with Kasowitz discovered on Ceglia's computer the original contract between Ceglia and Zuckerberg attached to contemporaneous emails; the consultant concluded that the document had been altered to create the Work for Hire Contract by adding references to Facebook. Kasowitz notified Argentieri of these findings and immediately withdrew as Ceglia's counsel.

         2. Ceglia's Amended Complaint

         On April 11, 2011, Ceglia filed an amended complaint in federal court signed by DLA Piper, with co-counsel identified as Argentieri and Lippes. Like Ceglia's original complaint, his amended complaint attached a copy of the “Work for Hire Contract” and alleged that Zuckerberg had breached it. The amended complaint also quoted alleged emails between Ceglia and Zuckerberg.

         3. Kasowitz's Letter and the Parties' Expedited Discovery

         On April 13, 2011, Kasowitz sent a letter to Lippes, with a copy to Argentieri and lawyers for DLA Piper, advising that documents Kasowitz had reviewed from Ceglia's computer on March 30, 2011, “established that page 1 of the [Work for Hire Contract] is fabricated.” It also noted that Kasowitz had communicated these findings to Argentieri on March 30, April 4, and April 12, 2011. Kasowitz agreed to refrain from reporting the matter to the court pending an investigation that Lippes had promised to undertake.[2]

         In June 2011, the parties filed cross-motions for expedited discovery regarding the authenticity of the Work for Hire Contract. In support of Facebook's motion, Zuckerberg submitted a declaration in which he denied signing the Work for Hire Contract and set forth his own version of the events. Zuckerberg averred that, while a freshman at Harvard in early 2003, he had responded to an online job listing regarding the development of a website for a company named StreetFax. Around April 2003, Zuckerberg entered into a written contract with Ceglia, by which Zuckerberg agreed to provide limited website development services for StreetFax.com only. The StreetFax contract did not concern Facebook or any related social networking service or website-in fact, Zuckerberg had not even conceived of the idea of Facebook until months later in December 2003. Zuckerberg performed development work for StreetFax in 2003 and early 2004, although Ceglia failed to pay Zuckerberg in full for his services.

         On the eve of the hearing on the motions for expedited discovery, DLA Piper and Lippes withdrew from the case without explanation, leaving Argentieri and other attorneys representing Ceglia.

         A federal magistrate ordered expedited discovery into the authenticity of the Work for Hire Contract and purported emails, requiring, among other things, that Ceglia produce the original purported contract and the native electronic version by July 15, 2011.

         4. Dismissal of Ceglia's Lawsuit

         After discovery, Facebook and Zuckerberg filed a motion to dismiss Ceglia's lawsuit on the basis that the StreetFax contract was the true agreement between Zuckerberg and Ceglia, the Work for Hire Contract and alleged emails were fraudulent, and Ceglia had spoliated evidence.

         In March 2013, a federal magistrate issued a 155-page Report and Recommendation, proposing that the district court exercise its inherent power to dismiss the lawsuit as a fraud on the court and due to Ceglia's spoliation. The magistrate found there was clear and convincing evidence that the StreetFax contract was the “authentic contract governing the business relationship” between Ceglia and Zuckerberg. The magistrate also found that Facebook had proven, by clear and convincing evidence, “the fraudulent nature of the Work for Hire Document and the supporting emails.” He further found that it was “reasonably certain that the Work for Hire Document and the supporting e-mails were fabricated for the express purpose of filing the instant action.” In addition, the magistrate determined, Ceglia had “engaged in sufficient spoliation of evidence to support outright dismissal of the action.” The magistrate concluded that Ceglia had created at least two distinct physical versions of the forged Work for Hire Document, “baked” the Work for Hire Contract to thwart ink analysis, and destroyed at least six USB removable storage devices containing relevant evidence.

         In March 2014, the district court adopted the magistrate's “admirably well-reasoned Report and Recommendation” and dismissed Ceglia's lawsuit because the Work for Hire Contract was a fabrication and, alternatively, because of Ceglia's spoliation of evidence.

         In April 2015, the Second Circuit Court of Appeals affirmed the dismissal. Noting Ceglia's “total disregard for [the] judicial system, ” the court concluded that “the discovery of the real StreetFax contract... put[] the lie to Ceglia's claim” and opined that many of the font and formatting “irregularities” in the forged document “are apparent [even] to the naked, untrained eye.” The court also affirmed the dismissal on the basis of Ceglia's “extensive spoliation.” [3]

         B. Facebook/Zuckerberg's Malicious Prosecution Action and Stretch Email

         In October 2014, after Ceglia's civil case was dismissed in federal court in New York, Facebook and Zuckerberg filed a lawsuit in state court in New York against lawyers who had represented Ceglia in his lawsuit: Argentieri and his law firm, DLA Piper, Lippes, Milberg LLP, and individual lawyers from those firms.

         1. Facebook/Zuckerberg's Allegations

         The complaint asserted claims for malicious prosecution and deceit in violation of New York Judicial Law section 487.[4] It alleged that Argentieri and the other lawyers “conspired to file and prosecute a fraudulent lawsuit against Facebook and [Zuckerberg], based on fabricated evidence, for the purpose of extorting a lucrative and unwarranted settlement.” According to the complaint, Argentieri and the other lawyers knew that the lawsuit was a fraud, yet continued to pursue it anyway. More specifically, the complaint alleged: “The lawyers representing Ceglia knew or should have known that the lawsuit was a fraud-it was brought by a convicted felon with a history of fraudulent scams, and it was based on an implausible story and obviously forged documents. In fact, Defendants' own co-counsel discovered the fraud, informed the other lawyers, and withdrew. Despite all this, Defendants vigorously pursued the case in state and federal courts and in the media.” (Italics added.)

         2. Stretch's Statement Emailed to the Press

         On October 20, 2014, the same day that Facebook and Zuckerberg filed their malicious prosecution action, Facebook's general counsel Stretch sent an email to members of the press, allegedly on behalf of Facebook and Zuckerberg (Statement). Stretch's Statement asserted: “ ‘We said from the beginning that Paul Ceglia's claim was a fraud and that we would seek to hold those responsible accountable. DLA Piper and the other named law firms knew the case was based on forged documents yet they pursued it anyway, they should be held to account.' ” (Italics added.) This Statement is the basis of Argentieri's defamation action now before us.

         3. Dismissal of Facebook/Zuckerberg's Malicious Prosecution Action

         Argentieri filed an answer to the complaint and served discovery requests. The other defendants, however, filed a motion to dismiss the complaint on the ground it failed to state a cause of action for malicious prosecution or a violation of section 487 of New York's Judiciary Act. A trial judge in the New York Supreme Court denied the motion to dismiss in May 2015.

         In December 2015, the New York Appellate Division unanimously reversed the trial court's ruling and ordered that Facebook's and Zuckerberg's complaint be dismissed (apparently only as to the moving law firms, not Argentieri).[5]

         As to the malicious prosecution claim, the New York Appellate Division found that the allegations concerning the lawyers' lack of probable cause were conclusory and thus inadequate to state a claim, noting the authenticity of the Work for Hire Contract was vigorously contested throughout the Ceglia litigation. The court also looked to the efforts counsel undertook to ascertain the truth: “Moreover, the DLA-Lippes defendants conducted a quite thorough investigation after being advised of Kasowitz's findings, going so far as subjecting Ceglia to a polygraph test, which he passed. The Kasowitz letter alone is not sufficient to support a claim that any further representation of Ceglia was patently unsupported by probable cause.”

         As to the claim under the Judiciary Law, the court concluded that “the allegations that defendants knew of Ceglia's fraud are conclusory and not supported by the record.” The court explained: “Although plaintiffs allege that the DLA-Lippes defendants had been advised by Kasowitz that the Work for Hire Contract was a forgery prior to the filing of the amended complaint in the Ceglia action on April 11, the record unequivocally shows that the Kasowitz letter to that effect was dated April 13, two days after the amended complaint was filed. There is nothing to indicate that this information had been communicated to the defendants prior to the issuance of that letter. Moreover, plaintiffs offer no support for their claim that defendants had actual knowledge of the fraudulent nature of the claim based on statements made to them by Ceglia. In fact, the opposite is true. As noted, Ceglia consistently maintained that the Work for Hire Contract was genuine and even passed a polygraph test covering the contract and his other claims.”[6]

         Facebook and Zuckerberg moved for reconsideration of the appellate division's ruling, and their motion was denied. They thereafter petitioned the New York Court of Appeals for review; according to the parties, that petition was ...


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