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Article: May 2017: California Court Issues Decision Regarding Protection of Statements to Press Regarding Litigation

May 01, 2017
Business Litigation Reports

In Argentieri v. Zuckerberg, 8 Cal. App. 5th 768 (1st Dist. 2017), the California Court of Appeal recently held that an attorney’s statements to the press summarizing the allegations of a complaint are protected by the “fair and true reporting privilege,” but not the litigation privilege. Argentieri and other similar cases suggest that attorneys should exercise caution in communications with outside parties regarding ongoing litigation. In general, attorneys should adhere closely in their statements to the allegations made in any filings, and avoid extemporizing. When attorneys are communicating with the press, the safest course is often to say nothing or simply to provide interested parties with copies of public filings.

The Ceglia/Facebook Case
Paul Argentieri served as counsel to Paul Ceglia in his lawsuit against Facebook and its founder, Mark Zuckerberg (Ceglia v. Zuckerberg, No. 10–CV–00569A(F) (W.D.N.Y. 2013)). Ceglia’s complaint alleged that he and Zuckerberg had entered into a written contract in 2003 providing that Zuckerberg would perform programming and coding services for a now-defunct website Ceglia was developing, and more importantly, that Ceglia would acquire a substantial interest in what would eventually become the social networking site Facebook. In response, Zuckerberg conceded that he had signed a work for hire contract in connection with work on Ceglia’s site, but he claimed that the subject of another website (what has now become Facebook) had never been raised. In fact, Zuckerberg contended that he had not even thought of the idea for the social networking site at the time of the contract.

In support of his claim, Ceglia attached to his complaint what he alleged was the contract signed by the parties. The document stated that Zuckerberg agreed to work on Ceglia’s site and to transfer part ownership of Facebook to Ceglia. During the proceeding, an e-discovery consultant that Argentieri’s co-counsel had retained to analyze the documents located a different version of the same contract, which had no mention of Facebook. This led Argentieri’s co-counsel to conclude that the version produced by Ceglia was fraudulent. The co-counsel immediately notified Argentieri of its findings, and withdrew as counsel for Ceglia.

Nevertheless, Argentieri signed and filed an amended complaint for Ceglia, which once again attached the apparently fraudulent contract as an exhibit. The amended complaint also included quotes from emails that allegedly had been exchanged between the parties regarding the agreement. Both parties filed motions for expedited discovery regarding the authenticity of the contract, and Zuckerberg also produced a copy of the alternative version of the contract that had been located by Ceglia’s e-discovery vendor.

Following the expedited discovery, the court dismissed the complaint “because the [contract] was a fabrication and, alternatively, because of Ceglia’s spoliation of evidence.” The dismissal was subsequently affirmed by the U.S. Court of Appeals for the Second Circuit.

The New York Malicious Prosecution Case Against Ceglia and Facebook’s Statement to the Press
Zuckerberg and Facebook subsequently filed a complaint in New York state court against Argentieri and other attorneys who had represented Ceglia in his suit, asserting claims for malicious prosecution and deceit. The complaint alleged that “[t]he 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.”

The same day the action was filed, Facebook’s general counsel Colin Stretch sent an email to various media outlets asserting that “[w]e said from the beginning that Paul Ceglia’s claim was a fraud and that we would seek to hold those responsible accountable. [Argentieri’s co-counsel] 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.”

The Defamation Action in California
Based on Stretch’s email to the press, Argentieri filed a defamation action against Stretch and Zuckerberg in California. In response, Stretch filed a motion to strike the complaint under California’s anti-Strategic Lawsuit Against Public Participation (SLAPP) statute (Cal. Civ. Proc. Code § 425.16), which generally prevents a plaintiff from bringing a cause of action based on the defendant’s valid exercise of free speech. The trial court concluded that the litigation privilege applied to Stretch’s statements, and it struck the complaint. The Court of Appeal affirmed the dismissal, albeit on different grounds. It made several rulings that are important for any lawyer speaking with the press regarding ongoing litigation to bear in mind:

First, a communication is protected by the litigation privilege only if the recipient has some connection to the proceeding or has a “substantial interest in the subject matter.” The court held that the press had no such interest here and that Stretch’s statement was a “communication . . . to major news outlets [and] a publication to the general public through the press and therefore not protected by the litigation privilege.” The court stated that the “litigation privilege should not be extended to litigating in the press.” Argentieri v. Zuckerberg, 8 Cal. App. 5th at 782-84 (internal quotations omitted).

Second, the Court of Appeal reasoned that there was not a “sufficient nexus between the statement and the litigation.” Even though Stretch’s statement may have been intended to further the ultimate goal of the lawsuit—to set the public record straight regarding the Ceglia fraud—a “desire to vindicate a client does not constitute the type of furtherance or connection sufficient for the litigation privilege to apply.” Id. at 785-87.

Third, the court recognized that at least one prior case had held that transmission of pleadings to the press is protected by the litigation privilege. Id. at 781-82. However, the court warned that “the vitality” of that rule “is in doubt” because a newspaper is “not related to the litigation.” Although Stretch did more than transmit a pleading, the court’s discussion of this issue indicates that the litigation privilege may not apply to the simple act of transmitting a pleading to the press or to others that are not directly connected to the litigation. Id. at 783-85.

Fourth, the court found that the “fair and true reporting privilege” did protect Stretch’s statement, even though that issue had not been raised by the parties in the trial court. This privilege protects “a communication to [] a public journal of . . . a judicial [proceeding] . . . or anything said in the course thereof.” Id. at 787 (citing Cal. Civil Code § 47(d)).

Fifth, Argentieri argued that Stretch’s statement was not literally a “fair and true” report of the proceedings because it differed slightly from the allegations in the complaint. The court held, however, that the privilege requires only that the communication “capture the substance, the ‘gist,’ or ‘sting,’ of the subject proceedings as measured by considering the natural and probable effect of the report on the mind of the average reader.” Id. at 787 (internal quotations omitted). A statement about ongoing litigation “need not track verbatim the underlying proceeding because only if the deviation is of such a substantial character that it produces a different effect on the reader will the privilege be suspended.” Id. at 790 (internal quotations omitted).

Finally, the court held that there was no genuine issue of material fact for trial as to Stretch’s statement, and therefore determining whether it qualified as “fair and true” for purposes of the reporting privilege was a question for the court, not a jury. Id. at 791.

In sum, although the statements at issue in Argentieri were found to be protected, it was a close call, and protection was afforded on a basis not initially raised by the parties. Attorneys should keep in mind that acting as counsel in a case does not automatically confer protection on their public statements concerning the matter, and that they should be careful when making such statements in light of this decision.