Judge: H. Jay Ford, III, Case: 21SMCV01868, Date: 2022-12-09 Tentative Ruling

Case Number: 21SMCV01868    Hearing Date: December 9, 2022    Dept: O

Case Name:  Kavanaugh v. Klein, et al.

SUBJECT:                SLAPP MOTION

MOVING PARTY:   Defendants Ethan Klein and Ted Entertainment, Inc.

RESP. PARTY:         Plaintiff Ryan Kavanaugh

UPDATED TENTATIVE RULING

            Defendants Ethan Klein and Ted Entertainment, Inc.’s SLAPP Motion is DENIED. 

            Defendants’ Evidentiary Objections to M. Lambert Dec.—OVERRULE

            Defendants’ Evidentiary Objections to R. Kavanaugh Dec.—SUSTAIN as to identified references to “illegally,” “false” and “falsely” and “defamatory” and ¶18(3:1-16) and OVERRULED as to remaining objections. 

            Defendants’ Evidentiary Objections to Dec. of T. Clare—SUSTAIN as to Exhibits N, S, T, U, ¶¶6, 8, 9 and reference to “defamatory” in ¶5 (2:7). 

            Defendants’ Evidentiary Objections to Dec. of A. Gura—SUSTAIN

            The Tentative ruling distributed to counsel at the September 8, 2022 hearing is WITHDRAWN in its entirety.          

“Litigation of an anti-SLAPP motion involves a two-step process. First, the moving defendant bears the burden of establishing that the challenged allegations or claims arise from protected activity in which the defendant has engaged.  Second, for each claim that does arise from protected activity, the plaintiff must show the claim has “at least ‘minimal merit.  If the plaintiff cannot make this showing, the court will strike the claim.”  Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1009 (where moving party seeks to strike an entire cause of action alleging multiple factual bases, court does not determine whether 1^st prong is met based on “gravamen” test but must determine whether each factual bases supplies the element of claim or merely provides context). 

I. 1^st step analysis: Plaintiff’s complaint arises from protected conduct under (e)(3) and (e)(4)

            A.  Issue Preclusion

Defendants argue that certain issues determined by the Court in Triller, LLC v. Ted Entertainment, Inc. (“Triller”) are binding on Ryan Kavanaugh in this action.  Defendants argue issue preclusion as to the following 1^st step determinations made in the Triller case:  (1) Kavanaugh is a matter of public interest under prong one of SLAPP; and (2) YouTube and Reddit are public forums under the SLAPP statute.  Defendants argue issue preclusion applies to these issues, and the statements alleged against them in this action are protected conduct under (e)(3) and (e)(4).

Issue preclusion bars relitigating the same issues that were argued and decided in the previous action.  See DKN Holdings, LLC v. Faerber (2015) 61 Cal.4th 813, 824.  The elements of issue preclusion are “(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.  Id. at p. 825.  “The party asserting collateral estoppel bears a ‘heavy’ burden of proving all of these factors.” Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1482.

            Defendants argue in a conclusory manner that Kavanaugh is the “owner” of Triller and Proxima.  Defendants fail to submit evidence of the nature of his ownership interest in either entity.  Defendants admit that Proxima is the entity that has an interest in Triller, but Defendants fail to submit any evidence as to Kavanaugh’s ownership interest in Proxima or Proxima’s ownership interest in Triller.  The Court in Triller referred to Kavanaugh as Triller’s “majority shareholder,” implying there were other Triller shareholders.  See Defendants’ Compendium of Exhibits, Ex. 129, p.8. 

Kavanaugh’s testimony on his ownership interests is equally vague.   Kavanaugh testifies that Proxima owns “an interest” in Triller.  See Dec. of R. Kavanaugh, ¶2.  Kavanaugh’s evidence establishes that he is the sole owner of Proxima, having bought out the interest of the only other member, Michael Lambert.  Id. at ¶10; see Dec. of M. Lambert, ¶3. 

            The evidence presented is insufficient to establish privity for purposes of issue preclusion.  In order to find that Kavanaugh was in privity with Triller, the Court must disregard the general rule that a corporate entity is separate from its shareholders or members.  See PacLink Communications Intern., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 963.  Kavanaugh was not named in the Triller action, and there were no allegations of vicarious or derivative liability against him.  The Court cannot find that Kavanaugh’s due process interests were satisfied regarding his status as a public figure or Youtube and Reddit’s status as public forums. 

            In addition, while the Court in Triller clearly adjudicated the issue of whether Youtube and Reddit were public forums, it is not clear that the Court found Kavanaugh to be a matter of public interest under CCP §425.16(e)(3) and (e)(4).  The 1-12-22 Order states, “[T]his Court finds YouTube and Reddit are public forums because they are publicly accessible websites.”  See Defendants’ Appendix of Exhibits, Ex. 129, p. 7.  The 1-12-22 Order does not make such an unequivocal finding as to whether Kavanaugh himself is a matter of public interest.  The Court found that the Triller App clearly satisfied the criteria for an issue of public interest under Daniel v. Wayans (2017) 8 Cal.App.5^th 367, 387-388.  See Defendants’ Appendix of Exhibits, Ex. 129, p. 9.  Collaterally, the Court stated, “Even Triller’s majority shareholder Mr. Kavanaugh, a nonparty here, has been the topic of many news articles regarding his business dealings and personal life.  Defendants cite to various articles…regarding Triller and Mr. Kavanaugh.”  Id.  For purposes of issue preclusion, the Court in Triller did not finally adjudicate the issue of whether Kavanaugh himself was an issue of public interest. 

            Defendants fail to establish that the requisite privity to apply issue preclusion.  In addition, Defendants fail to establish that the Court in Triller finally and fully adjudicated whether Kavanaugh was an issue of public interest under (e)(3) and (e)(4).

            B.  Defendants establish that Kavanaugh and his business dealings are issues of public interest

Defendants assert the challenged statements are protected under both (e)(3) and (e)(4).  Under (e)(3), protected conduct includes 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.  CCP §425.16(e)(3).  “The California Supreme Court held that Web sites accessible to the public are ‘public forums’ for the purposes of the anti-SLAPP statute.  Cases construing the term ‘public forum’ as used in section 425.16 have noted that the term is traditionally defined as a place that is open to the public where information is freely exchanged.  Under its plain meaning, a public forum is not limited to a physical setting, but also includes other forms of public communication.”  Kronemyer v. Internet Movie Database Inc. (2007) 150 Cal.App.4th 941, 950 (movie database website that was accessible to anyone who chose to visit the site was a public forum).  Thus, websites that are accessible to anyone who chooses to visit the site is a public forum.  Id.; see also Wilbanks v. Wolk (2004) 121 Cal.App.4^th 883, 984 (defendant’s statements were “published in her Web site on the Internet, meaning they are accessible to anyone who chooses to visit her Web set.  As a result, here statements hardly could be more public.”)

            Under (e)(4), protected conduct includes, “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.”  CCP §425.16(e)(4).  “The inquiry under the catchall provision instead calls for a two-part analysis rooted in the statute's purpose and internal logic. First, we ask what ‘public issue or issue of public interest’ the speech in question implicates—a question we answer by looking to the content of the speech.  Second, we ask what functional relationship exists between the speech and the public conversation about some matter of public interest. It is at the latter stage that context proves useful.”  FilmOn.com Inc., supra, 7 Cal.5th at 149-150. 

“Not surprisingly, we have struggled with the question of what makes something an issue of public interest…We share the consensus view that a matter of concern to the speaker and a relatively small, specific audience is not a matter of public interest, and that a person cannot turn otherwise private information into a matter of public interest simply by communicating it to a large number of people.”  Rand Resources, LLC v. City of Carson (2019) 6 Cal.5^th 610, 621.

“[T]he California cases establish that generally, a public issue is implicated if the subject of the statement or activity underlying the claim (1) was a person or entity in the public eye; (2) could affect large numbers of people beyond the direct participants; or (3) involved a topic of widespread, public interest.  And where the issue is of interest to only a private group, organization, or community, the protected activity must occur in the context of an ongoing controversy, dispute, or discussion, such that its protection would encourage participation in matters of public significance.”  D.C. v. R.R. (2010) 182 Cal.App.4th 1190, 1226.

Defendants establish that Kavanaugh and his business dealings, including those with Elon Spar are issues of widespread public interest.   Defendants submit numerous articles in widespread, popular publications reporting on Triller, Kavanaugh specifically and Kavanaugh’s business dealings.  See Defendants’ Appendix of Exhibits, Exs. 41-98. 

            Defendants also establish based on Plaintiff’s allegations that Youtube, Klein’s Youtube program, as well as his Twitter posts, were made on a public forum.  See Complaint, ¶¶16 and 29.  As noted by the Court in Triller, the hallmark of a public forum is public access, not the right to public comment.”  See Defendants’ Appendix of Exhibits, Ex. 129, p. 7.  Based on Plaintiff’s own allegations, Klein’s podcast is on Youtube and it is part of the “Youtube community.”  Id.  Klein’s Youtube channel “reaches millions of viewers” and his two channels enjoy nearly 6.4 million and 3 million subscribers.  See Complaint, ¶20.  These alleged facts support a finding that Youtube is a public forum. 

            In response, Plaintiff argues that a personal vendetta cannot be protected conduct under (e)(4) and the test set forth in FilmOn. However, the Supreme Court recently rejected that premise. The mere fact that speech may “stem” from a personal dispute or a personal interest does not mean the speech cannot also implicate public issues and further the public discourse on those issues under (e)(4) and the two-part test under FilmOn.  See Geiser v. Kuhns (2022) 13 Cal.5^th 1238,  (sidewalk protests by former homeowners regarding loss of their home due to foreclosure qualified as protected conduct under (e)(4); demonstrations implicated public issues of unfair foreclosures and residential displacement practices and furthered public discourse on those issues by drawing public attention to them). 

            Here, the Challenged Statements pertained to issues of public interest and they were made in a public forum.  Klein’s statements were also made to his audience, which Plaintiff alleges number between 3 and 6 million depending on the channel.  The statements were intended to further the public discourse, as they were made in a public forum and to a massive audience.  Thus, the Challenged Statements satisfy both (e)(3) and (e)(4).  The 1^st prong of the SLAPP analysis is therefore satisfied. 

II. 2^nd step analysis—Plaintiff has met his evidentiary burden to show facts sufficient to sustain a favorable judgment on his claims.

Once defendant demonstrates that a cause of action arises from protected conduct, the plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.  See Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.  “Precisely because the statute (1) permits early intervention in lawsuits alleging unmeritorious causes of action that implicate free speech concerns, and (2) limits opportunity to conduct discovery, the plaintiff's burden of establishing a probability of prevailing is not high: We do not weigh credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law.  Only a cause of action that lacks ‘even minimal merit' constitutes SLAPP.”  See Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699.

“The second prong of the statute deals with whether the plaintiff has demonstrated a probability of prevailing on the claim.  Under section 425.16, subdivision (b)(2), the superior court, in making these determinations, considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ For purposes of an anti-SLAPP motion, the court considers the pleadings and evidence submitted by both sides, but does not weigh credibility or compare the weight of the evidence. Rather, the court's responsibility is to accept as true the evidence favorable to the plaintiff.  A plaintiff need only establish that his or her claim has minimal merit to avoid being stricken as a SLAPP.  With these descriptions in mind, we will not strike a cause of action under the anti-SLAPP statute unless it lacks even minimal merit.”  Ralphs Grocery Co. v. Victory Consultants, Inc. (2017) 17 Cal.App.5th 245, 261.

The “probability of prevailing” is tested by the same standard governing a motion for summary judgment, nonsuit, or directed verdict.  Thus, in opposing a SLAPP motion, it is plaintiff's burden to make a prima facie showing of facts that would support a judgment in plaintiff's favor.” Taus v. Loftus (2007) 40 Cal.4th 683, 714 (a “summary-judgment-like procedure”). 

            A.  The Challenged Statements and Plaintiff’s allegation of falsity

            The Challenged Statements are identified in ¶¶26-40 of the Complaint.  The statements were made from June 2021 through October 2021.  The statements were made by Klein during his Youtube show and on Twitter.  Klein asserted in the challenged statements that Kavaugh’s ex-business partner, Elon Spar, had accused him of running a Ponzi Scheme.  Klein indicated that these accusations had been reported on in the 2019 Variety article entitled, “Ryan Kavanaugh Accused by Ex-Partner of Running a Ponzi Scheme.”  See Complaint, ¶¶26-40.  Klein also made comments regarding Kavanaugh’s character and desirability as a business partner based on Spar’s accusations.  Id. 

            According to Plaintiff, Defendants have been “re-publishing the defamatory and highly damaging accusation, which they knew to be false, that Mr. Kavanaugh was accused of running a criminal ‘Ponzi scheme.’  They did so in such a way that their series of statements was reasonably capable of sustaining the incorrect and defamatory meaning that Mr. Kavanagh did in fact run a criminal Ponzi scheme.”  See Complaint, ¶37.

            B.  Based on a totality of the circumstances, Plaintiff presents prima facie evidence that the Challenged Statements are actionable statements of fact

“Defamation is an invasion of the interest in reputation. The tort involves the intentional publication of a statement of fact that is false, unprivileged, and has a natural tendency to injure or which causes special damage.”  Smith v. Maldonado (1999) 72 Cal.App.4th 637, 645.  “The sine qua non of recovery for defamation ... is the existence of a falsehood.”  Baker v. Los Angeles Herald Examiner (1986) 42 Cal.3d 254, 259, 228.  Thus, a claim for defamation fails unless the challenged statement can be reasonably understood to express or imply a provably false assertion of fact.  See Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1, 19–20; Kahn v. Bower (1991) 232 Cal.App.3d 1599, 1607–1608. 

Because of the falsity requirement, rhetorical hyperbole, vigorous epithets, lusty and imaginative expressions of contempt, and language used in a loose, figurative sense have all been accorded constitutional protection.”  Ferlauto v. Hamsher (1999) 74 Cal.App.4th 1394, 1401.  As explained in Franklin v. Dynamic Details, Inc. (2004) 116 Cal.App.4th 375, 385, “satirical, hyperbolic, imaginative, or figurative statements are protected because the context and tenor of the statements negate the impression that the author seriously is maintaining an assertion of actual fact.”

In determining whether a statement is actionable fact or nonactionable opinion, courts use a “totality of the circumstances” test.  See Franklin, supra, 116 Cal.App.4^th at 385.  The same totality of the circumstances test is used to determine whether the statement in question communicates or implies a provably false statement of fact.  Id.  “Under the totality of the circumstances test, first, the language of the statement is examined. For words to be defamatory, they must be understood in a defamatory sense.  Next, the context in which the statement was made must be considered.”  Id.  “Whether a statement declares or implies a provably false assertion of fact is a question of law for the court to decide, unless the statement is susceptible of both an innocent and a libelous meaning, in which case the jury must decide how the statement was understood.”  Id at 385.

When determining whether a statement has a defamatory meaning, “ a court is to place itself in the situation of the hearer or reader, and determine the sense or meaning of the language of the complaint for libelous publication according to its natural and popular construction.  That is to say, the publication is to be measured not so much by its effect when subjected to the critical analysis of a mind trained in the law, but by the natural and probable effect upon the mind of the average reader.”  Morningstar, Inc. v. Superior Court (1994) 23 Cal.App.4th 676, 688.  Equally as important, the court must carefully examine the context in which the statement was made, which means it must “look at the nature and full content of the communication and to the knowledge and understanding of the audience to whom the publication was directed.  ‘[T]he publication in question must be considered in its entirety; ‘[i]t may not be divided into segments and each portion treated as a separate unit.’  It must be read as a whole in order to understand its import and the effect which it was calculated to have on the reader, and construed in the light of the whole scope [of the publication].”  Baker, supra, 42 Cal.3d at 261.

“That a publication states a truth, however, does not insulate the publication as a whole from a claim of defamation. It also is not determinative that [defendant]’s publication asked a rhetorical question. The ultimate question is whether a reasonable trier of fact could conclude that the published statements imply a provably false factual assertion.”  Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 901–902.

Plaintiff’s evidence establishes a prima facie case that the statements were reasonably interpreted an assertion of fact.  The challenged statements are undisputed.  Based on a review of the challenged statements located at ¶¶26-40, the Court finds the statements can reasonably be understood in the defamatory sense alleged by Plaintiff. In almost all instances, Klein expressly referenced the 2019 Variety article as the source of that assertion.  In many instances, Klein read directly from the 2019 Variety article and ran laugh tracks and comedic voice tracks while reading it and repeating the headline from the 2019 Variety article.  See e.g. Defendants’ Appendix of Exhibits, Ex. 5, July 1, 2021 Podcast.  

As a republisher of Spar’s accusation, Klein’s statements asserted that Kavanaugh was running a Ponzi scheme.  “If the defendant reprints or circulates a libelous writing, this has the same effect as an original publication. The same is true where the defendant repeats a slanderous charge, even though the defendant states the source of it, or indicates that he or she is merely repeating a rumor. In other words, each publication of a defamatory statement gives rise to a new cause of action.”  5 Witkin, Summary (11^th ed. 2022), Torts §633. 

A reasonable viewer would interpret Klein’s statements as statements of fact.  “The question is whether the statement is provably false in a court of law.”  John Doe 2 v. Superior Court (2016) 1 Cal.App.5th 1300, 1313.  Whether a person is running a Ponzi scheme is a provable statement of fact.  A Ponzi scheme is “a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors[.]” Ponzi scheme, New Oxford Am. Dictionary (Angus Stevenson & Christine A. Lindberg eds., Oxford Press 3d ed.).  See Plaintiff’s Compendium of Exhibits, Ex. O.  Whether Klein was running a Ponzi scheme can be objectively determined in a court of law. 

The context of the statements also supports a finding that the statements were assertions of fact, not hyperbolic, satirical or imaginative statements.  Klein cited to the Variety article, Spar’s accusations, and the alleged pending lawsuit as evidentiary support for his assertion that Kavanaugh was operating a Ponzi scheme.  The laugh tracks and comedic voices Klein played while he made the statements and the show’s overall comedic atmosphere do not change the Court’s analysis. 

When viewed in context, Klein was affirmatively stating that Kavanaugh was running a Ponzi scheme as a matter of fact.  However, even if the statements were susceptible to both an innocent and libelous meaning, a jury must resolve the question of how the audience understood Klein’s statements.  See Franklin, supra, 116 Cal.App.4^th at 385. 

            Klein fails to establish as an issue of law that the statements were nonactionable opinion.  Klein argues he cannot be held liable for his statements because they were statements of opinion and he fully disclosed the basis for his opinion.  “A statement of opinion based on fully disclosed facts can be punished only if the stated facts are themselves false and demeaning.  The rationale for this rule is that when the facts underlying a statement of opinion are disclosed, readers will understand they are getting the author's interpretation of the facts presented; they are therefore unlikely to construe the statement as insinuating the existence of additional, undisclosed facts.  When the facts supporting an opinion are disclosed, readers are free to accept or reject the author's opinion based on their own independent evaluation of the facts.”  Franklin, supra, 116 Cal.App.4th at 387 (statements that FCC stole copyrighted material and plagiarized data were statements of opinion purportedly interpreting copyright law and contract law and applying them to a particular set of facts). 

“Even if the speaker states the facts upon which he bases his opinion, if those facts are either incorrect or incomplete, or if his assessment of them is erroneous, the statement may still imply a false assertion of fact. Simply couching such statements in terms of opinion does not dispel these implications.”  Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 903 (plaintiff established prima facie case that defendant’s publication made provably false assertions of fact where plaintiff presented incomplete facts regarding Department of Insurance’s investigation of plaintiff’s business).

As discussed above, the Court finds a reasonable trier of fact could determine that Klein’s statements were statements of fact, not opinion.  This alone precludes the Court from finding that Klein’s statements were nonactionable statements of opinion based on fully disclosed, accurate facts.

In addition, Klein’s case is factually distinguishable from Franklin.  Here, Klein republished Spar’s defamatory accusation.  Klein did not have access to the factual basis for Spar’s defamatory accusation to which he could refer his viewers.  Klein referred his viewers to the article reporting on Spar’s accusation and his complaint in the LA Superior Court.  In contrast, the defendant in Franklin stated that the FCC “stole copyrighted material and plagiarized data,” and “the statements purported to interpret copyright law and contract law and appl[ied] that law to fully disclosed facts.”  Franklin, supra, 116 Cal.App.4^th at 387-388. The defendant in Franklin referred directly to the source material upon which he based his opinion. 

Moreover, Klein’s presentation of the factual basis for his statements was both incorrect and incomplete.  Klein failed to disclose that Spar (1) retracted his statement that Kavanaugh was operating a Ponzi scheme; (2) withdrew his complaint filed with the LA Superior Court and the complaint was no longer pending; and (3) filed the complaint in error from the outset.  Klein’s presentation of the factual basis for his statement was misleading and resulted in the inaccurate impression that (1) Spar was presently maintaining that Kavanaugh was operating a Ponzi scheme; (2) Spar never admitted that the initial accusation was in error; and (3) Spar’s complaint was pending. 

            Klein’s situation is more akin to that of the defendant in Wilbanks.  In Wilbanks, the defendant stated that one of plaintiff’s clients had obtained a judgment against plaintiff and that plaintiff “was under investigation” by the Department of Insurance.  See Wilbanks, supra, 121 Cal.App.4^th at 903.  The defendant’s statement “omitted significant facts,” including that (1) the judgment was obtained in small claims court and (2) the Department of Insurance investigates all complaints that are made.  “The actual facts therefore show only that a disgruntled viator contacted the department. Wolk's assertions, in context, suggest that the department had formed the opinion that the viator's claims had validity.”  Id. 

            Similarly, Klein’s comments suggested that Spar was still maintaining that Kavanaugh operated a Ponzi scheme, his civil complaint containing the accusation was still pending in LA Superior Court and Kavanaugh was therefore operating a Ponzi scheme.  These facts were incorrect based on the Variety article, which contained an update reporting on Spar’s settlement, his retraction of the accusation and his immediate withdrawal of the complaint.  Significantly, the Variety article reported that, “Spar apparently has some regrets as well, saying that Kavanaugh is not really running a Ponzi scheme” and quoted Kavanaugh as saying, “To my knowledge based on information provided to me…any reference to ESX or any related business as a ‘Ponzi scheme’ is not accurate.”  See Defendant’s Compendium of Exhibits, vol. II, Ex. 94. 

On the 2^nd step of SLAPP, the court “accept[s] as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law.”  Overstock.com, Inc., supra, 151 Cal.App.4th at 699.  Klein fails to establish as a matter of law that the statements in question were nonactionable statements of opinion and not assertions of fact.  Klein fails to defeat Plaintiff’s showing on this element of defamation. 

            C.  Kavanaugh presents sufficient evidence of falsity and Klein fails to establish the truth of the statements as matter of law

            Kavanaugh testifies that he is not running a Ponzi scheme and has never run a Ponzi scheme.  See Dec. of R. Kavanaugh, ¶¶6-7; Plaintiff’s Compendium of Exhibits, Ex. P, Dec. of R. Kavanaugh dated 7-9-19, ¶2.  Kavanaugh testifies that he was not running a Ponzi scheme through Proxima Media LLC and any affiliated or otherwise related entities.  See Plaintiff’s Compendium of Exhibits, Ex. P, Dec. of R. Kavanaugh dated 7-9-19, ¶2.  Kavanaugh testifies he and Michael Lambert fully funded Proxima, which funded ESX, and he eventually purchased Lambert’s interest in Proxima using his own capital.  Id.  In addition, Spar retracted the accusation that Kavanaugh was running a Ponzi scheme and in fact stated the statement was “inaccurate.”  Given the low threshold applied to the second step of SLAPP, Kavanaugh establishes that Spar’s accusation as republished by Klein was false.

            In response, Klein fails to establish as a matter of law that his statements were “substantially true,” and that Kavanaugh did operate a Ponzi scheme as detailed by Spar in his complaint.  “The law does not require the defendant to justify the literal truth of every word of the allegedly defamatory content.  It is sufficient if the defendant proves true the substance of the charge, irrespective of slight inaccuracy in the details, so long as the imputation is substantially true so as to justify the gist or sting of the remark.  Thus, the statement is not considered false unless it would have a different effect on the mind of the reader from that which the pleaded truth would have produced.”  Issa v. Applegate (2019) 31 Cal.App.5th 689, 708 (implied statement that plaintiff “famed the system to line his own pockets” was “substantially true”). 

            Klein fails to submit any evidence that Kavanaugh operated a Ponzi scheme.  Klein argues Kavanaugh cannot rely on Spar’s retraction to establish the falsity of the accusation.  However, Kavanaugh does not rely on Spar’s retraction. 

In addition, Klein argues Spar’s verified complaint is evidence of the truth of Spar’s accusations.  Klein does not present the verified complaint or a declaration from Spar attesting to the truth of his accusation.  Klein presents no evidence establishing the substantial truth of the accusation that Kavanaugh was operating a Ponzi scheme.  Even if he submitted such evidence, it would merely raise a triable issue of fact regarding the falsity of Klein’s statements.  Given Kavanaugh’s evidence, such evidence would not establish as a matter of law that Kavanaugh operated a Ponzi scheme.

D.  Kavanaugh presents prima facie evidence of actual malice and Klein fails to establish the absence of actual malice as a matter of law

“If the person defamed is a public figure, he cannot recover unless he proves, by clear and convincing evidence, that the libelous statement was made with ‘actual malice’—that is, with knowledge that it was false or with reckless disregard of whether it was false or not.”  Reader's Digest Assn. v. Superior Court (1984) 37 Cal.3d 244, 256; Nygård, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1048.  The test to determine actual malice is “a subjective test, under which the defendant’s actual belief concerning the truthfulness of the publication is the crucial issue.  This test directs attention to the defendant’s attitude toward truth or falsity fo the material published [,] not the defendant’s attitude toward the plaintiff.”  Reader’s Digest Assn., supra, 37 Cal.3d at 256. 

Actual malice can be proven by circumstantial evidence.  See Reader’s Digest Assn., supra, 37 Cal.3d at 257.  “Evidence of negligence, of motive and intent may be adduced for the purpose of establishing, by cumulation and by appropriate inferences, the fact of a defendant’s recklessness or of his knowledge of falsity.  A failure to investigate, anger and hostility toward the plaintiff, reliance upon sources known to be unreliable, or known to be biased against the plaintiff—such factors may, in an appropriate case, indicate that the publisher himself had serious doubts regarding the truth of his publication.”  Id. at 258. 

“The failure to conduct a thorough and objective investigation, standing alone, does not prove actual malice, nor even necessarily raise a triable issue of fact on that controversy.  Similarly, mere proof of ill will on the part of the publisher may likewise be insufficient.”  Id. 

“[A] defendant cannot automatically insure a favorable verdict by testifying that he published with a belief that the statements were true. The finder of fact must determine whether the publication was indeed made in good faith. Professions of good faith will be unlikely to prove persuasive, for example, where a story is fabricated by the defendant, is the product of his imagination, or is based wholly on an unverified anonymous telephone call. Nor will they be likely to prevail when the publisher's allegations are so inherently improbable that only a reckless man would have put them in circulation. Likewise, recklessness may be found where there are obvious reasons to doubt the veracity of the informant or the accuracy of his reports.”  Id. at 257.

Even when measuring the sufficiency of the evidence of malice under the clear and convincing standard, Kavanaugh presents prima facie evidence of actual malice.  Klein republished Spar’s accusation that Kavanaugh was operating a Ponzi scheme based entirely on the June 2019 Variety article.  Klein’s statements were made in June 2021 through October 2021, long after the article was updated to reflect Spar’s retraction of the accusation. The updated Variety article quoted Spar as stating that his prior allegation was “not accurate.”  The updated article also indicated that Spar and Kavanaugh did not intend to legally file their complaints and the documents were filed by “mistake.”  See Defendants’ Compendium of Exhibits, v. II, Ex. 94.  The updated article contained statements by Spar disclaiming the truth of his original accusations.  A trier of fact could conclude that Klein intentionally disregarded Spar’s retraction, intentionally concealed the true status of Spar’s accusation and knew Spar’s accusation was false because Spar himself said it was.

In addition, circumstantial evidence regarding Kavanaugh and Klein’s acrimonious litigation supports a finding that Klein recirculated Spar’s original accusations knowing they were false or with reckless disregard as to its falsity.  Based on the podcast episodes, Klein was clearly expressing hatred and disdain for Kavanaugh personally, and he was trying to goad, insult and humiliate Kavanaugh by repeating Spar’s retracted accusations.  See Plaintiff’s Compendium of Exhibits, Exs. A-H. 

Defendant Klein testifies he did not find Spar’s post-settlement statement to Variety credible, because (1) the Verified Complaint was made under oath but Spar’s post-settlement statement in Variety was not made under oath; (2) it seemed implausible that Spar would do such an about-face so shortly after filing the complaint; (3) the explanation that the complaint was filed by accident was completely implausible; and (4) Spar never provided the factual basis for his statement that his Ponzi scheme accusations were “not accurate.”  See Dec. of E. Klein, ¶13.  “Ultimately,” Klein told his audience they would have to decide for themselves whether to believe Spar’s verified complaint or his post-settlement statement.  Id.; see Defendant’s Compendium of Exhibits, Vol. I, Ex. 8, 51:50-54:50 and 1:45:20-1:47:50.  At best, Klein’s evidence raises a triable issue of on the element of actual malice. 

E.  General Damages are presumed

Statements are defamatory per se (eliminating the need to prove special damages) if, for example, they tend “directly to injure” in respect to the person's “office, profession, trade or business” by imputing “general disqualification in those respects which the office or other occupation peculiarly requires” or charge the plaintiff with a crime. Civ.C. §§ 45a, 46; Di Giorgio Fruit Corp. v. American Federation of Labor & Congress of Industrial Organizations (1963) 215 CA2d 560, 577 (victim of defamation per se need not prove special damages to recover general damages); see also CACI 1700, 1702, 1704.  “This being a case of slander which is libelous Per se (charging the crime of theft), general damages are presumed as a matter of law.”  Douglas v. Janis (1974) 43 Cal.App.3d 931, 940. 

Plaintiff presents prima facie evidence of slander per se based on Klein’s statements imputing him with a crime, i.e. operation of a Ponzi scheme.  Plaintiff is therefore not required to present evidence of special damages as an element of his claim. 

Klein argues that Plaintiff is limited to special damages under Civ. C. §48a(a).  The limitations and requirements of Civil Code §48a only apply to actions for damages for “publication of libel in a daily or weekly publication, or of slander by radio broadcast.” 

Klein’s statements on his podcast that Kavanaugh operated a Ponzi scheme were verbal statements and therefore constitute slander, not libel.  CC §45 (“Libel is a false and unprivileged publication by writing, printing, picture, effigy or other fixed representation to the eye…”); CC §46 (“Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means…”).  Klein’s podcast is not a “radio broadcast,” nor is any authority cited expanding the very specific category of “radio broadcast” to include podcasts streamed over the Internet. 

Klein fails to establish that CC §48a’s requirements apply to the entirety of Plaintiff’s claims.  As such, Plaintiff’s general damages as a result of Klein’s statements that he ran a Ponzi scheme are presumed. 

F.  Klein fails to establish that the entire action is barred as a matter of law under Civil Code §47(d)

“Generally, a defendant may defeat a cause of action by showing the plaintiff cannot establish an element of its cause of action or by showing there is a complete defense to the cause of action, and there is nothing in the language of section 425.16 or the case law construing it that suggests one of these avenues is closed to defendants seeking protection from a SLAPP suit.  [¶] However, the defendant also generally bears the burden of proving its affirmative defenses. Thus, although section 425.16 places on the plaintiff the burden of substantiating its claims, a defendant that advances an affirmative defense to such claims properly bears the burden of proof on the defense.”  See Peregrine Funding Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4^th 658, 676 (defendant established that plaintiff investor’s claims were time barred as a matter of law and plaintiff failed to establish likelihood of prevailing in face of that showing).

Klein argues his statements accusing Kavanaugh of operating a Ponzi scheme are privileged under CC §47(d).  As the proponent of the affirmative defense on the 2^nd step of SLAPP, Klein must establish that Kavanaugh’s claims are barred by CC §47(d) as an issue of law.

Under CC §47(d), “a privileged publication or broadcast is one made:…(d) By a fair and true report in, or a communication to, a public journal, of (A) a judicial…proceeding, or (D) of anything said in the course thereof, or (E) of a verified charge or complaint made by any person to a public official, upon which complaint a warrant has been issued.” 

            “The fair report privilege confers an absolute privilege on any fair and true report in, or a communication to, a public journal of a judicial proceeding, or anything said in the course thereof.  When it applies, the reported statements are absolutely privileged regardless of the defendants' motive for reporting them.  Courts have construed the privilege broadly, mindful of the Legislature's intent to preserve the scarce resources of California's courts and to avoid using the courts for satellite litigation.  [¶]  In general, whether a privileged occasion exists within the meaning of Civil Code section 47, subdivision (d), is for the court to decide; whether the report of the official proceedings itself is ‘fair and true,’ provided reasonable minds could disagree as to the effect of the communication on the average reader or listener, is a question of fact for the jury.  When, however, there is no dispute as to what occurred in the judicial proceeding reported upon or as to what was contained in the report, the question is one of law.”  Healthsmart Pacific, Inc. v. Kabateck (2016) 7 Cal.App.5^th 416, 431

            “The privilege applies to fair and true reports of anything said in the course of a judicial proceeding.  California courts have construed the phrase, ‘judicial proceeding,’ broadly to include the filing of a complaint.  Thus, fair and true communications to the news media about allegations in a complaint are covered by the privilege.”  Id. at 432. 

            As discussed connection with Plaintiff’s prima facie showing of an affirmative false statement of verifiable fact, Klein’s statements regarding Spar’s accusations and the status of his complaint were incomplete and inaccurate.  There is therefore a question as to whether Klein’s statements could be construed as a “fair and true report” of the complaint and the judicial proceeding.  Klein never mentioned that the complaint was submitted by accident to the LA Superior Court or that it was withdrawn.  Klein “ultimately” disclosed that Spar had retracted both his accusation and his complaint, but prior to that disclosure, Klein republished Spar’s accusation as an affirmative statement of fact.

            Kavanaugh also submits evidence that Spar’s complaint was never actually “filed,” because the LA Superior Court does not have any record of it.  See Plaintiff’s Evidence, Ex. R; Kavanaugh Dec., ¶¶12-13.  This calls into question whether a complaint was ever filed and a judicial proceeding ever initiated.  If not, CC §47(d) would not apply. 

            In addition, as Kavanaugh points out, many of Klein’s statements did not reference the complaint at all.  The issue is whether the average viewer or listener of the media reports would understand Klein’s statements as communications about Spar’s complaint (which would be privileged) or as facts (which would not).  See Healthsmart Pacific, Inc., supra, Cal.App.5th at 435–436. 

Based on the Court’s review of the podcast episodes, a reasonable viewer could understand Klein’s statements to be assertions of fact that Kavanaugh operated a Ponzi scheme.  Klein couched his statements as Spar’s accusations, but he did not indicate that his statements were a report or reference to Spar’s withdrawn complaint.  See, e.g., Plaintiff’s Evidence, Ex. A, July 30 Podcast at 61:3-5; Defs.’ Exs. 31-36 (podcasts displaying text “Ryan Kavanaugh Accused by Ex-Partner of Running a Ponzi Scheme”); Klein Decl. ¶ 3 (admitting Defs.’ Exs. 31-36 contain no additional information about Klein); Exhibit I, July 8, 2021 5:37 PM EST Tweet; Exhibit J, July 8, 2021 6:10 PM EST Tweet). 

Contrast, for example, defendant’s statements in Healthsmart Pacific, Inc. in a CBS radio report.  Defendant was counsel on the case and he was introduced during the report as such.  Id. at 436.  The reporter referenced the lawsuit several times during defendant’s interview and defendant himself referenced the “complaint.”  Id.  Defendant used the words “allege” and “alleged” when conveying the substance of his client’s allegations.  Id. 

Unlike the defendant attorney in Healthsmart Pacific, Inc., Klein republished Spar’s original accusation in several different episodes of his podcast, not just a single program or segment.  Klein was not counsel or a party to the Spar complaint, nor did he represent himself as such.  Klein did not reference the complaint or lawsuit each time he made the accusation. 

Defendant fails to establish that CC §47(d) applies to bar Plaintiff’s action as a matter of law.  As such, Defendant fails to defeat Plaintiff’s prima facie showing of defamation on the 2^nd step of SLAPP. 

Defendant’s SLAPP Motion is DENIED.