23-7838-cv Dfinity Found. v. N.Y. Times Co.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER“). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of July, two thousand twenty-four.
PRESENT: PIERRE N. LEVAL, RAYMOND J. LOHIER, JR., EUNICE C. LEE, Circuit Judges. ------------------------------------------------------------------ DFINITY FOUNDATION, SWITZERLAND- BASED NOT-FOR-PROFIT ORGANIZATION,
Plaintiff-Appellant,
v. No. 23-7838-cv
THE NEW YORK TIMES COMPANY, A NEW YORK CORPORATION, ANDREW ROSS SORKIN, AN INDIVIDUAL, EPHRAT LIVNI, AN INDIVIDUAL, ARKHAM INTELLIGENCE, INC., A DELAWARE CORPORATION, MIGUEL MOREL, AN INDIVIDUAL, JONAH BENNET, AN INDIVIDUAL, ZACHARY LERANGIS, AN INDIVIDUAL, KEEGAN MCNAMARA, AN INDIVIDUAL, NICHOLAS LONGO, AN INDIVIDUAL, JOHN DOES 1‒10,
Defendants-Appellees.* ------------------------------------------------------------------
FOR APPELLANT: DILAN A. ESPER (Charles J. Harder, Emmanuel B. Fua, on the brief), Harder Stonerock LLP, New York, NY
FOR APPELLEES THE NEW YORK DANA R. GREEN (David E. TIMES COMPANY, ANDREW ROSS McCraw, on the brief), The New SORKIN, EPHRAT LIVNI: York Times Company Legal Department, New York, NY
FOR APPELLEES ARKHAM ANDREW KIM (Jeffrey A. Simes, INTELLIGENCE, INC., MIGUEL Meghan K. Spillane, Goodwin MOREL, ZACHARY LERANGIS, Procter LLP, New York, NY, NICHOLAS LONGO: Jesse Lempel, Goodwin Procter LLP, Boston, MA, on the brief), Goodwin Procter LLP, Washington, DC
FOR APPELLEE KEEGAN DANIEL A. SINGER, Law Offices MCNAMARA: of Daniel A. Singer PLLC, New York, NY
Appeal from a judgment of the United States District Court for the
Southern District of New York (Lewis A. Kaplan, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
* The Clerk of Court is directed to amend the caption as set forth above. 2 AND DECREED that the judgment of the District Court is AFFIRMED.
Plaintiff-Appellant Dfinity Foundation appeals from a November 14, 2023
judgment of the United States District Court for the Southern District of New
York (Kaplan, J.) dismissing its complaint against Defendants-Appellees for
failure to state a claim. Dfinity brought New York state law defamation and
deceptive business practice claims against Arkham Intelligence, Inc. and its
current and former employees (the “Arkham Defendants”) arising from
Arkham’s publication of a report and video analyzing the collapse in price of
Dfinity’s Internet Computer Protocol (“ICP”) token, a blockchain asset that can
be traded as a cryptocurrency. Dfinity also sued The New York Times
Company and two individual reporters (the “Times Defendants”) for defamation
under New York law, based on a New York Times article discussing the decline
in ICP’s value and citing to the Arkham report. We assume the parties’
familiarity with the underlying facts and the record of prior proceedings, to
which we refer only as necessary to explain our decision to affirm.
I. Defamation Claims
A. Arkham Defendants
Where the defamation claim is brought by a public figure, the First
3 Amendment requires a showing that the defendant acted with actual malice, as
defined in N.Y. Times Co. v. Sullivan, 376 U.S. 254, 280 (1964), to mean awareness
of the falsity or reckless disregard for likely falsity of the challenged statements.
Biro v. Conde Nast, 807 F.3d 541, 544 (2d Cir. 2015). 1 The District Court
dismissed Dfinity’s defamation claims against the Arkham Defendants after
concluding, among other reasons, that Dfinity had failed to plead facts sufficient
to establish actual malice. On appeal, Dfinity argues that its complaint
adequately pleads actual malice. We reject that argument and affirm with
respect to the Arkham Defendants.
The “hurdles to plausibly pleading actual malice . . . [are] significant given
the First Amendment interests at stake” in defamation cases. Id. at 545. “[A]
public-figure plaintiff must plead ‘plausible grounds’ to infer actual malice by
alleging ‘enough fact[s] to raise a reasonable expectation that discovery will
reveal evidence of’ actual malice.” Id. at 546 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556 (2007)). The allegations must plausibly support that the
defendant acted with “a subjective awareness of either falsity or probable falsity
1Dfinity does not dispute that it qualifies as a public figure and is required to plead actual malice as an element of its defamation claim. 4 of the defamatory statement[s], or acted with reckless disregard of the . . . truth
or falsity” of the challenged statements. Celle v. Filipino Rep. Enters. Inc., 209 F.3d
163, 182 (2d Cir. 2000).
Dfinity’s allegations fall short of raising a plausible inference of actual
malice. See Biro, 807 F.3d at 545. The allegations that Arkham has ties to
Dfinity’s economic competitors or that Arkham’s officers fled the country flush
with cash after the report’s publication do not support a plausible inference that
the Arkham Defendants acted with malice “at the time of publication.” Herbert
v. Lando, 781 F.2d 298, 306 (2d Cir. 1986); see Celle, 209 F.3d at 182.
Finally, although malice may be inferred when a publication is “fabricated
or is based wholly on an unverified, anonymous source,” Church of Scientology
Int'l v. Behar, 238 F.3d 168, 174 (2d Cir. 2001) (emphasis added), Dfinity’s claims
about the veracity of the data discussed in the report fail to render its allegations
of malice plausible. Dfinity claims that the facts in the Arkham report are
fabricated. But the complaint does not allege that the underlying blockchain
data cited in the report is inaccurate. And to the extent that Dfinity’s complaint
references specific transfers of ICP, it confirms rather than contradicts the
underlying data provided by Arkham. Dfinity also claims that the statements in
5 the Arkham report were inherently implausible because Dfinity’s senior team
members were subject to lockup restrictions and delayed token allocations at the
time of the ICP token launch. The existence of lockup restrictions does not
negate the statements made in the Arkham report regarding the possibility that
current or former employees engaged in the transfers alleged. In any event, as to
the actual malice element, Dfinity has not plausibly alleged that Arkham was
aware of any lockup restrictions before it published the report. 2 See Lando, 781
F.2d at 306.
Accordingly, we affirm the District Court’s dismissal of the defamation
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23-7838-cv Dfinity Found. v. N.Y. Times Co.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER“). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of July, two thousand twenty-four.
PRESENT: PIERRE N. LEVAL, RAYMOND J. LOHIER, JR., EUNICE C. LEE, Circuit Judges. ------------------------------------------------------------------ DFINITY FOUNDATION, SWITZERLAND- BASED NOT-FOR-PROFIT ORGANIZATION,
Plaintiff-Appellant,
v. No. 23-7838-cv
THE NEW YORK TIMES COMPANY, A NEW YORK CORPORATION, ANDREW ROSS SORKIN, AN INDIVIDUAL, EPHRAT LIVNI, AN INDIVIDUAL, ARKHAM INTELLIGENCE, INC., A DELAWARE CORPORATION, MIGUEL MOREL, AN INDIVIDUAL, JONAH BENNET, AN INDIVIDUAL, ZACHARY LERANGIS, AN INDIVIDUAL, KEEGAN MCNAMARA, AN INDIVIDUAL, NICHOLAS LONGO, AN INDIVIDUAL, JOHN DOES 1‒10,
Defendants-Appellees.* ------------------------------------------------------------------
FOR APPELLANT: DILAN A. ESPER (Charles J. Harder, Emmanuel B. Fua, on the brief), Harder Stonerock LLP, New York, NY
FOR APPELLEES THE NEW YORK DANA R. GREEN (David E. TIMES COMPANY, ANDREW ROSS McCraw, on the brief), The New SORKIN, EPHRAT LIVNI: York Times Company Legal Department, New York, NY
FOR APPELLEES ARKHAM ANDREW KIM (Jeffrey A. Simes, INTELLIGENCE, INC., MIGUEL Meghan K. Spillane, Goodwin MOREL, ZACHARY LERANGIS, Procter LLP, New York, NY, NICHOLAS LONGO: Jesse Lempel, Goodwin Procter LLP, Boston, MA, on the brief), Goodwin Procter LLP, Washington, DC
FOR APPELLEE KEEGAN DANIEL A. SINGER, Law Offices MCNAMARA: of Daniel A. Singer PLLC, New York, NY
Appeal from a judgment of the United States District Court for the
Southern District of New York (Lewis A. Kaplan, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
* The Clerk of Court is directed to amend the caption as set forth above. 2 AND DECREED that the judgment of the District Court is AFFIRMED.
Plaintiff-Appellant Dfinity Foundation appeals from a November 14, 2023
judgment of the United States District Court for the Southern District of New
York (Kaplan, J.) dismissing its complaint against Defendants-Appellees for
failure to state a claim. Dfinity brought New York state law defamation and
deceptive business practice claims against Arkham Intelligence, Inc. and its
current and former employees (the “Arkham Defendants”) arising from
Arkham’s publication of a report and video analyzing the collapse in price of
Dfinity’s Internet Computer Protocol (“ICP”) token, a blockchain asset that can
be traded as a cryptocurrency. Dfinity also sued The New York Times
Company and two individual reporters (the “Times Defendants”) for defamation
under New York law, based on a New York Times article discussing the decline
in ICP’s value and citing to the Arkham report. We assume the parties’
familiarity with the underlying facts and the record of prior proceedings, to
which we refer only as necessary to explain our decision to affirm.
I. Defamation Claims
A. Arkham Defendants
Where the defamation claim is brought by a public figure, the First
3 Amendment requires a showing that the defendant acted with actual malice, as
defined in N.Y. Times Co. v. Sullivan, 376 U.S. 254, 280 (1964), to mean awareness
of the falsity or reckless disregard for likely falsity of the challenged statements.
Biro v. Conde Nast, 807 F.3d 541, 544 (2d Cir. 2015). 1 The District Court
dismissed Dfinity’s defamation claims against the Arkham Defendants after
concluding, among other reasons, that Dfinity had failed to plead facts sufficient
to establish actual malice. On appeal, Dfinity argues that its complaint
adequately pleads actual malice. We reject that argument and affirm with
respect to the Arkham Defendants.
The “hurdles to plausibly pleading actual malice . . . [are] significant given
the First Amendment interests at stake” in defamation cases. Id. at 545. “[A]
public-figure plaintiff must plead ‘plausible grounds’ to infer actual malice by
alleging ‘enough fact[s] to raise a reasonable expectation that discovery will
reveal evidence of’ actual malice.” Id. at 546 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556 (2007)). The allegations must plausibly support that the
defendant acted with “a subjective awareness of either falsity or probable falsity
1Dfinity does not dispute that it qualifies as a public figure and is required to plead actual malice as an element of its defamation claim. 4 of the defamatory statement[s], or acted with reckless disregard of the . . . truth
or falsity” of the challenged statements. Celle v. Filipino Rep. Enters. Inc., 209 F.3d
163, 182 (2d Cir. 2000).
Dfinity’s allegations fall short of raising a plausible inference of actual
malice. See Biro, 807 F.3d at 545. The allegations that Arkham has ties to
Dfinity’s economic competitors or that Arkham’s officers fled the country flush
with cash after the report’s publication do not support a plausible inference that
the Arkham Defendants acted with malice “at the time of publication.” Herbert
v. Lando, 781 F.2d 298, 306 (2d Cir. 1986); see Celle, 209 F.3d at 182.
Finally, although malice may be inferred when a publication is “fabricated
or is based wholly on an unverified, anonymous source,” Church of Scientology
Int'l v. Behar, 238 F.3d 168, 174 (2d Cir. 2001) (emphasis added), Dfinity’s claims
about the veracity of the data discussed in the report fail to render its allegations
of malice plausible. Dfinity claims that the facts in the Arkham report are
fabricated. But the complaint does not allege that the underlying blockchain
data cited in the report is inaccurate. And to the extent that Dfinity’s complaint
references specific transfers of ICP, it confirms rather than contradicts the
underlying data provided by Arkham. Dfinity also claims that the statements in
5 the Arkham report were inherently implausible because Dfinity’s senior team
members were subject to lockup restrictions and delayed token allocations at the
time of the ICP token launch. The existence of lockup restrictions does not
negate the statements made in the Arkham report regarding the possibility that
current or former employees engaged in the transfers alleged. In any event, as to
the actual malice element, Dfinity has not plausibly alleged that Arkham was
aware of any lockup restrictions before it published the report. 2 See Lando, 781
F.2d at 306.
Accordingly, we affirm the District Court’s dismissal of the defamation
claims against Arkham on the ground that Dfinity has failed to allege actual
malice.
B. Times Defendants
Dfinity’s defamation claim against the Times Defendants rests on three
2 On appeal, Dfinity explicitly argues that the underlying data in the Arkham report was fabricated, and it urges us to consider the transcript of an interview with Dfinity employees, Arkham CEO Miguel Morel, and a third-party blockchain analyst, in which the Dfinity employees allege that Arkham’s data is untrue and unverifiable. This evidence is outside the “narrow universe of materials” we may review on a motion to dismiss, and we decline to consider it here. Clark v. Hanley, 89 F.4th 78, 93 (2d Cir. 2023). And, for reasons stated below, we do not find that the contents of the interview would serve to plead the falsity of the underlying transactions and allege malice even if included in the complaint. 6 statements (out of five initially alleged in the complaint) published in an article
that discussed the ICP price crash and cited the Arkham report. We agree that
the District Court properly dismissed the defamation claims based on these
statements.
Statement 1, in which the article described the release of ICP tokens as an
“initial coin offering, the crypto equivalent of a company going public and listing
shares for investors to buy,” is non-actionable. App’x 14 ¶ 35(a). Dfinity
claims that the statement falsely implies that ICP is a security and that Dfinity
illegally engaged in the unregistered sale of securities. Because not all initial
coin offerings are regulated as securities sales, see U.S. Sec. & Exch. Comm’n,
Framework for “Investment Contract” Analysis of Digital Assets (Apr. 3, 2019), we
agree with the District Court that Dfinity’s reading represents a “strained” and
“artificial” interpretation of the statement. Dfinity Found. v. N.Y. Times Co., No.
22-cv-5418, 2023 WL 7526458, at *4 (S.D.N.Y. Nov. 13, 2023) (quoting Aronson v.
Wiersma, 65 N.Y.2d 592, 594 (1985)). The description of the ICP release as an
initial coin offering, either alone or viewed in light of the other challenged
statements, is not itself “reasonably susceptible of a defamatory meaning.”
Aronson, 65 N.Y.2d at 594.
7 We also affirm the District Court’s dismissal of claims arising from
statements 4 and 5 on the basis that Dfinity has failed to plead actual malice.
Dfinity’s conclusory and implausible allegations do not establish that the Times
Defendants “actually entertained serious doubts about the veracity of the
publication[s], or that there [were] obvious reasons to doubt the veracity of
[Arkham] or the accuracy of [its] reports.” Contemp. Mission, Inc. v. N.Y. Times
Co., 842 F.2d 612, 621 (2d Cir. 1988) (quotation marks omitted).
We accordingly affirm the District Court’s dismissals of the defamation
claims against the Times Defendants.
II. Deceptive Business Practices Claim Against Arkham
Dfinity also claims that the Arkham Defendants violated New York
General Business Law § 349(a), which prohibits “[d]eceptive acts or practices in
the conduct of any business, trade, or commerce or in the furnishing of any
service[s] in [New York].” We affirm the District Court’s dismissal of this claim
for substantially the reasons explained by the District Court: the gravamen of the
complaint was not consumer injury or harm to the public interest. See Dfinity
Found., 2023 WL 7526458, at *6; see also Securitron Magnalock Corp. v. Schnabolk, 65
F.3d 256, 264 (2d Cir. 1995).
8 III. Leave to Amend
The District Court dismissed the case without addressing Dfinity’s request
for leave to amend its complaint. We construe the District Court’s dismissal as
having also implicitly denied leave to amend on the basis that it would be futile
to do so. On appeal, Dfinity argues that amendment would not be futile. In
support, it points to the interview statements of Miguel Morel, Arkham’s Chief
Executive Officer, acknowledging that the Arkham report failed to disclose
available data on which it relied, in the form of links to specific blockchain
transactions or addresses. Dfinity asserts that amending the complaint to add
Morel’s statements during the interview would cure any pleading deficiencies
identified by the District Court. We disagree. The Morel interview does not
adequately support that the transactions detailed in the Arkham report were
false or fabricated.
We accordingly affirm the District Court’s decision to dismiss without
granting leave to amend.
9 CONCLUSION
We have considered Dfinity’s remaining arguments and conclude that
they are without merit. For the foregoing reasons, the judgment of the District
Court is AFFIRMED.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court