Forensic Advisors, Inc. v. Matrixx Initiatives, Inc.

907 A.2d 855, 170 Md. App. 520, 35 Media L. Rep. (BNA) 1115, 2006 Md. App. LEXIS 216
CourtCourt of Special Appeals of Maryland
DecidedSeptember 19, 2006
Docket2621, September Term, 2004
StatusPublished
Cited by5 cases

This text of 907 A.2d 855 (Forensic Advisors, Inc. v. Matrixx Initiatives, Inc.) is published on Counsel Stack Legal Research, covering Court of Special Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Forensic Advisors, Inc. v. Matrixx Initiatives, Inc., 907 A.2d 855, 170 Md. App. 520, 35 Media L. Rep. (BNA) 1115, 2006 Md. App. LEXIS 216 (Md. Ct. App. 2006).

Opinion

*523 MURPHY, Chief Judge.

In this appeal from the Circuit Court for Montgomery County, Forensic Advisors, Inc. and Timothy M. Mulligan, appellants, present two questions for our review:

1. Whether the circuit court erred when it failed to apply the correct legal standard by failing to quash the non-party subpoena in this SLAPP suit where Matrixx [Initiatives, Inc., appellee] failed to show that it had filed an actionable case and that it had a legitimate need for the material sought.
2. Whether the circuit court erred when it refused to rule on Forensic Advisor’s claim of the news media privilege.

For the reasons that follow, although we agree with appellants that they are entitled to assert the “news media privilege,” we also agree with the circuit court “that the deposition should go forward.”

Relevant Factual Background

Appellant Forensic Advisors, Incorporated (“FAI”) is a Maryland corporation that publishes The Eyeshade Report, a newsletter about publicly traded companies, which is distributed to FAI’s subscribers via the Internet. Appellant Timothy M. Mulligan, Esq. is the founder, president, and sole shareholder of FAI. Matrixx Initiatives, Inc. (“Matrixx”), a Delaware corporation, has its principal place of business in Arizona, and its stock is publicly traded on the NASDAQ stock exchange under the symbol MTXX. In the words of appellees’ brief:

Through its subsidiary, Zicam, LLC, Matrixx produces and sells several different products under the Zicam brand, all of which are nasal applicants targeted at alleviating the symptoms and effects associated with the common cold, allergic reactions, and nasal congestion. Matrixx’s stock is publicly traded ... and, as such its stock prices are negatively affected by false information and false statements published by individuals and made available to all stockhold *524 ers and potential investors through a variety of media, including the Internet.
Over the past several years, Matrixx has been the target of a large number of negative, defamatory statements published on the Internet through message boards dedicated to stock discussions. During this time period, trading on the Matrixx stock has been unusual, characterized by relatively large-volume “short” selling activity transactions which seek to capitalize on a decrease in stock price near the time that the market closes. Upon information and belief, these defamatory statements are made and coordinated by individuals engaged in illegal short-selling schemes, who are attempting to negatively affect Matrixx’s stock price for their financial benefit.

In December of 2002, Matrixx filed a lawsuit in Maricopa County, Arizona. 1 Appellants are not parties to the Arizona lawsuit. 2 An August 2003 edition of The Eyeshade Report contained (in the words of appellants’ brief) “a detailed, 23 page report with 104 footnotes ... that expressed concerns regarding certain aspects of Matrixx’s accounting and business operations.” In the words of appellees’ brief:

The [FAI] report contained a number of misleading statements regarding Matrixx’s sales growth, business relations, gross profit margins, potential earnings, statutory compliance and other operational matters [and that] [s]ome of these statements bear a striking resemblance to the types of statements and information which formed the basis for Matrixx’s lawsuit in Arizona.

*525 On October 28, 2003, Matrixx applied to the Arizona court for leave to take a foreign deposition. That application was granted, and the Arizona court issued a commission that “authorized [Maryland] to cause to be issued a subpoena duces tecum” to appellants. On October 31, 2003, the Circuit Court for Montgomery County issued a subpoena to “FORENSIC ADVISORS INC C/O STATUTORY AGENT, TIMOTHY M. MULLIGAN,” which “commanded [that Mr. Mulligan] personally appear and ... produce [records and documents described in an attached subpoena duces tecum].” According to appellants, they responded to this subpoena by producing “383 pages of documents[.]”

On August 16, 2004, Matrixx petitioned the Arizona court for another commission to take a foreign deposition of Mr. Mulligan. That petition was granted, and the Arizona court issued a commission that “authorized [Maryland] to cause to be issued an amended subpoena duces tecum for the taking of the deposition of the following individual: Mr. Timothy M. Mulligan Forensic Advisors, Inc.” On August 26, 2004, the Circuit Court for Montgomery County issued the following subpoena:

To: TIMOTHY M MULLIGAN FORENSIC ADVISORS INC 8101 CONNECTICUT AVENUE # N109 CHEVY CHASE MD 20815

You are commanded to personally appear and [X] produce the following:

SEE ATTACHMENT

At CAPITOL PROCESS SERVICES 9892 HOLLOW GLEN PLACE, SILVER SPRING,

MD 209100-1138

On Friday, the 22nd day of October, 2004 at 10:00 A.M.

Attached to the subpoena was an AMENDED SUBPOENA DUCES TECUM that “commanded” Mr. Mulligan to produce “books, papers, documents, or tangible things” described in the subpoena. The record shows that Mr. Mulligan was *526 served with the subpoena duces tecum on September 13, 2004. 3

Thereafter, in a letter to Mr. Mulligan, 4 appellees’ counsel stated that Mr. Mulligan was “served with a Subpoena at [his] address ... on September 13, 2004 at 10:00 a.m.” This letter also stated:

Because you have been legally served with the Subpoena, you are required by law to appear for this deposition. If you do not appear, a warrant may be issued for your arrest. Please contact me regarding the deposition. We are willing to discuss with you when and where the deposition takes place, if you find this date inconvenient. But, in the absence of an agreement with us, we will expect you to appear for the deposition.

In a letter dated October 9, 2004, Mr. Mulligan responded to appellees’ counsel, advising that he intended to file a protective order so that “discovery may not be had,” and asserted the following reasons why a protective order should issue:

1.) Neither Forensic Advisors, Inc. nor Timothy M. Mulligan were personally or properly served; 2.) The subpoena names two different entities, Timothy M. Mulligan and Forensic Advisors, Inc., without clarifying which of those two entities the plaintiff is attempting to subpoena; 3.) Neither Forensic Advisors, Inc., nor Timothy M. Mulligan ever communicated with Floyd Schneider in any manner *527

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Bluebook (online)
907 A.2d 855, 170 Md. App. 520, 35 Media L. Rep. (BNA) 1115, 2006 Md. App. LEXIS 216, Counsel Stack Legal Research, https://law.counselstack.com/opinion/forensic-advisors-inc-v-matrixx-initiatives-inc-mdctspecapp-2006.