Medifast, Inc. v. Barry Minkow

Opinion

FILED NOT FOR PUBLICATION JUL 14 2014

MOLLY C. DWYER, CLERK UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

MEDIFAST, INC., a Delaware corporation No. 11-55687 and SHIRLEY MACDONALD, as personal representative of Bradley D.C. No. 3:10-cv-00382-JLS-BGS MacDonald,

Plaintiffs - Appellants, AMENDED MEMORANDUM*

v.

BARRY MINKOW, an individual; et al.,

Defendants - Appellees.

MEDIFAST, INC., a Delaware corporation No. 11-55699 and SHIRLEY MACDONALD, as personal representative of Bradley D.C. No. 3:10-cv-00382-JLS-BGS MacDonald,

Plaintiffs - Appellees,

v.

BARRY MINKOW, an individual; et al.,

Defendants,

And

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. ROBERT L. FITZPATRICK, an individual,

Defendant - Appellant.

Appeal from the United States District Court for the Southern District of California Janis L. Sammartino, District Judge, Presiding

Argued March 5, 2013** Submitted March 31, 2014 Pasadena, California

Before: PAEZ and WATFORD, Circuit Judges, and KENNELLY, District Judge.***

Plaintiffs Medifast, Inc. and Shirley MacDonald appeal the district court’s

order granting Defendants (1) Tracy Coenen and Sequence, Inc.’s (collectively,

“Coenen”), and (2) Barry Minkow and Fraud Discovery Institute, Inc.

(collectively, “Minkow”) respective Motions to Strike Plaintiffs’ complaint under

California’s anti-SLAPP statute, California Code of Civil Procedure section

425.16. Plaintiffs also appeal the district court’s order granting Defendant Robert

L. Fitzpatrick’s anti-SLAPP motion as to MacDonald’s libel per se cause of

*** The Honorable Matthew F. Kennelly, District Judge for the U.S. District Court for the Northern District of Illinois, sitting by designation.

-2- action.1 Fitzpatrick appeals the district court’s denial of his anti-SLAPP motion as

to Medifast’s libel per se cause of action. We affirm in part, reverse in part, and

vacate in part.2

1. We affirm the district court’s order granting Defendants’ anti-SLAPP

motions as to MacDonald. MacDonald’s claims were properly dismissed because

the statements at issue do not refer to him. See SDV/ACCI, Inc. v. AT & T Corp.,

522 F.3d 955, 961 (9th Cir. 2008).

2. We vacate the district court’s determination that Medifast is not a

limited public figure. In so concluding, the district court relied heavily on the

district court’s opinion in Makaeff v. Trump Univ., LLC, 10-CV-940-IEG(WVG),

2010 WL 3341638 (S.D. Cal. Aug. 23, 2010). We subsequently reversed Makaeff.

See id., 715 F.3d 254 (9th Cir. 2013). We therefore remand this issue to the district

court for further consideration in light of our opinion in Makaeff.

1 The district court also granted Fitzpatrick’s anti-SLAPP motion as to Plaintiffs’ causes of action for civil conspiracy to defame, market manipulation, and unfair competition law. Plaintiffs do not appeal the district court’s ruling with respect to these claims. 2 We have jurisdiction over Plaintiffs’ appeal of the district court’s order granting Minkow and Coenen’s motions and Fitzpatrick’s motion as to MacDonald under 28 U.S.C. § 1291. We have jurisdiction over Fitzpatrick’s appeal of the district court’s order denying his motion as to Medifast under the collateral order doctrine. See DC Comics v. Pac. Pictures Corp., 706 F.3d 1009, 1014–15 (9th Cir. 2013).

-3- 3. As to Fitzpatrick’s anti-SLAPP motion, Fitzpatrick’s statements that

Medifast’s TSFL program is an “‘endless chain’ within the meaning of California

Penal Code, Chapter 9[] § 327” are libel per se because they accuse Medifast of

operating an illegal enterprise. See Weinberg v. Feisel, 110 Cal. App. 4th 1122,

1135 (2003). We also conclude that Fitzpatrick’s statements are actionable

because a “reasonable jury,” Makaeff, 715 F.3d at 261, could find that the facts

underlying the statements are false, see Milkovich v. Lorain Journal Co., 497 U.S.

1, 18–19 (1990); Standing Comm. on Discipline of U.S. Dist. Court for Cent. Dist.

of California v. Yagman, 55 F.3d 1430, 1439 (9th Cir. 1995); Overstock.com, Inc.

v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 704–05 (2007). For example, a

reasonable jury could find that Fitzpatrick falsely stated that: (1) Medifast requires

buying TSFL product to participate in the program; (2) the only feasible means of

reaching the upper ranks in the TSFL program is to recruit new coaches; and (3)

Medifast pays client assist and client acquisition bonuses merely for recruiting.

Accordingly, we affirm the district court’s denial of Fitzpatrick’s anti-SLAPP

motion. However, our affirmance is subject to the district court’s determination

regarding Medifast’s limited public figure status. If the district court determines

that Medifast is a limited public figure, it must also determine whether Medifast

-4- has adduced sufficient evidence to support the conclusion that Fitzpatrick’s

defamatory statements were made with actual malice. Makaeff, 715 F.3d at 261.

4. As to Minkow, we affirm in part and reverse in part the district court’s

order granting Minkow’s anti-SLAPP motion. We agree that Medifast has failed

to show that Minkow’s individual statements were libelous per se. Minkow may,

however, be liable for re-publishing Fitzpatrick’s statements. On appeal, Minkow

asserts (for the first time) that the Communications Decency Act (“CDA”), 47

U.S.C. § 230(c), immunizes him from liability for re-publishing Fitzpatrick’s

statements. The CDA, however, does not provide immunity to “information

content providers.” 47 U.S.C. § 230(f)(3). Here, Minkow made statements that

indicate he may be “responsible, . . . in part, for the creation or development” of

Fitzpatrick’s reports. Id. For example, in an “Open Letter” to MacDonald

defending Fitzpatrick’s reports and FDI’s publication of those reports, Minkow

states: “Were we ‘false, misleading or without merit’ when we stated that the

foundation of Medifast’s recent stock surge . . . Were we ‘false, misleading or

without merit’ when we stated that the pyramid selling scheme of Medifast . . . .’”

Because Minkow failed to raise this defense below, Minkow’s developer/creator

status does not appear to have been considered by the district court. We therefore

-5- remand to the district court for further consideration of whether Minkow may be

held liable for Fitzpatrick’s statements.

5. Finally, we affirm the district court’s order granting of Coenen’s anti-

SLAPP motion. Coenen’s statements were either not libelous per se or were re-

publications for which she should be afforded immunity under the CDA.

6. Appellee Coenen shall recover her costs on appeal. All the other

parties shall bear their own costs on appeal.

AFFIRMED in part, REVERSED in part, and VACATED in part.

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