Virginia Lawyers Weekly VA Lawyers Weekly
Where a pharmaceutical company sued a newspaper for claims arising from an article about COVID-19 home testing, the newspaper’s demurrer to defamation claims is overruled. Demurrers to claims against the paper’s executives in their personal capacity the paper’s parent companies are sustained as is a claim for tortious interference with a business expectancy.
Background
“Spring 2020 marked the onset of the Covid-19 pandemic, which led to the increased demand for supplies to respond to the outbreak. Companies began producing more medical supplies and Covid-19 tests as well as antibody tests. Plaintiff Vivera Pharmaceuticals Inc. (‘Vivera’) is one company that began manufacturing Covid-19 home test kits.
“As more antibody tests flooded the market, the public wanted reviews of the products. Defendant Gannett Satellite Information Network, LLC, better known as USA Today, published an article … in June 2020 discussing the U.S. Food and Drug Administration’s regulation of antibody tests. The article featured Vivera as a prime example of an antibody test manufacturer with limited experience managed by a questionable CEO.
“It specifically highlighted Vivera CEO, Paul Edalat’s troubled history with regulators and his legal entanglements. Vivera viewed this Article as a ‘scattershock attack’ news report that disparaged its business.
“For this reason, Vivera objected to the Article and demanded that USA Today retract certain statements. When the statements were not removed, Vivera filed a Complaint for defamation in federal court and then voluntarily dismissed the action in August 2020. On September 21, 2021, Vivera filed suit in this Court for defamation, defamation per se, and tortious interference with a business expectancy. Vivera seeks $500 million in damages as well as $350,000 in punitive damages. In the current matter, Defendants demur to all counts raised in Vivera’s Complaint.”
Legal standards
“A defamation claim requires the publication of an actionable statement with the requisite intent. … A statement is considered ‘actionable’ when it is false and defamatory. … Defendants call upon this Court to exercise its gatekeeping function and dismiss Vivera’s defamation claims based on their assertion the Article is accurate.
“Yet, at the pleading stage, the Court’s function is limited to determining as a matter of law whether a statement is defamatory – not to verify its truth. …
“The only question the Court must ask regarding the statements’ falsity on demurrer is whether the alleged defamatory statement has a ‘provably false factual connotation and thus [is] capable of being proven true or false.’ … (emphasis added) …
“A statement is defamatory if it has the ‘requisite defamatory sting to one’s reputation.’ … If the language does not appear defamatory on its face, it may still be disparaging through suggestion or innuendo.”
Discussion
“The Article focuses mainly on Vivera’s CEO, Paul Edalat [who is not a plaintiff in this case] and his independent business ventures and lawsuits. Defendants easily dismiss these statements because they reason Vivera cannot bring a defamation claim on someone else’s behalf. However, these statements concern Vivera’s reputation and perhaps could be construed as to Vivera. …
“Vivera properly pled throughout the Complaint that the statements about Mr. Edalat concern Vivera and its business. For example, in paragraph 55 of the Complaint, Vivera states, ‘This statement is false and misleading by implying that, because an opposing party in litigation made false and misleading accusations about Edalat and accused Edalat of fraud, there must be something wrong with Vivera’s antibody tests.’
“Additionally, a person reading the Article would understand Mr. Edalat’s reputation to reflect poorly on Vivera. Although some statements are not blatantly about Vivera, they suggest Vivera is managed by an unscrupulous individual and is therefore unethical. The CEO is the face of the company and any misgivings about his honesty or transparency place Vivera’s credibility into question. …
“The Article begins by suggesting Vivera should not be making tests because of its CEO’s character. The same implications are weaved throughout the Article. Consequently, these statements imply Vivera and its products are unreliable. The statements about Mr. Edalat not only concern Vivera, but are defamatory through innuendo. Therefore, the defamation claim against Gannett Satellite Information Network, LLC, d/b/a USA Today and the authors of the article survive demurrer.”
Concerning statements in the article about the testing kits, some “are ostensibly defamatory and others seemingly innocuous, [so] the only way to determine whether the Article is defamatory through suggestion is by reading it from start to finish.
“For instance, the Article states: ‘The FDA now requires all companies to reveal the results of validation tests to the agency. Many companies post accuracy numbers on their website. Vivera does not – and when asked about the test’s accuracy, McColgan [an agent for Vivera] was reluctant to answer.’ …
“This statement on its own suggests Vivera is refusing to be transparent with the public as well as regulators. Similar statements are dispersed throughout the Article and even imply that Vivera representatives are concealing information regarding the accuracy of the tests. …
“A person reading the Article’s claims about Paul Edalat, Vivera’s lack of transparency, and failure to comply with FDA requirements would question Vivera’s reputation and the efficacy of its products. …
“[B]ased on the pleadings and the Article, it is evident that the Article is reasonably capable of defamatory meaning.”
As to actual malice, “Vivera alleges Defendants sought out one-sided statements from attack pieces against the company. … It also alleges Defendants relied on articles and information that were later retracted. … Vivera further claims Defendants failed to investigate public records revealing the falsity of its statements and the FDA standards it refers to in the Article. …
“These are only a few examples of the ways in which Vivera claims the existence of malice. Whether Defendants actually acted with malice must be left to the factfinder to determine. …
“Under Virginia law, defamatory statements that prejudice one’s profession or trade are actionable for defamation per se. … Vivera sufficiently pleads the statements within the Article prejudiced Vivera in its profession or trade.”
Conclusion
“[T]he demurrer as to the claims against the corporate executives and USA Today’s parent companies and tortious interference is sustained without prejudice. The demurrer as to the defamation and defamation per se counts is overruled.”
Vivera Pharmaceuticals v. Gannett Co., et al., Case No. CL-2020-14458, March 23, 2021, Fairfax Cir. Ct. (Smith) Matthew E. Kelley, Chad R. Bowman, Jack White for the parties. VLW 021-8-046, 10 pp.
