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Wednesday, August 04, 2021

Defamation procedure II

Devins Nunes is not the only new defamation action raising interesting procedural issues. Alan Dershowitz sued Netflix and others for defamation over the documentary Jeffrey Epstein: Filthy Rich. Defendants answered yesterday; here is Netflix's Answer.

Netflix has good lawyers (the firm of Davis Wright Tremaine). But the Answer does many of the things that are inconsistent with the FRCP, that I try to teach students not to follow, but that are common in practice because no one--not plaintiffs, not defendants, and not judges (since Milton Shadur died)--cares about the content of the Answer. This would make a good final exam next spring.

Here are some problems:

    • Netflix responds to numerous allegations as it "lacks information sufficient to form a belief as to the truth or falsity of the
allegations and "on that basis, denies each and every allegation in" the paragraph. This is wrong. FRCP 8(b)(5) allows a party to "state" that it "lacks knowledge or information sufficient to form a belief about the truth of an allegation," which has the "effect of a denial." That is, a defendant can respond to an allegation by saying "I don't know" and the court will treat that as a denial. But Netflix said "I don't know and therefore I deny." That is not logically possible and not what FRCP 8(b)(5) authorizes. This might reflect a disconnect between FRCP 8(b)(5) and FRCP 11(b)(4), which requires a defendant to certify that denials "specifically so identified, are reasonably based on belief or a lack of information." But if 11(b)(4) allows a denial based on lack of knowledge, 8(b)(5) is superfluous.

    • This is one I had not seen before: After responding to 138 numbered paragraphs, the Answer has a subject-heading "General Denial" and states:

Each numbered paragraph in this Answer responds to the identically numbered paragraph in the Amended Complaint. Netflix denies all allegations, declarations, claims, or assertions in the Amended Complaint that are not specifically admitted in this Answer. To the extent the headings contained in the Amended Complaint constitute allegations, such allegations are denied.

        This is unnecessary. FRCP 8(b)(3) allows general denials of the entire complaint or a general denial of everything not admitted. But the Answer admitted and denied facts paragraph-by-paragraph. This blanket statement is unnecessary.

    • The Answer asserts 24 affirmative defenses. But most of these are not affirmative defenses--where the defendant admits the allegations in the complaint but raises new facts and law that cause those facts not to have their ordinary effect. These are expressly stated failure-of-proof defenses--defendant arguing that the plaintiff cannot prove the truth of the allegations in the complaint. For example, the sixth defense is that Dershowitz is a public figure and cannot prove actual malice by clear-and-convincing evidence. That is a failure-of-proof defense--Dershowitz will fail to prove his claim because he cannot carry his burden of persuasion on an element. The defendant is not required to plead the absence of malice. The twenty-third defense is that Dershowitz's reliance in his fraud claim was not reasonable. Again, this argues that Dershowitz cannot prevail on an element on which he bears the burden of proof--the reasonableness of any reliance. The defendant does not have to prove unreasonableness.

            Again, this is common. If the complaint alleges the plaintiff spoke with actual malice, denying the allegation is equivalent to saying  "we did not act with actual malice," which puts the plaintiff to the task of proving the disputed fact of the defendant's state of mind. If the complaint alleges the plaintiff reasonably relied on false statements, denying the allegation is equivalent to saying "his reliance was not reasonable," which puts the plaintiff to the task of proving the disputed fact of the reasonableness of his reliance. But defendants are afraid that will be lost to whomever reads the pleading. So they affirmatively state the failure of the element, even though that is not what the rules imagine.

    • The Answer includes a counterclaim under New York's new Anti-SLAPP law. I have written before about how the procedural defenses of anti-SLAPP laws should not apply in federal court. But New York's law creates a counterclaim that the claim is a SLAPP (as defined), allowing for recovery of attorney's fees and compensatory and punitive damages. It functions something like the tort of abuse of process, often raised as an affirmative defense to a questionable tort claim. This is a nice example of how one legal rule can be an affirmative defense and a counterclaim and the different roles each plays. The SLAPP issues will not defeat Dershowitz's claims (that will happen under New York Times), but they provide basis for Netflix to recover money apart from the resolution of the original claim. By establishing a new claim, New York found a way to allow federal defendants to pursue anti-SLAPP arguments and recover anti-SLAPP remedies, in a slightly different posture.

    • Netflix alleged supplemental jurisdiction over the counterclaim because Dershowitz's claims arise from the same set of facts. This is a legal and strategic mistake, although another common one.

        Why not allege diversity jurisdiction? That is the basis for jurisdiction over Dershowitz's original claims (defamation, fraud, and other torts) over the defendants. If there is diversity over the claims Dershowitz and all defendants, there must be diversity over counterclaims between the same parties. The fees and damages sought almost certainly will exceed $ 75,000. So § 1332(a)(1) is satisfied. Supplemental jurisdiction is supposed to be limited to cases in which there is no "independent" basis for jurisdiction. My guess is this practice derives from habit established in the paradigm case--plaintiff brings federal claims against non-diverse defendants and the defendants assert state counterclaims; supplemental jurisdiction is necessary in those cases. But it is not necessary when the basis for original jurisdiction is diversity and the same parties are involved in claims and counterclaims.

        There is a second problem--there may not be supplemental jurisdiction here. The best conclusion is that the SLAPP counterclaim is permissive rather than compulsory, because it does not arise out of the same transaction or occurrence as the claim. This case reflects a common posture--defendant does something to injure plaintiff, plaintiff seeks a remedy for the injury, defendant alleges that plaintiff's remedial efforts violate defendant's rights, defendant brings counterclaim based on those injuries. For example, courts generally hold that an abuse-of-process counterclaim is not compulsory to an original tort claim--the tort claim is based on the real-world events that caused the injury to the plaintiff, while the counterclaim is based on the action of filing the lawsuit. Or take Jones v. Ford Motor Credit. Plaintiffs believed the terms of their auto loans were racially discriminatory and brought ECOA claims while also stopping payment on the loans, prompting counterclaims to recover the money owed on the loans; the court said the counterclaims were permissive because the claims were based on the mark-ups in the loan agreement while the counterclaims were based on subsequent non-payment. Dershowitz's claims arise out of the documentary, while the counterclaim arises out of Dershowitz's subsequent lawsuit itself seeking a remedy for that injury; these are distinct real-world facts and events. There is a but-for connection--but-for the false statements in the doc, Dershowitz would not have sued, which would not have caused the alleged injury to Netflix. But such a but-for connection is generally insufficient.

        That matters because most courts treat "same transaction or occurrence" in FRCP 13(a)(1)(A) as meaning the same thing as "same case or controversy" (which courts interpret to mean "common nucleus of operative fact") in § 1367. That is, a counterclaim that is not sufficiently related to satisfy 13(a)(1)(A) is not sufficiently related to satisfy § 1367. That is why it makes sense for defendants to plead diversity jurisdiction when they can--it provides a basis for jurisdiction over the counterclaim independent of the original claim, jurisdiction that the district cannot decline to exercise. Some courts, including the Second Circuit in Jones, treat "same case or controversy" as broader than "same transaction or occurrence," allowing jurisdiction over a non-compulsory counterclaim where there is a "loose factual connection" among claims, including the sort of but-for connection we see here. At least to this point, however, the Eleventh Circuit has not treated them differently.

None of this matters, of course. Dershowitz is not going to push back on improper responses or bad affirmative defenses and I doubt he will both moving to dismiss the counterclaim for lack of SMJ (since Netflix can replead to establish diversity). Any errors  are harmless because the court and the parties treat them as such. The FRCP often is observed in the breach in the name of moving forward, for better or for worse.

Posted by Howard Wasserman on August 4, 2021 at 02:10 PM in Civil Procedure, Constitutional thoughts, First Amendment, Howard Wasserman, Judicial Process | Permalink


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