On February 25, 2020, Justice Sherwood of the New York County Commercial Division issued a decision in Yangtze Riv. Port & Logistics Ltd. v. Hindenburg Research, 2020 NY Slip Op. 30506(U), holding that a claim for defamation cannot be based on statements of opinion, explaining:
Plaintiff fails to allege that any of Hindenburg’s statements are defamatory. To state a cause of action alleging defamation, a plaintiff must allege that the defendant published a false statement, without privilege or authorization, to a third party, constituting fault as judged by, at a minimum, a negligence standard, and, it must either cause special harm or constitute defamation per se. A false statement constitutes defamation per se when it charges another with a serious crime or tends to injure another in his or her trade, business or profession.
CPLR 3016(a) requires that the particular words complained of shall be set forth in a defamation complaint. The complaint must also allege the time, place and manner of the false statement and specify to whom it was made. Because falsity is a required element of a defamation claim, only statements of fact can be the subject of a defamation claim.
Accordingly, expressions of opinion, as opposed to assertions of fact, are deemed privileged and, no matter how offensive, cannot be the subject of an action for defamation. That is because falsity is a sine qua non of a libel claim and only assertions of fact are capable of being proven false. Whether a particular statement is one of opinion or fact is a question of law for the court to decide. In making that determination, courts should consider three factors:
(1) whether the specific language in issue has a precise meaning which is readily understood; (2) whether the statements are capable of being proven true or false; and (3) whether either the full context of the communication in which the statement appears or the broader social context and surrounding circumstances are such as to signal readers or listeners that what is being read or heard is likely to be opinion, not fact.
The third factor of the above formula, context, is a significant part of the analysis. Thus, with any statement challenged as defamatory, the context must be examined to determine whether a reasonable reader would have believed that the communication was fact, not opinion. In addition to considering the immediate context in which the disputed words appear, the courts are required to take into consideration the larger context in which the statements were published, including the nature of the particular forum. Certain contexts may indicate whether a statement constitutes fact or opinion. For instance, the culture of Internet communications, as distinct from print media, has been characterized as encouraging a freewheeling, anything-goes writing style. Thus, epithets, fiery rhetoric or hyperbole advanced on social media have been held to warrant an understanding that the statements contained therein are vigorous expressions of personal opinion, rather than the rigorous and comprehensive presentation of factual matter. Consequently, New York courts have consistently protected statements made in online forums as statements of opinion rather than fact.
As their context shows, Hindenburg’s allegedly defamatory statements are constitutionally protected opinions. Where, as here, the context reveals that a reasonable reader would understand an assertion as an allegation to be investigated, rather than as a fact, the statement constitutes opinion. It is on that basis that courts frequently determine that investment analysis, such as that presented in the Report, constitutes the author’s opinion. For instance, in Eros Intl. PLC v Mangrove Partners (2019 NY Slip Op 30604[U] [Sup Ct, NY County 2019]), Justice Joel M. Cohen dismissed a similar case filed against the moving defendants here and other market commentators by another foreign issuer traded on the New York Stock Exchange. The plaintiff claimed that a group of short-seller investors (including ClaritySpring, ClaritySpring Securities, Anderson and Hindenburg) conspired, over several years, to spread false or misleading information about the company in order to artificially depress its stock price. The plaintiff brought defamation, defamation per se, and other related causes of action against the defendants. Like here, the defendants argued that the statements at issue conveyed constitutionally protected opinions, and therefore could not give rise to a claim of defamation, or defamation per se. The court agreed, determining that an analysis of the context surrounding the publication of Hindenburg’s report showed that the author was presenting an opinion on plaintiff. In dismissing the defamation and defamation per se causes of action, the court specifically found that the articles and reports published by the Moving Defendants expressed opinions accompanied by a recitation of the facts on which they were based, signaling to the reasonable reader through a mix of key words and context that the statements were not based upon undisclosed facts.
Likewise here, it is clear that defendant’s statements are nonactionable statements of opinion. First, the Report contains a global disclaimer highlighting that its contents include opinions of an author: “To the best of our ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stock covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer. However, such information is presented ‘as is,’ without warranty of any kind – whether express or implied. Hindenburg Research makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and Hindenburg Research does not undertake to update or supplement this report or any of the information contained here”. Indeed, the Report’s first sentence – which plaintiff claims to be defamatory – acknowledges that what follows is purely the author’s opinion.
The other allegedly defamatory sections of the Report similarly point out to the reader that its conclusions are merely expressions of the author’s opinion. Thus, any reasonable reader would expect the Report to contain the author’s negative opinion of the value of Yangtze’s stock, especially where, as here, the author has disclosed a decision to short.
In addition, the allegedly defamatory statements were advanced on social media, including Yahoo Finance, Twitter, Hacker News and Reddit, which New York courts typically protect as statements of opinion, rather than fact.
Moreover, in assessing the allegedly defamatory statements in their full context, there are numerous additional disclaimers in the Report signaling to any reasonable reader that it is an opinion piece.
Given the supporting documents linked to the Report, it is clear that this is pure opinion. Embedded within the allegedly defamatory statements are electronic links to various publicly available sources, most prominently Yangtze’s SEC filings. Thus, the Report is nothing more than a financial commentary based on the publicly available information cited, and linked to, by the Report – in other words, textbook opinion.
Although plaintiff contends that the Report contains only a handful of opinion-like words, the opposite is true. Indeed, Hindenburg frequently used many opinionlike qualifiers throughout the Report – words like “think,” believe” and “infer”. Moreover, Hindenburg provided readers with a general disclaimer making clear not only that the Report was based on opinion, but that the author had a financial interest in Yangtze’s stock. This disclaimer unequivocally signaled to readers that the article is one of opinion.
Plaintiff also contends that the Report’s reference to Yangtze as a shell or scheme constitutes mixed opinion defamation. Plaintiff further argues that Defendants’ allegations of corporate mismanagement are provably false, likewise making them mixed opinion.
The court rejects this argument as mixed opinion defamation requires allegations that a statement is based on undisclosed defamatory facts. Contrary to plaintiffs contentions, the Report contains numerous citations and hyperlinks to primary source materials on which Hindenburg’s opinions were based.
Plaintiffs allegations likewise fail to demonstrate any instance of defamatory opinion. A defamatory opinion is a statement of opinion based on disclosed facts that are false to such a degree that the difference between the stated facts and the truth would cause a reader to question the opinion’s validity. The Report is largely based on Yangtze’s own financial filings and other publicly available documents – all of which are hyperlinked throughout the Report. Thus, because plaintiff denies that those financial filings and public records are themselves falsely represented or grossly distorted, plaintiffs claim of defamatory opinion has no merit.
Accordingly, the court concludes that the Report, considered within its overall context as the research findings of a financial analysis shorting a company’s stock, is constitutionally protected opinion. As such, plaintiffs claims for defamation and defamation per se must be dismissed.
(Internal quotations and citations omitted).
Civil litigation can involve claims that cause real reputational harm, but not every statement can be the subject of a defamation claim. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client have questions about whether statements about you or your business can be the basis for a claim for defamation.
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