ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AS TO COUNT II
THIS CAUSE comes before the Court upon two motions for summary judgment filed by Defendant. First, Defendant filed a Motion for Final Summary Judgment *1262 [DE 62] on July 19, 2004. Plaintiffs filed a Memorandum in Opposition to Defendant’s Motion for Final Summary Judgment [DE 69] on August 13, 2004, and Defendant filed its Reply Memorandum in Support of Motion for Final Summary Judgment [DE 78] on August 26, 2004.
Second, Defendant then filed a Motion for Summary Judgment as to Count II [DE 74] on August 18, 2004. Plaintiffs responded [DE 79] on September 8, 2004, and Defendant filed a Reply Memorandum in Support of Motion for Partial Summary Judgment as to Count II [DE 90] on September 15, 2004.
The Court heard oral arguments from the parties on Thursday, September 23, 2004 at 11:00 a.m. The motions are now ripe for adjudication.
I. Background
Plaintiffs are the shareholders and officers of Duty Free Acquisition Corp. (now known as DFA Holdings, Inc. and hereinafter “DFA Holdings”). See Second Am. Compl. [DE 41], at ¶ 10; Decl. of Simon Falic [DE 79], at ¶ 2; Decl. of Leon Falic [DE 79], at ¶ 2. On October 11, 2001, DFA Holdings acquired World Free Duty Americas, Inc. (“Duty Free”) from BAA pic. See Second Am. Compl. [DE 41], at ¶ 11. At the time of the Duty Free acquisition, Duty Free was obligated under a bond indenture to various companies including The Prudential Insurance Company of America, U.S. Bancorp Asset Management, the California Public Employees Retirement System, General Electric Capital Assurance Company, and others (collectively, the “Bondholders”), for a principal balance, of $115 million, at 7% interest per annum. Id. at ¶ 12.
Plaintiffs allege that shortly after the Duty Free acquisition, Defendant made various defamatory statements regarding the Plaintiffs. Id. at ¶¶ 13-14. First, Defendant described the “Falic Family” in an internal October 11, 2001 memorandum as “well-named” and “aggressive entrepreneurs with a history of restructurings, write-offs, bankruptcies, falling stock prices, dubious inter-family business transactions, and extremely generous salaries coming out of marginal or failing public entities.” Id. at Exh. A. This memorandum was sent by Jeffrey Manning (a manager in Defendant’s special situations group) to Joe Sullivan and Frank Jamison (managers in Defendant’s fixed income group) for the purpose of discussing how Defendant might represent an ad hoc committee of Bondholders, some of whom were clients of the fixed income group. Mr. Manning based his statements on information contained in public documents and news stories. See Dep. of Jeffrey Manning [DE 58], at 40,110-115.
Thereafter, Mr. Manning enlisted the assistance of Martin Mitsoff, a research analyst who regularly advised bondholders of developing market news. See id. at 81-83. On October 23, 2001, Mr. Manning and Mr. Mitsoff sent a memorandum to all Bondholders to warn them of the “serious and potentially total loss” of their investment and advise them of legal avenues available to them. See Second Am. Compl. [DE 41], at Exh. B. In that memorandum, Defendant stated that the “Falic family” had a “checkered past” and suggested that they had been involved in a “host of restructurings, write-offs, bankruptcies, falling stock prices, controversial inter-family business transactions, and extremely generous salaries coming out of marginal or failing public entities.” Id. Defendant offered its services to prevent or reverse “asset stripping” by DFA Holdings, and urged that BAA be notified that “the ‘puke and run’ strategy is a fraudulent attempt to avoid fiduciary obligations to creditors once the Company has entered the ‘realm of insolvency.’ ” Id.
*1263 Plaintiffs allege that although Defendant’s senior management criticized the October 23, 2001 memorandum as containing “incendiary language” and being of insufficient quality, the memorandum was re-circulated. See App. in Supp. of Plaintiffs’ Mem. in Opp. to Defendant’s Mot. for Final Summ. J. [DE 70], at Exhs. 8, 9. Additionally, on January 18, 2002, after DFA Holdings missed a coupon payment, Mr. Manning and Mr. Mitsoff sent another memorandum to thé Bondholders, stating therein that they had “a number of ‘good facts,’ including a series of articles from the Miami Herald outlining the dubious business shenanigans of some of the people involved on the other side.” Id. at Exh. 10. Finally, Mr. Mitsoff sent an internal memorandum, stating that DFA Holdings was “controlled by an asset stripper who will bleed this company dry.” Id. at 7.
Referring to the “Falic family,” some of the disparaging statements contained in the memoranda apparently concerned the business activities of Ilia Lekach, Simon Falic’s brother in law. See Mot. , for- Final Summ. Judgment [DE 62], at 6; Plaintiffs Mem. in Opp. [DE 69], at 7 n. 4. Mr. Lekach did not have any involvement with DFA Holdings, but had been accused of asset stripping in connection with an entity called Luria & Sons, which filed for bankruptcy. Id. The asset stripping appears to have occurred after Plaintiffs divested themselves of management responsibilities in Luria & Sons. Id. See also Dep. of Simon Falic [DE 81], at 15, 99-100.
The Bondholders declined to retain Defendant as a financial advisor. Plaintiffs allege, however, that as a result of Defendant’s memoranda, .the Bondholders filed a lawsuit in the Circuit Court for Anne Arundel County, Maryland, against Plaintiffs, DFA Holdings and other parties for fraud and breach of fiduciary duty. See Mot. for Summ. J. as to Count II [DE 74], at Exh. A. Defendants filed a counterclaim for breach of contract, alleging that the Bondholders breached a “no action clause” of the indenture and claiming losses to Duty Free of $70 million. Id. at Exh. B. The lawsuit was settled, between the Bondholders, DFA Holdings and the Plaintiffs in November, 2003. As part of the settlement,. Duty Free agreed to pay a substantial portion of the bond obligation in cash and to provide a note for the remainder. See Dep. of Simon Falic [DE 81], at 58.
On May 9, 2003, Plaintiffs filed their original Complaint [DE 1] against Defendants, alleging two counts of defamation (Count I) and injurious falsehood (Count II). Plaintiffs filed a First Amended Complaint [DE 5] on May 22, 2003 and a Second Amended Complaint for Damages and Demand for Jury Trial [DE 41] on February 17, 2004.
II. Discussion
A. Motion for Final Summary Judgment
As an initial matter, Defendant states without conceding or briefing the choice of law issue, that its Motion for Final Summary Judgment is based on Florida law- 1 See Mot. for Final Summ. J. [DE 62], at 8. Accordingly, the Court does not address the choice of law issue and proceeds on the assumption that Florida law applies. Additionally, Defendant does not attack Plaintiffs prima facie case of defamation, and bases its summary judgment motion only on the qualified privilege defense. Thus, the Court presumes for purposes of Defen *1264 dant’s motion that Plaintiffs have met their initial burden.
Whether a statement is protected by a qualified privilege is a question of law for the court to decide only if the circumstances surrounding the communication are undisputed or so clear under the evidence as to be unquestionable.
See, e.g., Nodar v. Galbreath,
The Florida Supreme Court has explained the concept of a qualified privilege based on mutuality of interest as follows:
One who publishes a defamatory matter concerning another is not liable for the publication if (a) the matter is published upon an occasion that makes it conditionally privileged and (b) the privilege is not abused.... The law of Florida embraces a broad range of the privileged occasions that have come to be recognized under the common law.... A communication made in good faith on any subject matter by one having an interest therein, or in reference to which he has a duty, is privileged if made to a person having a corresponding interest or duty, even though it contains matter which would otherwise be actionable, and though the duty is not a legal one but only a moral or social obligation.
Nodar,
The essential elements of the qualified privilege are: (1) good faith; (2) an interest in the subject by the speaker or a subject in which the speaker has a duty to speak; (3) a corresponding interest or duty in the listener or reader; (4) a proper occasion; and (5) publication in a proper manner.
See Thomas v. Tampa Bay Downs, Inc.,
A statement is made in good faith if it is made “with a good motive, and not for the purpose of harming the subject of the defamation.”
Lewis v. Evans,
The second element of the privilege requires the Defendant to show that it made the false statement pursuant to a corresponding interest or duty in the subject matter of the statement.
See, e.g., Nodar,
In the present case, the evidence is sufficient to show that Mr. Manning and Mr. Mitsoff had a valid interest in serving their employer when they sent the disparaging memoranda to the Bondholders. 2 As á manager in the special situations group, Mr. Manning was employed to engage business development strategies and solicit potential clients for the company’s financial consulting services. See Dep. of Jeffrey Manning [DE 58], at 269-273. As a research analyst, Mr. Mitsoff was employed by Defendant to work with financial advisors to notify clients of information that might affect their investments. See Dep. of Martin Mitsoff [DE 70], at 349, 359. Thus, both Mr. Manning and Mr. Mitsoff acted, at least in part, to fulfill legitimate job duties within the scope of their employment. In addition, Defendant had a duty, whether of a fiduciary nature or arising from an “imperfect obligation”, te those Bondholders that were its clients to disclose information that might affect their investment. See Dep. of Jeffrey Manning [DE 58], at 41. Therefore, the Court finds that Defendant had valid interests in making the allegedly defamatory statements.
Next, the Court must examine whether the Bondholders had a valid interest in receiving the subject memoranda. Florida courts have found, inter
alia,
the following interests of a recipient to be sufficient for the privilege to apply: an employer’s interest in knowing about the job performance of an employee,
Randolph v. Beer,
It is not sufficient for the Court to find that Defendant and the Bondholders had valid interests, as speaker and recipient. This Court must further consider whether the interests of the speaker and listener *1266 were corresponding, or mutual. Common interests may include shared interests in property, business and professional dealings. See Restatement (First) of ToRts § 596 (1938). For example, tenants in common and other co-owners of land or chattels, as well as partners, fellow officers of a corporation for profit, fellow shareholders, fellow servants, and persons associated together in professional, religious, fraternal, charitable or other non-profit associations, are conditionally privileged to communicate among themselves defamatory matter concerning their common interests. Id. “Common interests are usually found among members of identifiable groups in which members share similar goals or values or cooperate in a single endeavor.... The idea is to promote free exchange of relevant information among those engaged in a common enterprise or activity and to permit them to make appropriate internal communications and share consultations without fear of suit.... The privilege does not arise in the first place unless the communication relates in some degree to the common interest..(Dan B. Dobbs, the Law of Toets (2000), § 414, at 1160-61).
In
Teare,
the court declined to find a qualified privilege where there was no mutuality of interest between the speaker and listener.
Teare,
*1267
Similarly, in
Drennen,
the court suggested that a qualified privilege does not exist if the speaker acts ijpr its own unilateral interest.
Drennen,
As to the Bondholders that were existing clients of Defendant, there appears to be mutuality of interest. Defendant and its clients had an existing business relationship that gave rise to at least a moral, if not legal duty, to advise those Bondholders of information that might affect the stability of their investment. As their financial advisor, Defendant shared a common interest with Bondholders to protect the Bondholders’ investment. For Bondholders that were not clients, however, the analysis compels a contrary conclusion. Defendant did not share any common property, business, professional, or civic interests with these Bondholders, of the kind outlined in the Restatement (First) of Torts. See
Scholz v. RDV Sports, Inc.,
Defendant may be able to prove at trial that an informal business relationship existed between Defendant and those Bondholders that were not clients, to give rise to a common interest or duty. There is testimony, for example, that one of the Bondholders had purchased bonds through Defendant in the past, see Dep. of Brian Murray [DE 70], at 9, and that some of the Bondholders regularly received business calls from Defendant, see id; Dep. of Andrew White [DE 70], at 16. However, the facts are not sufficiently developed at this stage to enable the Court to be reasonably certain that there is no genuine issue of material fact to render summary judgment.
Accordingly, the Court holds that Defendant’s allegedly defamatory statements are not protected by a qualified privilege. In light of this holding, the Court need not address the issue of malice, or whether the publication was made to too wide an audience.
B. Motion for Summary Judgment as to Count II
In its Motion for Summary Judgment as to Count II [DE 74], Defendant argues that it is entitled to summary judgment on the injurious falsehood count because Plaintiffs have failed to allege or prove special damages that are recoverable by them individually, and Plaintiffs lack standing to sue for any of the corporations in which they own an interest. Defendant contends that Plaintiffs can only recover as *1268 damages their attorney’s fees incurred in defending the Maryland lawsuit. However, all attorney’s fees were paid by Duty Free, not the Plaintiffs individually, and Count II cannot be maintained as a shareholder derivative action.
As an initial matter, the Court notes that simultaneous with this latter summary judgment motion, Defendant filed a Supplemental Motion for Leave to Amend Answer [DE 76], requesting leave to add the affirmative defense of lack of standing to recover business damages suffered by the Plaintiffs’ corporations. Thus, Defendant’s Motion for Summary Judgment as to Count II [DE 74] is based in part on an affirmative defense that has not been pled in its Answer to Second Amended Complaint [DE 49]. This Court can permit Defendant to assert an affirmative defense for the first time in a summary judgment motion, and the Court, finding no prejudice to Plaintiffs, thus proceeds to consider the merits of Defendant’s motion.
See Miranda de Villalba v. Coutts & Co. (USA) Int’l,
The tort of injurious falsehood protects the economic interests of an injured party against pecuniary loss, in contrast to defamation, which protects the personal reputation of the injured party.
Callaway Land & Cattle Co., Inc., v. Banyon Lakes C. Corp.,
One who, without a privilege to do so, publishes matter which is untrue and disparaging to another’s property, in land, chattels or intangible things under such circumstances as would lead a reasonable man to foresee that the conduct of a third person as purchaser or lessee thereof might be determined thereby is liable for pecuniary loss resulting to the other from the impairment of vendability thus caused.
Any kind of legally protected property interest which is capable of being sold or transferred, such as corporate stock, may be the subject of disparagement.
Salit,
I. Plaintiffs Have Failed to Plead Special Damages.
To survive summary judgment on their injurious falsehood claim, Plaintiffs must specifically plead special damages.
Id.
at 388. The special damage rule “requires the plaintiff to establish pecuniary loss that has been realized or liquidated, as in the case of specific lost sales.”
Id.
(quoting Prosser and Keeton, § 128 at 971). Special damages are actual, out of pocket losses which must be proven by specific evidence as to the time, cause and amount; whereas, general damages encompass the more customary harms inflicted by a defamatory falsehood, such as impairment of reputation and standing in the community.
Continental Cas. Co. v. Southwestern Bell Tel. Co.,
Moreover, “the pecuniary loss recoverable for the injurious falsehood is restricted to that which results
directly and immediately
from the falsehood’s ef-
*1269
feet on the conduct of third persons and the expenses incurred to counteract the publication.”
Bothmann v. Harrington,
Plaintiffs have alleged a number of items as special damages. For example, Plaintiffs claim their damages should include over $2 million in attorney’s fees incurred in defending the Maryland lawsuit.
See
Plaintiffs Mem. in Opp. to Defendant’s Mot. for Summ. J. as to Count II [DE 79], at 5. However, it is undisputed that these fees were paid by Duty Free, not the Plaintiffs personally. Attorney’s fees that are paid by a corporation rather than a shareholder personally cannot be considered a realized loss of the shareholder, even in the case of a sole shareholder or a closely held corporation.
See Schaffer v. Univ. Rundle Corp.,
Plaintiffs have also alleged as special damages the depreciation of their stock.
See
Plaintiffs Mem. in Opp. to Defendant’s Mot. for Summ. J. as to Count II [DE 79], at 6. In the
Salit
case, plaintiffs were shareholders whose stock declined after the corporation’s president and law firm published falsehoods about plaintiffs and the manner in which they conducted the corporation’s business. The court found that plaintiffs “claimed only that their stock declined in value” but failed to reveal any “realized loss.”
Salit,
Finally, Plaintiffs allege that as a result of the alleged defamation by Defendant, vendors, creditors and other third parties declined to do business with Duty Free. For example, Plaintiffs allege that LaSalle Bank of Chicago refused to extend letters of credit to Duty Free.
See
Dep. Of Simon Falic [DE 81], at 59. Plaintiffs further claim that Duty Free also lost multi-million dollar contracts to operate duty free stores, including at Los Tomates and the Hartsfield-Jackson Atlanta International Airport.
Id.
at 59-60; Deck
of
Simon Falic [DE 79]; Decl. of Leon Falic [DE 79]. In addition, Plaintiffs allege that suppliers imposed “cash on delivery” terms or demanded substantial guarantees from Duty Free.
Id.
The foregoing damages described by Plaintiffs could be recoverable by Duty Free, as a corporation can properly allege special damages for injurious falsehood by identifying the loss of specific customers or transactions lost
*1270
as a result of the disparagement.
See, e.g., Isuzu Motors Ltd. v. Consumers Union of U.S., Inc.,
II. Plaintiffs Cannot Maintain this Action as a Direct Action.
Lastly, the Court considers whether this suit can be maintained as an individual action. It is well-established that in general, the proper party to bring a claim on behalf of a corporation is the corporation itself. In other words, “where the business or property allegedly interfered with... is that being done and carried on by a corporation, it is that corporation alone, and not its stockholders (few or many), officers, directors, creditors or li-censors, who has a right of recovery, even though in an economic sense real harm may well be sustained as the impact of such wrongful acts bring about reduced earnings, lower salaries, bonuses, injury to general business reputation, or diminution in the value of ownership.”
Martens v. Barrett,
As a limited exception, however, a shareholder can bring a derivative suit on behalf of a corporation.
Daily Income Fund, Inc. v. Fox,
In contrast to derivative actions, a direct or individual action, is “a suit by a stockholder to enforce a right existing in the stockholder.”
Id.
A direct action is thus, a limited exception to the rule regarding derivative suits, and allows a shareholder to sue on his or her own behalf if he or she (1) is not similarly situated to other shareholders; (2) suffers a distinct injury (i.e., special damages) from the other shareholders; and (3) does not have the same opportunity to be made whole by a corporate recovery.
Kloha,
The
Salit
court concluded that the injurious falsehood action was properly brought as a direct claim because the plaintiffs sought compensation for damage to their personal property interests as shareholders, and did not seek to obtain a benefit that would inure to the corporation.
Salit,
Although Salit makes clear that an injurious falsehood claim may be maintainable as a direct action under the facts of that case, this Court declines to interpret that decision as allowing all injurious falsehood claims, by mere nature of the action, to be brought as direct actions. Plaintiffs are not relieved from the requirement of showing that they suffered personal property damages unique to themselves and distinct from other shareholders (or from the corporation as a whole), nor have they satisfied this requirement. In this case, the defamatory memoranda essentially treated the “Falic family” and Duty Free as one entity, and affected the willingness of third parties to do business with Duty Free. It can be said, then, that this injurious falsehood claim derives from a duty or obligation owed to the corporate entity. All damages claimed ($2 million in attorney’s fees, diminished stock values, lost contracts) were those of the corporation. As the only shareholders of DFA Holdings, which owns Duty Free, Plaintiffs can be made whole by any recovery by Duty Free. Thus, Salit is distinguishable from the present case, and does not allow Plaintiffs to maintain their claim as a direct action.
III. Conclusion
THIS COURT, having considered the motions and the arguments before this Court at the September 23, 2004 hearing, and being otherwise fully advised in the premises, does hereby
ORDER AND ADJUDGE that:
(1) Defendant’s Motion for Final Summary Judgment [DE 62] is DENIED.
(2) Defendant’s Motion for Summary Judgment as to Count II [DE 74] is GRANTED.
Notes
. At the September 23, 2004 hearing, counsel for the parties stated that they agreed that Florida law should apply.
. The Court does not consider the internal memoranda actionable for purposes of defamation, as they do not constitute communications published to a third party.
See Mims v. Metro. Life Ins. Co.,
. Commonality of interest in some aspect of the subject matter of a communication is not sufficient for the privilege to apply.
See Various Markets, Inc. v. Chase Manhattan Bank, N.A.,