SG Interests I, Ltd., a Texas limited partnership, and SG Interests VII, Ltd., a Texas limited partnership, Plaintiffs-Appellants, v. Peter T. Kolbenschlag, a/k/a Pete Kolbenschlag, Defendant-Appellee.
Court of Appeals No. 18CA1316
COLORADO COURT OF APPEALS
Announced July 25, 2019
2019COA115
JUDGE FREYRE
Delta County District Court No. 17CV30026, Honorable Steven L. Schultz, Judge. Division VI, Fox and Welling, JJ., concur. Prior Opinion Announced June 27, 2019, WITHDRAWN. OPINION PREVIOUSLY ANNOUNCED AS “NOT PUBLISHED PURSUANT TO C.A.R. 35(e)” ON June 27, 2019, IS NOW DESIGNATED FOR PUBLICATION. Petition for Rehearing DENIED.
SUMMARY
July 25, 2019
2019COA115
No. 18CA1316, SG Interests I, Ltd. v. Kolbenschlag - Torts - Defamation - Libel
In this libel action, a division of the court of appeals holds that defendant‘s online comment to a newspaper article is substantially true and, thus, that plaintiffs failed to prove the elements of defamation. It further concludes that there was no basis for plaintiffs to depose the defendant under
Ballard Spahr, LLP, Steven D. Zansberg, Denver, Colorado, for Defendant-Appellee
I. Background
A. Prior Federal Actions and Settlement
¶ 2 SGI and a competitor, Gunnison Energy Corporation (GEC), separately acquired and developed oil and gas leases in the Ragged Mountain Area of western Colorado. SGI focused its efforts on the eastern side while GEC focused on the southern side. Eventually, their interests collided and resulted in litigation between an SGI affiliate and GEC in 2004. As part of settling this litigation, SGI and GEC agreed to collaborate in developing the Ragged Mountain Area.
¶ 4 SGI successfully bid on the four leases and certified that its bid was calculated “independently and without collusion for the purpose of restricting competition.” It then assigned a 50% interest in the leases to GEC. After the assignment, SGI and GEC executed additional agreements to share 50% of any oil and gas interests acquired in the area at cost and to work together on permitting pipelines to service the area.1 Neither SGI nor GEC informed the BLM of these agreements.
¶ 5 In October 2009, a former vice president of GEC (relator) filed a qui tam complaint under the False Claims Act (FCA) alleging that
¶ 6 The Department of Justice (DOJ) then initiated an investigation into SGI‘s bidding practices with respect to federal oil and gas leases in the Ragged Mountain Area. It filed a complaint in February 2012 against SGI and GEC alleging that the companies had violated section 1 of the Sherman Act by executing the MOU on the eve of the auction and that, consequently, the United States had received less revenue than it would have received had SGI and GEC competitively bid for the leases. The DOJ offered to settle both the Sherman Act violation and the FCA violation for $550,000 and issued a press release stating:
The Department of Justice today announced that it has reached a settlement with Gunnison Energy Corporation (GEC), SG Interests I Ltd. and SG Interests VII Ltd. (SGI) that requires the companies to pay a total of $550,000 to the United States for antitrust and False Claims Act violations related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior‘s Bureau of Land Management (BLM). Today‘s action marks the
first time the Department of Justice has challenged an anticompetitive bidding agreement for mineral rights leases.
¶ 7 The government received seventy-six public comments, and on December 12, 2012, a federal district court judge rejected the proposed settlement, finding “[t]here is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers ‘joint bidding’ to be common in the industry.” The court concluded “the settlement of this civil action for nothing more than the nuisance value of this litigation is not in the public interest.”
¶ 8 The parties then reached a second proposed settlement, which required SGI and GEC to each pay $275,000 in the Sherman Act case and SGI to pay $206,250 and GEC pay $245,000 in the FCA case. It also required SGI and GEC to provide advance notice to the government of any intention to bid for future leases with another company for a period of five years.
¶ 9 The agreement also stated that “[t]he United States contends that it has certain civil claims against SG arising from the Covered Conduct” and “[t]his Settlement Agreement is neither an admission of liability by SG nor a concession by the United States that its
¶ 10 The DOJ‘s motion for entry of final judgment stated:
The revised settlements constitute meaningful relief that compensate the United States for damages it incurred as a result of the alleged antitrust violations, serve as a deterrent to these Defendants from engaging in joint bidding that violates the antitrust laws, and put others in the industry on notice that such anticompetitive conduct will not be tolerated.
The DOJ explained that the antitrust suit was an issue of first impression and that it wanted to quickly resolve the litigation to “deter others from crossing the line from appropriate to illegal joint bidding at BLM auctions” and specifically to deter SGI and GEC from crossing this line in the future. It acknowledged that the AMIA and OPA agreements did not violate the Sherman Act because those agreements involved “a collaboration through which pro-competitive efficiencies arise.” However, it found that the MOU “reflected a deviation from common industry practice, as the MOU was merely a naked restraint that allowed Defendants to avoid a bidding war.” And the DOJ noted that under this second proposed settlement
¶ 11 The federal district court judge accepted this second proposed settlement on April 23, 2013. Thereafter, numerous publications reported that SGI had paid a fine to the federal government, and several stated that the fine was for violating antitrust laws. See, e.g., Jon B. Dubrow, Natural Gas Companies Settle Antitrust Suit Stemming from Joint Bidding, Nat‘l L. Rev. (Apr. 28, 2013) (noting that SGI and GEC “will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law“); infra Part II.B n.2. SGI never brought a defamation action against these commentators.
B. Current Litigation
¶ 12 Mr. Kolbenschlag is an environmental activist from Paonia, Colorado, who manages Mountain West Strategies, Ltd., a website that “specializes in public outreach and community engagement” in western Colorado. In 2016, the BLM cancelled eighteen of SGI‘s gas
¶ 13 Mr. Kolbenschlag posted a reader comment to the article on the newspaper‘s website in which he noted the irony of SGI‘s collusion allegation and stated:
While SGI alleges “collusion” let us recall that it, SGI, was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers. Yes, these two companies owned by billionaires thought it appropriate to pad their portfolios at the expense of you and I and every other hard-working American.
The comment included a link to the DOJ press release describing the first settlement agreement for antitrust and FCA violations related to anticompetitive bidding by SGI and GEC.
¶ 14 Four months later, SGI filed this lawsuit. Mr. Kolbenschlag filed a motion to dismiss, contending that his comment was
¶ 15 The district court granted the motion for summary judgment, denied SGI‘s request to depose Mr. Kolbenschlag, and in a separate hearing not at issue here, awarded Mr. Kolbenschlag attorney fees finding that the lawsuit was frivolous and vexatious. This appeal followed.
II. Summary Judgment Properly Granted
¶ 16 SGI first contends that the district court erroneously concluded that Mr. Kolbenschlag‘s comments were substantially true and immaterial. We disagree.
¶ 17 We review grants of summary judgment de novo. Morrison v. Goff, 91 P.3d 1050, 1052 (Colo. 2004); SMLL, L.L.C. v. Peak Nat‘l Bank, 111 P.3d 563, 564 (Colo. App. 2005). Summary judgment is a drastic remedy and is appropriate only when the pleadings and the supporting documents show that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo. 2002).
¶ 18 A “material fact” is one that will affect the outcome of the case or claim. Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo. 2004). In determining whether a genuine issue of material fact exists, we consider “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any.”
¶ 19 “Defamation is a communication that holds an individual up to contempt or ridicule thereby causing him to incur injury or damage.” Lawson v. Stow, 2014 COA 26, ¶ 15 (quoting Keohane v. Stewart, 882 P.2d 1293, 1297 (Colo. 1994)). “A statement may be
¶ 20 The elements of defamation are:
(1) a defamatory statement concerning another; (2) published to a third party; (3) with fault amounting to at least negligence on the part of the publisher; and (4) either actionability of the statement irrespective of special damages or the existence of special damages to the plaintiff caused by the publication.
McIntyre v. Jones, 194 P.3d 519, 523-24 (Colo. App. 2008) (quoting Williams v. Dist. Court, 866 P.2d 908, 911 n.4 (Colo. 1993)).
¶ 21 Substantial truth is a complete defense to defamation. Gordon v. Boyles, 99 P.3d 75, 81 (Colo. App. 2004). A defendant need only show that “the substance, the gist, the sting of the matter is true.” Id. (citation omitted). So, the question is whether “there is a substantial difference between the allegedly libelous statement and
¶ 22 In Colorado, the plaintiff in a defamation case must prove that a statement is false and material. Bustos v. A & E Television Networks, 646 F.3d 762, 764 (10th Cir. 2011) (applying Colorado law). To be material, “the alleged misstatement must be likely to cause reasonable people to think ‘significantly less favorably’ about the plaintiff than they would if they knew the truth; a misstatement is not actionable if the comparative harm to the plaintiff‘s reputation is real but only modest.” Id. at 765 (citation omitted).
¶ 23 Because “protracted litigation could have a chilling effect upon constitutionally protected rights of free speech,” it is appropriate to “prompt[ly] resolv[e] . . . defamation actions . . . by summary
B. Application
¶ 24 SGI asserts that the comment, “was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers,” was not substantially true because (1) it had settled the antitrust suit for nuisance value; (2) the claims had not proceeded to trial; (3) there were no actual findings of illegal conduct; (4) the DOJ had expressed concerns about its ability to succeed at trial; and (5) SGI did not admit any wrongdoing and, therefore, any statement that it was “fined for colluding” was materially false. We are not persuaded.
¶ 25 First, we reject SGI‘s claim that it settled the case for nuisance value. The record shows that the federal judge rejected the first settlement agreement precisely because it reflected a nuisance value settlement that would not deter the parties or others in the industry from engaging in illegal bidding. The federal judge concluded that a nuisance value settlement was not in the public interest.
¶ 27 Next, we are not persuaded that the absence of a trial requires a different result or that the record shows there was no improper conduct. Initially, we note that SGI does not dispute that it executed the MOU with GEC on the eve of the auction and that it did not disclose the MOU to the BLM. While we acknowledge that the FCA agreement states the agreement is not an admission of liability by SGI, importantly, it also states that it is not a concession by the United States that its claims are not well founded. Moreover, the agreement specifically provides that “[n]othing in this Agreement releases SG from any liability for the Covered Conduct
¶ 28 As well, the antitrust settlement specifically addressed the wrongful conduct by declaring up front that “the United States determined that SGI‘s and GEC‘s agreement to bid jointly pursuant to the MOU constituted a per se violation of the Sherman Act.” It also addressed the companies’ defenses, stating that
[t]he United States determined that [SGI‘s] purported . . . defense amounted to little more than a contention that by successfully colluding under the MOU at the February and May 2005 auctions, the Defendants eventually learned to overcome their mutual distrust. However, the mere hope that parties might someday come to an understanding on terms of a legitimate venture does not justify their agreeing to a naked restraint of trade in the interim.
¶ 29 Moreover, the antitrust agreement set forth “punishment” related to the improper bidding — not only the monetary damages SGI and GEC had to pay, but also the further requirement that “GEC and SGI agree to provide thirty days advance notice to the
¶ 30 As well, the DOJ explained its reasoning for not proceeding to trial in the antitrust case, which had nothing to do with the strength of its case or the absence of misconduct. Instead it explained that
[t]he improper joint bidding by Defendants occurred nearly eight years ago and since that time they have been engaged in a legitimate venture that has resulted in substantial development of the Ragged Mountain Area. . . . [T]he goal of a civil antitrust remedy is to terminate the violation, undo its effects and, in cases where the United States is the injured party, obtain compensation for its injury.
¶ 31 Accordingly, we conclude that viewing the evidence favorably for SGI and GEC, Mr. Kolbenschlag‘s comment that SGI and GEC “colluded to rig bid prices,” as understood by the average reader, is substantially true and is well supported by the record. See Gomba, 180 Colo. at 236, 504 P.2d at 339; see also Brokers’ Choice of Am., Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1107 (10th Cir. 2017) (“The law of defamation overlooks inaccuracies and focuses on
¶ 32 Finally, we are not persuaded that Mr. Kolbenschlag‘s use of the word “actually fined” requires a different result. The word “fine” means “a sum imposed as punishment for an offense” or “a forfeiture or penalty paid to an injured party in a civil action.” Merriam-Webster Dictionary, https://perma.cc/6792-KGWE; see also Knapp v. Post Printing & Publ‘g Co., 111 Colo. 492, 497-98, 114 P.2d 981, 984 (1943) (the meaning of an allegedly defamatory statement is determined by the plain and ordinary meaning of the word). Given that SGI and GEC paid twelve times the amount of the government‘s actual damages to settle the antitrust and FCA claims, we have little difficulty concluding that an average reader
¶ 33 Even if we were to conclude that the “gist” of the comment was false, we agree with the district court that any inaccuracy is immaterial. See Bustos, 646 F.3d at 764 (“Where truth was once
¶ 34 We are not persuaded that Mr. Kolbenschlag‘s comment that SGI was actually fined is problematic when compared to other articles describing a fine for allegations for the reasons described above. The undisputed record demonstrates that SGI paid twelve times the actual amount of damages to settle two civil claims related to its illegal bidding practices in the MOU and that it agreed to additional restrictions to its bidding practices in future joint bidding ventures. Therefore, the absence of the word “alleged” is immaterial and does not affect the substantial truth of the comment.
III. Deposition Would Not Alter the Outcome
¶ 35 SGI next contends that the district court erroneously denied its discovery request to depose Mr. Kolbenschlag. It reasons that a deposition would shed light on whether Mr. Kolbenschlag could
A. Standard of Review and Law
¶ 36 “Whether to grant a request for discovery pursuant to
¶ 37 The district court found that SGI had failed to articulate how Mr. Kolbenschlag‘s deposition would reveal facts that could change the outcome. See id. Indeed, it found that Mr. Kolbenschlag‘s deposition was irrelevant to the objective question whether his comment was substantially true; that actual malice (the subjective issue) was no longer part of the litigation; and that Mr. Kolbenschlag had no personal, special, or unique knowledge of the prior litigation that would cause him to know more about the substantial truth of it. We discern no abuse of discretion in the court‘s finding for two reasons.
¶ 38 First, Mr. Kolbenschlag‘s subjective reasons for the comment have no bearing on the question whether a reasonable person would find his comment substantially true or materially false. This is particularly so since the burden of proving material falsity is on the plaintiff. See Brokers’ Choice of Am., 861 F.3d at 1110 (applying Colorado law). SGI‘s assertion that the deposition would “determine any objective criteria upon which he can validate that his statement was substantially true” is illogical and misconstrues both the burden and the objective standard applicable to defamation. And,
¶ 39 Second, nothing in the records shows that Mr. Kolbenschlag had any special or unique knowledge of the prior litigation. SGI argues that Mr. Kolbenschlag may have followed the litigation closely because he worked on issue campaigns and some of the commenters in the antitrust litigation had “endorsed” his LinkedIn page. These assertions are speculative. And, even if proven, they are irrelevant to the issue whether the comment itself is substantially true. Because Mr. Kolbenschlag‘s comment does not constitute defamation, his intent in making it is irrelevant; thus, we affirm the district court‘s order denying SGI‘s deposition request.
¶ 40 Relying on
¶ 41 In any civil action, a court shall award “reasonable attorney fees against any attorney or party who has brought or defended a civil action, either in whole or in part, that the court determines lacked substantial justification.”
¶ 42 Appeals can be frivolous in two ways: (1) they may be frivolous as filed where the judgment by the court below is so plainly correct and the legal authority contrary to appellant‘s position so clear that there is really no appealable issue; or (2) an appeal may be frivolous as argued where the appellant commits misconduct in arguing the appeal. Averyt v. Wal-Mart Stores, Inc., 2013 COA 10, ¶ 40. “Standards for determining whether an appeal is frivolous should be directed toward penalizing egregious conduct . . . .” Mission Denver Co. v. Pierson, 674 P.2d 363, 365 (Colo. 1984).
¶ 43 We begin with SGI‘s appeal of the second issue — the court‘s refusal to order Mr. Kolbenschlag‘s deposition — and conclude that it is frivolous because there is no proper legal basis for SGI‘s argument. See Mitchell v. Ryder, 104 P.3d 316, 323 (Colo. App. 2004) (“An appeal is frivolous if the proponent can present no rational argument based on the evidence and law or the appeal is prosecuted for the sole purpose of harassment or delay.“). Once Mr. Kolbenschlag withdrew his actual malice argument, his subjective belief in the truth of his comment was plainly irrelevant. We therefore discern no basis in law or in fact for SGI to pursue an appeal of that ruling.
¶ 44 SGI asserts repeatedly that Mr. Kolbenschlag‘s deposition was relevant because he “may have had knowledge regarding the underlying federal litigation and its eventual outcome.” It argues that Mr. Kolbenschlag “is not a random person” but is “a seasoned media professional and the owner of” an issue group. And it asserts
¶ 45 For similar reasons, we award appellate attorney fees for the libel claim. SGI‘s claim on appeal that its settlement was purely a “business decision” for “nuisance value” and that it did not engage in misconduct is directly refuted by the undisputed record. These undisputed facts are
- SGI and GEC competed for oil and gas leases.
- SGI and GEC executed the MOU agreeing not to compete against each other for four leases.
- SGI and GEC never disclosed the MOU to the BLM.
- Representatives from both SGI and GEC attended the auction where SGI secured the successful bid.
- The successful bids were less than market value.
SGI conveyed 50% of the leases to GEC after the bidding process. - Emails among GEC executives congratulated themselves on avoiding a bidding war with SGI by way of the undisclosed MOU.
- A GEC executive brought a federal qui tam action alleging illegal collusion between SGI and GEC in the MOU and SGI‘s false certification that there had been no bid rigging.
- The DOJ concluded the MOU constituted a per se restraint of trade, violated section 1 of the Sherman Act, and commenced an antitrust lawsuit.
- A federal judge rejected the first settlement proposal concluding it was for nuisance value, provided insufficient deterrence to the parties and others in the industry, and, thus, was not in the public interest.
- The settlement entered required SGI and GEC to pay twelve times the amount of damages actually incurred and required them to give the government advance notice of any proposed joint bidding practices for five years.
V. Conclusion
¶ 47 The judgment is affirmed, and the case is remanded for the district court to determine and award reasonable appellate attorney fees.
JUDGE FOX and JUDGE WELLING concur.