Wednesday, May 30, 2012
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C.A. Invalidates Statute Criminalizing Defamation of Bank
Unconstitutionality of Law Precludes Invoking It as a Defense to Anti-SLAPP Motion, First District Says
By a MetNews Staff Writer
The First District Court of Appeal held yesterday that a previously uninterpreted 1917 statute which renders it a misdemeanor to spread untrue statements about the condition of a bank is constitutionally invalid.
Writing for Div. Two, Justice Ignazio Ruvolo declared that Financial Code section 1327 “is an impermissible content-based restriction on speech protected by federal and state constitutional free speech guarantees.”
The opinion reverses an order denying an anti-SLAPP motion brought by Robert Rogers, a former employee of Summit Bank, sued by the Oakland-based institution for posting allegedly false comments about it on Craigslist.org. The trial court denied the motion based on a provision in the anti-SLAPP statute that protection will not be afforded where “the assertedly protected speech or petition activity was illegal as a matter of law.”
Section 1327—upon which the bank relied in asserting illegality of the postings—provides:
“Any person who willfully and knowingly makes, circulates, or transmits to another or others, any statement or rumor, written, printed, or by word of mouth, which is untrue in fact and is directly or by inference derogatory to the financial condition or affects the solvency or financial standing of any bank doing business in this state, or who knowingly counsels, aids, procures, or induces another to start, transmit, or circulate any such statement or rumor, is guilty of a misdemeanor punishable by a fine of not more than one thousand dollars ($1,000), or by imprisonment for not more than one year, or both.”
Declaring the statute unconstitutional, Ruvolo noted that under a succession of cases springing from Times v. Sullivan (1964) 376 U.S. 254, public figures can only recover in an action for defamation if they can show that the statements were made with knowledge of their falsity or in reckless disregard of the truth.
He wrote:
“Financial Code section 1327 is unconstitutional on its face for the same reason similar statutes have been found to be unconstitutional––it does not contain a clear requirement of actual malice or any statutory language limiting its reach to those banks which are not considered public figures….Instead, the language of the statute allows for criminal punishment of persons making statements ‘untrue in fact’ which are ‘willfully and knowingly made’ without a clear requirement that the prosecutor prove defendant’s knowledge of falsity or recklessness with regards to falsity.”
Ruvolo continued:
“Exacerbating this infirmity, the statute criminalizes the circulation of untrue ‘rumors.’ A rumor is commonly defined to be ‘[g]eneral talk or hearsay, not based on definite knowledge.’…By its very nature, one who ‘transmits’ or ‘circulates’ a rumor, as opposed to one who ‘starts’ a rumor, does not know if the information transmitted is true. Thus, Financial Code section 1327 not only fails to include a malice element required by modern defamation law, but it also criminally punishes a person who passes on a rumor ultimately determined to be factually groundless. The absence of any requirement that the person making the statement either know that is false or, at a minimum, acted with reckless disregard of its truth or falsity, is a fundamental constitutional defect in section 1327.”
The jurist also said the statute contains “broad and amorphous terms” which do not provide a clear warning as to what statements are criminal, and hence is void for vagueness.
Ruvolo was unpersuaded by the position of the bank and an amicus curiae, California Bankers Association, that the statute should be lent deference in light of the growing number of failed banks. He countered:
“Rather, it is precisely because of the current financial climate that we believe the public should be given broad latitude to express a wide range of viewpoints on matters relating to the operation and solvency of our financial institutions. That debate not only contributes ultimately to a proper understanding of the role and function of financial institutions in our society, but also furthers the search for solutions leading to the strengthening of the banking sector, and therefore, to our economy as a whole. Therefore, the public interest in the dissemination of this type of information is legitimate and substantial.”
The opinion declares that the first prong of the anti-SLAPP statute—that the conduct described in the complaint stems from protected speech—was met. The postings on Craigslist, in the “Rants and Raves” section, related to a subsidiary of a publicly traded corporation, Ruvolo pointed out, adding that the bank had courted public attention and was a public figure.
The second prong of the statute—unlikelihood of the plaintiff prevailing in the lawsuit—was also met, the justice said.
Postings included this one, on June 7, 2009:
“Being a stockholder of this screwed up Bank, this year there was no dividend paid. The bitch CEO that runs this Bank thinks that the Bank is her personel [sic] Bank to do with it as she pleases. Time to replace her and her worthless son.”
To the extent facts were stated, “there is evidence that the verifiable facts in Rogers’s posts were basically true,” Ruvolo wrote, noting:
“The Bank in fact paid no dividend in 2009. Regulators did in fact look at the Bank on multiple dates in 2009. The Bank, in fact, closed its Hayward branch in March 2009 and did so because it was unprofitable.”
The complaint against Rogers was also based on comments that were in the nature of “nonactionable statements of opinion,” Ruvolo said.
The case is Summit Bank v. Rogers, Al29800.
Copyright 2012, Metropolitan News Company