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Court of Appeal:
Liability Can Lie for Truthful but Incomplete Recitation
Justices Say TV/Movie Producer Has Probability of Winning Defamation Action Based on Accurate Reference to Article in Variety Reporting on Allegation of Lawsuit Against Him, but Omitting Fact That Accusation Was Withdrawn
By a MetNews Staff Writer
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RYAN KAVANAUGH Hollywood producer
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ETHAN KLEIN podcaster
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A truthful recitation repeatedly made by a YouTuber/podcaster that the show-business news publication Variety had quoted a complaint filed in the Los Angeles Superior Court as alleging that a television and movie producer had perpetrated a Ponzi scheme can give rise to liability for defamation where accusation of unlawful conduct had been quickly withdrawn, the Court of Appeal for this district held yesterday.
The opinion by Justice Dorothy Kim of Div. Five affirms an order by Los Angeles Superior Court Judge H. Jay Ford III denying an anti-SLAPP motion filed by Ethan Klein and his company, Ted Entertainment, Inc. They are facing a lawsuit filed by one-time billionaire Ryan Kavanaugh, a financier of entertainment projects whose venture Relativity Media went into bankruptcy twice and has been absorbed by a holding company.
Kavanaugh’s lawsuit stems from Klein’s incessant references to a June 7, 2019 article in Variety entitled, “Ryan Kavanaugh Accused by Ex-Partner of Running a Ponzi Scheme.” The news magazine reported, accurately, that Elon Spar, a former partner of Kavanaugh, alleged in the complaint that Kavanaugh was operating his new company, Proxirna. and related entities, “as essentially a Ponzi scheme, using meager new investment capital to satisfy old debts, diverting corporate funds for personal use…and manipulating the corporate books and records to conceal his misrepresentations.”
Accidental Filing
Not alluded to by Klein was that within a day, Variety updated the article to add that Kavanaugh’s representative had said in a statement that Kavanaugh and Spar had “satisfactorily resolved all of their issues” and that Spar’s complaint was not “intended to be legally filed” and was “submitted to the court by accident.” The update noted:
“Spar apparently has some regrets saying that Kavanaugh is not really running a Ponzi scheme, as he alleged in his suit.”
Two years later, Kavanaugh sued Klein and his company, alleging that Klein, on his two YouTube channels and on other social media platforms, repeatedly pointed to the article in Variety. Klein was apparently acting out of anger based on a copyright infringement action having been filed against him by a company in which Kavanaugh had a major interest.
In ruling on the defendants’ special motion to strike, Ford ruled that the first prong the anti-SLAPP statute, Code of Civil Procedure §425.16—that the lawsuit stemmed from protected conduct—was met, but that Klein and Ted Entertainment had failed to show that the requirement of the second prong, a probability of success on the merits, was satisfied.
Civil Code §47
The defendants/appellants asserted the applicability of Civil Code §47(d)(1) which renders privileged “a fair and true report in, or a communication to, a public journal, of (A) a judicial…proceeding, or…anything said in the course thereof.”
Ford had held that the allegations by Klein did not constitute a “fair and true report” because of the omitted facts. The appellants’ opening brief says:
“The Order’s finding rewrites the statute, which uses the disjunctive ‘or’—i.e., that the report can be about the ‘judicial’ proceeding ‘or anything said in the course thereof.’…(emphasis added)….By requiring Appellants to report that the Verified Complaint was withdrawn and filed by accident, the Order rewrites the statute to require a report on anything said in a judicial proceeding to include a fair and true report on the proceedings as a whole. The statute contradicts this interpretation.”
Kim responded:
“Assuming without deciding the Spar compliant was part of a judicial proceeding and the challenged statements were made in public journals, we nevertheless hold the fair and true report privilege does not apply to the statements quoted in the complaint that are alleged to be defamatory. Defendants’ statements that Kavanaugh’s partner accused him of running a Ponzi scheme were not fair and true because, as they concede, they omitted, in almost all instances, the context that Variety published an updated article stating that neither Kavanaugh nor Spar intended their complaints to be ‘legally filed’ and Spar retracted his allegation.”
Factual Assertions
The defendants agued on appeal that Ford erred in finding that Klein had “asserted that Kavanaugh was running a Ponzi scheme.” He made no such statement of fact, they contended, saying:
“…Appellants repeatedly and expressly disclaimed any knowledge of the facts underlying the Variety Article or Verified Complaint (as detailed below in the discussion of each Challenged Statement). Nor did Appellants state or imply Kavanaugh was liable or convicted of running a Ponzi scheme. By repeatedly referencing Spar…, a reasonable average viewer of the Challenged Statements would understand that Appellants were discussing a civil (and not criminal) action and no liability (or conviction) was established.”
Unpersuaded, Kim wrote:
“The evidence shows defendants intended the challenged statements to be viewed as assertions of fact by their audience. They emphasized that Kavanaugh’s ‘ex-partner’ Spar alleged Kavanaugh ran a Ponzi scheme. A person viewing defendants’ podcasts or tweets reasonably would assume that Spar…was in a position to know if Kavanaugh was running a Ponzi scheme.
“Defendants also sought to bolster the veracity of the challenged statements by stating they were published in Variety. In the June 11, 2021, podcast, after directing his viewers to Variety’s website where they could find the Variety article, Klein said, ‘That’s written—that was written by Variety, which is like a pretty—that’s like a reputable, you know ...’ Later, during the July 1, 2021, podcast, Klein again directed his viewers to the Variety’s website and a podcast member stated, ‘Why, Variety, that’s one of the two major trade papers in the entertainment industry. They’re very reputable.’ ”
The jurist declared that “Kavanaugh presented sufficient evidence to establish a prima facie case that the challenged statements were assertions of fact, and defendants do not identify sufficient evidence that disproves the challenged statements are assertions of fact as a matter of law.”
Audience’s Perception
The defendants agued on appeal that Ford “erred by finding a reasonable average member of Appellants’ audience understood the Challenged Statements in the defamatory sense (i.e., that Kavanaugh actually operated a Ponzi scheme).” They maintained:
“The undisputed evidence demonstrates Appellants’ audience interpreted Appellants’ statements as a meme lampooning Kavanaugh with the fact his business partner alleged he ran a Ponzi scheme and Variety reported it.”
Kim advised that a dictionary defines a “meme” as “an amusing or interesting item (such as a captioned picture or video) or genre of items that is spread widely online especially through social media.” Rejecting that characterization of Klein’s remarks, she said:
“The length of the broadcasts and statements suggest that the audience did not interpret the statements as a ‘meme.’ ”
But even if the statements were so regarded, she said, it “is unavailing” because humor, when used to drive across a point, can be actionable as defamation.
Kim said that unrebutted declarations by Kavanaugh, alone, point to the falsity of the allegation that he had been involved in a Ponzi scheme, noting that there was additional evidence in his favor. The omission of essential facts, she wrote, “supports a finding defendants’ Ponzi scheme statements were not published in good faith but with actual malice.”
The case is Kavanaugh v. Klein, B327155.
Rom Bar-Nissim of the Century City firm of Heah Bar-Nissim LLP represented the defendants/appellants. Acting for Kavanaugh were, Farhad Novian and Lauren Woodland of the Century City firm of Novian & Novian and District of Columbia attorney Amy McCann Roller.
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