Free Trial Brief - District Court of Arizona - Arizona

GREENBERG TRAURIG, LLP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Third Party Defendants Gordon and Barbara Allcock (collectively, "Allcock") and Mary and Eric Schmidt (collectively, "Schmidt") hereby submit their joint bench memorandum regarding all claims asserted against them in the Distributor Defendants' November 12, 2003 Third Party Complaint. The Distributor Defendants each brought suit against Allcock and Schmidt for tortious interference with business relations, defamation, and unfair competition. The Distributor Defendants' claims against Allcock and Schmidt have no merit, no support in the record, and no legal justification. I. Tortious Interference with Business Expectancy. To establish a claim for tortious interference with business expectancy, the Distributor Defendants must establish the following elements with respect to both Allcock
phx-fs1\1506614v01\8/8/05\6:39:00PM ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, v. Group Vision International, L.L.C., et al., Defendants. And related cross claims and third party actions. No. CV03-2024-PHX-DGC THIRD PARTY DEFENDANTS ALLCOCK AND SCHMIDT'S BENCH MEMORANDUM REGARDING ALL CONTESTED ISSUES OF LAW ARISING FROM CLAIMS RAISED IN THE THIRD PARTY COMPLAINT

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and Schmidt: (i) a valid contractual relationship or business expectancy between the Distributor Defendants and a third party, (ii) Allcock's and Schmidt's individual knowledge that the business relationship or expectancy exists, (iii) intentional interference by Allcock and Schmidt that caused the third party to terminate the business relationship, or otherwise not enter into in the relationship, (iv) a showing that Allcock and Schmidt each acted improperly, and (v) a showing that damage resulted. See Barrow v. Ariz. Bd. of Regents, 761 P.2d 145, 152 (Ariz. Ct. App. 1988) (interference with contract); Antwerp Diamond Exch. v. Better Bus. Bureau, 637 P.2d 733, 739-40 (Ariz. 1981) (interference with business relationship). Knowledge of, and intent to interfere with, plaintiff's business expectancy are essential elements of this claim. Edwards v. Anaconda Co., 565 P.2d 190, 192 (Ariz. Ct. App. 1977). Even if knowledge and intent are established, however, plaintiff must prove that defendant's conduct was improper. Id. Under Arizona law, the trier of fact is to determine whether the defendants' actions were proper based upon the following seven factors: (a) the nature of the actor's conduct, (b) the actor's motive, (c) the interests of the other with which the actor's conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor's conduct to the interference, and (g) the relations between the parties. Safeway Ins. Co., Inc. v. Guerrero, 106 P.3d at 1027. "[T]he propriety of the means employed by the [alleged] interferer is determined in light of the circumstances of the case." Id. at 1028 (citing RESTATEMENT (SECOND) OF TORTS § 767 cmt. c) (noting that even such means as `physical violence, fraudulent misrepresentation, and threats of illegal conduct may not constitute `improper conduct' ... in light of the particular relation between the actor and the person induced").

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A defendant is not liable for tortious interference with business expectancy where defendant's conduct is privileged. The Restatement of Torts recognizes the privilege of competitors as follows: (1) One is privileged purposely to cause a third person not to enter into or continue a business relation with a competitor actor if (a) the relation concerns a matter involved in the competition between the actor and competitor, and the actor does not employ improper means, and the actor does not intend thereby to create or continue an illegal restraint of competition, and the actor's purpose is at least in part to advance his interest in his competition with the other.

(b) (c) (d) (2)

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The fact that one is a competitor of another for the business of a third person does not create a privilege to commit a breach of contract with the other even under the conditions stated in Subsection (1).

RESTATEMENT (SECOND) OF TORTS, § 768 (1979). "The competitor's privilege does not apply to the inducement of breach of contract but only to interference with business expectancies." Edwards, 565 P.2d at 193. Accordingly, unless the Distributor Defendants can establish that Allcock and Schmidt employed improper means when contacting Awareness' distibutors, Allcock and Schmidt's conduct ­ even if otherwise sufficient to support a claim for tortious interference ­ is subject to the competitor's privileged, and the Distributor Defendants' claim must be dismissed. II. Defamation. To establish a claim for defamation against Allcock and Schmidt, Arizona law requires the Distributor Defendants to prove (i) publication to a third party (ii) of a false or defamatory statement of or concerning each of the Distributor Defendants (iii) that is not
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privileged. Spratt v. N. Auto. Corp., 958 F.Supp. 456, 465 (D. Ariz. 1996). As a threshold matter, then, each Distributor Defendant must establish that the alleged defamatory statements refer specifically to him or her -- either explicitly or by implication. See id. See, e.g., Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). Plaintiffs may not bring a claim for defamation premised solely upon statements made about an unrelated third party. See id. 1. Statements of Opinion are Not Defamatory. Statements of opinion do not constitute defamation and are therefore not actionable. Info. Control Corp. v. Genesis One Computer Corp., 611 F.2d 781, 783 (9th Cir. 1980) (citations omitted). "The determination of whether an allegedly defamatory statement is a statement of fact or statement of opinion is a question of law," and is typically based upon the court's analysis of three factors. Id. First, "it is established that words are not defamatory unless they are understood in a defamatory sense." Id. "Mere expressions of opinion or severe criticism are not libelous if they clearly go only to the merits or demerits of a condition, cause, or controversy which is under public scrutiny." Id. Second, even apparent statements of fact can assume the character of opinion statements when made under circumstances in which an "audience may anticipate efforts by the parties to persuade others to their positions by [the] use of epithets, fiery rhetoric, or hyperbole." Id. at 784. The third and final factor to consider concerns the language of the alleged defamatory statement. "Where the language of the allegedly defamatory statement is cautiously phrased in terms of apparency or is of a kind typically generated in a spirited legal dispute in which the judgment, loyalties, and subjective motives of the parties are reciprocally attacked and defended in the media and other public forums, the statement is less likely to be understood as a statement of fact rather than as a statement of opinion." Id.

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2.

Truth is a Complete Defense to a Claim for Defamation.

Only false statements can be considered defamatory. Accordingly, the truth of the contents of the alleged defamatory statements is a complete defense to a claim for defamation. Read v. Phoenix Newspapers, Inc., 819 P.2d 939, 941 (Ariz. 1991) (en banc). "[W]hen proving the statement's truth, the defendant need not prove the literal truth of every detail, but must only prove that the statements are substantially true. Substantial truth is an absolute defense to a defamation action in Arizona." Id. (citations omitted). "Slight inaccuracies will not prevent a statement from being true in substance, as long as the gist or sting of the publication is justified." Id. (internal citations omitted). III. Unfair Competition. The term "unfair competition" is used to describe a commercial tort involving competitive behavior that in its totality is unfair. Chafee, Unfair Competition, 53 HARV. L. REV. 1289 (1940). "The law of unfair competition is the umbrella for all statutory and nonstatutory causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters." Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3 (5th Cir. 1974); Prof'l Golfers Ass'n v. Bankers Life & Cas. Co., 514 F.2d 665 (5th Cir. 1975). The Distributor Defendants' claim for unfair competition against Allcock and Schmidt are based solely upon Allcock's and Schmidt's alleged "false misrepresentations, intentional tortious interference with business relations and other acts." Defendants' failed claims, and, like those claims, also fails. The unfair competition claim is therefore little more than a repackaging of the Distributor

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RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corp. and Third Party Defendants Allcock and Schmidt

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CERTIFICATE OF SERVICE I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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