Dear Board of Directors:
Here is the requested memorandum of applicable state law on the likelihood of success on claims against HAND in the matter discussed at the board meeting.
"MANSANJO IS TURNING HUMANS INTO CANNIBALS!" "BLOOD ORANGES TODAY WILL REALLY BE BLOOD!" "STOP THE MUTATION OF THE HUMAN RACE DO NOT EAT MANSANJO PRODUCED SEED!" These are a few examples of headlines which HAND (Humans Against New DNA) have attached to their whole page advertisements against Mansanjo. The accompanying articles refer to a new line of products that Mansanjo plans to unveil to the public in July. In addition to claims that the products comprise of both plant and human tissue, the advertisements also contain false statements to the companies failed research attempts. Some of these false statements allege that tomatoes grew fingers and potatoes had ears, instead of eyes.
Mansanjo is world known as the largest producer of genetically altered pest-resistant foods and is about to unleash its newest line of products. Through years of research, Mansanjo has mastered the technique of combining human genes and plant DNA to create what it calls MegaProduce. The product not only provides its own pesticides, it is twice as large as its non-engineered counter-parts. Crops of tomatoes, corn, and potatoes have been planted by licensed farmers. Mansanjo had planned to start advertising the new produce at the onset of each crops harvest.
The product is not even on the open market yet. However, the market for such produce has already been drastically reduced by the efforts of the defendants. While the products have been patented and the F.D.A. has given approval for their consumption, the American public is being lied to about the nature of the product and Mansanjo is being harmed. Farmers are canceling orders for all products produced by Mansanjo, even items such as the New Leaf Potato version XII, which has been on the market for the past thirty years. In addition to canceled orders, Mansanjo is now facing double counting. As the market anticipates a decline in the demand for Mansanjo products due to the defendants defamation, the stock prices fall.
Defendants in the suit would include HAND, which is an extreme branch of the Organics for Life Organization, and several prominent newspapers that have run the advertisements. These groups have spearheaded the campaign to bring down the name of Mansanjo and its products in the MegaProduce line.
The courts of the United States, nor the courts of California have dealt with the issue of disparaging remarks of this nature since Mansanjo is the first to genetically engineer these plants. Mansanjo can seek relief on the theory of trade libel. The relief sought is monetary damages for actual and punitive damages and the plaintiff also seeks a preliminary injunction to prevent further libel.
A. Trade Libel
1. Definition of Trade Libel
Trade libel is the intentional disparagement of the quality of property. "Unlike classic defamation, [the defamatory statements] are not directed at the plaintiffs personal reputation, but rather at the goods a plaintiff sells or the character of his or her business, as such." Guess v. Superior Court, 176 Cal.App.3d 473, 479 (1985). The disparagement must result in pecuniary damage to the plaintiff. The disparagement may be in the form of a false statement of fact or opinion. (see 5 Witkin Sum. Cal. Law Torts §573, citing Rest.2d, Torts §§626).
The current law on trade libel comes from the California Court of Appeals decision in Melaleuca v. Clark 66 Cal.App.4th 1344 (1998). The court held that the statements may be in the form of opinion or fact, the disparaging statements must be false, and they must be made with actual malice.
a. Disparaging the quality of the product
The definition of trade libel may create an obstacle for Mansanjo. The tort requires the disparagement of the quality of the product. The defendants in this case do not claim that the fruit is of a lower quality, but that it should not be consumed because it contains human genes and tissue which make its consumption a form of cannibalism. Mansanjo will have to convince the court that the mention of cannibalism is a disparagement of the quality of the product and the nature in which plaintiff conducts business.
Mansanjo can rely on the holding in Melaleuca v. Clark, where the defendant was an independent researcher who claimed through her own scientific tests that she found benzene in the plaintiffs products which caused cancer in consumers. The court held this to be an actionable disparagement of the products quality. Melaleuca is an older case and given the advances in technology a court should analogize the holding in that case to the issue at hand. HAND is claiming that Mansanjos products will result in cannibalism. Since cannibalism has an incredible stigma in society the court will most likely make the analogy that this is a disparagement of quality.
A court faced with this issue will next have to decide whether the advertisements contain statements of fact or opinion. A defendant in a trade libel case is going to argue that their statements are opinion and not actionable, Hoffman Co v. E.I. Du Pont de Nemours & Co. 202 Cal.App.3d 390, 397 (1988). They will argue that they feel as though eating plants that contain human genes are essentially eating human tissue and this is only an opinion that they offer.
However, the advertisements do in fact contain assertions of factual findings. The article claims that Mansanjo research attempts have resulted in tomato growing fingers. This can only be deemed as an assertion of fact and "there is no constitutional value in false statements of facts." 66 Cal.App.4th at 1353, citing Copp v. Paxton 45 Cal.App.4th 829 (1996). These statements will be ruled to be actionable false statements of fact.
In regards to the cannibalism charges, even if the court rules it as opinion, this can still be actionable. A plaintiff has a cause of action for trade libel when the opinion appears to be based on undisclosed facts and "the dispositive question for the court is whether a reasonable fact finder could conclude that the published statements imply a provably false factual assertion." Copp v. Paxton 45 Cal.App.4th 829, 837 (1996). The claims by HAND give the appearance that they are based on false factual findings. They claim that Mansanjo is turning humans into cannibals, and the only way to make that claim is to imply that there is in fact human tissue being created with the genes that are incorporated. The test: is it reasonable for a fact finder to conclude that statements of cannibalism indicate that there is in fact human tissue. This is a conclusion that a reasonable fact finder can make. The court in Melaleuca, rationalized that the defendants statements could not be mere opinion, because they referred to research which suggested the factual basis for her statements, 66 Cal.App.4th at 1355. Even if the court believes the cannibalism charges to be opinion they should find them actionable due to the underlying assertions of false facts.
"The plaintiff in a defamation action bears the burden of showing the statements the defendant made were false." 66 Cal.App.4th at 1355. Mansanjo will have little difficulty showing HANDS claims are false. The mere incorporation of human genetic material does not result in the plant developing human tissue. While this may a possibility in later years to produce tomatoes that actually do make human blood, this is not the purpose of MegaProduce. The incorporation of human genes that produce human growth hormone have merely resulted in larger fruit. The falsity of HANDs statements can be shown through the use of experts, Cal.App.4th at 1355. Mansanjo may present at trial one of the many scientists that engineered MegaProduce, who can explain to the jury the process of seed production and the consistency of the fruit.
However, the court in Melaleuca recognized, "that a defamation defendant may also find it helpful or necessary to present expert testimony as to the truth of an allegedly defamatory statement." Cal.App.4th at 1359. HAND will be allowed to present their own experts as to the truth of their statements. While this may become a battle of the experts, the truth of the matter is that the claims of HAND boil down to radical anti-progress rhetoric which have no basis in truth. A fact finder when faced with the evidence will find the statements to be false. The next element Mansanjo will have to prove is that the defendant made the false statements with actual malice.
The actual malice standard in defamation is held to plaintiffs that are public figures or when the matter is one of public concern. Having recognized that free speech requires "breathing space" to avoid self censorship in speaking on important matters, courts require plaintiffs in defamation suits to meet the heightened standard of actual malice. Courts have also held plaintiffs in a trade libel action to the actual malice standard, 66 Cal.App.4th at 1362-1363.
In Melaleuca, the court held when:
66 Cal.App.4th at 1350. If Mansanjo wants to proceed against both HAND and the newspapers, it must show that both knew or should have known of the falsity. This is a subjective test that only requires a showing that the defendant knew or should have known the statements to be false. Cal.App.4th 1365.
The case against HAND is much more straight forward. HAND created the ad which it ran. HAND made the claims of botched research attempts, in which there is no evidence that they occurred, they knew these claims to be false. Clear and convincing evidence of actual malice may be shown in the extensive documentation concerning research that Mansanjo sent HAND last August when it first sensed trouble over the product. Since they made bold lies with no factual basis Mansanjo will be able to prove actual malice under the clear and convincing evidence standard in regards to the research statements.
The cannibalism claims may prove more difficult to show actual malice. Regardless of whether the court finds the statements to be of fact or actionable opinion, Mansanjo still bears the burden of showing that HAND knew the statements were false. HAND may claim that they asserted the claims based on their belief that human genetics in plants resulted in the plant making human tissue. HAND is a group against all new DNA especially in food products; however they are a scientific group and aware of current theories and trends in biology. Actual malice can be inferred from their knowledge of basic comparative genetics. Any expert they put on the stand will know that all mammals have genes in common and if they do not they may be impeached as a witness. The argument follows that if MegaTomatoes DNA is 99.9% tomato and 0.1% human it is still far less than a cow whose percentage of common DNA is much higher. No one considers eating a steak to be cannibalism. HAND may counter that they are referring to origin and not genetic overlap. Mansanjo may be vulnerable to this argument until it completes its research on the substitution of genes to produce bgh for those to produce hgh&endash;delayed by the late completion of the bovine genotype project&endash;Mansanjo legal and research departments need to work on more persuasive arguments between now and trial.
One line of argument may be that plant products already contain human genetics accidentally transferred by viral action. Researchers believe that some viruses have transferred human genes from a human nucleus to a plant nucleus. Professor Northcote is to fax me his report at its completion. However, the argument follows that if HAND is considered that any amount of human genes transferred into a plant result in cannibalism, then many people are already cannibals.
HAND knows all of this information and it may be used to prove actual malice. They have been raging a public battle over Mansanjo research for decades and know the operations of Mansanjo. They knew the claims were false and said them merely to inflame society. The claims of cannibalism will most likely pass the actual malice standard. It will be easier for a fact finder to find that this defendant should have knew the statements to be false, because this is a group that is out to stop Mansanjo at all costs.
The newspapers have a greater constitutional leeway in the material that they publish, New York Times v. Sullivan, 376 U.S. 254 (1964). Mansanjo will not be able to claim that the newspapers knew the statements were false, because Mansanjo has released no information to the public about the products because of efforts to patent the seeds. Mansanjo may argue that the newspapers should have known the statements were false due to the long standing battle between Mansanjo and HAND. However, this is going to be a difficult claim to proceed on, because courts grant media defendants broad latitude due to freedom of press and speech concerns. The clear and convincing standard is a high standard and there is little to show that the newspapers should have known the statements to be false. The action against the newspapers most likely will not be sustained.
In a trade libel case, the plaintiff "must prove special damages in the form of pecuniary loss." Guess v. Superior Court, 176 Cal.App.3d at 479. According to Blacks Law Dictionary pecuniary loss is the loss of money by the defendants intervention. The court in Erlich v. Etner held the damages must be more than a general decline in plaintiffs business, the plaintiff must "identify particular purchasers who have refrained from dealing with him, and specify the transactions of which he claims to have been deprived," 224 Cal.App.2d 69 at 73-74 (quoting Prosser on Torts, 764-766).
Mansanjo should easily meet this burden. Once the advertisements ran in the papers, farmers began to call with their concerns and canceled orders, many of these farmers being customers for many years. Mansanjo will be able to meet the burden by showing specific transactions that were lost due to the advertisements. The general decline in business in the from of stock decreases, will not be recoverable, because that will most likely be deemed a general decline in business which does not meet the burden.
Mansanjo seeks relief in two forms: monetary damages and injunctive relief. In the regards to the monetary relief, the plaintiff is entitled to recover only the amount of injury that resulted from the libel, i.e. the pecuniary loss, Burkett v. Griffith, 90 Cal.App. 532, 537 (1891). Mansanjo will clearly receive any proved loss resulting from the advertisement.
Injunctive relief provides greater relief to Mansanjo. A preliminary injunction will prevent HAND from further defaming Mansanjo and perhaps discourage other groups from entering into such conduct. The controlling case on preliminary injunctions in trade libel is Vondran v. McLinn, 1995 U.S. Dist. LEXIS 21974. In that case, the plaintiff had created a new process for making fiber enforced concrete, on which he obtained a patent. The defendant, a former employer, began to write letters to prominent industry magazines defaming the process. The plaintiff was granted a preliminary injunction against the defendant from further defaming the plaintiff.
Although defamatory speech is not protected by the First Amendment, Beauharnais v. Illinois, 343 U.S. 539, 562 (1952), enjoining speech implicates the First Amendment and this form of relief is presumptively invalid. However, some courts have allowed injunctions when the defamatory speech injures business related interests. 1995 U.S. Dist. LEXIS 21974, 8-9. "An injunction enjoining speech cannot issue, however, unless (1) the nonmoving party is given an opportunity to respond and (2) the trier of fact has made a finding that the statements sought to be enjoined are libelous" 1995 U.S. Dist. LEXIS 21974, 10. In order to obtain a preliminary injunction the plaintiff must show likely success on the merits and the possibility of irreparable harm, Arcamuzi v. Continental Air Lines, 819 F.2d 935, 937 (9th Cir. 1987).
The holding in the above cases suggest that Mansanjo will be able to receive a preliminary injunction against HAND as long as they can prove the statements to be libelous at a proceeding in which HAND may respond to the charges. Mansanjo will not be able to obtain the injunction prior to filing suit with HAND.
Mansanjo also must prove that the defamation injures their business. An analogy to the facts of Vondran are helpful. There the defendant had purported to have actual knowledge of the plaintiffs business and made assertions of facts that could be proved false, 1995 U.S. Dist. 21974. HAND has made assertion of facts that indicate knowledge of the plaintiffs business with the statements of the research attempts. Mansanjo will have to show irreparable harm that cannot adequately be compensated by monetary relief. The irreparable Mansanjo faces is losing business, in the loss of actual orders, and the inability to market their product. An inability to market his product was a factor in Vondran in finding the plaintiff faced irreparable harm, 1995 U.S. Dist. 21974, 16. While injunction relief is rarely awarded in cases involving free speech issues, this is a case that may be made and a court could find favorably for Mansanjo.
It is my recommendation that Mansanjo has actionable claims against HAND. If it wishes to proceed it will certainly receive any loss in business it can prove. Also the court may be willing to issue a preliminary injunction against HAND with regards to statements about MegaProduce. However, the best approach, since an injunction is unlikely or may not cover the scope of the cannibalism charges, is to proceed against HAND for a large monetary award. If Mansanjo can receive a sufficiently high award or even pierce the corporate veil and go after individual members of HAND, other activist groups may be less inclined to attack Mansanjo in the future. Also the threat of a large award may persuade HAND, to reserve its funds for other pursuits, to accept a blanket injunction. Mansanjo has many options before it and should proceed at once.
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