Gantman v. Farahan

Background

David Gantman sued Afshin “Alex” Farahan for defamation and tortious interference. The claims arose from statements Farahan allegedly made about Gantman’s purchases of Mazor securities.

According to the complaint, Farahan learned from Doron Tavlin, a Mazor Robotics executive, that Medtronic might acquire Mazor and buy its stock at a premium. Farahan purchased about $1 million of Mazor stock. Farahan later told Gantman that Mazor was a “good buy,” and Gantman purchased Mazor stock and options based on his own research.

After the Federal Bureau of Investigation contacted Gantman and Farahan about their 2018 securities purchases, Farahan retained a lawyer and negotiated proffer sessions with the FBI, the Securities and Exchange Commission, and the U.S. Attorney’s Office for the District of Minnesota. A proffer session is a negotiated interview in which a person provides information to the government under agreed conditions. Gantman alleged that Farahan falsely told investigators that he had informed Gantman about the acquisition tip and that Gantman traded on it. Gantman was later charged with securities fraud and conspiracy to commit securities fraud, but he was acquitted after trial.

Motion and Legal Standard

Farahan moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court assumes the complaint’s factual allegations are true and draws reasonable inferences for the plaintiff. The complaint must contain enough facts to make the claimed relief plausible rather than speculative.

Farahan argued that the statements made during the proffer sessions were protected by absolute privilege. Under Minnesota law, absolute privilege can protect statements related to a judicial or quasi-judicial proceeding, including statements made before the proceeding when they relate to a proceeding contemplated in good faith and under serious consideration. Absolute privilege applies even to intentionally false or malicious statements.

Gantman argued that the court should instead apply qualified privilege, which protects certain reports of suspected criminal activity only when they are made in good faith and without malice. He relied on cases involving people who reported suspected shoplifting or other crimes to law enforcement.

Court’s Analysis

The court distinguished those crime-reporting cases from Farahan’s proffer sessions. The complaint alleged that Farahan believed he might be charged, retained a lawyer, negotiated the sessions, confessed to securities fraud, and sought a lenient sentence or favorable government recommendation. These allegations showed that the sessions were preliminary to a criminal proceeding contemplated in good faith and under serious consideration.

The court stated that proffer sessions may sometimes be part of plea negotiations, but it did not base its decision on finding that every proffer session is part of plea negotiations. It also did not decide whether absolute immunity applies to every proffer session. Instead, it held that the particular sessions described in Gantman’s complaint were not merely reports of a crime; they were part of Farahan’s effort to address his own potential criminal liability and obtain leniency.

The court therefore concluded that the statements Farahan made during these proffer sessions were absolutely immune. Because Gantman’s tortious-interference claim stemmed from the alleged defamation, the court concluded that absolute privilege also barred that claim.

Disposition

The court granted Farahan’s motion to dismiss. It dismissed Gantman’s claims against Farahan with prejudice and directed that judgment be entered.