Tang v. Guo

Background

Baiqiao Tang and Jing Geng moved for permission to file a second amended complaint and to add three defendants: Rule of Law Foundation III Inc., Rule of Law Society IV Inc., and Saraca Media Group Inc. The motion followed the court's March 14, 2019 dismissal without prejudice of the first amended complaint against Wengui Guo, also known as Miles Kwok, and Golden Spring (New York) Ltd.

The first amended complaint asserted a federal claim under the Lanham Act and six state-law claims. The court had previously dismissed the Lanham Act claim against Guo because the complaint did not adequately allege that his communications were economically motivated commercial speech. It dismissed Golden Spring because the complaint did not sufficiently allege wrongdoing by that company, and it dismissed the remaining state-law claims after declining to exercise supplemental jurisdiction.

Legal standard

Under Federal Rule of Civil Procedure 15, courts generally should allow an amended pleading when justice requires. The court may deny permission if the amendment was unduly delayed, made in bad faith, would prejudice the opposing party, or would be futile. An amendment is futile if the proposed claim could not survive a motion to dismiss for failure to state a claim under Rule 12(b)(6).

At this stage, the court treated the proposed complaint's factual allegations as true and drew reasonable inferences in the plaintiffs' favor. The question was whether the proposed allegations plausibly stated claims, not whether the plaintiffs had ultimately proved them.

Lanham Act claim

The court concluded that the proposed complaint plausibly alleged a violation of the Lanham Act. The new allegations stated that Guo had added “DONATE” buttons to video infomercials promoting his media outlets and fundraising organizations, and that the defendants sought to increase viewership and donations for organizations competing with the plaintiffs' nonprofits.

The proposed complaint also alleged that the defendants misled the public about donated funds by failing to disclose that donations were not tax-deductible and that funds would be used for lobbying, to support for-profit media companies, and to fund Guo's asylum application. The court further found plausible allegations that the parties competed for fundraising dollars, that the statements were intended to influence donations, and that the statements were widely distributed through public forums including YouTube and Twitter.

The court rejected Guo's argument at this procedural stage that the statements were protected free speech. Assuming the conduct occurred as alleged, the court found that the allegations described commercial speech within the Lanham Act's scope. The plaintiffs therefore could amend to assert the Lanham Act claim.

Golden Spring and proposed defendants

The proposed complaint plausibly alleged specific wrongdoing by Golden Spring and the three proposed defendants. It alleged that the Rule of Law Defendants, which the complaint described as wholly owned and controlled by Guo, operated the Media Defendants and used them to publish Guo's allegedly false and misleading statements. It also alleged that the Rule of Law Defendants engaged in false advertising about charitable donations and that the Media Defendants promoted the statements and advertising by receiving funding and publishing infomercials.

The court rejected the argument that the three new defendants could not be liable because they were formed after Guo made some earlier statements. The proposed complaint alleged false advertising after the new defendants were created, stated that earlier statements remained publicly available, and alleged new false and defamatory statements as recently as February 2019. The court found these allegations sufficient at the pleading stage to permit the new defendants to be added.

State-law claims

The court permitted amendment of the unfair-competition claim because New York common-law unfair competition and the Lanham Act claims have matching elements under the authorities cited by the court.

The proposed tortious-interference claim failed because it did not identify the relevant donor contracts, their terms, the parties to those contracts, or any specific breach caused by the defendants. The court stated that this claim was dismissed without prejudice and denied leave to amend it without prejudice.

The proposed intentional-infliction-of-emotional-distress claim also failed. The court found that the alleged conduct was not sufficiently extreme and outrageous, that the complaint did not identify a specific severe emotional injury, and that the claim duplicated the defamation claim. The court stated that this claim was dismissed without prejudice and denied leave to amend it without prejudice.

The court permitted the defamation and harassment claims to proceed. It found that the proposed complaint identified specific statements by Guo accusing the plaintiffs of serious wrongdoing, that the statements could be proven true or false rather than being merely opinions, and that the allegations plausibly showed at least reckless disregard for whether the statements were false. The court also permitted the harassment claim under New York Penal Law § 240.26.

The court denied leave to amend the false-light claim with prejudice as futile. It concluded that false-light allegations are not actionable under New York law and that the proposed claim duplicated the defamation and harassment claims that survived.

Ruling and effect

The court held that the plaintiffs' motion to amend was GRANTED in part and DENIED in part. The plaintiffs may file a second amended complaint asserting their Lanham Act, unfair-competition, defamation, and harassment claims. The opinion does not describe a final merits judgment on those claims; it finds only that they were sufficiently pleaded to proceed beyond this stage.

If the plaintiffs wanted to amend the remaining claims again, the court required them within 30 days to show how they would cure the deficiencies and why justice required permission to file a third amended complaint. If they chose not to amend those claims, the defendants were ordered to answer the second amended complaint within 15 days after it was filed.