SuperCom Ltd. v. Sabby Volatility Warrant Master Fund Ltd.

Background

SuperCom, Ltd. brought claims against Sabby Volatility Warrant Master Fund Ltd. and Wedbush Securities, Inc. for fraud, breach of contract, negligence, violations of federal securities laws, and defamation per se. The dispute arose after SuperCom and Sabby entered into agreements concerning SuperCom shares and a warrant allowing Sabby to buy additional shares under specified conditions.

On March 19, 2021, Sabby initiated a cashless exercise of the warrant and sought an electronic share transfer. After an alleged problem with Sabby’s notice, SuperCom told Sabby that the notice was invalid and told Wedbush that SuperCom had not approved issuance of the shares. Wedbush nevertheless initiated the transfer, and Sabby received 647,000 SuperCom shares.

In a March 23, 2021 email sent to representatives of SuperCom, Wedbush, and others, Rob Grundstein, Sabby’s Chief Operating Officer and General Counsel, complained about a $125 transfer fee, said Sabby would not return the shares until it was reimbursed, and described SuperCom as “the dirtiest we have dealt with in 9 years of existence” and “the most filthy individuals we have ever encountered.” SuperCom based its defamation claim on that email.

Motion and Legal Standard

Sabby moved under Rule 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. At this stage, the court generally accepts the complaint’s factual allegations as true and draws reasonable inferences for the plaintiff. The court considered the full email because SuperCom relied on and quoted substantially from it.

Under New York law, a defamation claim generally requires a false and defamatory factual statement about the plaintiff, publication to a third party, fault, and either special damages or a statement treated as actionable without proof of special damages. A statement is defamation per se when it tends to injure a person or entity in its trade, business, or profession. But expressions of opinion are not actionable as defamation, regardless of how offensive they are.

Court’s Analysis

The court concluded that the words “dirtiest” and “most filthy” were opinions rather than actionable facts. First, the words were subjective and could mean different things to different people. Their superlative form also made them hyperbolic rather than precise descriptions that could be proven true or false.

Second, the surrounding email showed that Grundstein was expressing frustration about the transfer fee, the share dispute, and Sabby’s refusal to return the shares until it was compensated. In that setting, a reasonable reader would understand the statements as subjective epithets criticizing SuperCom’s conduct during the business dispute, not as factual assertions.

The court also rejected SuperCom’s argument that the statements were “mixed opinions.” A mixed opinion implies undisclosed facts that support the opinion, while a pure opinion either states the supporting facts or does not imply undisclosed supporting facts. The court found that the email did not imply that Grundstein possessed undisclosed facts about SuperCom; instead, the statements were figurative expressions of dissatisfaction with the parties’ dealings.

Disposition

The court held that the challenged statements were pure opinions and therefore not actionable under New York defamation law. It granted Sabby’s motion to dismiss the sixth cause of action and dismissed the sixth count of SuperCom’s complaint. The order did not state that the dismissal was with or without prejudice. Judge Analisa Torres directed the Clerk of Court to terminate the motion at ECF No. 21.