Kesner v. Buhl

Background

Harvey J. Kesner sued Teri Buhl over blog posts and a tweet concerning Kesner’s work as an attorney for companies and individuals connected to alleged securities-law violations and pump-and-dump schemes. The court had previously dismissed Kesner’s claims against Dow Jones & Company, Inc. and William Alpert, and had dismissed most of Kesner’s claims against Buhl. The only claims remaining against Buhl concerned three publications to the extent they accused Kesner of criminal conduct:

- An October 31, 2018 article described Kesner as part of “Team Honig” and a “bad actor.” - A March 27, 2019 tweet stated that Honig and Kesner had engaged in “illegal back room deals and intimidation” involving Biozone. - A June 7, 2019 article said that Kesner had aided Andy DeFrancesco in a questionable cannabis-stock transaction and could have helped insiders avoid beneficial-ownership disclosure rules.

Buhl moved for summary judgment on the remaining libel claims. Kesner separately moved to dismiss Buhl’s counterclaim under New York Civil Rights Law § 70-a, which sought costs and attorney’s fees under New York’s anti-strategic-lawsuit statute.

Summary-judgment ruling on the libel claims

Under the New York law applied by the court, the statements concerned matters of public interest, so Kesner had to prove “actual malice.” That term does not mean personal hostility. It required clear and convincing evidence that Buhl knew the statements were false or published them while seriously doubting whether they were true.

The court held that Kesner had not produced evidence from which a reasonable jury could make that finding. The court disregarded portions of Kesner’s required factual statement because his responses relied on the complaint, unsupported assertions, speculation, or legal argument rather than citations to admissible evidence. The court nevertheless independently reviewed whether Buhl’s evidence supported her factual assertions.

Kesner argued that a statement by Daniel Fisher showed Buhl knew he had not engaged in illegal conduct. The court rejected that argument because Kesner had not shown that Fisher was a source for the three publications at issue. The court also said that Fisher’s statement concerned what Fisher had told Buhl in 2016 and did not address information Buhl obtained later.

Kesner also relied on emails concerning an off-market transfer of shares. The court said the emails did not establish illegal conduct, but they also did not affirmatively establish that the conduct was legal or give Buhl an obvious reason to doubt her reporting. The court further rejected Kesner’s argument that Buhl’s failure to investigate, his lack of criminal charges, or the absence of Securities and Exchange Commission charges established actual malice. In the court’s view, those circumstances did not show that Buhl had serious doubts about the truth of her statements.

The court also considered Buhl’s evidence that she relied on informants, documents, emails, public filings, Securities and Exchange Commission filings, and allegations in the Securities and Exchange Commission’s amended complaint. The court noted that Buhl stated under oath that she believed her statements were true and was unaware of contradictory facts. The court concluded that no rational jury could find actual malice based on the record and granted Buhl’s motion for summary judgment on Kesner’s libel claims.

Counterclaim under New York Civil Rights Law § 70-a

Buhl’s counterclaim sought costs and attorney’s fees under § 70-a based on her prevailing on the libel claims. Kesner argued that the counterclaim could not be applied in federal court because the statute’s “substantial basis” standard conflicted with Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint states a plausible claim for relief.

The court agreed with Kesner. Applying the rules governing federal courts hearing state-law claims, the court held that § 70-a imposed a different and more demanding standard than the federal rules for deciding whether a claim should be dismissed before trial. The court therefore ruled that applying § 70-a in this case would conflict with Federal Rules of Civil Procedure 12 and 56. It granted Kesner’s motion to dismiss Buhl’s counterclaim. The court stated that this ruling did not question substantive parts of New York’s anti-strategic-lawsuit statute, including its actual-malice standard.

Disposition

The court granted Buhl’s motion for summary judgment and granted Kesner’s motion to dismiss Buhl’s counterclaim. The clerk was directed to terminate the pending motions and close the case.