Stupid Legal(ish) Question

[GlimDropper]

(This doesn't cleanly fit into any forum category, I hope this is the least worst fit.)

Imagine I own a company that purchases a product from another company ( we'll call it the "raw material") and incorporates that product into products I create and market. Now somewhere along the line several people make disparaging statements about that raw material and publishes those statements on the internet.

Could I productively sue those people for libel?

A few points:

• The people who made the negative statements have commercial interests in the same market segment as my company or in related segments.
• One particular piece of disparaging information was a preliminary lab result which was published before full testing was completed. The preliminary results indicated significant problems with the "raw material." When the full battery of tests were concluded those problems were proven to be much less significant than the preliminary results indicated.
• The people I wish to sue published the preliminary results but also (later) published the much less damaging full report.
• I have a hell of a hard time establishing actual damages from the alleged disparagements. In my complaint I can only point to a drop in my stock price in the relevant time frame but there are other, arguably more relevant factors which could have effected the stock price and in my SEC filings I reported a 20% increase in product sales in the relevant quarter over the previous one.
• My company could honestly referred to as a "stinky pinky," a thinly traded pink sheet public company with significant corporate governance issues including a majority owner and former (but unofficially still active) CEO facing significant fraud charges from a previous business endeavor.
• In my suit I'm asking for in excess of one hundred million dollars.

A copy of the complaint if anyone's interested. I think what I'm having the most trouble wrapping my head around is that the "raw material" which was alleged to have been disparaged is not produced by the company filing the lawsuit and the company which does produce it is not a party to the action. That just doesn't seem to fit right.

I suspect the lawsuit is something like an intimidation tactic and a publicity stunt. Even if damages could be established I sincerely doubt any or all of the defendants could come up with anywhere even remotely close to the amount of damages asked for. Further, the actions mentioned in the complaint took place in April and the suit wasn't filed until last week and followed closely on the heels of a negative report published by a largely respected activist group. Now the author and the publisher of that report are not named defendants in the suit, even though an initial press release indicated they would be:

“We will seek full legal remedies and awards for the damages caused by the malicious and intentionally harmful article and actions by the enterprise made up of the publication’s author, the publicist, and the company, other parties and individuals,”

I believe the publisher wasn't sued because they would not be inclined to settle out of court and could retain the caliber of legal council to mop the courtroom floor with the complaint and the attorney who wrote it. So instead they are only going after the "other parties and individuals."

[Judge Roy Bean]

...
[*]I have a hell of a hard time establishing actual damages from the alleged disparagements. ...

I think you answered your own question.

[JamesVincent]

I agree with Judge, kinda shaky there that I see with my layman eyes.

[fortinbras]

The case is intriguing but not quite as third party as the message fears: A (legal) marijuana processing company, that sells its product to a legal (let me emphasize that) mj dispensaries in Colorado and elsewhere - and its holding company - are suing a competing mj processor for publishing and advertising a supposed laboratory report to the effect that the plaintiff's brand of mj extract contained toxic impurities and was mislabeled and possibly dangerous. Naturally enough, this sort of publication is defamatory unless true. So the plaintiff companies are suing. It might be more of a third party question if an mj dispensary, not the manufacturer, sued because its stock-in-trade not of its own making was disparaged; that situation would be more of a problem, especially if the manufacturer is not a willing co-plaintiff.

On the whole, however, I think the damages will be nominal because, after all, potheads are too mellow to care about lab reports.

[notorial dissent]

On the whole, however, I think the damages will be nominal because, after all, potheads are too mellow to care about lab reports.

And probably too stoned to care even on the odd off chance they did. I don't think the ultimate consumers will either know, care, or comprehend. I will admit to having come across a few affectianados who, at least claim, and can rhapsodize with some of the best wine snobs I know about what ever they are smoking, but i doubt if they make up even 1% of the clientele. From a strictly business standpoint that I can see the really have is what amounts to an attempt to manipulate the stock, and you'd have to come up with real proof of that, and even then I wouldn't give them good odds. As to the "product defamation" I think that would be really hard to prove in court as well. There are two other issues they really don't want to tangle with. Taking this to a Federal court where they could possibly get a large payout is right out the window as the Fed's official opinion is still that it is a proscribed material, so no help there. Trying it in state court has about the same, or possibly even less likelihood of success since the state courts haven't exactly shown themselves friendly either. While I'm not familiar with the current judicial attitude in CA I can't imagine it would be too friendly to this sort of suit, so I really don't expect much of it.

[GlimDropper]

First and foremost I thank each of you for your considerate replies.

This is a kettle of fish I've been looking at for a good number of months. My entry point was the "Hemp Lifestyle" MLM Kannaway but honestly it's the legal vagaries of State/Federal marijuana laws and unaudited SEC filings of pink sheet publicly traded companies that hold my fascination. Just one link to help explain why the companies involved give me pause to wonder about them.

That article was published in April of this year and it describes a somewhat incestuous and mutually self confirming relationship between two other than completely audited financial filing publicly traded companies, one named Cannavest and the other Medical Marijuana Incorporated (MJNA). Since the time that article was published Cannavest terminated their distribution contract with MJNA and while Cannavest is not named in the litigation almost all of Cannavest's beneficial owners are currently suing and/or are being sued by MJNA. I can't say as to how fine it may be but this is most defiantly a kettle of fish.

I don't know the underlying cause of the mutual litigation, the Colorado state website doesn't share that much information but this link will point you to what is available. One possible point of friction, and one I became aware of in the last few hours is the ownership of the trade (or word) mark on the initials RSHO.

RSHO stands for "Real Scientific Hemp Oil" which is a registered trademark of Cannavest. As to what RSHO is, that's a little more complicated. The DEA considers marijuana and products containing it to be Schedule 1 narcotics. This also applies to Cannabidiol (CBD) which is a non psychoactive cannabinoid which is believed to have many medical benefits without any recreational uses. Still, under federal law CBD is an other than legal substance (which I think is stupid). However back in 2004 the Doc Bronner soap company won an appeal invalidating the DEA's “Interpretive Rule stating that any product that contains any amount of THC is a schedule I controlled substance . . . .” and thus a loophole was born. Cannavest, MJNA and numerous other companies are claiming their products containing CBD are "legal in all 50 states" not because they do not contain THC (they usually do) but rather because they are sourced from "Hemp" and not from marijuana. The fact that the difference between the two is less a genetic one than a legal classification is not unnoteworthy.

Somewhere in here I should point out that RSHO used to be understood to be "Rick Simpson Hemp Oil," Mr. Simpson being a medical marijuana activist who realized that not everyone who wished the presumed medical benefits of marijuana were either able or willing to smoke the stuff so published a technique to soak pot (leaves mostly) in Everclear (near pure ethyl alcohol), straining out the remaining vegetable matter and allowing the alcohol to evaporate leaving a concentrated cannabis oil which may be more readily consumed for it's presumed medical benefits. But Mr. Simpson lacked the commercial foresight to trademark this product, hell he didn't even market it he just shared information he felt could help people leaving (quite possibly) Cannavest and MJNA to fight each other over who owns the initials "RSHO."

As to that, as said above Cannavest owns the trademark on "Real Scientific Hemp Oil" and filed for but may not have received the trademark on RSHO. Three days before they first applied for the trademark (word mark?) MJNA filed for a trademark on "CBD RSHO." That application was made in the name of HDDC Holdings which is owned by Micheal Llamas who directly and through HDDC owns more MJNA stock than anyone else.

Why this interests me? The lawsuit that started this topic. MJNA does not "produce" RSHO, Cannavest does. But MJNA is trying to sue people for saying bad things about RSHO. I don't believe there is any question that the RSHO people are being sued for complaining about was produced by Cannavest but MJNA's lawsuit claims it is their product. Given how intertwined these companies were in the past and how acrimonious their current relationship has become, add in how fluidly and frequently both seem to be willing to lie to their investors we have what looks to be a classic disinformation paradox with two unreliable narrators and a lawsuit which is starting to smell very herring like which we might need to wait till March of next year to find out if it's red or not.

Circling back to the original question i now see I did a very poor job of asking. IF "RSHO" is not a trade or word mark owned by MJNA, and if they were not directly responsible for the creation of the product itself and including that at the time of the alleged disparagement MJNA held (but no longer does) a preferential distribution contract for the sale of RSHO, what is the likelihood of outcome of a lawsuit filed by MJNA against people they perceive to have disparaged RSHO?

[notorial dissent]

Sounds like a right nasty little love fest you've stumbled upon there, kind of brings back the golden memories of prohibition.

That being said, I don't think, and I could be really wrong here, but I seem to remember that you can't patent or trademark an illegal process or name.

[Judge Roy Bean]

... what is the likelihood of outcome of a lawsuit filed by MJNA against people they perceive to have disparaged RSHO?

Statistically?

95+% of civil litigation ends in pre-trial settlement, often via professional mediation.

In reality? Meeting the standards of proof for a libel case among parties that might be perceived as having unclean hands (or questionable veracity) would be more than just difficult.

And just imagine trying to find witnesses willing to be deposed - "... yes, I buy and use this illegal substance and I personally heard so-and-so say he put fish poop in the ..."

I'd be surprised if you could find an attorney willing to pursue such a case. In fact, if you could find one, I would suggest you keep looking.

[davids]

I love questions like this. It reminds me of law school.

The idea that one could sue for trade libel due to a person disparaging a raw material doesn't bother me. It isn't hard to imagine that one could use the disparagement of a raw material to take out a competitor that uses it or even an entire market sector. So, at least initially, no problem there.

I only skimmed the Complaint. But there were a few things that stood out to me. One, it comes perilously close to NOT pleading defamation/trade libel at all. So close, in fact, that I would suspect it will be responded to with a demurrer, and possibly a SLAPP motion. Basically, it alleges the guy truthfully reported actual preliminary test results...perhaps mixed in with some hyperbole. And again, I just skimmed it (since not being paid for this shindig) but I did not see anywhere where the Complaint alleges the falsity of the statements regarding the child dying or the concentration of metals in the child's system. So, again, a basic element of a trade libel claim would seem to be not only missing in terms of provability, but even missing as an allegation in the Complaint. If it's in there and I missed it, so be it.

The lawyer is a sole practitioner. Nothing wrong with that. But it may say something about the funding of the Plaintiff. That plaintiff to prevail in this case will need expert witness support. So the true merits of the case and the ability of the plaintiff to prove it might not even be known until the last weeks prior to trial, during the statutory expert discovery phase. And that perhaps is part of the idea, that the opponent may realize they will likely (though not necessarily) be stuck with a legal battle for many months, then retaining an expert, etc. to win. And that information, relayed to the defendants, may be a means of getting someone to a negotiating table. Somewheres.

[wserra]

I love questions like this. It reminds me of law school.

I hate questions like this. It reminds me of law school.

[Famspear]

I love questions like this. It reminds me of law school.

I hate questions like this. It reminds me of law school.