Pot site’s negative report on CBD from hops wasn’t commercial speech

Peak Health Center v. Dorfman, 2019 WL 5893188, No.
19-cv-04145-VKD (N.D. Cal. Nov. 12, 2019)
Peak allegedly sells plant-based pharmaceuticals and
supplements, including an exclusive strain of Humulus yunnanensis, a hops
plant, as a source of cannabidiol (CBD). This source of CBD is potentially
valuable given the constraints on hemp and cannabis, the typical sources. At
the time of the relevant events, Dorfman was the editor-in-chief and a writer
for PotNetwork, which distributes cannabis and hemp products, including CBD,
and also publishes industry news on its website.
In 2019, Dorfman contacted a Peak principal to ask questions
for an article he was writing; his attitude was allegedly disdainful. Peak
allegedly provided documents proving that Peak’s CBD came from the hops plants,
documents showing lab results supporting its claims, and patent filings for
related inventions.  Dorfman published an
article titled “A PotNetwork News investigative report: Bomi Joseph’s
‘hops-derived’ CBD was a world-changing cannabis alternative fought over by
Isodiol and Medical Marijuana, Inc. But he lied about his discovery—and his
identity.” The article asserts that Peak’s hops variant does not exist, that
the alleged discoverer’s research publications about Humulus kriya and CBD were
plagiarized from others’ legitimate peer-reviewed publications, that he is a
convicted felon who served prison time for defrauding various banks of $20
million in the early 2000s, and that he pled guilty in January 2019 to using a
false name on a passport application. It allegedly defamed him by stating that  “This time around [Mr. Joseph] may very well
have stolen from little old ladies, or the sick and injured—from anyone who
purchased ImmunAg or Real Scientific Humulus Oil or one of its derivatives in
hopes of curing some pain.” So too for quoting Dr. Volker Christoffel, one of
the people whose work Mr. Joseph allegedly plagiarized, e.g., “ ‘The whole
story with CBD from hop is insane,’ Dr. Christoffel told PotNetwork via email.
‘By the phylogenetic relatedness it MIGHT be possible, that some hop varieties
may have genes and express i.e., form cannabinoids—the biochemical pathways are
not so different and there is a theoretical possibility I would not exclude a
priori. BUT these are definitively only traces.’ ” This was allegedly reckless
because Christoffel never performed or reviewed chemical analysis of Peak’s
CBD. And the article failed to disclose that Christoffel was a managing
director of a competing cannabis pharmaco, not an independent expert.
Peak sued Dorfman for (1) trade libel; (2) intentional
interference with prospective economic advantage; (3) negligent interference
with prospective economic advantage; (4) unfair competition under the Lanham
Act; and (5) unfair competition under California Business and Professions Code
§ 17200 et seq.  It alleged harm to its
reputation and lost business opportunities worth at least $10 million.
Trade libel, intentional and negligent interference with
prospective economic advantage: These all require pleading special damages. A
plaintiff must “identify particular customers and transactions of which it was
deprived.” Peak did not.
Lanham Act: No false association claim, obviously, and this
wasn’t false advertising because the article wasn’t “commercial advertising or
promotion” because it wasn’t commercial speech. On its face, the article didn’t
look like an ad; it purported to be an “investigative report.”  It didn’t have anything that plausibly
promoted PotNetwork’s own products, or anyone else’s.  Allegations of a competitive relationship between
Peak and PotHealth weren’t sufficient.  I
am nervous about this result but see why the court here reached it; query
whether allegations that the news reported on defendant’s site was consistently
biased against competitors and thus worked as a disguised ad for defendant
would have changed anything.
First Amendment standards: The general tenor of the article
was fact-like: it described itself as an “investigative report” “based on an
in-depth review of Mr. Joseph’s research, a trove of confidential documents,
and interviews with people familiar with the events….” There was, however, figurative
or hyperbolic language throughout the article. Defendant described one of Mr.
Joseph’s purported collaborators, Donish Cushing, as “a ghost,” because he does
not appear in social media or Internet searches, and because “it’s hard to find
anyone who has met the man.” The Christoffel quotes also included colorful
language: “This is total bullshit”; “The whole story with CBD from hop is
insane”; etc.  Use of “figurative and
hyperbolic language” weighed in favor of First Amendment protection. 
Some of the statements in the article were susceptible of
factual proof: specifically, whether the CBD in Peak Health’s products comes
from a hops plant, or specifically a hops plant called Humulus kriya. Dorfman
argued that his statements were protected opinion based on fully disclosed
facts, but it was the truth of those facts that was at issue. “Dorfman
disclosed the facts on which he based his assertion that Peak Health’s hops-derived
CBD is a sham: Mr. Joseph’s history of plagiarism, attempts to assert new
identities, criminal fraud record, and purchases of large quantities of CBD
despite allegedly possessing the ability to produce that CBD from hops, as well
as statements from scientists concluding that hops-derived CBD is
unsubstantiated and not credible.” Nonetheless, his conclusion about the lack
of hops-derived CBD wasn’t a statement of subjective opinion or interpretation;
it was “an assertion of fact based on other asserted facts.”
In addition, the complaint flunked Rule 9(b) because it
failed to allege why the challenged statements were false.  With respect to the Christoffel statements,
Peak alleged only that the statements were unreliable because he didn’t test
Peak’s products himself and because he’s involved with a competing business,
but Peak didn’t plead facts from which it could be inferred that the CBD in its
products came from a specific hops plant. At most, it alleged that its public
relations agency provided “proof” of its CBD-related claims to Dorfman, but the
complaint didn’t explain why the statements were false.
Peak could, in theory, amend its complaint to remedy these
deficiencies as to the falsifiable statements, including the failure to plead
special damages and the failure to plead commercial advertising/promotion.
Anti-SLAPP motion: the Ninth Circuit has cautioned against
the application of procedural state laws if such application “would result in a
direct collision with a Federal Rule of Civil Procedure.” Thus, “granting a
defendant’s anti-SLAPP motion to strike a plaintiff’s initial complaint without
granting the plaintiff leave to amend would directly collide with Fed. R. Civ.
P. 15(a)’s policy favoring liberal amendment.” Dorfman could renew his motion
if Peak included amended state law claims in its second amended complaint (or,
apparently, if the time for pleadings passed or he otherwise prevailed).

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