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The GreenTech Automotive, Inc. v. Watchdog.org Libel Suit

The electric car company founded by Terry McAuliffe has sued a local non-profit for libel. Is this lawsuit an attempt to suppress free speech?

On April 8, 2013, GreenTech Automotive, Inc., an electric car company founded by Terry McAuliffe, filed a libel suit in Federal court in Mississippi against the Alexandria-based non-profit Franklin Center for Government and Public Integrity which does business under the name Watchdog.org.  GreenTech alleges it was libeled by two on-line articles and seeks $85 Million in damages.  Additionally, there is an allegation of intentional interference with business and prospective business relations.  The suit also names as defendants the author of the article, Kenric Ward, and a Chinese language website that ran articles based largely on the Watchdog.org articles. (Copy of GreenTech Complaint attached.)

In brief, libel is a published false statement that is damaging to a person's, or company’s, reputation.

This article will examine the lawsuit and attempt to determine if GreenTech has a decent chance of winning this case or has filed suit in an attempt to suppress public criticism of GreenTech and Mr. McAuliffe during his campaign run and then drop the lawsuit when the election is over.  Attempts to suppress public criticism by corporations via libel suits have been called SLAPP suits which stands for Strategic Lawsuits Against Public Participation.

With regard to my analysis, I would like to note that I have personal experience with the mechanics of libel lawsuits.  I was Assistant House Counsel for Jack Kent Cooke when he sued the Washingtonian for libel in 1989.  I will do my best to summarize the complaint;however, I don’t want to essentially repeat the entire complaint in my article.  You can read the complaint attached hereto if you want.

The Complaint

The GreenTech suit was filed after on-line publication of two articles concerning GreenTech’s business practices.  (Articles dated April 1 and April 3, 2013 attached.)  The primary focus of the articles was GreenTech’s use of the Federal EB-5 Visa program as a source of funding for the company.  The EB-5 visa provides a method of obtaining green cards for foreign nationals who invest money in the United States.  To obtain the visa, individuals must invest $1,000,000 (or at least $500,000 in a "Targeted Employment Area,” i.e. a high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investors and their immediate families.  

The GreenTech complaint is notable for failing to specifically identify any single sentence in the articles which GreenTech contends is false.

With regard to the April 1, 2013 article, the GreenTech complaint refers to allegedly false “quotes from Investment Advisor Michael Gibson criticizing [GreenTech’s] business model . . .” and “false assertions that EB-5 funding is [GreenTech’s] chief source of funding and its long-term plan for continuing capital.”  (GreenTech Complaint, Par. 13(a) and (c)).  By way of comparison, I have attached a copy of the libel complaint Redskins owner Dan Snyder filed against the Washington City Paper.  As you can see from the Snyder complaint at paragraph 21, Mr. Snyder quoted verbatim the assertions that he contended were false.

The GreenTech complaint objects to the use of the word “fraud” in the headline of the April 1, 2013 article and in the article itself. However, the title of the article was changed prior to the filing of the libel suit from “McAuliffe Car Funding A ‘Fraud’ Investment Advisor Says” to “Experts Question Source of McAuliffe Car Company Funding” in response to objections Watchdog.org received from GreenTech attorneys.  The use of the word “fraud” in the article was also deleted by Watchdog.org prior to the filing of the complaint.

With regard to the April 3, 2013 article, the title of the article and a partial sentence is specifically quoted by GreenTech as being misleading. The April 3, 2013 article was originally titled “Feds Look Closer At Cash Source in McAuliffe Car Scam” and is now titled “SEC Raids Illinois-Based Cash-For-Visa Program.” Once again, the revision was made prior to the libel suit being filed in response to objections Watchdog.org received from GreenTech attorneys.

The April 3, 2013 article also asserted that the corporate headquarters of GreenTech have been moved to “a hallway corner like a broom closet” in a “less prestigious” area of McLean, Virginia.  GreenTech alleges in its complaint this allegation is false as the new office is located in the building next door to the prior office in “one of the most expensive and prestigious building complexes in Northern Virginia.” (GreenTech Complaint, Par. 15(c).)

Apart from these specific references, once again the GreenTech complaint refers to unspecified “statements” and “allegations” without quoting the actual statements themselves.  (GreenTech Complaint, Par. 15.)

The GreenTech complaint notes, and then dismisses as inadequate, Watchdog.org’s disclaimer which it posted at the head of both articles prior to the libel suit being filed. The disclaimer reads:  “To be clear, our articles were not intended to (and did not) accuse GreenTech of committing fraud.  Instead, the articles pointed out that the federal EB-5 visa program – which trades U.S. green cards for business investments and which GreenTech has used as a source of capital – has lax oversight, is prone to abuse and fraud, and cannot possibly deliver on its promises to taxpayers and investors.”  The Chinese language website simply removed the articles from its website on April 4, 2013 in response to objections from GreenTech attorneys.

The Roadblocks GreenTech Faces

So what must GreenTech prove to prevail at trial?  It must prove the complained of statements were false and that they damaged the reputation of GreenTech causing economic injury.

In addition, if GreenTech is determined to be a “public figure” it must prove that Watchdog.org acted with “actual malice” which is defined as knowledge of falsity or reckless disregard for the truth.   In other words, GreenTech couldn’t rely solely on allegations that untrue statements caused injury to its reputation. Without going into detail, “public figures” have less protection than private persons under U.S. libel law.  As the Supreme Court noted in the landmark case of New York Times v. Sullivan “it is a prized American privilege to speak one's mind, although not always with perfect good taste, on all public institutions.” Corporations have been held to be public figures in some cases. While GreenTech is certainly a more high-profile company than many entities (see photograph of President Clinton and Haley Barbour attending a GreenTech event in 2012), I don’t know how the Mississippi court will rule on this issue.  

With regard to the public figure legal standard, I note that GreenTech’s complaint contains no allegations of actual malice.  GreenTech merely alleges that either the defendants made the statements with “the intent to harm” GreenTech or the “failure to verify the truth of the allegations inthese articles amounts to at least negligence.” (GreenTech Complaint, Pars. 18 and 19.)  By way of comparison, Dan Snyder alleged that the City Paper’s misrepresentations were “fabricated, malicious, and defamatory statements of fact of and concerning Mr. Snyder."  (Snyder Complaint, Par. 26.)  Further, Snyder alleged that the City Paper “portrayed Mr. Snyder in this manner knowing that the depiction was false or with reckless disregard for its truth or falsity.”  (Snyder Complaint, Par. 28.).  If GreenTech is held to be a public figure, it will most probably have to amend its complaint to read more like Mr. Snyder’s complaint in order to survive a motion to dismiss.

GreenTech will also surely face a defense that some of the complained of statements were opinion and not fact.  Watchdog.org’s statement that GreenTech’s new office is in a “hallway corner like a broom closet” leaps to mind as a statement of opinion and not fact.  

The biggest obstacle GreenTech faces is the discovery requests it has opened itself up to by virtue of its allegations.  GreenTech stated in its complaint that in the 7 day period between the publication of the April 1, 2013 article and the April 8, 2013 filing of the lawsuit “[m]ultiple current and potential EB5 investors contacted [GreenTech] expressing concerns over these articles and have refused to transfer funds until they receive guarantees of the articles’ falsity.” (GreenTech Complaint, Par. 24) Obviously, GreenTech will be asked to name these investors and provide all correspondence, including e-mails and texts, supporting this allegation.  The investors themselves, if they are in the United States, face possible depositions and requests for production of documents. They certainly will be asked when, or even if, they read the articles in question and how they became aware of the existence of the articles. Watchdog.org is not exactly an internationally known publication.  Will GreenTech continue on with the case when faced with the prospect of such intrusions into the lives of its current and potential investors?

GreenTech has alleged that the April 1, 2013 article falsely asserted that “GreenTech is behind schedule in its building and hiring when both construction and employment goals are on pace to be met.” (GreenTech Complaint, Par. 13(d)). Accordingly, the defendants will undoubtedly seek all records on what the goals of GreenTech originally were and what GreenTech’s present state of production is.  I presume GreenTech will also be asked to provide records regarding its present, and past, financial status.  

Terry McAuliffe himself will be subject to document requests and a deposition in which he will be asked all manner of questions about GreenTech.  Will he allow himself to be put through this ordeal or suggest to the GreenTech attorneys that the libel suit be dropped prior to such an inquiry?

The issue of damages is also problematic.  GreenTech claims that its present investors are “wavering in their commitment” to provide $25 million in funding and an effort to raise $60 million in new capital is “in significant danger.”  (GreenTech Complaint, Par. 39).  In other words, the $85 million in damages may be illusory if the “wavering” doesn’t result in investors actually pulling the plug.   

Why Did GreenTech File Suit in Mississippi?

GreenTech filed this suit in Mississippi rather than Virginia even though Virginia is where most of the witnesses and records are, as I detail below. GreenTech’s purported reason for filing suit in Mississippi is that it is a Mississippi corporation with its principal place of business, i.e. its manufacturing plants, there.  However, the fact remains that this venue will be exceedingly inconvenient and more expensive for the defendants.  Bringing suit in Mississippi will also be a warning to other Virginia residents thinking about publishing articles critical of GreenTech and Mr. McAuliffe that they too could be hauled into court in Mississippi.

Indeed, GreenTech attorneys have threatened to add as a defendant in the Mississippi suit the Fauquier Free Citizen, a spare-time, not-for-profit blog. (Letter dated April 10, 2013 to Fauquier Free Citizen attached.)   The letter complained that a Fauquier Free Citizen article “relies upon and links to articles originally published by the Virginia Bureau of Watchdog.org” and notes in bold that“[i]f you fail to remove the offending article and print the retraction described herein, you will be joined to the pending lawsuit.”

So why do I believe Virginia is the proper venue for this case? The Franklin Center for Government and Public Integrity is located in Alexandria, Virginia.  Mr. McAuliffe, a key witness, lives in McLean, Virginia.  The following GreenTech executives live in the Washington DC Metro area:  Charles Xioalin Wang, President & Director, Marianne McInerney, Vice President & Director, Gary Tang, Vice President & Director, and Rick C. Wade, Senior Vice President & Head of China Operations. GreenTech’s website lists a McLean, Virginia office as its “Corporate Office” where, I presume, corporate records are kept.  WM GreenTech Automotive Corp., a Virginia corporation which appears to own 100% of the stock of GreenTech Automotive,Inc., is headquartered in McLean, Virginia.  WM GreenTech Automotive Corp.’s President is Charles Xioalin Wang.  All of these facts strongly suggest that Virginia was the proper place to file this lawsuit.

The Final Verdict

So, what is the final verdict?  I believe this suit has little chance of success on the merits and will present such a burden to GreenTech in terms of complying with document requests and deposition demands that GreenTech will voluntarily dismiss the case at some point in time after the November elections.  I further believe that one of the motivations behind this suit was to squelch public criticism of GreenTech and Mr. McAuliffe.  The threatening letter sent to the Fauquier Free Citizen certainly supports the theory that intimidation is one of the factors behind this lawsuit.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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