Court Opinion

ID: 9953099
Source: CourtListenerOpinion
Date Created: 2024-03-21 15:08:36.377096+00
Date Added: 2024-06-11T14:45:40.623106
License: Public Domain

2024 IL 129227

                                                IN THE
                                      SUPREME COURT

                                                    OF
                               THE STATE OF ILLINOIS

                                          (Docket No. 129227)

                PROJECT44, INC., Appellee, v. FOURKITES, INC., Appellant.

                                     Opinion filed March 21, 2024.

        JUSTICE HOLDER WHITE delivered the judgment of the court, with opinion.

        Chief Justice Theis and Justices Neville, Overstreet, Cunningham, Rochford,
     and O’Brien concurred in the judgment and opinion.

                                                 OPINION

¶1       In filing suit for defamation per se, project44, Inc. 1 (project44), alleged that
     agents of FourKites, Inc. (FourKites), sent defamatory e-mails to project44’s chief
     revenue officer (CRO) and two members of its board of directors. FourKites
     responded that there was no publication to a third party because the e-mails were
     sent to members of the corporation who were, in effect, the corporation itself. The

        1
            We adhere to project44’s preference of not capitalizing its name.
     Cook County circuit court agreed with FourKites and granted its motion to dismiss
     project44’s complaint for failure to state a claim. On appeal, the appellate court
     reversed the circuit court and remanded the cause for further proceedings. For the
     following reasons, we affirm the decision of the appellate court holding that there
     is publication to a third party when an allegedly defamatory statement is
     communicated to a member of a corporation’s executive leadership team.

¶2                                        I. BACKGROUND

¶3       FourKites and project44 are competitors in the shipping logistics industry. Both
     entities are incorporated in Delaware but have their principal places of business in
     Chicago. The dispute between the parties arises from two separate e-mails sent to
     Tim Betrand, project44’s CRO, and Jim Baum and Kevin Dietsel, both
     nonemployee members of project44’s outside board of directors. In the e-mail to
     Baum and Dietsel, the sender, “Ken Adams,” wrote that he was previously
     employed by project44 and was aware of “rampant accounting improprieties” at
     project44. Adams wrote that project44 employees were silenced with legal threats
     and defamation suits and that project44 was using an executive’s family member’s
     affiliation with the Chicago mafia to silence people. Adams encouraged the board
     members to look at various project44 contracts and contact a recently departed chief
     financial officer for more information. Adams concluded by warning that there was
     “widespread discontent brewing and it [was] just a matter of time before people
     [went] public and another Theranos[ 2] happen[ed] in Chicago.”

¶4       The e-mail sent to the CRO was sent from an e-mail address belonging to a
     person identified as “Jason Short.” Short congratulated Betrand on joining
     project44 but then told him that he should flee as soon as possible and find another
     job. Referencing a message Betrand sent about joining project44, Short stated,
     “You mention about people, investors etc in your email. There is one ingredient

         2
           According to project44’s complaint, the Theranos reference was presumably to Theranos, Inc.,
     a health technology company whose founder, Elizabeth Holmes, and president, Ramesh Balwani,
     falsely claimed that they had created a revolutionary blood-testing technology. Holmes and Balwani
     were later convicted of various counts of wire fraud and conspiracy to commit wire fraud after
     defrauding investors of millions of dollars, as well as defrauding consumers who used the unreliable
     technology. See United States v. Holmes, No. 5:18-cr-00258 EJD, 2023 WL 3489320, at *1 (N.D.
     Cal. May 16, 2023).

                                                    -2-
     you missed—a great product. At some point you have to stop selling s** and start
     delivering.” Short warned that Betrand did not “want to be part of the next Ponzi
     scheme or the next [T]heranos.” Short suggested several people Betrand could
     speak to in order to get the truth but warned that, if Betrand forwarded the e-mail
     to “broker Jett” and moved on, he would be making a mistake. Short concluded the
     e-mail by wishing Betrand the best because he seemed like a nice guy who deserved
     better and signed off as “Friend.”

¶5       Because the Adams and Short e-mails were from Gmail accounts, project44
     began its investigation into the source of the e-mails by filing a petition for
     discovery pursuant to Illinois Supreme Court Rule 224(a) (eff. Jan. 1, 2018) naming
     Google, LLC (Google)—a company that hosts and manages Gmail accounts—as
     the respondent. The petition sought the Internet protocol (IP) address of the devices
     used to send the Adams and Short e-mails in order to identify the individuals who
     sent the e-mails. According to project44, “Ken Adams” and “Jason Short” appeared
     to be aliases, as it had no previous employees bearing those names. The circuit court
     entered an agreed order regarding production of the account information project44
     sought. Google indicated it would provide the requested information if project44
     obtained a subpoena in the Superior Court of Santa Clara County, California.
     Project44 obtained the necessary subpoena, and according to the complaint, Google
     provided documents indicating the Adams and Short e-mails were sent by
     individuals associated with FourKites.

¶6       The information from Google also identified a series of IP addresses registered
     to AT&T Mobility, LLC (AT&T), and Mimecast North America, Inc. (Mimecast).
     Project44 filed a petition for discovery pursuant to Illinois Supreme Court Rule
     224(a) (eff. Jan. 1, 2018) naming AT&T and Mimecast as respondents. As with the
     Google petition, project44 filed this petition to identify the individuals behind the
     Adams and Short e-mail addresses. AT&T sent notice to the customer who
     presumably would have been identified through the IP address, so that the customer
     could object to the disclosure of identifying information if the customer wanted to
     do so. Thereafter, Jane Doe, a third-party movant appearing under a fictitious name,
     filed a petition for intervention asking the circuit court to deny project44’s petition
     for discovery.

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¶7       While litigation regarding the AT&T petition for discovery was pending, 3
     project44 filed a complaint against FourKites and several additional defendants,
     identified as John Doe and Jane Doe, alleging defamation per se and a conspiracy
     to commit defamation. Based on the information it received in its investigation into
     the source of the e-mail addresses, project44 alleged that FourKites and the Doe
     defendants conspired with each other in making defamatory statements in the
     Adams and Short e-mails. The complaint alleged the defendants entered the scheme
     with the goal of harming project44’s business reputation and, as a result, project44
     suffered presumed damages in the form of impairment of its business reputation
     and standing in the community.

¶8       In the complaint, project44 alleged that the statements in the Adams e-mail were
     defamatory per se because they imputed the commission of crimes by project44, “a
     want of integrity in project44’s business conduct, and a lack of ability in project44’s
     business.” Specifically, the e-mail alleged project44 had connections with
     organized crime and implied that project44 used these connections to “silence
     folks” through threats of violence or other intimidation. Comparing project44 to
     Theranos further conveyed the impression that project44 had engaged in fraud. The
     e-mail also imputed a lack of integrity in project44’s business by accusing it of
     “rampant accounting improprieties.” The e-mail’s reference to a cancelled contract
     imputed a lack of ability in project44’s business ability. Finally, project44 alleged
     that, since the Adams e-mail was sent to e-mail addresses belonging to members of
     project44’s board of directors, it was published to one or more third parties without
     privilege.

¶9       Similarly, project44 alleged the Short e-mail was defamatory per se because it
     falsely implied project44 had committed one or more crimes. Specifically,
     project44 alleged the e-mail’s reference to Theranos and its accusation that
     project44 was a “Ponzi scheme” were statements accusing project44 of engaging
     in criminal conduct. Project44 alleged that the Short e-mail was published because
     it was sent to the CRO, a third party, without privilege.

         3
           Project44 filed the complaint while the litigation was pending because it did not anticipate a
     decision before the statute of limitations ran on its defamation claim. See 735 ILCS 5/13-201 (West
     2020).

                                                    -4-
¶ 10       FourKites filed a motion to dismiss project44’s complaint pursuant to section
       2-615 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615 (West 2020).
       FourKites argued that project44 failed to state a defamation claim because, first,
       there was no third-party publication of the allegedly defamatory statements.
       According to FourKites, because both e-mails were sent to members of project44
       who had the authority to bind the corporation and through whom the corporation
       acted, communication to them was, in effect, communication to project44. Second,
       FourKites argued that the statements at issue were not defamatory per se because
       they did not impute the commission of a crime, project44’s inability to perform
       professionally, or its lack of integrity. FourKites also argued the statements were
       not defamatory because they were too vague, too imprecise, and expressions of
       opinion, not verifiable fact.

¶ 11       Following additional written and oral arguments by the parties in support of
       their positions, the circuit court entered an order granting FourKites’ motion to
       dismiss. The court first found that, “as a matter of law,” the statements made to the
       CRO and the members of the board of directors were not published to a third party.
       The court then found the statements in the e-mails were actionable and that a jury
       could find the statements were defamatory. The court dismissed, with prejudice,
       project44’s counts I and II alleging defamation per se and count III alleging civil
       conspiracy. The court further dismissed project44’s subpoena to AT&T as moot.

¶ 12       Project44 appealed, arguing the circuit court erred in finding the statements in
       the e-mails were not published to third parties. The appellate court found the issue
       of whether there was publication when defamatory communication was sent to
       corporate employees from a person outside the corporation was a question of first
       impression. 2022 IL App (1st) 210575, ¶ 25. To resolve the issue, the court looked
       to the “ ‘intracorporate publication’ ” rule for guidance. Id. ¶¶ 26-27. The court
       found the rule generally applies when employees are terminated based on
       defamatory comments made by management or coworkers within a corporation and
       subsequently files a defamation action against the corporation. Id. ¶ 28. The court
       held that in “Illinois, the corporation that is named as the defendant in such an action
       cannot claim a lack of publication—it cannot defeat the lawsuit by claiming that
       the interoffice statements were merely ‘the corporation talking to itself.’ ” Id.
       (quoting Popko v. Continental Casualty Co., 355 Ill. App. 3d 257, 263 (2005)).
       Under the intracorporate publication rule, each employee has a reputational interest

                                                -5-
       within the company that deserves protection. Id. ¶ 30. The appellate court
       concluded that, since Illinois followed this approach, the same rationale should
       apply when communication to corporate employees came from outside the
       corporation. Id. ¶ 32.

¶ 13       The court explained that “[a] corporation is not only concerned with its
       reputation to the outside world. Just as employees care about their reputation within
       the corporation, the corporation cares about its reputation among its own
       employees—be they high-ranking executives, lower-level workers, or
       nonemployee directors.” Id. The court thus concluded that, by alleging the
       transmission of defamatory messages about project44 to directors and an officer of
       project44, the complaint adequately alleged publication. Id. ¶ 35. The appellate
       court reversed the judgment of the circuit court dismissing the complaint and
       remanded the case for further proceedings. Id. ¶¶ 54, 56.

¶ 14      We granted FourKites’ petition for leave to appeal pursuant to Illinois Supreme
       Court Rule 315(a) (eff. Oct. 1, 2020).

¶ 15                                     II. ANALYSIS

¶ 16       Before this court, FourKites argues that project44 did not properly allege
       publication of the Adams and Short e-mails because the members of project44’s
       executive leadership who received the e-mails were not third parties and were, in
       effect, “the human embodiment” of project44. In response, project44 maintains its
       argument that a corporation has its own reputation to protect that is separate from
       its employees and, as a result, its complaint properly alleged that sending
       defamatory statements to its employees resulted in publication to third parties.

¶ 17                                 A. Standard of Review

¶ 18       The circuit court dismissed project44’s complaint pursuant to a motion for
       dismissal under section 2-615 of the Code. 735 ILCS 5/2-615 (West 2020). A
       section 2-615 motion tests the legal sufficiency of the plaintiff’s complaint, asking
       whether the allegations in the complaint, construed in the light most favorable to
       the plaintiff, state sufficient facts to establish a cause of action upon which relief

                                               -6-
       may be granted. Dent v. Constellation NewEnergy, Inc., 2022 IL 126795, ¶ 25. A
       complaint should not be dismissed pursuant to section 2-615 unless it is clearly
       apparent that no set of facts can be proved that would entitle the plaintiff to
       recovery. Id. We review de novo the circuit court’s order granting a motion to
       dismiss pursuant to section 2-615. Id.

¶ 19                      B. Defamation and Publication to Third Parties

¶ 20       Generally, to state a claim for defamation, a petitioner must allege sufficient
       facts showing that (1) the defendant made a false statement about the plaintiff,
       (2) the defendant made an unprivileged publication of that statement to a third
       party, and (3) the publication caused damages. Id. ¶ 26. Here, project44 alleged
       defamation per se. In Illinois, there are five categories of statements that are
       considered defamatory per se, including, as relevant here, statements that impute a
       person has committed a crime, is unable to perform or lacks integrity in performing
       her or his employment duties, or lacks ability or otherwise prejudices that person
       in her or his profession. See Green v. Rogers, 234 Ill. 2d 478, 491-92 (2009). A
       statement is defamatory per se if its harm is obvious and apparent on its face.
       Hadley v. Doe, 2015 IL 118000, ¶ 30. If a defamatory statement is actionable
       per se, the plaintiff need not plead or prove actual damages to recover. Bryson v.
       News America Publications, Inc., 174 Ill. 2d 77, 87 (1996). FourKites did not
       appeal the circuit court’s finding that the statements at issue were actionable; as a
       result, the primary issue in this appeal is whether the Adams and Short e-mails were
       published to third parties for purposes of establishing a claim for defamation.

¶ 21       The word “publication” is a term of art referring to the intentional or negligent
       communication of the allegedly defamatory statement to a third party, that is, a
       person other than the person who is allegedly defamed. Restatement (Second) of
       Torts § 577 cmt. a (1977); William W. Prosser, Handbook of the Law of Torts
       § 113, at 766 (4th ed. 1971) (“[I]t is essential to tort liability *** that the defamation
       be communicated to some one other than the person defamed.”). Publication of a
       defamatory statement to the plaintiff alone is insufficient to state a cause of action
       for defamation. Prosser, supra, at 766. This is the cornerstone of FourKites’
       argument—that because the Adams and Short e-mails were sent to senior agents of
       project44, they were only published to project44 itself.

                                                 -7-
¶ 22       FourKites argues that the appellate court’s approach, finding there was
       publication when communication was to project44’s leadership-level employees,
       fails to recognize that a corporation can only act through its agents. See Small v.
       Sussman, 306 Ill. App. 3d 639, 646 (1999) (“Corporations can only act through
       their agents.”). FourKites likens the leadership-level employees of a corporation to
       puppeteers and the corporation their puppet. Under such a relationship, a statement
       to the puppeteer is a statement to the puppet. FourKites’ argument has found favor
       in at least one jurisdiction, which finds there is no publication when a defamatory
       statement is sent to a corporate employee from someone outside the corporation.
       See Hoch v. Loren, 273 So. 3d 56, 58 (Fla. Dist. Ct. App. 2019). Jurisdictions that
       follow this approach, and also find there is no publication when defamatory
       communication is sent between corporate employees, do so based on the agency
       relationship between the management-level employees and the corporation. Id.
       Because of this agency relationship, these jurisdictions find the interests of the
       management-level employees are intertwined or unified with those of the
       corporation such that they are one for purposes of defamation actions. Id.

¶ 23       However, as the appellate court noted, Illinois courts have recognized that an
       employee of a corporation can be a third party for purposes of finding a defamatory
       statement was published. See e.g., Popko, 355 Ill. App. 3d at 262. Under the
       “intracorporate publication” rule, “interoffice reports or communications that are
       circulated among employees within a corporation have been ‘published’ to ‘third
       parties’ for defamation purposes.” 2022 IL App (1st) 210575, ¶ 27. Therefore, in
       an action arising from defamatory communications between managers within a
       corporation, the defendant corporation cannot claim that the interoffice statements
       were merely the corporation talking to itself. Id. ¶ 28. While the situation in this
       case involves communication from outside the corporation, we agree with the
       appellate court that the intracorporate publication rule provides some guidance
       because it addresses the relationships between corporate employees and their
       employer corporations.

¶ 24      As the intracorporate publication rule recognizes, the managers and employees
       of a corporation can have separate identities from the corporation itself when
       determining if publication occurred. See Biber v. Duplicator Sales & Service, Inc.,
       155 S.W.3d 732, 736 (Ky. Ct. App. 2004) (“ ‘Although corporate officers might be
       the embodiment of the corporation . . . they remain individuals with distinct

                                              -8-
       personalities and opinions which might be affected just as surely as those of other
       employees by the spread of injurious falsehoods.’ ” (quoting Bals v. Verduzco, 600
       N.E.2d 1353, 1355 (Ind. 1992))). This is consistent with section 577 of the
       Restatement (Second) of Torts, which states,

          “The fact that the defamatory matter is communicated to an agent of the
          defamer does not prevent it from being a publication sufficient to constitute
          actionable defamation. The publication may be privileged, however, under the
          rule stated in § 593. So too, the communication to a servant or agent of the
          person defamed is a publication although if the communication is in answer to
          a letter or a request from the other or his agent, the publication may not be
          actionable in defamation.” (Emphasis added.) Restatement (Second) of Torts
          § 577 cmt. E, at 203 (1977).

¶ 25       We agree with this approach, which is adopted by a majority of jurisdictions
       that have addressed the issue. See 3 Rodney A. Smolla, Law of Defamation § 15:9
       (2d ed. Nov. 2022 Update) (collecting cases); Wallulis v. Dymowski, 918 P.2d 755,
       760 (Or. 1996) (en banc) (collecting cases and holding that “The legal fiction
       created by the intracorporate nonpublication rule is inconsistent with the purpose
       for which the common law recognizes defamation claims. An individual’s interest
       in maintaining a good reputation in the business community to which the individual
       belongs is not modified by the individual’s relationship to the defamer.”); Duste v.
       Chevron Products Co., 738 F. Supp. 2d 1027, 1042 (N.D. Cal. 2010) (finding
       California law considers internal corporate statements about an employee to be
       published for purposes of a slander claim). These cases acknowledge that
       management-level employees have their own separate interests from the
       corporation as to be third parties for purposes of the publication in intracorporate
       communication cases. This rationale applies equally when communications are sent
       to managerial employees from a party outside the corporation. See Sleepy’s LLC v.
       Select Comfort Wholesale Corp., 909 F.3d 519, 528 (2d Cir. 2018) (finding New
       York adheres to the view that communication to an agent of the defamed party
       constitutes publication).

¶ 26       We find that a corporation has a distinct reputation from that of its management-
       level employees and an interest in protecting that reputation among its employees
       and the public at large. Therefore, defamatory statements made to corporate

                                               -9-
       employees, even those with the power to act on behalf of the corporation, can harm
       the corporation’s business reputation among those employees. Communication of
       a defamatory statement regarding the corporation to these employees establishes
       the publication element for a defamation action brought by the corporation against
       the party that publishes the statement. Here, the Adams and Short e-mails were
       communicated to an employee of project44 and members of its board of directors,
       who were arguably agents of the corporation but were nonetheless distinct from the
       corporation itself. We find project44 properly alleged there was publication of the
       e-mails to third parties for purposes of pleading a cause of action for defamation.

¶ 27        FourKites argues that this approach eliminates the consideration of reputational
       harm in considering a defamation claim involving corporate parties. However, in
       this case, project44 filed a defamation action alleging defamation per se. As such,
       if a defamatory statement is actionable per se, the plaintiff need not plead or prove
       actual damage to his or her reputation to recover for a statement that is actionable
       per se. Van Horne v. Muller, 185 Ill. 2d 299, 307 (1998). In situations where the
       corporate plaintiffs file a claim of defamation per quod, the plaintiff would still
       need to prove reputational harm in order to recover damages. Tuite v. Corbitt, 224
       Ill. 2d 490, 501 (2006) (“In a defamation per quod action, damage to the plaintiff’s
       reputation is not presumed. Rather, the plaintiff must plead and prove special
       damages to recover.”).

¶ 28       Finally, FourKites argues that, in holding that there is publication when an
       allegedly defamatory statement is sent to an agent of a corporation but that a
       privilege may apply to shield the sender of the statement from liability, the appellate
       court did away with the publication element altogether. This is not so. Qualified
       privilege remains a defense against a defamation action. See Dent, 2022 IL 126795,
       ¶ 30. The question of whether privilege applied would arise after the plaintiff
       established the elements of a defamation claim, including publication. We need not
       address the application of this defense at this point, as we reverse the judgment of
       the circuit court and remand the cause for further proceedings.

¶ 29                                   III. CONCLUSION

¶ 30       For the foregoing reasons, we hold that the circuit court erred in dismissing
       project44’s complaint pursuant to section 2-615 of the Code. Therefore, we affirm

                                               - 10 -
       the judgment of the appellate court reversing the judgment of the circuit court and
       remanding the cause to the circuit court for further proceedings.

¶ 31      Appellate court judgment affirmed.

¶ 32      Circuit court judgment reversed.

¶ 33      Cause remanded.

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