F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
NOV 26 2002
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
COMPUTERIZED THERMAL
IMAGING, INC., a Nevada corporation,
Plaintiff - Appellant,
v.
No. 01-4140
BLOOMBERG, L.P., a Delaware
Limited Partnership,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. No. 1:00-CV-98-K)
Carl F. Schoeppl of Schoeppl, Burke & Kayton, P.A., Boca Raton, Florida, (Andrew H.
Kayton and Stuart A. Davidson of Schoeppl, Burke & Kayton, P.A., Boca Raton, Florida;
Robert R. Wallace of Plant, Wallace, Christensen & Kanell, Salt Lake City, Utah, with
him on the briefs), for Plaintiff - Appellant.
Randy L. Dryer of Parsons, Behle & Latimer, Salt Lake City, Utah, (Richard L. Klein,
Thomas H. Golden and Charles J. Glasser, Jr., of Willkie Farr, & Gallagher, New York,
New York, with him on the brief), for Defendant - Appellee.
Before HARTZ, ALDISERT* and PORFILIO, Circuit Judges.
*
Honorable Ruggero J. Aldisert, Senior United States Circuit Judge for the Third
Circuit, sitting by designation.
PORFILIO, Senior Circuit Judge.
To propel a breast imaging technology from its development stage to the
marketplace, Computerized Thermal Imaging, Inc. (CTI) sold stock in the venture,
applied to the NASDAQ Stock Exchange for a national listing, and sought FDA pre-
market approval. Bloomberg News reported the activity, fomenting the underlying
lawsuit for libel. CTI now appeals the dismissal of that action, contending the district
court erroneously interpreted Utah law and oppressively denied its motion to amend the
pleadings. Computerized Thermal Imaging v. Bloomberg L.P., No. 1:00CV98K, 2001
WL 670927 (D. Utah March 26, 2001) (CTI). In spite of the absence of a clear line of
Utah substantive law, the district court did not err in concluding CTI failed to state a
claim for libel per se or libel per quod, the latter defeated by the absence of a proper plea
for special damages which was not achieved in its motion for relief from judgment. We
affirm.
I. Background
CTI, a Nevada corporation, is a development stage company, which promotes
business ventures by selling stock to raise capital.1 One of its products in development is
1
Some of the businesses CTI lists are the integration of computer hardware,
proprietary software and sophisticated heat sensing cameras to create systems that
(continued...)
-2-
a Breast Imaging System (the Project), which promised to provide higher resolution
mammography to detect and treat breast cancer.
To fund the Project, CTI initiated a private placement of securities in December
1999, offering subscribers units of 13,123 shares of common stock and 13,123 warrants
at a price determined on November 11, 1999. The private placement of these restricted
securities included a typical discount of the market price of the stock at the
commencement of the public offering as an incentive for investors, who would then bear
the risk of future price volatility. CTI extended the offering until February 29, 2000, to
generate more capital.
Representing it had raised $39.5 million, CTI then applied for a listing on
NASDAQ and issued a press release. To shareholders meeting in June, it announced
that NASDAQ approved the listing and the FDA had extended pre-market approval of
the Project, driving its stock price up to $10.80 per share.
The day after the shareholders’ meeting, however, NASDAQ inquired about an
outstanding $25 million default judgment for racketeering and fraud against CTI’s CEO,
David Johnston, prompting the company to issue another press release to report
NASDAQ had placed the listing on hold to investigate the matter. The following day,
David Evans, a reporter for Bloomberg News, headlined his story, Computerized
Thermal Raises Capital at 72% Discount to Market, and wrote that CTI “sold 11.1
1
(...continued)
produce, interpret, and catalogue computerized thermal images for medical applications.
-3-
million shares of its stock at an 80 percent discount to its market price in March,
according to a filing it made with regulators last week.” David Evans, Computerized
Thermal Raises Capital at 72% Discount to Market, Bloomberg News, June 29, 2000.
Mr. Evans proceeded to describe the private placement, quoting CTI’s CFO, “it would
have been nice for us to go out at 7 or 8 bucks” a share in the sale, instead of $2.81 but
“that’s not what happened.” Id. John Coffee, a securities professor at Columbia Law
School, commented for the piece, that “[r]aising capital from investors at such a large
discount . . . is a red flag . . . . The market price is well above what more informed
parties think it should be.” Id. Adding that “Computerized Thermal needs the money to
fund money-losing operations,” and that it had “struggled to sell its $500,000 breast
imaging systems,” selling only one to a hospital in Thailand in 1996, Mr. Evans included
statements from a radiology professor and other doctors who questioned the accuracy
and efficacy of the new technology. Id.
CTI demanded a retraction. Bloomberg News then published a second,
substantially similar article in July, Computerized Thermal Imaging Raises Money at
Discounted Price (Correct), Bloomberg News, July 18, 2000, in which Mr. Evans
principally corrected the 80 percent discount rate to read “72 percent discount” to the
market price and explained that CTI extended the offering because it had not “received
the minimum amount it said it needed.” Both Articles (the Articles) were available on
the Internet.
-4-
A month later, CTI filed suit alleging the Articles “instantaneously published over
BLOOMBERG’s website” contained “malicious defamation” tending to impeach the
honesty, integrity, virtue or reputation of its business, and, thus, constituted libel under
Utah Code Ann. § 45-2-2. The Articles, CTI alleged, led to the loss of capitalization of
the Project, cancellation of ongoing efforts to expand its business into Central and South
America (CTII de Mexico), disruption of its NASDAQ listing, and derailing of FDA
approval. CTI sought special damages in excess of $100 million as well as punitive
damages.
Bloomberg moved to dismiss the complaint, countering that the alleged
defamatory statements did not constitute libel per se or libel per quod under Utah law
and, in any event, were protected expressions of opinion and non-actionable fair
comment under Utah and federal law. The district court agreed, focusing its analysis on
five alleged defamatory statements in the Articles,2 which, it concluded, were not
2
The district court stated,
“Statement 1 reports that CTI ‘sold 11.1 million shares of its stock at a 72%
discount to its market price,’ and includes commentary from Professor John
Coffee adding that ‘the market price is well above what more informed
parties think it should be.’
Statement 2 reports that CTI needed to sell its stock ‘to fund money-losing
operations.’
Statement 3 reports that the CTI had ‘struggled to sell its imaging systems,’
and had at the time sold only one to a Thai hospital.
Statement 4 reports that a prospective buyer was given options in CTI stock
as an ‘inducement’ to purchase CTI's imaging systems.
(continued...)
-5-
libelous per se under Baum v. Gillman, 667 P.2d 41, 43 (Utah 1983), an action for
slander; nor libelous per quod, despite the falsity of two of the statements, because CTI
neither properly pled nor proved special damages. The latter conclusion rested on Allred
v. Cook, 590 P.2d 318 (Utah 1979), an action for slander, and Cox v. Hatch, 761 P.2d
556, 561 (Utah 1988), an action for libel.
II. Utah Defamation Law
Seeking de novo review of the district court’s interpretation and application of
Utah law, Field v. Farmers Ins. Co., 18 F.3d 831, 833 (10th Cir. 1994),3 CTI contends
the court erred when it collapsed the separate causes of action for slander and libel into a
single, undifferentiated claim and, then, dismissed its complaint solely alleging libel.
(...continued)
2
Statement 5 reports on CTI’s public discussion by CTI’s and other medical
experts and the public’s discussion of the viability of CTI’s experimental
technology in comparison to traditional mammograms and biopsies.”
Computerized Thermal Imaging v. Bloomberg L.P., No. 1:00CV98K, 2001 WL 670927,
at *2 (D. Utah March 26, 2001) (CTI) (footnote omitted).
3
In fact, CTI moved for relief from and reconsideration of the court’s order under
Fed. R. Civ. P. 59(e) and 60(b), alleging, were it required “as a matter of law to plead and
prove special damages, sufficient fact bases exist to do so, such facts were newly
discovered only after the complaint was filed . . . .” A motion for reconsideration, not
recognized by the Federal Rules of Civil Procedure, Clough v. Rush, 959 F.2d 182, 186
n.4 (10th Cir. 1992), may be construed in one of two ways: if filed within 10 days of the
district court’s entry of judgment, it is treated as a motion to alter or amend the judgment
under Rule 59(e); if filed more than 10 days after entry of judgment, it is treated as a
motion for relief from judgment under Rule 60(b). The standard of review for either is an
abuse of discretion. Adams v. Reliance Standard Life Ins. Co., 225 F.3d 1179, 1186 n.5
(10th Cir. 2000). Nonetheless, we review the substance of this appeal de novo.
-6-
To arrest the growth of this hydra, CTI offers us Seegmiller v. KSL, Inc., which, it
insists, “expressly endorsed” the very distinctions between libel per se and slander per se
it advances in this appeal. 626 P.2d 968 (Utah 1981).
Seegmiller, however, was an action to redress the alleged defamatory words
spoken by an investigative television reporter, that is, slander, in which the Utah
Supreme Court had to decide “the degree of fault which a ‘private figure’ must prove in
a defamation action against a media defendant and whether the defendant is entitled to
the benefit of a conditional privilege permitting comment on a matter of public interest.”
Id. at 969. In that endeavor, the court quoted Utah Code Ann. § 45-2-10, the legislative
directive for privileged broadcasts.4 Id. at 977 n.7. In the same footnote, the Seegmiller
court wondered “what the Legislature had in mind when it used the words ‘libelous,
slanderous or defamatory per se,’” and cited William Prosser, Law of Torts §112 (4th ed.
1971), and a Colorado case to support its reminder that “[t]he concepts of slander per se
and libel per se are distinct and the term ‘per se’ has different meanings depending on
context.” Id. Thus, although Seegmiller has since provided the decisional ground for
cases involving privilege, its utility here is marginal. See, e.g., Van Dyke v. KUTV, 663
P.2d 52, 56 (Utah 1983) (college official investigated for sexual harassment occupied a
4
Utah Code Ann. § 45-2-10 provides, in part,
Privileged broadcasts. A privileged broadcast which shall not be
considered as libelous, slanderous, or defamatory per se is one made . . . .
-7-
position “that invited public scrutiny,” shielding the reporter’s comments with a qualified
privilege).
Instead, this case easily aligns with the progenitor of Utah’s common law of libel,
Nichols v. Daily Reporter Co., 83 P. 573 (Utah 1905).5 There, Mr. Nichols, a candidate
for office in the Salt Lake City Typographical Union and delegate to the national
convention, sued the Daily Reporter for printing and publishing a card which stated, on
one side, “Vote for Honest Jake Bosch for Delegate,” and, on the other, “Explanatory
Mr. C.A. Nichols owes the Daily Reporter Co. a balance of $34.25 for printing done in
1894. Draw your own conclusions and vote for Mr. Nichols, if you think he is not able
to pay this debt.” Id. at 573. The meaning of these words, Mr. Nichols alleged, was
clear: unable to pay his debts, unworthy of credit, this typographer was not to be trusted;
all statements of “contempt and ridicule” which damaged him “in his reputation, good
repute, and credit.” Id. Because Mr. Nichols claimed the publication was false and
defamatory on its face, he did not allege special damages.
Writing on a clean slate,6 the Utah Supreme Court stated:
It, of course, is conceded that written derogatory or disparaging words
which impute to a person the commission of a crime, or degradation of
character, or which have a tendency to injuriously affect him in his office
or trust, profession, trade, calling or business, or which tend to degrade
5
Although CTI’s counsel acknowledged Nichols in oral argument, the case only
appeared in its reply brief. Nichols v. Daily Reporter Co., 83 P. 573 (Utah 1905).
6
The court cited an 1895 Tennessee case, an 1886 Michigan case, and a 1903
federal case, among the cases and treatises relied upon, but no Utah precedent.
-8-
him in society, or expose him to public hatred, contempt, or ridicule, are
libelous and actionable. It also is the well-recognized rule that when the
words are libelous per se, it is not necessary to allege or prove special
damages, for malice and damage are implied; but where they are not
libelous per se, special damages must be averred and proven to warrant a
recovery.
Id. at 574. Hence, the correct test to determine whether a publication is libelous per se is
“when language is used concerning a person or his affairs which from its nature
necessarily must, or presumably will, as its natural and proximate consequence, occasion
him pecuniary loss.” Id. (emphasis added). The presumption of damage inheres to the
words of the writing itself. Without this presumption, “special damages to the plaintiff’s
reputation must be alleged and proved to have been the actual and natural result of the
language used.” Id. (emphasis added).7
Although cited in a later Utah case for libel,8 Nichols lay dormant for sixty
7
That is,
Such words, however, may be rendered libelous by the place and
circumstances of their publication, or by proof of extraneous matters,
together with proof of damages other than those implied when shown to be
the natural and proximate consequence of the publication.
Nichols, 83 P. at 575.
8
In Malouf v. Metro. Life Ins. Co., 283 P. 1065, 1066 (Utah 1929), plaintiff sued
a rival insurer for libel based on a letter the rival sent plaintiff’s boss, who was also the
president of the Church of the Latter Day Saints, alerting him to such unscrupulous and
dishonorable business practices as his rounding up L.D.S. agents to accompany his
Roman Catholic managers to get “into homes that they could not go in themselves only by
the introduction of L.D.S. boys.” Because the “manifest purpose” of the letter was to
prejudice and injure plaintiff in his employment, the court reversed and remanded for
(continued...)
-9-
years,9 until it surfaced again in Western States Title Ins. Co. v. Warnock, 415 P.2d 316
(Utah 1966), an action for libel and slander, which concluded, first, a document
disparaging another’s title was not libelous per se; and, second, statements made to
opposing counsel in the course of a lawsuit were not slanderous. Id. at 318.10 Baum v.
Gillman, 667 P.2d 41, 43 (Utah 1983), inexorably fused the two claims, citing Nichols
for the test for “defamation,”11 to conclude Gillman’s verbal statements about Baum’s
sour cherry business did not “impute criminal conduct, loathsome disease, conduct
incompatible with the exercise of a lawful business or unchastity,” and, thus, supported
no action “for either per se or per quod defamation.” Id. at 43. Relying on Allred v.
Cook, 590 P.2d at 322 (“[t]he only damage which could come to the plaintiff would be
that the defendants had fired him from his position, and the plaintiff makes no such
8
(...continued)
reinstatement of the case. Id.
9
The subsequent cases for “defamation” do not cite Nichols. See, e.g., Hales v.
Commercial Bank of Spanish Fork, 197 P.2d 910 (Utah 1948) (slander action in which a
conditional privilege was applied to bank official’s words, citing Kentucky and New
York cases); Berry v. Moench, 331 P.2d 814 (Utah 1958) (action in libel based on
doctor’s letter governed by conditional privilege analysis though C.J.S. and Am. Jur. cited
for definition of libel).
10
Later, Nichols was cited in Allred v. Cook, 590 P.2d 318, 321 (Utah 1979)
(slander action, citing Nichols, 83 P. at 573, stating, in Nichols, “the evidence did not
demonstrate that the plaintiff had been injured in his profession so that slander per se
would lie” to provide the analysis for the alleged defamatory words spoken about the
school superintendent).
11
But, propping that test on 50 Am. Jur. 2d Libel and Slander § 9.
- 10 -
contention in his complaint”), the Baum court emphasized the statements must damage
plaintiff “in a current business endeavor or pursuit. Statements which may only be
injurious to some future happening do not give rise to a cause of action for either per se
or per quod defamation.” 667 P.2d at 43. Special damages, then, must be specific,
actual, and non-speculative.
In our de novo review, “[t]o determine whether the complaint states a claim upon
which relief can be granted, we must examine the complaint in light of the substantive
law of [Utah] because this case arises under diversity jurisdiction.” Weatherhead v.
Globe Int’l, Inc., 832 F.2d 1226, 1228 (10th Cir. 1987). Thus, viewing the district
court’s interspersion of libel and slander law from this historical perspective, we are
constrained to conclude it incorrectly amalgamated the causes of action. In the end,
however, the court correctly held that no statement, on its face, bore the presumption of
damage, and, while perhaps two of the statements were false or “grossly distorted” if
extrinsic information is referenced for libel per quod, CTI at *3, CTI failed to plead and
prove special damages as required by Nichols and its mutations.12
For example, Bloomberg’s statement (Statement 1) that CTI “sold 11.1 million
shares of its stock at 72% discount to its market price,” may be rendered libelous per
quod with the introduction of specific, extraneous facts to establish not all of the 11.1
12
We note CTI did not challenge the court’s concluding, without discussion, the
remaining three statements are not libelous. Consequently, we do not address them here.
- 11 -
million shares were, in fact, sold on February 29, 2000, the final day of the private
placement when the market price was $9.875, the basis for the 72% discount rate
statement.13 Similarly, Statement 3 reporting CTI’s “struggle” to sell the imaging
systems may also be false with the introduction of evidence of its effort to obtain FDA
approval before launching its product on the domestic market. Even with the allegation
that “[a] significant portion of this loss of market capitalization was directly and
proximately caused by Bloomberg’s publication of the defamatory matter,” neither
statement becomes libelous per quod. CTI then alleged the loss of market capitalization
exceeded $100 million, a number that bears no resemblance to the actual capitalization
figures of the complaint. Further, the alleged “negative impact” on CTI’s business
dealings with third parties cannot rescue CTI’s generalized allegation of special
damages.
In assessing whether CTI’s “complaint alone is legally sufficient to state a claim
for which relief may be granted,” Sutton v. Utah State Sch. for the Deaf & Blind, 173
F.3d 1226, 1236 (10th Cir. 1999), we fully recognize the district court embedded a
13
The district court stated the private placement price was determined in
December 1999, when the price was “around 2.50.” CTI at *3. CTI averred in its
complaint the “price of the Company’s common stock offered in the Private Placement
was determined on November 11, 1999, [when] the closing bid price for the Company’s
common stock was $3.81 per share.” The difference would figure in CTI’s claim of
special damage, although CTI did not specifically target that calculation either.
- 12 -
correct articulation of Utah law in its disposition, citing both the statute and West v.
Thomson Newspapers, 872 P.2d 999 (Utah 1994). Section 45-2-2(1) defines libel:
“Libel” means a malicious defamation, expressed either by printing or by
signs or pictures or the like, tending to blacken the memory of one who is
dead, or to impeach the honesty, integrity, virtue or reputation, or publish
the natural defects of one who is alive, and thereby to expose him to public
hatred, contempt or ridicule.
Utah Code Ann. § 45-2-2(1). Under West an action for libel by the mayor of a small
Utah town against a newspaper which published three columns alleged to be defamatory,
the court noted “[t]he term ‘defamation’ encompasses both libel and slander. 872 P.2d at
1007 n.12. The primary distinction between libel and slander is the nature of the
publication.” Id. To state such a claim for defamation, plaintiff “must show that
defendants published the statements concerning him, that the statements were false,
defamatory, and not subject to any privilege, that the statements were published with the
requisite degree of fault, and that their publication resulted in damage.” Id. at 1007-08.
Because our de novo review, based on the statute and Utah cases, concludes that
Bloomberg’s statements did not bear the requisite malicious injury to reputation in the
absence of a precise statement of the damages sustained, we affirm the district court.
III. Amendment of the Pleadings
CTI asserts the district court was obligated to permit amendment of the complaint
to offer “new allegations of special damages.” Indeed, citing Curley v. Perry, 246 F.3d
1278, 1281 (10th Cir. 2001) (dismissal of pro se complaint proper only where it is
- 13 -
obvious plaintiff cannot prevail on the facts and futile to give him opportunity to
amend),14 CTI urges the district court abused its discretion without finding it “patently
obvious” plaintiff could not prevail on the facts alleged. In support of its motion to
amend, CTI attached the affidavit of its CFO, Kevin Packard, describing his involvement
in the unraveling of the NASDAQ listing. While reiterating the sequence of
communications between NASDAQ and CTI representatives, Mr. Packard failed to
specify any newly minted evidence of special damages that had not already been
included in the original complaint against Bloomberg. Instead, Mr. Packard asserted
CTI incurred $350,000 in legal fees in its prolonged effort to reinstate the NASDAQ
listing — a fact CTI surely knew when it filed its complaint, and an element of special
damages not recognized by Utah law.15
CTI styles its motion for relief from and reconsideration of final judgment under
Rules 59(e) and 60(b), presumably as a means of reopening the case to file a motion to
amend under Rule 15(a). Nonetheless, having produced no showing of how it would
14
CTI also relies on Triplett v. LeFlore County, Okla., 712 F.2d 444 (10th Cir.
1983), another pro se prisoner case, in which the court recognized three exceptions to
Rule 15(a) amendment.
15
Attorney’s fees, however, are permitted as special damages in a slander of title
action if incurred “to clear title or to undo any harm created by whatever slander of title
occurred.” Bass v. Planned Mgmt. Servs., Inc., 761 P.2d 566, 568 (Utah 1988).
Otherwise, Utah requires a party seeking special damages to plead each type of damage
specifically to afford the opposing party an opportunity to defend the claims. Hodges v.
Gibson Prod. Co., 811 P.2d 151, 162 (Utah 1991).
- 14 -
properly amend its pleadings or how newly discovered evidence warranted relief from
dismissal, CTI remains bound by the record it created.
The district court did not abuse its discretion in denying the motion to amend.
We, therefore, AFFIRM the dismissal of the cause of action under Fed. R. Civ. P.
12(b)(6).
- 15 -