Court File and Parties
COURT FILE NO.: CV-16-555861 DATE: 20170426 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Mark Thompson, Plaintiff AND: Marc Cohodes, Defendant(s)/Respondent(s)
BEFORE: Madam Justice Kristjanson
COUNSEL: Peter Downard, for the Plaintiff/Respondent Mark Wiffen, for the Defendant/Moving Party
HEARD: January 26, 2017
Endorsement
[1] The Plaintiff Thompson, then CEO of a publicly traded corporation, Concordia International Inc., commenced a libel action against Cohodes, a former hedge fund manager and short seller critical of Concordia. The alleged libel is an imputation of fraud against Thompson when he was a junior lawyer at Biovail Corporation more than a decade ago. Cohodes brought this motion under s. 137.1 of the Courts of Justice Act (CJA) to dismiss the proceeding on the basis that it limits expression on a matter of public interest.
[2] Section 137.1 of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that where a proceeding is brought regarding a statement relating to a matter of public interest, a defendant may seek a preliminary judicial assessment of the merits of the claim. In a preliminary review under s. 137.1, CJA, the defendant must establish that the impugned expression is on a matter of public interest. The plaintiff then bears the onus of showing that: (1) there are grounds to believe his or her claim has substantial merit; (2) there are grounds to believe that the defendant has no valid defence; and (3) the harm that has been or is likely to be suffered by the plaintiff is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.
[3] I have found that management of publicly traded corporations is a matter of public interest. However, in this case an unsupported allegation of committing fraud or participation in fraud against a specific individual relating to alleged actions a decade earlier, when he was a lawyer, leads me to conclude that the public interest in permitting Thompson to proceed with his libel action outweighs the public interest in protecting Cohodes’ expression.
The Facts
[4] Until November, 2016 when he resigned, Thompson was Chairman and CEO of Concordia International Inc. ("Concordia"), a publicly traded pharmaceutical company. Thompson was called to the bar in 1998 and began his career as a corporate associate with Osler, Hoskin & Harcourt in Toronto. As a third year lawyer he joined the legal department of Biovail Corporation as Associate General Counsel from 2001 to 2004, and then as Vice-President, Business Development. He left Biovail in early 2005, and was never a director or officer of Biovail.
[5] Cohodes is a chicken farmer, former hedge fund manager and outspoken critic of Concordia and other companies whom he believes are mismanaged. He is also an active short seller, who in 2016 was a frequent critic of Concordia (and other companies) on his Twitter account, making statements such as "Concordia is just a shell game loaded with legacy Biovail Cats. Oh the leverage", "[m]aybe people are starting to figure out that Concordia's leverage make [Valeant Pharmaceutical] look like [Merck & Co.]" and "Concordia is a low quality copycat with former Biovail execs running it at 2x more leverage than [Valeant Pharmaceutical]".
[6] At the April, 2016 Annual General Meeting of Concordia, Thompson responded to Cohodes’ attack on Concordia by stating: “If you are a chicken farmer, your chickens will come home to roost,” which Cohodes (as a chicken farmer) took as an attack on him.
[7] After Thompson's comment at the Concordia AGM, Business News Network (BNN) invited Cohodes on for an interview to respond to Thompson's comments and address his views on Concordia's stock. The BNN interviewer quoted Thompson's statement from the Concordia AGM, noted that "I think it's directed very specifically at you", and asked for Cohodes' response. Cohodes' response, which Thompson alleges was defamatory, was as follows:
One of the things that I always try to do is I bet the jockey and not the horse. And one thing I look at is career failures. And the management of Concordia, their past gig was at something called Biovail which I was short a long time ago which was a complete and utter fraud. So Thompson has a history of nonsense when he was at Biovail. He started up a company called Trimel Pharmaceuticals. I last quoted that at 18 cents. And for a guy who pays himself 9 million dollars U.S. per year and as leveraged as he is he should focus a little more on running his business and a little less on me. (emphasis added)
[8] Cohodes said later in the interview that in his statements about Thompson and Biovail he was “speaking out against complete and utter nonsense and frauds.”
[9] The interview continued to discuss Cohodes' views on Concordia, including specific comments regarding issues Cohodes took with Concordia's business. Cohodes also made additional comments such as "[e]veryone can come to their own conclusions and whatever the market decides, the market decides. The market is a court of public opinion, it's not a court of law …”. The broadcast is available on BNN’s website.
Alleged Libel
[10] The underlined portions in paragraphs 7-8 constitute the alleged libel. Cohodes spoke specifically about the “jockey” of Concordia, Mr. Thompson. He stated that Thompson was employed by Biovail which was a “complete and utter fraud”, and that Thompson had “a history of nonsense” when Thompson was employed by Biovail. The use of the term “nonsense” in this context are grounds to believe there is an imputation of fraud. The only “nonsense” at Biovail referred to by Cohodes is that Biovail was “a complete and utter fraud”. Later in his interview, Cohodes stated that he was speaking about “complete and utter nonsense and frauds”. Cohodes’ statement is therefore reasonably interpreted as stating that Thompson committed fraud, or participated in the commission of fraud, during his employment at Biovail early in his career.
Issues
[11] Under s. 137.1 of the CJA, Cohodes must first establish that his expression relates to a matter of public interest. Thompson will not be entitled to maintain his action unless he establishes that: (1) there are grounds to believe his claim has substantial merit; (2) there are grounds to believe the defendant has no valid defence; and (3) the harm likely to be or that has been suffered by the plaintiff is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.
Issue #1: Expression Relates to a Matter of Public Interest
[12] It is not in dispute that the statement complained of relates to a matter of public interest. The plaintiff has conceded, and I find, that the management of a publicly traded corporation is a matter of public interest.
Issue #2: Grounds to Believe the Proceeding has Substantial Merit
[13] The burden is on Thompson to establish that there are grounds to believe the proceeding has substantial merit: s.137.1(4)(a)(i), CJA. I agree with Justice Dunphy in Able Translations Limited v. Express International Translations Inc., 2016 ONSC 6785 at paras. 46-48, that Thompson must establish “an objective basis for the belief which is based on compelling and credible information.”
[14] There are three elements to a libel case. First, the plaintiff must establish that the words refer to the plaintiff. That has been conceded. Second, the plaintiff must establish the words were published by being communicated to at least one other person. That has also been conceded. Finally, the plaintiff must establish that words complained of were defamatory, in the sense of tending to lower the plaintiff’s reputation in the eyes of a reasonable person: Botiuk v. Toronto Free Press Publications Ltd., [1995] 3 S.C.R. 3 at p. 24 (S.C.C.) per Cory J.
[15] Cohodes argues that the statement that Thompson had a history of “nonsense” at Biovail, in the context of the interview referring to fraud and utter nonsense at Biovail, should be interpreted in context, including considering how much is publicly known about the plaintiff, and the nature of the audience. (WIC Radio Ltd. v. Simpson, 2008 SCC 40 at para. 69). Cohodes argues that a reasonable viewer would view this matter as a well-known critic of Concordia and its management criticizing Concordia and its management. Cohodes submits that: “Cohodes’ comment would simply be construed by the reasonable viewer as Cohodes expressing an opinion that Concordia is a bad investment, because its management (including Thompson) has a history of being involved in poorly managed companies (including Biovail and Trimel).” I do not agree.
[16] In this case, the alleged libel referred to Thompson personally. The words are reasonably interpreted as alleging that Thompson committed fraud, or participated in committing fraud, at a company where he was employed as a lawyer at an early stage of his career. The libel was widely disseminated, both publicly broadcast on BNN and posted on BNN’s website. I find there are reasonable grounds to believe the substantial requirements of the plaintiff’s claim in libel are satisfied.
Issue #3: No Valid Defences
[17] Cohodes has not yet filed a statement of defence. For the purposes of this motion, Cohodes advances two defences: justification and fair comment. I discuss each of these below, and find that there are reasonable grounds to believe there is no valid defence.
(a) Justification
[18] To establish a defence of truth, or justification, the defendant must prove the substantial truth of the “sting”, or main thrust, of the libel complained of: Cusson v Quan, 2007 ONCA 771 at para. 35; rev’d on other grounds 2009 SCC 62. In this case the words complained of are reasonably interpreted as conveying the defamatory sting that Thompson committed fraud, or participated in fraud, when he was employed at Biovail early in his career. Thompson has given evidence that he did not engage in any fraudulent conduct, or any misconduct, during his employment at Biovail.
[19] Cohodes led evidence that Thompson has, both during and after his Biovail tenure (where he was one of one two to four lawyers in the Biovail legal department), been closely associated with both Biovail and Eugene Melnyk, the former CEO of Biovail. Thompson was employed by Biovail as Associate General Counsel, and then as a Vice President of Business Development, from 2001 to 2005. Biovail was founded by Eugene Melnyk, and Melnyk was the CEO of Biovail during Thompson’s employment there.
[20] Cohodes relied on evidence including newspaper articles, press releases, litigation claims, and administrative and court orders to establish that during Thompson’s tenure at Biovail, Biovail was involved in a number of proceedings involving allegations of fraud or similar conduct including:
(a) The US Securities and Exchange Commission (the “SEC”) issued a civil complaint against Biovail for conduct between 2001 and 2003, alleging “chronic fraud” and a “corrupt strategy” of misleading investors and analysts. (b) As a result of the SEC complaint, there was a consent judgment in which Biovail paid a $10 million civil fine, and Melnyk paid a $150,000 fine and was barred from serving as an officer and director of a public company for 5 years. (c) The Ontario Securities Commission (the “OSC”) brought its own proceedings against Biovail and its management. Among other things, the OSC fined Melnyk $565,000 and barred him from acting as an officer and director of a reporting issuer for 5 years. (d) Biovail was sued by its shareholders in 2003 for fraud. It paid $138 million to settle that proceeding. (e) In 2000 (slightly before Thompson’s time at Biovail) and in 2002 (after Thompson began at Biovail), a Bank of America analyst named Jerry Treppel published negative reports about Biovail. Mr. Treppel sued Biovail, alleging that Biovail retaliated against him by distributing defamatory information about him, and causing him to lose his job in May 2002, and (f) Biovail pleaded guilty in either a criminal or administrative proceeding in a scheme related to paying doctors in 2002 and 2003 to buy a drug called Cardizem, and paid a $24.6 million fine.
[21] Cohodes alleged that Thompson was involved in at least some of the matters giving rise to the OSC complaint (and the similar SEC complaint) against Biovail, since: (a) Thompson gave evidence before the OSC on a Biovail matter; (b) Thompson’s hard drive from when he was employed at Biovail was included as part of a court ordered search in connection with the claim by Mr. Treppel against Biovail, Melnyk and Cancellera (whom Thompson directly reported to while at Biovail), and (c) in 2007 Thompson founded Trimel Pharmaceuticals with Eugene Melnyk, although Melnyk’s involvement in that going public process (which involved a reverse merger with J5 Acquisition Corp.) was restricted by the OSC order against him. This does not establish the truth of Thompson’s involvement in fraudulent conduct.
[22] I accept the evidence of Thompson on this motion that:
(a) Thompson has no history of fraud, or any misconduct, whether styled as “nonsense” or otherwise, during or related to his employment at Biovail; (b) No one has ever made any allegation in any legal proceeding that Thompson ever engaged in fraud or misconduct while he was employed at Biovail; (c) Thompson was never deposed in litigation in the United States involving Biovail; (d) He was not involved in the Treppel matter, and he had no information as to why in 2006, after he had left Biovail, a court order directed production of a 2005 hard drive storing information of Thompson and others; (e) He was not involved in the Cardizem matter; (f) Thompson was never deposed in any Securities and Exchange Commission matter in the United States involving Biovail; and (g) In Canada, Mr. Thompson appeared as a witness in an OSC proceeding involving a former director of Biovail. In that matter he did so as a witness for the Ontario Securities Commission. No allegation was made against Thompson.
[23] I find that Thompson has established that there are reasonable grounds to believe there is not a valid defence of justification.
(b) Fair Comment
[24] To establish a defence of fair comment, the comment must be (1) on a matter of public interest; (2) based on fact; (3) recognizable as comment (though a comment may include inherently debatable inferences of fact); and (4) fairly made, in the sense that a person could honestly make the comment on the proved facts. If the defendant establishes these elements, the defence may still be defeated if the plaintiff establishes that the defendant was actuated by malice: WIC Radio Ltd. v. Simpson, 2008 SCC 40, [2008] 2 S.C.R. 420 at para. 28, per Binnie J. Under CJA s. 137.1(4)(a), the burden is on the plaintiff to demonstrate there are grounds to believe the defence is not made out.
[25] Cohodes submits that since Thompson was employed by Biovail, and for the purposes of the motion Biovail’s fraud was sufficiently established, the reference to Thompson’s “history of nonsense” is a statement that is not capable of being objectively proven true or false since nonsense is neither true nor false, and as such it is a comment. Cohodes also argued that the test to be applied is whether any person could honestly express that opinion on the proved facts such that there is “a nexus or relationship between the comment and the underlying facts” (WIC Radio, at para. 40).
[26] In this case, Cohodes has no defence of fair comment since the statement complained of is a statement of fact, not comment. Statements of comment are statements of opinion, or inherently subjective and debatable inferences from facts: WIC Radio at para. 26. They are distinguished from defamatory statements of fact, which purport to assert objective truth. If the words are presented in a manner which does not indicate with reasonable clarity that they are comment and not statements of fact, the words may be found to be a statement of fact.
[27] The sting that one has committed or participated in fraud is an allegation of fact. In Wasserman v. Freilich, [2016] EWHC 312 (Q.B.), Eady J. stated that an allegation that a person has been dishonest is “generally regarded as a factual allegation”: at para. 16, stating at paras. 16 and 22:
Juries are deciding on every day of the week, as a matter of fact, whether a particular defendant was, or was not, dishonest. Accordingly, it is an allegation which in the context of libel is readily understood as being susceptible to a plea of truth…It is not thought to be a matter of opinion: nor can one convert an allegation of dishonesty (or for that matter, of murder or rape) into a matter of opinion by merely inserting in front of it a formula such as “I believe…” or “she thinks…An allegation of dishonesty, fraud or attempted fraud will usually fall fairly and squarely on the side of fact rather than opinion.
[28] The defence of fair comment is only available for comment based on facts proven to have been true: WIC Radio Ltd. v. Simpson, 2008 SCC 40, [2008] 2 S.C.R. 420 at para. 31 (S.C.C.). I have found that on this motion, it has not been established that Thompson engaged in fraud at Biovail, and thus there are grounds to believe there is no defence of fair comment.
Issue #4: Public Interest
[29] The final aspect of the test is whether the harm that has been or is likely to be suffered by the plaintiff as a result of the libel complained of is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression: s. 137.1(4)(b), Courts of Justice Act.
[30] Justice Dunphy in Able Translations has held that in order for the plaintiff to meet this onus in a defamation claim, the evidence of damages suffered or likely to be suffered in consequence of the impugned statements must be such that there is “credible and compelling evidence of harm that appears reasonably likely to be proved at trial”: Able Translations Ltd. v. Express International Translations, 2016 ONSC 6785 at para 83; Fortress Real Developments Inc. v. Rabidoux, 2017 ONSC 167 at paras 28, 36.
[31] Cohodes submits that there was little, if any, consequence to Thompson from the comments made by Cohodes, pointing to evidence that:
(a) Although it is suggested that Cohodes’ motivation in making his comments was to lower the reputation of both the company and its senior management in order to capitalize on the fall in Concordia’s stock price, there was no substantial decrease in the stock price at the time of the interview. (b) Thompson has acknowledged that his resignation from Concordia was not connected to Cohodes’ comments. (c) Thompson has delivered no libel notice to BNN, and brought no action against BNN. This, he states, is indicative of a claim brought to attack Cohodes, rather than to genuinely protect or vindicate Thompson’s reputation by having the interview removed from BNN’s website. On this point, I note that the jurisprudence regarding pursuing a claim of defamation against the media raises different issues and I place no weight on this point. (d) Although Thompson was invited on BNN “multiple times” after Cohodes’ interview, he never appeared, and never took advantage of the opportunity to correct any alleged misstatements made by Cohodes. (e) This lawsuit itself appears to have received more coverage than the BNN interview. (f) Thompson has now been sued in securities class actions in the United States for deception and fraud, and has received substantial negative publicity due to the downfall of Concordia and the associated margin calls requiring him to divest shares of Concordia. This negative publicity is not the result of Cohodes’ BNN interview.
[32] The harm that has or is likely to be suffered as a result of the libel must be established having regard to the law of libel as it relates to the assessment of damages. General damages are presumed from the publication of the libel, and need not be established by proof of actual loss: Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at para. 164 (S.C.C.). Valid purposes of a general damages award are to compensate the plaintiff for loss of reputation and injury to the plaintiff’s feelings, and to vindicate the plaintiff, although the relevance of each of these may vary from case to case: Walker v. CFTO Ltd. (1987), 59 O.R. (2d) 104 at 111 (C.A.).
[33] In this case I note the following factors are relevant to the harm that has and is likely to be suffered by the plaintiff. First of all, the seriousness of the charge is an important issue. An allegation that a plaintiff has committed fraud is treated seriously. In this case, the defamatory imputation that Thompson committed fraud or participated in the commission of fraud, which for a CEO of a public company, and a lawyer at the time of the allegations, is indeed a very serious charge.
[34] The mode and extent of publication is also important. The damages are increased if the libel is published in a major newspaper or widely broadcast. In this case, the libel was part of a national television broadcast, and is available on the internet.
[35] The court will also consider the position and standing of the plaintiff in the community. At the time of the libel, Thompson was the chairman and CEO of a public corporation. The court also considers the importance of the plaintiff’s reputation to his or her employment or profession. Thompson’s evidence is that a number of people including those who worked in his office and Concordia shareholders, asked him about Cohodes’ allegation against him. He was in management at a publicly traded corporation, and the allegations relate to a time he was practising law.
[36] In addition, the conduct of the defendant before and after the time of publication may be taken into account in assessing general damages: Dingle v. Associated Newspapers Ltd., [1964] A.C. 371 at 395 (H.L.) Conduct of a defendant that may be regarded as having increased the plaintiff’s damages include a repetition of the libel and conduct calculated to deter the plaintiff from proceeding or other persecution of the plaintiff. In this case there is evidence of such conduct by Cohodes.
[37] After the issuance of the claim, Cohodes has made further public statements about Thompson on Twitter. Cohodes has an audience of approximately 7,000 followers. Those followers may in turn pass on Cohodes’ tweets to others. The tweets include the following:
(a) May 20, 2015: “…Thompson came by the Hen House the other night and did him in with a shovel…” Beneath this message Cohodes placed a photograph of an opossum that Cohodes had killed at his farm by hitting him in the head with a shovel; (b) June 5, 8 and 21, 2015: Cohodes posted several ‘tweets’ referring to Thompson as a snake, posting photographs of snakes with each of them; (c) August 2, 2015: Cohodes responded to a ‘tweet’ by another Twitter user which asked, “Are you bringing your…umm…castration equipment with you when you visit Ontario?” Cohodes replied on Twitter, “Never leave home without it.” Cohodes posted a photograph of a chicken and her chicks, with the words, “Of course. They hatched when that Cock Sucker served me with that Silly Ass Suit. When I see them I think of that shit stock.” Cohodes testified that the “Silly Ass Suit” was this lawsuit, and in referring to the “cock sucker”, it was either the law firm or Thompson; (d) September 9, 2015: “He is at a bar somewhere drinking out a shoe. That is what you get and deserve”. Above this message Cohodes posted a photograph of Thompson; (e) September 13, 2015: “Not to mention I got sued for speaking out after Thompson grandstands. He will truly rot in Hell”; (f) September 16, 2015: “Maybe Thompson should have called Gaston before he sued me…Only 5 more points to go. Someone collect his passport”. Immediately below this message Cohodes posted a photograph of an individual named Gaston being led away in handcuffs by law enforcement officers. Cohodes accepts that in this post he implied that someone should collect Thompson’s passport so he couldn’t leave the country. On the same date Cohodes posted another tweet stating, “Thompson in the not to [sic] distant future”. Beneath this message Cohodes posted a cartoon of an RCMP officer dragging behind him a cartoon villain; (g) September 21, 2015: “Thompson is a Bully and a Coward & suing people for having an opinion doesn’t work. I hope to make an example of him gloating it is not…”; (h) September 29, 2015: “The Joker Card. Don’t leave home without it.” Beneath this message Cohodes posted a photograph of a movie villain (the “Joker”) holding a card with a picture of Thompson’s face on it.
[38] For these reasons, I find that there are grounds to believe that Thompson will be entitled to damages in the action.
[39] An attack on professional reputation through an imputation of fraudulent conduct is a classic concern of the law of libel. The libel referred to the plaintiff personally and was widely disseminated. Following publication of the libel complained of, the defendant has continued to comment on Thompson’s character. These are all significant factors which I weigh in recognizing the public interest in allowing the plaintiff to continue his lawsuit.
[40] By contrast, the value of the defendant’s expression is low. The statement complained of was an allegation that the plaintiff committed or participated in fraudulent conduct when he was a lawyer at the start of his career with another company in the context of a larger discussion about the management of Concordia. There were no details with respect to the “nonsense” which Thompson allegedly engaged in Biovail and the statement focussed on the personal conduct of the plaintiff over a decade earlier. As such, I find the public interest in permitting Thompson to proceed with his action outweighs the public interest in the expression at issue.
Costs
[41] There is a special costs regime under s. 137.1 of the CJA. Section 137.1(8) provides that if a judge does not dismiss the proceeding, the plaintiff is not entitled to costs on the motion unless the judge determines that such an award is appropriate in the circumstances. The plaintiff seeks costs against the defendant on a substantial indemnity basis, citing conduct-based factors including (a) a high volume of “plainly irrelevant evidence”; (b) misuse of cross-examination to “harass” the plaintiff; (c) abuse during his cross; (d) continuing to assert the truth of the allegation of fraudulent conduct unsupported by evidence.
[42] I find no basis to depart from the presumption that costs not be awarded against an unsuccessful defendant. As suggested at para. 20 of the 2010 Anti-SLAPP Advisory Panel report, costs awards against unsuccessful defendants are intended to act as “costs sanctions against parties who bring frivolous motions for protection”. The motion was not frivolous, and did not raise the kind of high volume of issues or evidence of concern in Platnick v. Bent, 2017 ONSC 585. As a result, no costs awarded to the successful plaintiff.
Kristjanson J. Date: April 26, 2017