This lawsuit for defamation by Plaintiff Trump Media & Technology Group Corp. (“TMTG”) against Defendant WP Company LLC (the “Post”) arises from an article titled “Trust linked to porn-friendly bank could gain a stake in Trump’s Truth Social,” published by the Post on May 13, 2023, and circulated on Twitter (now known as “X”) by Post personnel. The article described events related to a contemplated merger between TMTG and a special purpose acquisition company (“SPAC”) known as Digital World Acquisition Corp. (“DWAC”) as part of taking TMTG’s “Truth Social” business public.
The article noted there had been a delay in obtaining SEC approval for the merger, which supporters of former President Donald Trump and TMTG attributed to political bias. The article offered a “possible” alternative explanation: concerns by the SEC and other regulators regarding a loan obtained by TMTG, the identity of the lender, and whether the loan had been properly disclosed by TMTG and/or DWAC to DWAC’s shareholders or the SEC. The article cited various sources for its story, including “internal documents a company whistleblower has shared with federal investigators and [the Post],” as well as statements expressly attributed to the whistleblower, former TMTG officer Will Wilkerson.
The article related that in late 2021, with the proposed merger “frozen” and TMTG concerned about paying its bills, then-DWAC president Patrick Orlando announced he had arranged for an $8 million loan from an entity known as “ES Family Trust.” According to the article, the loan was part of a deal in which TMTG would receive the loan and, in exchange, ES Family Trust would acquire an equity interest in the public entity to be formed from the merger of TMTG and DWAC. This loan-for- stock deal was reflected, according to the article, in a convertible promissory note, although the article acknowledged that the only copy of the note the Post had been able to locate was unsigned.
The article reported that some of the funds were wired by another entity, Paxum Bank, which had ties to ES Family Trust and to the adult film industry. Also, according to the article, TMTG paid a finder’s fee of $240,000 in connection with the loan to Entoro Securities, a Texas entity of which Orlando was a managing director. Although the article did not refer to a specific document evidencing the payment, it pointed to a broker agreement regarding the fee and an invoice for payment from Entoro.
The article stated that neither the loan-for-stock deal nor the finder’s fee had been disclosed to shareholders of DWAC or the SEC. It further reported the opinion of Michael Ohlrogge, a New York University law professor who studies SPACs, that these matters could affect the value of the shares and should have been disclosed. The article also noted that the British journal The Guardian had earlier reported that federal prosecutors in New York were investigating whether TMTG had violated money laundering statutes in connection with the loan, and that TMTG Chief Executive Officer Devin Nunes had filed a lawsuit against Wilkerson and others (including The Guardian) asserting that the Guardian story was “fabricated.” …
TMTG does not challenge the accuracy of the bulk of the story set forth in the Post’s article, including the assertions that TMTG borrowed $8 million from an entity or entities with connections to the adult film industry, that the loan deal involved a pledge of stock in the company to be formed by the merger, and that some TMTG executives were concerned about the lack of information regarding the lender. TMTG’s defamation claims now center on the Post’s statements regarding the disclosure of the loan and the finder’s fee to the SEC and investors….
The court concluded that the allegations were substantially true, plus that TMTG in any event didn’t adequately allege “actual malice” (i.e., knowing or reckless falsehood on the Post‘s part):
Loan Statements
The first statement TMTG challenges is the following, taken from the text of the Post’s May 13, 2023, article:
[T]he role ES Family Trust would assume in Trump Media and Technology Group has never been officially disclosed to the Securities and Exchange Commission [“SEC”] or to shareholders in Digital World Acquisition [“DWAC”], the special purpose acquisition company, or SPAC, that has proposed merging with Trump’s company[.]
… The Court agrees with the Post that these allegations fail to plead either falsity or actual malice. TMTG’s allegation that disclosure of the involvement of ES Family Trust was not required does not suggest the falsity of the Post’s assertion that no disclosure was made. TMTG argues, however, that the first Loan Statement falsely implied that disclosure of ES Family Trust’s involvement was required. Assuming the statement could be reasonably read to imply that requirement, and further assuming no such requirement exists, TMTG as a public figure must allege actual malice by setting forth “facts sufficient to give rise to a reasonable inference that the false statement was made ‘with knowledge that it was false or with reckless disregard of whether it was false or not.'” …
TMTG alleges no facts supporting the proposition that the Post acted with actual malice in publishing the statement. TMTG’s conclusory allegation that the Post knew disclosure of ES Family Trust was not required based on the Post’s “consultation with supposed experts” is belied by Ohlrogge’s opinions quoted in the article. Based on those opinions, the Post reasonably would have believed that disclosure was required, and TMTG’s amended complaint contains no facts plausibly suggesting the Post was aware of contrary expert or other authority from which it would have known Ohlrogge’s opinions were wrong or had serious doubts on that score.
{TMTG’s responsive memorandum also refers to the “SEC’s declaration of effectiveness of a subsequent registration statement,” but this is not mentioned in the amended complaint and TMTG offers no explanation how it supports a contention that disclosure of ES Family Trust was not required or that the Post knew it was not required when it published the article.
TMTG attempts to cast doubt on Professor Ohlrogge’s reliability by citing “recent” appearances by Ohlrogge on “left wing” media sites such as CNN, NBC, the New York Times, and the BBC. The Court rejects this argument because TMTG offers no specific information suggesting that any of these “recent” appearances would have been relevant to the Post’s reliance on Ohlrogge when it published the article. Moreover, the amended complaint contains no allegations regarding Ohlrogge or his reliability, only a generic reference to the Post’s “consultation with supposed experts.”}
Equally insufficient are TMTG’s allegations that the Post “knew” that disclosure of ES Family Trust was not required based on the absence of any disclosure of other lenders in DWAC’s public filings. The article did not assert that TMTG or DWAC should have disclosed the ES Family Trust loan because disclosure of lenders is generally required. It reported Ohlrogge’s opinion that disclosure was required in this instance due to issues relating to this specific loan. Accordingly, the lack of disclosure of other lenders in DWAC’s filings is irrelevant.
Finally, TMTG’s attempt to allege a circumstantial case for actual malice with respect to this and the other challenged statements likewise falls short. TMTG alleges, for example, that Will Wilkerson, a key source relied on by the Post, had been “terminated for cause” and “ousted” from TMTG and that “bad blood” existed between Wilkerson and TMTG. TMTG, however, offers no further details as to Wilkerson’s departure from TMTG or his attitude toward the company. Reliance on a potentially biased source does not by itself establish actual malice. The article described Wilkerson as a “former executive” and a whistleblower who had shared information with government authorities as well as the Post. The fact that Wilkerson—an insider positioned to provide accurate information and supporting documents to the Post—was to some unspecified extent hostile to TMTG does not, without more, support an inference that he gave vent to that hostility by fabricating facts regarding the loan.
Further undermining any inference of actual malice, the article reflected the Post’s reliance on sources apart from Wilkerson, including DWAC’s public filings and other documents, as well as the opinions of Professor Ohlrogge. The article also noted that the Post had reached out to TMTG for comment before publication. Although TMTG did not respond, the article reported TMTG’s criticism of a previous Post story as based on “discredited hit pieces, defamatory allegations and false statistics.” … [T]here are no allegations showing that the statements in the article were inherently improbable, that the Post actually entertained doubts about the reliability of Wilkerson, or that the Post’s investigation was grossly inadequate under the circumstances. Nor do the allegations suggest that the Post “purposefully avoided further investigation with the intent to avoid the truth.
TMTG argues that it may rely on the “sum total” of proper inferences to allege a circumstantial case for actual malice. While this is correct as a general proposition, TMTG’s allegations, even taken collectively, do not support a reasonable inference the Post acted with actual malice. TMTG alleges, for example, that the Post harbored ill- will, bias, and “antipathy,” and had engaged in a years-long crusade against TMTG characterized by “willful concealment of relevant information” and “re-publication of dubious and unverified accusations of illegal or untoward actions by TMTG.” But TMTG alleges no specifics or factual support for these conclusions, just a series of negative headlines from previous Post articles. TMTG alleges that the Post’s conduct departed from its code of ethics and professional standards, but offers no specifics as to what standards were breached or how. Controlling case law holds that conclusory allegations of this type are insufficient to support an inference of malice.
Finally, the amended complaint points to the fact that TMTG’s CEO Devin Nunes filed a lawsuit (later dismissed) against The Guardian alleging that statements in the Guardian article, some of which the Post reported, were false. TMTG does not allege the Nunes lawsuit presented specific information that would have caused the Post to doubt the accuracy of statements made in its article. As the Court noted in its previous dismissal order, the Post’s awareness of this lawsuit challenging the Guardian article is not necessarily probative of actual malice on the part of the Post….
The second Loan Statement appears in a tweet republishing the Post’s May 13, 2023, article:
Trump’s media company took out an $8 million loan in exchange for stock, but no one told the SEC[.]
The amended complaint alleges this statement was false, and the Post knew it was false, for the same reasons it alleged as to the first Loan Statement. Accordingly, for the same reasons discussed above, TMTG fails to allege falsity or actual malice as to the second Loan Statement as well.
TMTG’s responsive memorandum argues the second Loan Statement was false because DWAC’s public filings disclosed TMTG’s debt in the aggregate and thereby disclosed “the loan.” The Court rejects this argument. First, this is not the basis for falsity or actual malice alleged in the amended complaint. The Court’s prior dismissal order directed TMTG to allege in its complaint in what respect each challenged statement was false, what information showed it was false, and why the Post would have been aware of that information. The Court will not allow TMTG to sustain its complaint based on different, unpleaded allegations set forth in its responsive memorandum. Second, TMTG offers no explanation why disclosure of its aggregate “debt” equates to disclosure of “the loan,” particularly in the context of an article that addressed concerns about the circumstances surrounding a particular loan, not TMTG’s “debt” or “convertible notes” in general. Accordingly, TMTG has failed to allege facts showing the second Loan Statement was false and that it was made with actual malice, as required to allege a claim for defamation.
The third of the challenged Loan Statements is the following, also in a tweet circulating the article:
Trump Media: this time they borrowed money from a bank best known for servicing the adult entertainment [sic], pledged a stake in the company for the loan and didn’t tell the SEC.
For the same reasons discussed above as to the first and second Loan Statements, TMTG fails to allege falsity or actual malice, and its defamation claim therefore fails to the extent it is based on this statement.
Finder’s Fee Statements
The statements TMTG challenges relating to the finder’s fee remain the same as in the original complaint. The first Finder’s Fee Statement is:
The companies also have not disclosed to shareholders or the SEC that Trump Media paid a $240,000 finder’s fee for helping to arrange the $8 million loan deal with ES Family Trust[.]
The amended complaint asserts this statement was false because no fee was paid, and therefore there was no failure to disclose a payment. The amended complaint, however, does not challenge the article’s assertion that there was an agreement to pay the fee. The Post accordingly argues that the defamatory “sting” of this statement would be the same whether the undisclosed finder’s fee was actually paid or merely agreed to. Therefore, the Post argues, its statement was substantially true.
The Court agrees. “[U]nder the substantial truth doctrine, a statement does not have to be perfectly accurate if the ‘gist’ or the ‘sting’ of the statement is true.”
A statement is considered false only where it is “substantially and materially false,” that is, where the statement “would have a different effect on the mind of the reader from that which the pleaded truth would have produced….
TMTG does not deny there was an agreement to pay the fee to an affiliate of Orlando nor does it contend that the agreement was disclosed. Instead, it argues that a statement that payment was made and not disclosed “arguably implies fraud,” whereas a statement merely asserting that “there was an agreement reached” does not imply fraud. Thus, TMTG argues, the defamatory sting of the two statements is different.
This argument is unpersuasive. As reflected in Ohlrogge’s opinions reported in the article, the potential impropriety concerning the undisclosed finder’s fee—and therefore the defamatory “sting” of the article—related to the potential conflict of interest involved when Orlando, an insider, arranged a payment to a company in which he had a financial interest. That conflict of interest would have existed whether TMTG merely undertook an undisclosed obligation to pay the fee to Orlando’s company, or actually paid the fee. In the context of the entire article, then, whether the fee was paid, as the Post reported, or whether there was merely an agreement to pay the fee, the effect on the mind of a reader would be the same. Accordingly, the Post’s statement was substantially true, even if incorrect on the issue of actual payment….
Even if the statement were not substantially true, the defamation claim based on the first Finder’s Fee Statement also fails because TMTG does not allege facts showing actual malice….
The second Finder’s Fee Statement is:
[T]he recipient of that fee was an outside brokerage associated with Patrick Orlando, then Digital World’s CEO[.]
This statement simply adds a detail to the first statement by identifying the recipient of the payment. The Court’s analysis of this statement is therefore the same as for the first statement….
The third Finder’s Fee Statement is:
Orlando’s finder’s fee could affect the value of the shares.
TMTG’s allegations as to falsity and actual malice in the amended complaint relate only to the first two Finder’s Fee Statements. Neither the amended complaint nor TMTG’s responsive memorandum offers anything specific to show the third statement was false or was published by the Post with actual malice and, as set forth above, TMTG has failed to plead facts making out a circumstantial case for actual malice. Accordingly, the amended complaint fails to state a claim for relief based on the third Finder’s Fee Statement.
Carol J. Locicero and Linda Riedemann Norbut (Thomas & LoCicero, PL) and Nicholas G. Gamse and Thomas G. Hentoff (Williams & Connolly LLP) represent defendant.
