United States District Court, N.D. Illinois, Eastern Division
January 11, 2005.
HARRY EDELSON, Plaintiff,
RAYMOND K.F. CH'IEN, PETER YIP HAK YUNG, ASIA PACIFIC ONLINE LTD., and CHINADOTCOM CORPORATION, Defendants.
The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Harry Edelson ("Edelson") filed his Second Amended
Complaint alleging tortious interference with prospective
economic advantage against Defendants Raymond K.F. Ch'ien
("Ch'ien"), Peter Yip Hak Yung ("Yip"), Asia Pacific Online, Ltd.
("Asia Pacific"), and chinadotcom corporation ("Chinadotcom").
Ch'ien moves to dismiss the Second Amended Complaint for lack of
personal jurisdiction, pursuant to Rule 12(b)(2), and for failure
to state a claim, pursuant to Rule 12(b)(6), and in the
alternative, to strike immaterial matter, pursuant to Rule 12(f).
Chinadotcom separately moves to dismiss the Second Amended
Complaint for failure to state a claim pursuant to Rule 12(b)(6).
For the reasons discussed below, the Court grants in part
Ch'ien's motion and denies Chinadotcom's motion.
For purposes of this Opinion, the Court presumes the following
allegations as true. I. Parties
Edelson is a citizen of New Jersey. (R. 53-1; Sec. Am. Compl. ¶
1.) He is the former outside, independent non-management director
of Chinadotcom. (Id.) Since January 1999, Edelson has served as
a non-executive director of Chinadotcom. (Id.) Edelson has also
served in a variety of other capacities for Chinadotcom and its
various subsidiaries. (Id.) He is also a stockholder of
Edelson is also a venture capitalist. (Id.) He is the
founding partner of Edelson Technology Partners, a high
technology venture capital partnership assisting multinational
corporations. (Id.) Over his 30-year career, Edelson has served
on the Board of Directors of numerous privately and publicly held
companies, in addition to Chinadotcom. (Id. ¶ 8.) Edelson
relies on connections made during his business career, as well as
his reputation in order to raise funds. (Id.)
Ch'ien was, at all times relevant, the Executive Chairman of
the Board of Directors of Chinadotcom. (Id. ¶ 3.) He is a
citizen and resident of Hong Kong. (Id.)
Chinadotcom is a corporation formed and existing under the laws
of the Cayman Islands. (Id. ¶ 5.) Its principal place of
business is in Hong Kong. (Id.) Chinadotcom is an integrated
enterprise solutions company offering software services and
outsourcing, technology, marketing, and media services and
content for companies and end users throughout the greater China
and the Asia-Pacific region, the United States, and the United
II. The Press Release
Shortly after Edelson filed his Complaint in this case,
Chinadotcom filed a Statement of Claim in the High Court of the
Hong Kong Special Administrative Region, Court of First Instance, Action No. 4004 of 2003 (the "Hong Kong Action"),
against Edelson and Edelson Technology Partners. (R. 53-1; Sec.
Am. Compl. ¶ 10.) Chinadotcom alleged breach of fiduciary duty
and breach of Chinadotcom's insider trading policy. (Id.)
Edelson disputes Chinadotcom's allegations in the Hong Kong
Action, arguing that they are baseless and filed for no other
reason than to retaliate against Edelson for filing this action.
Around the time it filed the Hong Kong Action, Chinadotcom
issued a press release on its website (www.corp.china.com)
entitled "chinadotcom reports fourth consecutive quarter of US
GAAP profit, revenues up 10% year-on-year, and net income of US
$6.1 million" (the "Press Release"). (Id. ¶ 11.) In the section
titled "Other Developments," the Press Release states in part:
The company recently filed a claim in the courts of
Hong Kong against former board member, Harry Edelson
and his affiliated fund seeking damages related to
the alleged breach of fiduciary duties owed to the
company and violations of the company's insider
trading policy. The company also recently became
aware that Mr. Edelson has filed an action against
the company and certain board members and one
shareholder alleging claims that relate principally
to his disagreement with the results of this year's
annual shareholders meeting whereby he was not
re-elected by shareholders to the chinadotcom board
(Id. ¶ 11, Ex. B.) Based on information and belief from
Edelson's experience on the Chinadotcom Board, Edelson alleges
that Yip and Ch'ien directed the preparation and dissemination of
the above-quoted portion of the Press Release. (Id. ¶ 12.)
Edelson alleges the Press Release is inaccurate and misleading in
a variety of aspects. (Id. ¶ 13-16.)
Edelson alleges the Press Release has "thrown a taint on" his
character and abilities, and "clouded his reputation in a public
and embarrassing way." (Id. ¶ 13.) Despite past success in
raising money for various funds, after the Press Release, Edelson
has been unable to raise money for his most recent fund. (Id. ¶
17.) Edelson contends the Press Release is readily available to
the entire world and that it is impossible for him to attract
investment funds. (Id. ¶ 18.) Edelson alleges that Defendants
made the statements in the Press Release "with malice, with
vindictiveness, and purely for revenge." (Id. ¶ 19.)
III. History of this Action
Edelson filed his complaint on October 15, 2003 alleging
violations of Section 13(d) of the Securities Exchange Act of
1934 and tortious interference with an economic advantage.
Plaintiff also moved for a preliminary injunction. (R. 1-1;
Compl.) Chinadotcom filed a motion to dismiss the complaint
pursuant to Rule 12(b)(6) arguing that (1) Edelson failed to
allege any wrongdoing on the part of Chinadotcom, and (2)
Edelson, as an ex-director of Chinadotcom, lacked standing to sue
under Section 13(d). (R. 16-1; Chinadotcom's Mot. to Dismiss
Compl.) In response, Edelson sought leave to file an amended
complaint containing further allegations with respect to
Chinadotcom's conduct. (R. 18-1; Pl.'s Mot. for Leave.)
Chinadotcom opposed Edelson's motion for leave on the basis that
the amendments were futile and still failed to state a claim. (R.
20-1; Chinadotcom's Opp. to Pl.'s Mot. for Leave; R. 23-1;
Chinadotcom's Supp. Opp. to Pl.'s Mot. for Leave.) On January 28,
2004, the Court denied Edelson's Motion for Preliminary
Injunction, granted Edelson's Motion for Leave to Amend its
Complaint with respect to the tortious interference claim, and
dismissed Edelson's claim for Section 13(d) violations. Edelson
v. Ch'ien, No. 03 C 7320, 2004 WL 422674 (N.D. Ill. Jan. 28,
2004). Edelson appealed the Court's dismissal of its Section
13(d) claims to the Seventh Circuit. That appeal is still
After Edelson filed his Amended Complaint (R. 32-1; Am.
Compl.), Chinadotcom filed a motion to strike the Amended
Complaint for failing to comply with the Court's prior Order. (R.
34-1; Chinadotcom's Mot. to Dismiss Pl.'s Am. Compl.) The Court
granted Chinadotcom's motion, striking the Amended Complaint and granting leave for
Edelson to file a second amended complaint consistent with the
Court's Order of January 28, 2004. (R. 48-1; Order.) Edelson
filed its Second Amended Complaint on May 17, 2004 alleging a
single claim of tortious interference with an economic advantage.
(R. 53-1; Sec. Am. Compl.) Ch'ien filed a motion: (1) to dismiss
for lack of personal jurisdiction; (2) to dismiss for failure to
state a claim; and (3) to strike immaterial matter. (R. 57-1;
Ch'ien Mot. to Dismiss.) Chinadotcom separately filed a motion to
dismiss the Second Amended Complaint pursuant to 12(b)(6). (R.
58-1; Chinadotcom's Mot. to Dismiss Sec. Am. Compl.)
I. Ch'ien's Motion to Dismiss for Lack of Personal
A. Rule 12(b)(2) Standards
A Rule 12(b)(2) motion to dismiss for lack of personal
jurisdiction tests whether a federal court has personal
jurisdiction over a defendant. See FED.R.CIV.P. 12(b)(2). A
plaintiff bears the burden of demonstrating the existence of
personal jurisdiction over a defendant. RAR, Inc. v. Turner
Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). A
plaintiff need only make a prima facie showing that jurisdiction
over a defendant is proper. Michael J. Neuman & Assoc., Ltd. v.
Florabelle Flowers, Inc., 15 F.3d 721, 724-25 (7th Cir.
1994). In determining whether a plaintiff has met this burden, a
court must resolve all factual disputes in the plaintiff's favor
and accept as true all uncontroverted allegations made by both
plaintiffs and defendants. Saylor v. Dyniewski, 836 F.2d 341,
342 (7th Cir. 1988); Turnock v. Cope, 816 F.2d 332, 333
(7th Cir. 1987); Allman v. McGann, No. 02 C 7442, 2003 WL
1811531 at *2 (N.D. Ill. Apr. 4, 2003).
A federal court's exercise of personal jurisdiction over a
non-resident defendant is proper "only if a court of the state in which it sits would have such
jurisdiction." Klump v. Duffus, 71 F.3d 1368, 1371 (7th
Cir. 1995) (quoting Wilson v. Humphreys (Cayman) Ltd.,
916 F.2d 1239, 1243 (7th Cir. 1990)). Thus, the Court has jurisdiction
"only if [an Illinois State Court] would have such jurisdiction."
Id. Any exercise of jurisdiction over a defendant must comport
with state statutory law, state constitutional law, and federal
constitutional law. RAR, Inc., 107 F.3d at 1276.
The Illinois long-arm statute, 735 ILCS 5/2-209, provides for
personal jurisdiction over a non-resident who commits certain
enumerated acts. Because the Illinois long-arm statute authorizes
the exercise of personal jurisdiction to the extent allowed under
federal due process,*fn1 "the three inquiries collapse into
two constitutional inquiries one state and one federal." Id.
But because the Seventh Circuit has found that "there is no
operative difference between the limits imposed by the Illinois
Constitution and the federal limitations on personal
jurisdiction," one due process inquiry suffices. Hyatt Int'l
Corp v. Coco, 302 F.3d 707, 715 (7th Cir. 2002) (citing
RAR, Inc., 107 F.3d at 1276; Klump, 71 F.3d at 1371 n. 4).
See also Janmark, Inc. v. Reidy, 132 F.3d 1200, 1202 (7th
The federal test for personal jurisdiction requires that the
defendant must have minimum contacts with the forum state "such
that the maintenance of the suit does not offend `traditional
notions of fair play and substantial justice.'" International
Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154,
90 L.Ed. 95 (1945). "[I]t is essential in each case that there be
some act by which the defendant purposefully avails itself of the
privilege of conducting activities within the forum State, thus invoking the benefits and protections of its
laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228,
2 L.Ed.2d 1283 (1958).
The Supreme Court has labeled two types of jurisdiction
"general" and "specific" that minimum contacts can establish.
Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408,
414-16, 104 S.Ct. 1868, 80 L.Ed. 404 (1984). General jurisdiction
exists when the defendant has "continuous and systematic"
contacts with the forum state. Id. at 416. If such contacts
exist, "the court may exercise personal jurisdiction over the
defendant even in cases that do not arise out of and are not
related to the defendant's forum contacts." Hyatt Int'l,
302 F.3d at 713. On the other hand, specific jurisdiction is more
limited. Id. Specific jurisdiction exists when the "litigation
arises out of or is related to [the defendant's contacts with the
forum state]." Logan Productions v. Optibase, 103 F.3d 49, 52
(7th Cir. 1996). Here, Edelson only argues that specific
B. Illinois Long Arm Statute
The Illinois Long Arm Statute authorizes an Illinois court to
exercise personal jurisdiction over a non-resident "who in person
or through an agent [engages in] [t]he commission of a tortious
act within this State; ?." 735 ILCS 5/2-209(a)(2). Regarding a
claim for tortious interference with economic advantage, the tort
occurs, where the injury occurs. Janmark, Inc. v. Reidy,
132 F.3d 1200, 1202 (7th Cir. 1997). As this Court noted in its
earlier Opinion, 2004 WL 422674, *6, n. 9, the location of injury
in this case is New Jersey, where Edelson is located. See
Medline Indus., Inc. v. Maersk Med. Ltd., 230 F.Supp.2d 857, 864
(N.D. Ill. 2002) (holding that the alleged place of injury was
Illinois, where the plaintiff's principal place of business was
located and where the economic impact of the tortious
interference would be felt). Edelson has not alleged the commission of any tortious act in the state of
Illinois and therefore, does not satisfy Section 2-209(a)(2) of
the long-arm statute.
Alternatively, even if the economic injury did occur in
Illinois, the Court determines that Edelson did not allege or
argue that Ch'ien had an intent to affect an Illinois interest.
Courts traditionally require that to establish jurisdiction under
the long-arm statute, the plaintiff must allege that the
defendant had an "intent to affect Illinois interests." Heritage
House Restaurants, Inc. v. Continental Funding Group, Inc.,
906 F.2d 276, 282 (7th Cir. 1990) (finding that defendant
intended to affect an Illinois interest because it made repeated
phone calls to Illinois during which the alleged tortious
misrepresentations were made and defendant knew the calls were
going to Illinois); Real Colors, Inc. v. Patel,
974 F.Supp. 645, 649 (N.D. Ill. 1997) ("Where the injury is merely
economic, rather than physical or emotional, the plaintiff needs to show
more than the "harm [was] felt" in Illinois;" the plaintiff must
also show an "intent to affect an Illinois interest.")*fn2
Here, Edelson does not even argue that Ch'ien intended to affect
an Illinois interest, and therefore exercising personal
jurisdiction over Ch'ien would not comport with Section
2-209(a)(2) of the long-arm statute.
C. Constitutional Analysis
The Illinois long-arm statute also provides that an Illinois
court may exercise personal jurisdiction to the extent permitted
by the United States Constitution. 735 ILCS 5/2-209(c).*fn3 Therefore, the Court may exercise personal jurisdiction over
Ch'ien if he has purposefully established minimum contacts in
Illinois, Burger King Corp., 471 U.S. at 474, such that
exercising personal jurisdiction would not offend "traditional
notions of fairplay and substantial justice." International
Shoe, 326 U.S. at 316. Edelson argues that the following list of
alleged contacts establishes the Court's personal jurisdiction
over Ch'ien: (1) Ch'ien "dominates" Chinadotcom's activities; (2)
"Chinadotcom does business in this district" by offering access,
via the Internet, to an Internet portal for the purpose of
accessing Asian markets; (3) Chinadotcom has institutional
shareholders, and solicits proxies, in this district; (4) "Ch'ien
directed and controlled the business activities of Chinadotcom in
this district"; (5) Ch'ien prepared and disseminated the Press
Release on Chinadotcom's website; and (6) Edelson conducts
venture capital activities, and solicits funds, in this district,
and Ch'ien's tortious conduct has impaired and impeded Edelson's
efforts in this district to raise capital.
1. Chinadotcom's Business Activities and Shareholders
Edelson argues that Chinadotcom's business (whether or not
"dominated by Ch'ien"), the presence of Chinadotcom's
shareholders, and Chinadotcom's solicitation of proxies in this
district establish minimum contacts with Illinois sufficient to
satisfy the Due Process Clause. Edelson, however, is only
asserting specific jurisdiction over Chien not general
jurisdiction. See Hyatt Init'l, 302 F.3d at 713 (because the
plaintiff did not assert that Illinois could assert general
jurisdiction, "we consider only the propriety of specific
jurisdiction, a more limited assertion of state power"). To
establish specific jurisdiction, the Court only analyzes those
contacts from which the cause of action arises. See Steel
Warehouse of Wisconsin, Inc. v. Leach, 154 F.3d 712, 715
(7th Cir. 1998) ("To satisfy due process, specific
jurisdiction requires that the suit `arise out of or `be related to' these minimum contacts with the forum
Here, Edelson asserts that Ch'ien tortiously interfered with
Edelson's prospective economic advantage by posting the press
release on Chinadotcom's website. This cause of action does not
arise from or relate to Chinadotcom's business, shareholders, or
solicitation of proxies in this district. Therefore, the Court
does not consider these alleged contacts in analyzing whether it
may exercise specific personal jurisdiction over Ch'ien.
2. The Press Release on Chinadotcom's Website
Edelson argues that it has alleged that Ch'ien had ultimate
responsibility for Chinadotcom's dissemination of the press
release into Illinois via the Internet. Ch'ien responds that the
Chinadotcom website is not "active" and therefore, the press
release on the website is not a cognizable basis for specific
personal jurisdiction. According to Edelson, however, the
Chinadotcom website is at least partially "active" because it (1)
provides links to obtain information about Chinadotcom; (2)
describes Chinadotcom's products and services; (3) contains
"Investor Relations" information; (4) contains financial
information; and (5) provides e-mail links to stock analysts and
company representatives or partners.
The Court agrees with Ch'ien. The Chinadotcom website, as
described by Edelson, is not the type of "active" website that
permits specific personal jurisdiction. The Seventh Circuit
recently confirmed that "a defendant's maintenance of a passive
website does not support the exercise of personal jurisdiction
over that defendant in a particular forum just because the
website can be accessed there." Jennings v. AC Hydraulic,
383 F.3d 546 (7th Cir. 2004). In Jennings, the plaintiff's
deceased husband was fatally injured at work when a forklift fell
on him. The plaintiff sued her deceased husband's employer and
the case was removed to federal court in Indiana. Plaintiff alleged specific personal jurisdiction in part because
of the employer's operation of an English-translated website that
advertised the same type of forklift involved in the accident.
The Seventh Circuit categorized this website as "passive" and
therefore not conferring personal jurisdiction over the employer
While the Seventh Circuit declined to address the analysis for
determining whether a website is "passive" or "active," the court
did note that it was "join[ing] the several circuits that have
addressed [the issue of passive websites.]" Jennings,
383 F.3d at 550 (citing ALS Scan, Inc. v. Digital Serv. Consultants,
Inc., 293 F.3d 707, 712-13 (4th Cir. 2002); Soma Med. Int'l
v. Standard Chartered Bank, 196 F.3d 1292, 1297 (10th Cir.
1999); Mink v. AAAA Dev. LLC. 190 F.3d 333, 337 (5th Cir.
1999)). The ALS, Soma, and Mink cases cited in Jennings,
all apply the "sliding scale" test set forth in Zippo Mfg. Co.
v. Zippo Dot Com. Inc., 952 F.Supp. 1119, 1124 (W.D. Pa. 1997),
to determine whether a website is "passive" or "active." Other
courts in this district have also adopted the Zippo approach.
NeoMedia Techs., Inc. v. AirClic, Inc., No. 04 C 566, 2004 WL
848181, *3 (N.D. Ill. Apr. 16, 2004); Softee Mfg., LLC v.
Mazner, No. 03 C 3367, 2003 WL 23521295, *5 (N.D. Ill. Dec. 18,
2003); Berthold Types Ltd. V. Eur. Mikrograf Corp.,
102 F.Supp.2d 928, 931-32 (N.D. Ill. 2000). Under the "sliding scale"
approach, a defendant's Internet activity falls under one of
three categories. When the "defendant clearly transacts business
in foreign jurisdictions over the Internet," a court may exercise
personal jurisdiction over the website operator. Berthold,
102 F.Supp.2d at 932 (internal citations omitted). On the opposite
end of the scale is the situation where a defendant posts
"information on the Internet, but has no further communication
with potential customers via the Internet." Id. With this
category, courts may not exercise personal jurisdiction over the
website operator on the basis of the website alone. In the middle category, "the
defendant operates an interactive web site that allows defendant
and potential customers in foreign jurisdictions to communicate
regarding defendant's goods or services." Id. In this category,
the court considers "the level of interactivity and the
commercial nature of the exchange of information" in determining
whether to exercise jurisdiction. Id.
In this case, Edelson argues that Chinadotcom's website falls
in the middle category of websites, but has sufficient
interactivity for the Court to exercise personal jurisdiction.
The examples of interactivity provided by Edelson, however, are
not the type of interactivity that courts have viewed as allowing
them to exercise personal jurisdiction. Providing information
about a company and its products and services is plainly not the
kind of interactivity that confers the power to exercise personal
jurisdiction. Jennings, 383 F.3d at 549-50 ("it is enough to
say that this logic certainly does not extend to the operation of
a "passive" website ? which merely makes available information
about the company and its products"). Moreover, providing e-mail
links*fn4 for customers to contact the company typically
does not make a website "active." Softee, 2003 WL 23521295 at
*6; Trost v. Bauer, No. 01 C 2038, 2001 WL 845477, *11 (N.D.
Ill. July 24, 2001); also see Mink, 190 F.3d at 337 (cited in
Jennings, 383 F.3d at 550.) Notably, Edelson does not present
evidence or argue that the website enables anyone to perform any
transaction. Nor does Edelson present evidence or argue that the
press release was ever e-mailed or purposefully pointed out to anyone. Therefore, the posting of the
press release on Chinadotcom's website does not qualify as Ch'ien
"purposefully establish[ing] minimum contacts within the forum
State." Burger King Corp., 471 U.S. at 475, 105 S.Ct. 2174.
Accordingly, this Court may not exercise specific personal
jurisdiction over Ch'ien on the basis that he directed the
posting of the press release on Chinadotcom's website.
II. Ch'ien's Motion to Dismiss for Failure to State a Claim
and Motion to Strike Immaterial Matter
Because the Court lacks personal jurisdiction over Ch'ien, it
cannot address his Motion to Dismiss for Failure to State a Claim
and Motion to Strike Immaterial Matter. The Court denies these
motions as moot.
III. Chinadotcom's Motion to Dismiss for Failure to State a
Chinadotcom moves to dismiss Edelson's Second Amended Complaint
for failing to state a claim pursuant to Rule 12(b)(6).
Chinadotcom first argues that the press release at issue is
privileged under New Jersey law. Chinadotcom next argues that
Edelson has failed to properly allege several elements of a claim
for tortious interference with prospective economic advantage
under New Jersey law. Finally, Chinadotcom argues that Edelson is
still basing its cause of action on the filing of the Hong Kong
Complaint in violation of the Court's January 28, 2004 Order.
A. Rule 12(b)(6) Standards
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is
to test the legal sufficiency of a complaint, not the merits of
the case. Triad Assocs., Inc. v. Chicago Hous. Auth.,
892 F.2d 583, 586 (7th Cir. 1989). A court must accept as true all
well-plead allegations of a complaint. Thompson v. Illinois Dep't of Prof'l Regulation,
300 F.3d 750, 753 (7th Cir. 2002). Courts construe ambiguities in
favor of the plaintiff. Id.
B. The Litigation Privilege Under New Jersey Law*fn5
Chinadotcom cites Medphone Corp. v. Denigris, Civ. No.
92-3785, 1993 U.S.Dist. LEXIS 21266, *6 (D.N.J. July 28, 1993),
in arguing that statements about litigation made in a press
release are absolutely privileged. In New Jersey, an absolute
privilege applies to "communications (1) made in judicial or
quasi-judicial proceedings; (2) by litigants or other
participants authorized by law; (3) to achieve the objects of the
litigation; and (4) that have some connection or logical relation
to the action." Hawkins v. Harris, 141 N.J. 207, 216 (1995).
The federal court in Medphone applied this absolute privilege
to a press release about a lawsuit. Edelson counters that only
statements made during the course of a judicial proceeding are
absolutely privileged and statements made in a press release
about the litigation are only qualifiedly privileged, citing
Cappello v. Scott, 274 N.J.Super. 282, 644 A.2d 102 (App.Div.
1994).*fn6 The New Jersey state appellate court in Capello
held that the absolute privilege does not apply to statements
made about the lawsuit but outside the confines of the lawsuit
The Court finds that Medphone is distinguishable from the
facts of this case. In Medphone, the press release read, "in a complaint filed Friday,
September 11, Medphone said Denigris since mid-April had engaged
in a `systematic program of defamation and trade disparagement'
against the company, its products, management and stock." Id. at
*2. The New Jersey federal court found it important that the
"press release informs the public that plaintiff filed this suit
and communicates the gravamen of the complaint using direct
quotes from the pleadings." 1993 U.S. Dist. LEXIS 21266, *6. From
the face of Edelson's pleadings, the same cannot be said for
Chinadotcom's press release, which does not directly quote from
the Hong Kong complaint.*fn7 Accordingly, the Court does not
believe that the New Jersey Supreme Court would find, from the
pleadings alone, the Chinadotcom press release to be a part of
the judicial proceedings such that it would be subject to New
Jersey's absolute privilege.
C. The Fair Report Privilege Under New Jersey Law
Even though the press release, from the face of Edelson's
pleadings, is not absolutely privileged, it may still be
qualifiedly privileged under New Jersey's fair report privilege.
"A full, fair and accurate report of a judicial proceeding is
qualifiedly privileged, although the report contains matters that
would otherwise be defamatory and actionable, and no action will
lie therefor except on proof of malice in making it." Cappello,
274 N.J.Super. at 284, 644 A.2d at 103. Chinadotcom argues that
Edelson has not adequately alleged that the press release was
issued with malice because "bare, conclusory alelgations of
malice are insufficient to negate a privilege." Altman v.
Viccaro, No. 89 C 5803, 1992 U.S. Dist. LEXIS 1455, *9 (N.D.Ill.
February 7, 1992). Edelson disagrees, pointing to various
portions of the Second Amended Complaint that allege Chinadotcom's motivation for issuing the
The Court agrees with Edelson that he has adequately alleged
that Chinadotcom acted with malice in issuing the press release.
"While bare, conclusory allegations of malice are insufficient to
negate a privilege, allegations are sufficient if they allow the
inference that the alleged tortfeasor acted with a desire to harm
which was unrelated to the interest he or she was presumably
seeking to protect." Altman, 1992 U.S.Dist. LEXIS 1455, *9.
Edelson has alleged that the press release was "deliberately
designed to create the misimpression that Edelson filed a claim
based on his `disagreement' with the results of the Annual
General Meeting only after, and implicitly in retaliation for,
Chinadotcom's filing of the Hong Kong Action against Edelson."
(R. 53-1, Sec. Am. Compl. ¶ 15.) Edelson also alleges that "[t]he
press release was a deliberate and malicious weapon used to
inflict damage on Edelson in retaliation for Edelson's filing of
the action." (Id. ¶ 16.) These allegations at least create a
reasonable inference that Chinadotcom acted with a desire to harm
Edelson and this desire was unrelated to any legitimate goal
Chinadotcom was seeking to accomplish in issuing the press
release. See Altman, 1992 U.S.Dist. LEXIS 1455, *9.
Accordingly, it is not clear from Edelson's pleadings that the
fair report privilege applies to Chinadotcom's press release.
D. Edelson's Allegation of the Elements of a Claim for
Tortious Interference with Prospective Economic Advantage
Chinadotcom raises three elements of a tortious interference
with economic advantage claim that it contends Edelson has failed
to sufficiently allege. First, Chinadotcom argues that Edelson's
allegations of his prospective economic advantage are not
specific enough to support a cause of action for tortious
interference under New Jersey law. The Court disagrees. Edelson alleges that he "had a reasonable expectancy that he would be
nominated to the Boards of additional entities, and that he would
garner additional business opportunities as a result of those
directorships." (R. 53-1; Sec. Am. Compl. ¶ 20.) Edelson also
alleges that "[d]uring the course of his 30-year business career,
[he] has served on the Board of Directors of numerous privately
and publicly held companies (in addition to Chinadotcom)." (Id.
¶ 8.) Edelson further explains that he was planning to parlay
these "valuable contacts" into future business opportunities,
including raising a "venture capital fund with philanthropic
goals." (Id. ¶¶ 8, 9.) Under New Jersey law, a plaintiff must
specify some reasonable expectation of economic advantage that it
has lost.*fn8 M. Eagles Tool Warehouse, Inc. v. Fisher
Tooling Co., Inc., 205 F.Supp.2d 306, 320 (D.N.J. 2002). Taken
as true, Edelson's allegations sufficiently set forth his
reasonable expectation of economic advantage.
Second, Chinadotcom argues that Edelson has failed to allege
that Chinadotcom was aware of Edelson's alleged expectation of
economic advantage. Edelson, however, has alleged that Chinadotcom "knew what [it was] doing in issuing the press
release they were striking at the heart of Edelson's business
career." (R. 53-1, Sec. Am. Compl. ¶ 19.) Taken in conjunction
with Edelson's other allegations related to Edelson's
relationship with Chinadotcom and his plans to raise venture
capital, an inference can be taken that Chinadotcom was aware of
Edelson's prospective economic advantage potential business
relationships and venture capital sources.
Third, Chinadotcom contends that Edelson has failed to allege
that Chinadotcom has maliciously interfered with any purported
expectation of economic advantage. As discussed above, in section
III.B., Edelson has properly alleged that Chinadotcom issued the
press release with malice.
In sum, Chinadotcom has failed to show that under no set of
facts would plaintiff's allegations entitle him to relief. Pope
v. Smith-Rothchiled Financial Co., No. 03 C 3335, 2003 WL
22889377, *2 (N.D. Ill. Dec. 8, 2003); see Henderson v.
Sheahan, 196 F.3d 839, 846 (7th Cir. 1999); Kennedy v.
National Juvenile Det. Ass'n, 187 F.3d 6990, 695 (7th Cir.
1999). Edelson has, therefore, stated a cause of action for
tortious interference with economic advantage under New Jersey
E. Edelson's Allegations Related to the Filing of the Hong
Chinadotcom argues that the Court should dismiss the Second
Amended Complaint because it still contains allegations of
tortious interference based on Chinadotcom's filing of the Hong
Kong lawsuit that the Court has already dismissed from this case
in its January 28, 2004 Order. As Chinadotcom points out, the
Second Amended Complaint contains numerous references to the Hong
Kong lawsuit. Edelson alleges that "[i]t is virtually impossible
for anyone to raise money for a fund that has been accused and is
being sued for insider trading and breach of fiduciary duty." (R. 53-1; Sec. Am. Compl. ¶ 17.) Edelson also
No investor would give millions of dollars to a
venture capitalist without first investigating the
venture capitalist's reputation. ? Once an investor
sees that Edelson has been accused and is being sued
in Hong Kong for insider trading and breach of
fiduciary duty, no matter how frivolous the
allegation and the complaint might be, these money
sources simply have and are going to continue to pass
on investing in Edelson's venture fund.
(Id. ¶ 18.) Edelson then goes on to allege that "Chinadotcom ?
knew what [it was] doing in issueing the press release ?
striking at the heart of Edelson's business career." (Id. ¶
19.) The Court infers from these allegations that the thrust of
Edelson's claim is that Chinadotcom made Edelson's potential
business partners aware of misleading information via the press
release and that these potential business partners would not have
been aware of that information but for the press release.
Therefore, Chinadotcom's references to the Hong Kong lawsuit are
a part of its tortious interference claim related to the press
release of that lawsuit. Chinadotcom is not attempting to state a
separate cause of action based on the initiation of the Hong Kong
The Court lacks the power to exercise personal jurisdiction
over Ch'ien and therefore grants Ch'ien's motion pursuant to Rule
12(b)(2), dismissing Ch'ien from this case. Because this Court
lacks personal jurisdiction over Ch'ien it cannot address his
motion to dismiss pursuant to Rule 12(b)(6) and his motion to
strike immaterial matter. Those motions are denied as moot.
The Court denies Chinadotcom's motion to dismiss pursuant to