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Lemelson v. Bloomberg LP

United States District Court, D. Massachusetts

May 19, 2017




         The present action arises out of the reporting by Bloomberg News that plaintiff Rev. Fr. Emmanuel Lemelson (“Fr. Lemelson”), a hedge fund manager and ordained Eastern Orthodox priest, was under investigation by the Securities Exchange Commission (“SEC”) for stock manipulation. Plaintiffs Fr. Lemelson and his eponymous private investment firm, Lemelson Capital Management, LLC (“LCM”), bring this action against Bloomberg, LP (“Bloomberg”) as well as the article's author and editor, Matthew Robinson and Jesse Westbrook, respectively, alleging defamation (Count I); commercial disparagement (Count II); negligence (Count III); and intentional interference with prospective economic advantage (Count IV). The Defendants move to dismiss the complaint for failing to state a claim because, inter alia, statements asserting that a person is the subject of a civil investigation are not defamatory as a matter of law, and the third amended complaint does not plead any facts to support an inference that the Defendants published the statements with “actual malice, ” as required to state a claim for defamation of a public figure and commercial disparagement. For the reasons outlined below, the motion to dismiss is granted.


         The following facts are taken from the third amended Complaint, and are assumed as true for the purposes of this motion. Fr. Lemelson is a “world-renowned priest, religious leader, financial expert, philanthropist, humanitarian and entrepreneur.” Compl. at 1. He is the Chief Investment Officer of LMC, which is itself the general partner of Amvona Fund, LP, a hedge fund launched by Lemelson in 2012. Fr. Lemelson has engaged with, and received significant attention from, the media. He has been interviewed by several international media outlets, including Fox News. His investment research and analysis has been cited in The Wall Street Journal, USA Today, and the New York Post, among others. A profile piece on Fr. Lemelson and LCM featured in the Wall Street Journal in October 2015, ran with the headline “Hedge Fund Priest: Thou Shalt Make Money.” In it, Fr. Lemelson is quoted as claiming “my whole life I always knew things before they happened. I guess it's just a gift from God.”[1] Opp. Ex. 1. Barron's financial magazine ranked LMC among the top hedge funds in the world in 2013 and 2014.

         On March 18, 2016, Bloomberg published an article online titled “Hedge Fund Priest's Trades Probed by Wall Street Cop, ” authored by Robinson (the “Article”). On March 17, prior to publication, Robinson called Fr. Lemelson for an interview. During that call, Fr. Lemelson told Robinson that he was aware that the SEC was investigating trading in a pharmaceutical company named Ligand, but that “neither he nor his firm was the target of any investigation.” Compl. ¶32. Robinson responded, “well, I'm going to write that you are being investigated anyway.” Compl.

         ¶33. Robinson sent two follow up emails and left a voicemail at Fr. Lemelson's office ahead of the Article's publication, seeking comment and asking Fr. Lemelson to contact him as soon as possible. Fr. Lemelson did not respond before Bloomberg published the Article online. The Bloomberg Article, which published online at around 10:30am, announced

A priest who sidelines as a hedge-fund manager is being investigated by U.S. regulators for possible stock manipulation, prompting scrutiny of trading skills that the cleric has described as a “gift from God, ” according to people with knowledge of the matter. The Securities and Exchange Commission is examining whether the Reverend Emmanuel Lemelson of Massachusetts made false statements about companies he was shorting, said the people who asked not to be named because the probe isn't public.

         Comp. at ¶¶42, 43, Ex. A. Plaintiffs claim that they were never the target of any regulatory investigation, and that the Defendants knew or should have known any statements to the contrary were false. The Article went on to state

The SEC started its investigation after companies complained to the regulator that Lemelson, 39, had made potentially inaccurate comments about their firms in public forums, the people said. The opening of an SEC probe is typically a preliminary step and doesn't mean Lemelson, who hasn't been accused of wrongdoing, will ever face an enforcement action.
While Lemelson's Amvona Fund is a minnow in the $2.9 trillion hedge fund industry, he gained attention after the Wall Street Journal published a profile of him in October. The article said Lemelson managed about $20 million, had made millions of dollars for his investors and quoted him as saying, “my whole life I always knew things before they happened. I guess it's just a gift from God”….
Investors are free to criticize companies and their management, but they can't spread inaccurate information in order to profit. In the Lemelson investigation, the SEC is examining commentaries about companies including Ligand Pharmaceuticals Inc., World Wrestling Entertainment Inc. and Skechers U.S.A. Inc., according to one of the people.
A report published on the financial markets website Seeking Alpha in June 2014 under the pseudonym Amvona said Ligand was in imminent risk of declaring bankruptcy and that demand for one of its drugs, Promacta, was rapidly declining. Within minutes, Ligand shares fell more than 7 percent. Since then, Promacta sales reached an all-time quarterly high and shares of the La Jolla, California-based company have increased 50 percent to $97.22 through yesterday.
Historically, the SEC has had difficulty in bringing “short-and-distort” cases, since the regulator has to prove a misstatement of fact rather than opinion, according to Stephen Crimmins, a former SEC attorney who's now with the firm Murphy & McGonigle. Wall Street executives famously complained that short-sellers were spreading false rumors about their banks during the 2008 financial crisis, but the allegations didn't result in SEC enforcement actions.
The SEC has had more success suing “pump-and-dump” fraudsters, where scammers promote stocks with fake information to ...

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