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Perlman v. Vox Media, Inc.

Court of Chancery of Delaware

June 27, 2019

VOX MEDIA, INC., Defendant.

          Date Submitted: April 17, 2019

          Matthew E. Fischer, Esquire, Jacob R. Kirkham, Esquire and Jacqueline A. Rogers, Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware, Attorneys for Plaintiffs.

          Peter L. Frattarelli, Esquire of Archer & Greiner, P.C., Wilmington, Delaware and James Rosenfeld, Esquire and Jeremy A. Chase, Esquire of Davis Wright Tremaine LLP, New York, New York, Attorneys for Defendant.



         The dispositive question presented by Defendant, Vox Media, Inc., in its motion for summary judgment reduces to this: can a plaintiff invoke this court's limited subject matter jurisdiction in connection with a claim for defamation by seeking a mandatory injunction to compel the defendant to remove the allegedly defamatory statement from an online publication? In my view, the answer to that question is no.

         Plaintiffs, Stephen G. Perlman, and his companies, Rearden LLC ("Rearden") and Artemis Networks LLC ("Artemis"), filed their Verified Second Amended Complaint (the "Complaint") against Vox on December 24, 2014, [1] in which they assert claims for defamation arising from two allegedly defamatory statements made in separate articles posted in Vox's online publication known as The Verge. Specifically, Plaintiffs seek a final judgment: (1) declaring the articles contain defamatory statements about Plaintiffs; (2) compelling Vox to remove all defamatory statements about Plaintiffs from its websites and related social media accounts; (3) compelling Vox to publish a retraction of the allegedly defamatory articles at the Uniform Resource Locator ("URL" or web address) of each article and on The Verge's main page;[2] and (4) awarding compensatory damages in an amount to be determined at trial.

         In this Memorandum Opinion, following this court's scholarly and thoughtful Opinion in Organovo Hldgs., Inc. v. Dimitrov, I conclude that, in connection with a claim for defamation, the Court of Chancery, in all instances, lacks subject matter jurisdiction to adjudicate the questions of whether a defendant made a false statement about the plaintiff and whether it did so with actual malice.[3] A defendant alleged to have committed the tort of defamation is entitled, should she wish, to have a jury decide those threshold questions. If the jury declares that the defendant is liable for defamation, then the plaintiff may seek to enforce that declaration of defamation with mandatory injunctive relief in Chancery, but only in the event the declaration is not enough to prompt the defendant to remove the defamatory content from the offending site.[4] Because this Court lacks subject matter jurisdiction to adjudicate the factual questions implicated by Plaintiffs' claims for defamation, Defendant's motion for summary judgment must be granted.


         For purposes of this Memorandum Opinion, I have focused on the facts relevant to the subject matter jurisdiction issue.[5] I have drawn the facts from the admissions in the pleadings, uncontested facts presented in the parties' submissions and those matters of which the Court may take judicial notice.[6] I have resolved any doubt as to the absence of a genuine issue of fact in favor of Plaintiffs as the non-moving parties.[7]

         A. The Parties

         Plaintiff, Stephen Perlman, is an entrepreneur and founder of technology companies including Plaintiffs, Rearden and Artemis.[8] Perlman serves as President and Chief Executive Officer of both companies.[9] Plaintiff, Artemis, is wholly owned by Rearden; Plaintiff, Reardon, is wholly owned by Perlman.[10]

         Defendant, Vox, a Delaware corporation, owns and operates The Verge, an online publication that covers the intersection of technology, science, culture and transportation. Vox also owns the online publications Polygon, Vox and SB Nation.[11]

         B. OnLive, Inc.

         In 2003, Perlman founded non-party, OnLive, Inc., which operated a video game streaming service by the same name ("OnLive Service").[12] After several efforts to raise capital for OnLive Service failed, [13] OnLive, Inc. was forced to enter into an Assignment for the Benefit of Creditors ("ABC"), under which it transferred its assets and OnLive Service to OL2, Inc. ("OL2"), an entity operated by technology investor Gary Lauder.[14] Following the ABC, in late August 2012, OnLive, Inc. had "no assets or operations," "no officers or employees . . . [and] no records."[15]In connection with the ABC, Russell Burbank was hired as OnLive, Inc.'s board director, manager and liquidating agent through at least April 21, 2015.[16]He managed the company's business dealings[17] and supervised the "wind[ing] up of the company, [including eventually] . . . dissolv[ing] it."[18]

         After years of inactivity, in April 2015, OnLive Service finally ceased operations altogether when OL2 sold its patents to Sony.[19] OnLive announced, "[a]fter April 30, 2015, our data centers will shut down and the service will be offline. All accounts will be closed, and all data deleted . . . ."[20] Until at least March 1, 2014, OnLive, Inc. remained a Delaware corporation.[21]

         C. The 2012 Articles

         On August 19, 2012, The Verge published an article by Tracey Lien titled "OnLive's bankruptcy protection filing leaves former employees in the dark" ("August 19 Article").[22] That same day, Jane Anderson, who was responsible for OnLive, Inc.'s communications and public relations, contacted individuals at The Verge, including Sean Hollister, to alert them of what she believed to be inaccuracies in the article.[23] After investigating Anderson's concerns, The Verge directed Hollister to write a corrected version of the August 19 Article.[24] The Verge removed the original version of the August 19 Article and published the corrected version.[25]The content of the original article, however, remained available online.[26]

         On August 28, 2012, The Verge published an article by Hollister titled "OnLive lost: how the paradise of streaming games was undone by one man's ego" ("August 28 Article" and, together with the August 19 Article, the "2012 Articles").[27] Hollister emailed the final draft of the August 28 Article to Anderson and notified her that he intended to publish.[28] Anderson tried to reach Hollister by phone and email to fact check the August 28 Article before it was posted.[29] They did not connect, however, and the article was published as written by Hollister.[30]

         When Perlman read the August 28 Article, he believed it was a "complete fiction."[31] He was "concerned [the article] would harm Reardon's business reputation and his own personal and business reputation.[32]

         D. The 2014 Article

         On February 19, 2014, The Verge published an article titled "The man behind OnLive has a plan to fix your terrible cellphone service," by Aaron Souppouris ("2014 Article").[33] The 2014 Article opened, "Steve Perlman, the creator of the defunct game-streaming service OnLive, claims he has the answer to slow wireless service."[34] The words "defunct game-streaming service OnLive" hyperlinked to the August 28 Article, allegedly for background information.[35] The 2014 Article went on to discuss a new wireless antenna developed by Perlman and Artemis called "pCell."[36] According to Plaintiffs, the reference to OnLive as "defunct," the link to the defamatory August 28 Article and certain criticisms of the pCell technology render the 2019 Article defamatory.

         E. Procedural Posture

         On August 18, 2014, Plaintiffs filed their initial Verified Complaint asserting that Vox made false statements about Plaintiffs in articles published from August 19, 2012 through February 19, 2014, and that the false statements continue to cause irreparable harm to Plaintiffs' reputations.[37] They sought damages and mandatory injunctive relief.[38] On September 24, 2014, Plaintiffs filed their Verified First Amended Complaint.[39] Vox responded with its motion to dismiss the Verified First Amended Complaint.[40]

         On December 24, 2014, Plaintiffs filed their Verified Second Amended Complaint.[41] On January 15, 2015, Vox moved to dismiss that Complaint, arguing Plaintiffs' claims were untimely as to the 2012 Articles and otherwise failed because the 2014 Article was substantially true and did not republish the 2012 Articles.[42]Vice Chancellor Parsons denied the motion to dismiss on September 30, 2015.[43]

         On October 28, 2015, Vox filed its Answer to the Plaintiffs' Verified Second Amended Complaint in which it raised twenty affirmative defenses, including that the Court lacked subject matter jurisdiction.[44] On October 12, 2017, the Court granted a stipulation and order governing the case schedule whereby the parties agreed to bifurcate fact discovery to allow Vox to move for summary judgment on its affirmative defenses.[45] On September 28, 2018, Vox filed its motion for summary judgment, [46] and the Court heard oral argument on that motion on March 21, 2019.[47]


         The Court of Chancery is proudly a court of limited jurisdiction. Its judges will adjudicate claims only when (1) the complaint states a claim for relief that is equitable in character, (2) the complaint requests an equitable remedy when there is no adequate remedy at law or (3) Chancery is vested with jurisdiction by statute.[48]In addition to these settled bases for subject matter jurisdiction, to avoid piecemeal litigation, the so-called "clean-up doctrine" allows Chancery to exercise subject jurisdiction over a claim at law if the plaintiff has stated a bona fide claim over which Chancery had original subject matter jurisdiction.[49]

         As well and thoroughly explained in Organovo, courts adhering to a common law tradition historically have reserved determinations of falsity and malice for the collective wisdom of a jury rather than cast a judge as the sole arbiter of defamation and libel.[50] With this and other considerations in mind, Vice Chancellor Laster concluded in Organovo that the plaintiff's defamation claim should be dismissed for want of subject matter jurisdiction.[51] He then allowed the plaintiff to elect to transfer its case to the Superior Court.[52]

         Plaintiffs would have me either depart from Organovo or distinguish the decision on the ground that Vice Chancellor Laster was addressing a prayer for injunctive relief with respect to future defamatory statements whereas Plaintiffs here seek an injunction to require Vox to remove defamatory statements already made from the websites where the statements are now posted. In this regard, Plaintiffs maintain that Organovo simply applied the "traditional maxim that 'equity will not enjoin a libel.'"[53]

         Plaintiffs are correct; Organovo did address a plaintiff's request that the court restrain future libelous statements. But that posture did not animate or alter the court's thorough discussion of defamation as a claim uniquely suited for adjudication by a law court, and specifically, if either party demands, by a jury. That holds true even where the plaintiff may ultimately seek equity's intervention to compel a defendant found ...

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