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Democracy Partners v. Project Veritas Action Fund

United States District Court, District of Columbia

January 4, 2018

DEMOCRACY PARTNERS, et al., Plaintiffs,
v.
PROJECT VERITAS ACTION FUND, et al., Defendants.

          MEMORANDUM OPINION

          ELLEN SEGAL HUVELLE UNITED STATES DISTRICT JUDGE

         Democracy Partners, LLC, Strategic Consulting Group, NA, Inc., and Robert Creamer (“plaintiffs”) bring this action against Project Veritas Action Fund, Project Veritas, James O'Keefe (“PV defendants”), and Allison Maass, alleging that defendants violated federal and state wiretap statutes and committed multiple common law torts in their execution of an undercover sting operation directed at plaintiffs. Before the Court are two motions to dismiss jointly filed by the PV defendants: a motion to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and a motion to dismiss pursuant to the D.C. Anti-SLAPP Act. (See PV Defs.' 12(b)(6) Mot., ECF No. 14; PV Defs.' Anti-SLAPP Act Mot., ECF No. 15.) For the reasons stated herein, the motions will be denied.

         BACKGROUND

         I. FACTUAL BACKGROUND [1]

         Democracy Partners, LLC, is “a company including a number of other consultants and vendors to progressive organizations and Democratic campaigns and committees, who market their services collectively through the company.” (Compl. ¶ 19.) Strategic Consulting Group, NA, Inc. (“Strategic”) is a member of Democracy Partners. (Id. ¶ 3.) It “provides campaign-related services to progressive organizations and Democratic campaigns and committees.” (Id. ¶ 18.) Robert Creamer is the sole owner of Strategic. (Id. ¶ 1.) “Democracy Partners' private offices . . . are not accessible to the general public, have 24-hour security, and are only accessible if one signs into the building at the lobby security desk, if one is provided entrance by [p]laintiffs' receptionist, and/or if one has an electronic pass card[, which] . . . is required to access the elevators to the office outside of regular business hours[, ] and a key[, which] is required to enter the office when no one is present.” (Id. ¶ 34.)

         Project Veritas (“PV”) and Project Veritas Action Fund (“PVAF”) are both nonstock, nonprofit corporations founded by James O'Keefe. (Id. ¶¶ 6, 12.) PVAF is an “arm” of PV, and O'Keefe is the President of both corporations. (Id.) Allison Maass and Daniel Sandini were, at the relevant times, employees of, or contractors to, PV and PVAF. (Id. ¶¶ 7-8.) Through the actions described below, they infiltrated Democracy Partners' offices, stole confidential documents and secretly recorded hours of conversation.[2]

         On or about June 24, 2016, Sandini, using the false name of Charles Roth and representing himself as a potential donor to a nonprofit organization that Creamer had worked for, was introduced to Creamer and the two men had a meeting. (Id. ¶ 22.) A few weeks later, on or about July 15, 2016, Sandini “told Creamer that he had a niece who wanted to volunteer to do some kind of political work for Democratic candidates or organizations while she was on a brief hiatus from college.” (Id. ¶ 24.) Sandini told Creamer that his niece's name was “Angela Brandt.” (Id.) In reality, no such person existed; rather, Angela Brandt was a false name used by Maass. (Id. ¶ 27.) Unaware of her real identity, Creamer connected Maass “with a progressive organization working in Cleveland, Ohio during the 2016 Republican National Convention, ” believing that Maass had performed volunteer work for that organization during the convention. (Id. ¶ 25.)

         In late August 2016, Sandini called Creamer and told him that his niece would like to gain more experience, leading Creamer to interview Maass “for an internship with Creamer and Strategic in the Democracy Partners office.” (Id. ¶ 26.) During the interview, Maass provided Creamer fictitious background information and falsely “told Creamer that her interest in obtaining an internship was to gain work experience in political and advocacy work.” (Id.) Based on this false information, Creamer told her that she might qualify for an internship at Democracy Partners. (Id. ¶ 28.) A few days later, in early September, Maass “called Creamer and said she would like to intern at Democracy Partners and could work three days per week.” (Id. ¶¶ 28-29.)

         On September 21, 2016, Maass started her internship at Democracy Partners. (Id. ¶ 30.) She was given an electronic pass card, which allowed her access to the entire office at all times, “including areas that contained file cabinets and computers with confidential information, ” and an account and password allowing her to use a company computer. (Id. ¶ 31.) She also met with Creamer, who gave her an overview of the work Democracy Partners/Strategic was performing, and he explained “how it interacted with clients and other information that was pertinent for an intern to know in order to perform her tasks.” (Id. ¶ 32.) The “information Creamer disclosed to Maass included confidential and sensitive business information including the identity of clients, client information and programmatic details, and the identity of partners.” (Id.) He “explicitly told Maass that based on the confidential and sensitive nature of the mission and programming of [Democracy Partners/Strategic], the information, and any additional information she was given over the course of her internship, was confidential and not to be shared with anyone other than persons with whom she had specifically been instructed to share that information.” (Id.) Finally, she was asked to provide a resume, so the following day she provided a fabricated resume for “Angela Brant” that omitted her current employment with Project Veritas and her past work for other conservative news outlets and provided instead “an entirely false and fabricated work history and education.” (Id. ¶ 43.) Maass' tasks as an intern included “coordinating and joining meetings with clients about highly sensitive and confidential political programs; putting together news clips; and researching and drafting client updates.” (Id. ¶ 36.) She was “included among the recipients of highly confidential emails and in confidential discussions in in-person meetings and on conference calls, ” “sent confidential documents, ” and “brought to confidential client meetings.” (Id. ¶ 39.) “These calls, emails and documents all contained confidential business information which Creamer told her was confidential and not to be shared with anyone with whom she had not been instructed to share it.” (Id.) According to the complaint, “[t]he procedures for pulling news clips and the client update memos were proprietary to Democracy Partners and its clients.” (Id. ¶ 36.)

         In early June 2016 Strategic had entered into a subcontract with a contractor for the Democratic National Committee (“DNC”). (Id. ¶ 20.) Strategic's contract was “to assist the DNC in arranging events in opposition to the candidacy of Donald Trump for President, including events to take place before and/or after Trump campaign events in various cities, ” which were “sometimes referred to as ‘bracketing' events.” (Id.) The “bracketing program” was “[o]ne of the most important projects that Maass was involved with.” (Id. ¶ 37.) As part of this program, Maass “coordinated press events in areas being visited by then-candidates Donald Trump and Mike Pence.” (Id.) “Prior to the public announcement of each event, information relating to the timing, location, nature of and the program to take place during each such event, was maintained in strict confidence by the DNC, other groups directly involved in the event, and their respective consultants.” (Id. ¶¶ 36-37.) “Maintaining that information in confidence was essential in order for each such event to be successful; otherwise the Republican Party and the Republican presidential campaign could adjust their own plans to anticipate or deflect the ‘bracketing' event.” (Id. ¶ 37.) “Maass participated in planning calls for these ‘bracketing' events, sitting in on meetings, and drafting emails and reports that contained information about upcoming events and after-event reporting.” (Id. ¶ 38.)

         During her internship, unbeknownst to plaintiffs, Maass carried concealed video and audio recording devices. (Id. ¶ 30.) She secretly recorded her discussion with Creamer on her first day of work, along with “other confidential internal conversations with Creamer and other Democracy Partners members, as well as confidential conversations they had with [Strategic] and Democracy Partner clients in-person and via conference call.” (Id. ¶ 33.) She provided these unauthorized audio and video recordings to PV and PVAF. (Id. ¶¶ 35.) Without permission, she also provided them with a number of confidential documents and emails. (Id. ¶¶ 40, 60-61.)

         Had Creamer known Sandini's and Maass' true identities, their connections to PV, PVAF and O'Keefe, and Maass' intentions, he never would have hired her as an intern, given her confidential documents, included her in meetings and on emails, brought her to meetings, or given her open access to the office and its computers and files. (Id. ¶¶ 42, 44.)

         On October 14, 2016, Creamer went to lunch with Mike Carlson, whom Sandini had falsely claimed was his financial advisor. (Id. ¶ 45.) Just as they were finishing, Creamer was accosted by a reporter, Raffi Williams, and a film crew from Circa Media, a subsidiary of Sinclair Broadcasting, who asked him to respond to two secretly recorded video clips of Creamer.[3] (Id.) The reporter indicated that O'Keefe had been the one to tip him off to Creamer's whereabouts. (Id.) When Creamer returned to his office, Maass was no longer there, and she never returned. (Id. ¶ 46.)

         Later that day, Williams called Creamer and told him that O'Keefe had provided his network with hundreds of hours of raw videotape and that Sinclair Media had agreed to syndicate four nightly news pieces based on the videos, which would begin the following week. (Id. ¶ 47.) He also asked Creamer if he would agree to an on-camera interview to respond to the videos. (Id.) That same evening, Creamer and his attorney met with Williams and viewed approximately three hours of videotape, much of it footage secretly recorded by Maass during her internship. (Id. ¶ 58.) On Monday, October 17th, 2016, Creamer and his attorney met with Sinclair Media's management and attorney, reviewed additional footage, and discussed legal and factual issues relating to the videos. (Id. ¶ 51.) “During that meeting, Sinclair Media's attorneys said that they would postpone the first installment of their four-part series as they reviewed the legal and factual issues surrounding their recording and release.” (Id. ¶ 52.) Ultimately, Sinclair Media did not run any stories on the videos. (Id.)

         On October 17, 18, 24 and 26th, however, PVAF released a series of videos to PV's YouTube channel that contained footage from Maass' recordings of Creamer, Democracy Partners, and its clients. (Id. ¶¶ 35, 50, 54, 56, 57.) Each was “heavily edited and contained commentary by O'Keefe that drew false conclusions.”[4] (Id. ¶ 53; see also id. ¶¶ 55, 57.) On October 26, 2016, PVAF published the confidential documents and emails Maass had obtained on its website under the heading “VeritasLeaks” and described them as “supporting documents for the Democracy Partners videos we have been releasing.” (Id. ¶ 40.)

         II. PROCEDURAL HISTORY

         On June 1, 2017, plaintiffs filed suit against the PV defendants, Maass, and Sandini, alleging that various actions during the course of their undercover operation violated federal and District of Columbia law. The complaint includes claims for: (1) breach of fiduciary duty against Maass (see Compl. ¶¶ 69-77); (2) trespass against Maass (id. ¶¶ 94-101); (3) violation of 18 U.S.C. § 2511 et seq. (“Federal Wiretap Act”) against all defendants (id. ¶¶ 78-85); (4) violation of D.C. Code § 23-541 et seq. (“D.C. Wiretap Act”) against all defendants (id. ¶¶ 86-93); (5) fraudulent misrepresentation against all defendants (id. ¶¶ 102-12); and (6) civil conspiracy against all defendants (id. ¶¶ 113-16). For every claim except trespass, plaintiffs seek “at least $1, 034, 000 in actual damages[, ] including $534, 000 in damages from lost contracts, and $500, 000 in damages from the diminishment of the economic value of confidential and proprietary information, loss of future contracts and damage to reputation.” (Id. ¶ 77 (breach of fiduciary duty); id. ¶¶ 84-85 (Federal Wiretap Act); id. ¶ 93 (D.C. Wiretap Act); id. ¶ 112 (fraudulent misrepresentation); id. ¶ 116 (civil conspiracy).) For the trespass claim, plaintiffs seek “at least $100, 000 in damages” for “the diminution of the economic value of the office and the diminishment of the economic value of confidential and proprietary information.” (Id. ¶ 101.) For the two wiretap claims, plaintiffs also seek statutory and punitive damages. (See id. at 25-26.)

         Plaintiffs timely served the PV defendants, but failed to serve Maass or Sandini within the 90 days provided for by Federal Rule of Civil Procedure 4(m). (See Minute Order, Nov. 14, 2017.) As a result, they voluntarily dismissed their claims against Sandini (see Notice of Voluntary Dismissal of Action Against Defendant Daniel Sandini, Nov. 21, 2017, ECF No. 21), and the Court granted their motion to extend the time to serve Maass. (See Minute Order, Nov. 27, 2017.) Plaintiffs served Maass on January 3, 2018. (See Return of Service, Jan. 3, 2018, ECF No. 23.)

         In the meantime, on July 28, 2017, the PV defendants filed the two pending motions to dismiss. (See PV Defs.' 12(b)(6) Mot.; PV Defs.' Anti-SLAPP Mot.; Mem. in Support of Mots. to Dismiss by the PV Defs., ECF No. 16 (“Mem.”)). Plaintiffs filed a combined opposition to both motions (see Pls.' Mem. in Opp'n of Mots. to Dismiss by the PV Defs., ECF No. 19 (“Opp'n”)), and the PV defendants filed a combined reply (see Reply in Support of Mots. to Dismiss by PV Defs., ECF No. 20 (“Reply”)). Both motions are now ripe.

         ANALYSIS

         The Court will first address the Rule 12(b)(6) motion to dismiss for failure to state a claim and then turn to the motion to dismiss under the D.C. Anti-SLAPP Act.[5]

         I. MOTION TO DISMISS PURSUANT TO FED. R. CIV. P 12(b)(6)

         The PV defendants contend that each count of the complaint should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.[6] They group their arguments into two categories: (1) problems with the legal theories of liability; and (2) problems with the claims for damages. The Court's analysis will also be divided into two categories.

         A. LEGAL STANDARD

         Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The facts alleged must “allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The court must ‘accept all the well-pleaded factual allegations of the complaint as true and draw all reasonable inferences from those allegations in the plaintiff's favor.'” Hurd v. District of Columbia, 864 F.3d 671, 678 (D.C. Cir. 2017) (quoting Banneker Ventures, LLC v. Graham, 798 F.3d 1119, 1129 (D.C. Cir. 2015)). “‘In determining whether a complaint fails to state a claim, [the court] may consider only the facts alleged in the complaint, any documents either attached to or incorporated in the complaint and matters of which [the court] may take judicial notice.'” Id. (quoting EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997)).

         B. LIABILITY ARGUMENTS

         As to the claims for liability, the PV defendants argue that there is at least one problem with the “legal theory of liability” for each claim in the complaint

         1. Fraudulent Misrepresentation

         The elements of a claim for fraudulent misrepresentation under District of Columbia law are that: “(1) the defendant made a false representation; (2) in reference to a material fact; (3) with knowledge of its falsity; (4) with the intent to deceive the plaintiff; (5) the plaintiff acted in reasonable reliance on that representation; (6) which consequently resulted in provable damages.” C & E Servs. v. Ashland, 498 F.Supp.2d 242, 255 (D.D.C. 2007) (citing Atraqchi v. GUMC Unified Billing Servs., 788 A.2d 559, 563 (D.C. 2002)); see also Chedick v. Nash, 151 F.3d 1077, 1081 (D.C. Cir. 1998).

         The complaint alleges that Maass made false representations during her interview with Creamer and on her resume “regarding her name, intent in securing and maintaining the internship, purpose in seeking the internship, her education, and work history”; that she made these misrepresentations knowing they were false and with an intent to deceive plaintiffs; and that the misrepresentations were material facts upon which plaintiffs relied in offering Maass an internship and giving her access to confidential information; that “as a result of Maass' fraudulent misrepresentation[s]” plaintiffs suffered actual damages, “including lost contracts, the diminishment of the economic value of confidential and proprietary information, loss of future contracts and damage to reputation” (Compl. ¶¶ 111-12); and that the PV defendants are liable for Maass' misrepresentations because they “induced Maass” and “conspired” with her to make the fraudulent misrepresentations. (Id. ¶¶ 103-110.)

         The PV defendants challenge only the adequacy of the complaint's allegations as to the sixth element, arguing that the complaint “fails to adequately allege the proximate cause of the supposed damages.” (Mem. at 34.) According to them, even though the complaint alleges that plaintiffs have suffered injury and actual damages “as a result of Maass' fraudulent misrepresentation[s]” (Compl. ¶¶ 111-12), “the facts alleged in the Complaint demonstrate that the proximate cause of the Plaintiffs' supposed $1 million in damages was the publication of Project Veritas Action's report, not any alleged misrepresentation of Maass.” (Mem. at 34.)

         The most obvious problem with the PV defendants' argument is that they are asking the Court to accept as true their interpretation of the facts alleged in the complaint and to reject plaintiffs' contrary allegations. But that is precisely the opposite of what a court must do in ruling on a motion to dismiss. In addition, it is well-established that under District of Columbia law that “[p]roximate cause is generally a factual issue to be resolved by the jury . . . .” Majeska v. District of Columbia, 812 A.2d 948, 950 (D.C. 2002) (quoting Washington Metro. Area Transit Auth. v. Davis, 606 A.2d 165, 170 (D. C. 1992)). “[O]nly in exceptional cases will questions of . . . proximate cause pass from the realm of fact to the one of law.” C & E Servs., 498 F.Supp.2d at 256 (internal citation and quotation omitted). Without a fully-developed factual record, it is impossible to say whether this might be such a case.[7]

         As plaintiffs acknowledge, “[i]n the District of Columbia, a ‘defendant's challenged conduct is the proximate cause of a plaintiff's injury only if the injury is the natural and probable consequence of the negligence or wrongful act and ought to [have been] foreseen in light of the circumstances.'” (Opp'n at 24 (quoting C & E Servs., 498 F.Supp.2d at 256 (internal citation and quotation omitted)). Plaintiffs will ultimately bear the burden of proving that actual damages were proximately caused by defendants' alleged fraudulent misrepresentations, but certainly at this point it would be premature to preclude them from trying to do so. See, e.g., Planned Parenthood Fed'n v. Ctr. for Medical Progress, 214 F.Supp.3d 808, 839 (N.D. Cal. 2016) (in a factually similar case, proximate cause was adequately alleged where complaint alleged damages that were the “direct result” of the fraudulent misrepresentation as distinguished from the publication of videos). Accordingly, the Court will not dismiss the fraudulent representation claim for failure to adequately allege proximately caused damages.

         2. ...


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