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Security Alarm Financing Enterprises, L.P. v. Alder Holdings, LLC

United States District Court, D. Alaska

February 7, 2017

SECURITY ALARM FINANCING ENTERPRISES, L.P., a California Limited Partnership, Plaintiff and Counterclaim Defendant,
ALDER HOLDINGS, LLC, a Utah Limited Liability Company; ALARM PROTECTION TECHNOLOGY, LLC, a Utah Limited Liability Company; ALARM PROTECTION TECHNOLOGY ALASKA, LLC, a Utah Limited Liability Company; ALARM PROTECTION ALASKA, LLC, a Utah Limited Liability Company, Defendants and Counterclaimants.


          Sharon L. Gleason UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff and Counterclaim Defendant SAFE's Motion for Summary Judgment at Docket 337. The motion is fully briefed, [1] and oral argument was held on December 15, 2016.[2] Defendants'[3] motion at Docket 351 for summary judgment on SAFE's claims has been addressed in a separate order.[4]


         This is a dispute between two home alarm security companies. Many of the pertinent facts are summarized in the Court's recent order on Alarm Protection's motion, and are not repeated here.[5] The following additional facts are drawn from Alarm Protection's Answer to Amended Complaint and Counterclaim.[6]

         In response to SAFE's concerns about Alarm Protection's potential poaching of SAFE's customers, Alarm Protection conducted its own internal investigation. Alarm Protection maintains that as a result of that investigation, it learned that SAFE had been calling SAFE's past customers that were now Alarm Protection customers-presumably as part of SAFE's investigation. According to Alarm Protection, SAFE told at least some of these customers that Alarm Protection was engaging in illegal activity and was defrauding its customers.[7] These alleged statements by SAFE to Alarm Protection's customers form the basis of Alarm Protection's counterclaims, which are the subject of this order. SAFE largely denied all of these allegations, and denied that Alarm Protection was entitled to any relief.[8]


         I. Jurisdiction

         The Court has supplemental jurisdiction over each of Alarm Protection's counterclaims pursuant 28 U.S.C. § 1367 because each shares some “common nucleus of operative fact” with SAFE's Lanham Act claim, over which the court has original jurisdiction pursuant to 28 U.S.C. § 1331.[9]

         II. Standard for Summary Judgment

         Federal Rule of Civil Procedure 56(a) directs a court to “grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The Court's recent order on Alarm Protection's Motion for Summary Judgment set out the controlling precedent for a trial court to apply when considering a motion for summary judgment.[10] That precedent is not restated here, but is again relied upon by the Court.

         III. Analysis

         Alarm Protection has asserted the following five counterclaims: (1) Tortious Interference with Contractual Relationship; (2) Tortious Interference with Business Relationship; (3) Defamation Per Se; (4) Defamation Per Quod; and (5) Violation of Alaska's Unfair Trade Practices Act (UTPA), AS 45.50.471. SAFE moves for summary judgment on all of these counterclaims.

         SAFE's primary argument is that Alarm Protection's claims-with the exception of the defamation per se claim-cannot stand because Alarm Protection has no evidence that it has suffered any damages.[11] SAFE also argues that, for various reasons, Alarm Protection cannot prove the essential elements of its defamation per se claim.[12] And SAFE asserts that it was privileged to interfere with Alarm Protection's contracts with SAFE's former customers.[13] The Court will address each argument in turn.

         A. Damages

         In Alaska, each of the torts of interference with contract, interference with prospective business relationship, defamation per quod, and the UTPA requires a plaintiff to show actual damages to win monetary relief.[14] Here, SAFE maintains that Alarm Protection has identified only four statements in discovery to support its claims. One of these statements was to an Alarm Protection employee who still works for Alarm Protection and the other three were to Alarm Protection customers who apparently have not cancelled their services with Alarm Protection.[15]

         Alarm Protection responds that SAFE's contention that “Alarm Protection cannot show damages caused by the few statements that SAFE preserved” is “true so far as it goes.”[16] But in Alarm Protection's view, it does not go very far. Alarm Protection maintains that SAFE's spoliation of its customer call recordings[17] has prevented Alarm Protection, and the Court, from knowing “how many other Alarm Protection customers heard the same false statements from SAFE and decided to cancel their contracts.”[18]The Court agrees that the spoliation might make it difficult, perhaps very difficult, to ascertain to whom SAFE made any improper statements. And for this reason, the Court awarded sanctions against SAFE, including the sanction of instructing the jury that it may consider the fact of the spoliation in reaching its verdict.[19]

         Alarm Protection contends that because of this spoliation and the possibility that the jury will infer that the spoliated material was favorable to Alarm Protection's claims, the Court must deny summary judgment. Alarm Protection points to the Second Circuit's decision in two cases, Byrnie v. Cromwell[20] and Kronisch v. United States, [21] to support this position. In Byrnie, the Second Circuit, citing Kronisch, explained that “a party seeking an adverse inference may rely on circumstantial evidence to suggest the contents of destroyed evidence” and that once this is done, “[i]t then becomes a matter for the jury to decide, based on the strength of the evidence presented, whether the documents likely had such content.”[22]

         The lost recordings might have been highly probative in proving that SAFE made defamatory statements about Alarm Protection, or attempted to interfere in Alarm Protection's contracts or business relationships, or engaged in some sort of deceptive practice. Because SAFE failed to preserve those recordings even in the face of an obligation to do so, the jury might infer that the recordings were favorable to Alarm Protection.[23] Thus, Alarm Protection is correct that the mere fact that the three customers for whom it has recordings have not left Alarm Protection does not preclude Alarm Protection from showing damages related to other customers, because “a reasonable jury [could] conclude that the destroyed recordings would contain more of the same: defamatory statements by SAFE . . . .”[24]

         But the spoliation, and any inference that may be drawn from it, gets Alarm Protection only so far. Alarm Protection bears the burden at trial of proving both SAFE's conduct and Alarm Protection's damages. The potential inference allows Alarm Protection to avoid summary judgment as to SAFE's conduct-the jury could infer that there was additional conduct for which there is not direct evidence. But the recordings that were spoliated would not contain evidence about Alarm Protection's damages.[25]That evidence would have to come from some other source-such as Alarm Protection's own records. Indeed, as the Court of Appeals explained in Bynrie, “[t]he burden falls on the ‘prejudiced party' to produce ‘some evidence suggesting that a document or documents relevant to substantiating his claim would have been included among the destroyed files.'”[26] Alarm Protection gives no reason to believe that there would be any evidence of its damages on the spoliated recordings. No reasonable jury could infer that the phone recordings contained evidence of Alarm Protection's damages, and so Alarm Protection cannot rely on the spoliation to escape its burden to produce evidence of such damages.[27]

         Because Alarm Protection concedes that it has no actual evidence that it incurred any damages as a result of SAFE's conduct, the Court will grant SAFE's motion for summary judgment with regard to Alarm Protection's claims for interference with contract, interference with prospective business relationship, defamation per quod, and violations of the UTPA, each of which requires a showing of damages.[28]

         B. Defamation per se

         Defamation per se requires proof of four elements: (1) a false and defamatory statement; (2) an unprivileged publication to a third party; (3) fault amounting at least to negligence; and (4) the existence of per se actionability.[29] SAFE asserts that none of the four statements for which Alarm Protection has a recording can satisfy these four elements. Alarm Protection counters that for the three statements SAFE made to customers, such elements are disputed. Alarm Protection also maintains that it can base its defamation per se claim on other statements for which the recordings were spoliated. At oral argument, Alarm Protection acknowledged that the statements SAFE made to Alarm Protection's representative cannot support a claim of defamation per se because those statements were not a “publication to a third party.”[30] Accordingly, the Court will not address the statements to Mr. Jesclard. SAFE raises several points on which it seeks summary judgment on Alarm Protection's claim. The Court will address each in turn.

         1. The Smith Call

         SAFE contends that the statements made to Philip Smith[31] are not defamatory because they are not clearly about Alarm Protection.[32] It is true that SAFE's representative did not mention Alarm Protection by name, but the reference to “aggressive door-to-door salesmen” closely followed Mr. Smith's statement that Alarm Protection salesmen had been by his house.[33] There is at the very least a genuine dispute as to whether this statement was about Alarm Protection; the Court will not grant summary judgment on this basis.

         2. The Esquiro Call

         A statement of opinion or belief cannot be the basis of a defamation action because such statements cannot be “false.”[34] SAFE contends that the statements made to Ms. Esquiro are statements of opinion, not statements of fact, and thus cannot support a defamation claim.[35] In SAFE's view, because the SAFE representative's statements were conditional, they are opinion. But as the Alaska Supreme Court explained in, “[e]ven if a statement is an opinion, it may give rise to a defamation claim if its ‘expression contains an implied assertion of false fact and is sufficiently derogatory as to cause harm to the subject's reputation.'”[36]

         One portion of the conversation between the SAFE representative and Ms. Esquiro is particularly relevant to this inquiry:

Ms. Esquiro: “But it's not like a, this isn't a fraud thing?”
SAFE: “Well, that's a good question, and it lends itself to be.”
Ms. Esquiro: “Because they're misrepresenting you guys?”
SAFE: “Correct.”[37]

         Although the Court may determine whether a statement was defamatory as a matter of law, [38] Alaska courts also recognize that whether a statement is one of opinion or fact is sometimes an appropriate question for the jury.[39] The Court finds that a rational jury could conclude that the statements to Ms. Esquiro “contain an implied assertion” of fact-for example, that Alarm Protection was “misrepresenting” SAFE, and was thus not to be trusted. The Court will not grant summary judgment on this basis.[40]

         3. Vagueness ...

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