Kutak Rock attorneys Jon Breyer and Leland Abide, from the firm’s Minneapolis office, recently represented a former corporate officer, Craig McKenzie, in a defamation lawsuit wherein Mr. McKenzie was being sued personally for allegedly defamatory statements that were contained in a 2016 press release issued by the corporation who employed Mr. McKenzie. Mr. DeRosa, the plaintiff, sought more than $12 million in damages.  On December 13, 2021 the jury returned a complete verdict in favor of Mr. McKenzie.

The case relates to events beginning in 2014 when William DeRosa was appointed to the board of directors of Dakota Plains Holdings, Inc. (“Dakota Plains”) by a major shareholder, Lone Star Value Management (“Lone Star”), an activist hedge fund. Mr. McKenzie was CEO of Dakota Plains. In time, Dakota Plains claimed that DeRosa was improperly sharing material nonpublic information about Dakota Plains with Lone Star.  In 2015, Mr. DeRosa resigned from the board, was fired by Lone Star, and Dakota Plains filed a lawsuit against him in Nevada alleging breaches of fiduciary duty.

In March 2016, while the Nevada action was pending, Dakota Plains issued a press release stating that “DeRosa . . . violated his fiduciary duties to all stockholders and committed unlawful acts by sharing material non-public information. Mr. DeRosa resigned from the Board because of this breach of fiduciary duty and will stand trial in court for his actions later this year.”

Mr. DeRosa claimed that the press release was issued by Dakota Plains at the direction of Mr. McKenzie and in March 2017, DeRosa sued McKenzie in New Jersey federal court. After being dismissed for lack of personal jurisdiction, Mr. DeRosa refiled the suit in Minnesota, asserting claims of defamation and intentional infliction of emotional distress. Although Mr. DeRosa did not allege that Mr. McKenzie authored the Dakota Plains press release, he nevertheless sought to hold Mr. McKenzie solely and personally liable for his alleged role in “directing and publishing” the company’s press release. DeRosa amended his complaint in January 2018 to further allege that Mr. McKenzie “authorized and approved” the press release and “had control over” its publication. In June 2018, the District Court granted Mr. McKenzie’s motion to dismiss because Mr. DeRosa had not alleged that Mr. McKenzie himself made or authored the alleged defamatory statements in the press release.

In March 2019, the Minnesota Court of Appeals affirmed the decision of the District Court and rejected Mr. DeRosa’s arguments that a defendant may be liable for another person or entity’s defamatory speech. On appeal to the Supreme Court, the issue presented was whether a corporate officer or director may be held personally liable for the defamatory statements of a corporation when the officer or director was not the author or maker of the statements.

The Minnesota Supreme Court reversed the decisions of the District Court and Court of Appeals and held that a corporate officer or director may be held individually liable for a defamatory press release issued by a company if the officer or director “personally participated” in the commission of the tort of defamation.  Unfortunately, the Minnesota Supreme Court did not define the level of personal participation required, nor did it articulate any tests to be used or provide much guidance on the issue.

The Kutak Rock team took the case back to District Court and brought another motion to dismiss in May 2020, which was granted in part and denied in part. After a year of discovery, they moved for summary judgment, which was denied. Mr. DeRosa filed a motion for punitive damages, which was also denied.

A jury trial to determine liability for the alleged defamatory statements in the 2016 press release was held during the week of December 6, 2021. The evidence presented to the jury demonstrated that Mr. McKenzie did not author any portion of the press release in question, nor did he ask anyone to write it or tell them what to include. His participation was limited a one-word response affirming the press release, which had already been drafted by an outside PR firm, reviewed and approved by other management, including the Dakota Plains’ general counsel and the chairman of the board, and reviewed and approved by the company’s external legal counsel.

However, the jury made no determination as to whether or not Mr. McKenzie’s actions constituted “participation” in the defamation because it determined that all of the statements in the press release were either substantially true, or were a fair and accurate recitation of the Nevada Lawsuit, and thus privileged. The jury further found that Mr. McKenzie reasonably relied on the advice of the company’s attorneys in approving the publication of the press release.

Kutak Rock partner Jon Breyer led the trial team, assisted by attorney Leland Abide. Paralegal Jenn Gauwitz of the Minneapolis office also was instrumental in achieving the successful outcome of the trial.

Jon Breyer is an experienced trial lawyer and MSBA Certified Civil Trial Law Specialist. He represents companies in complex transaction-related disputes arising from all varieties of business agreements, with a particular emphasis on shareholder, employment and complex business disputes, and securities litigation.

Leland Abide is a member of the firm’s litigation practice group and has significant experience working in complex litigation, including intellectual property litigation, commercial business disputes, and insurance coverage. He was recently selected to Minnesota Super Lawyers in 2021 as a Rising Star in the area of business litigation.