An appeals panel has ruled the founders of the defunct brokerage website Ditto Trade cannot push a lawsuit, which claimed Crain's Chicago Business ran a defamatory story, saying not only did Crain's act without malice, but the story they published was true.
The Sept. 21 decision was penned by Justice Cynthia Cobb, with concurrence from Justices James Fitzgerald Smith and Terrence Lavin, of Illinois First District Appellate Court. The ruling was filed under Illinois Supreme Court Rule 23, which may limit its use as precedent.
The decision was a blow to an action brought in 2017 by brothers Joseph and Avi Fox, who headed online brokerage Ditto Trade until its collapse in December 2015.
The Foxes filed suit in 2017 in Cook County Circuit Court against Crain's, reporter Lynne Marek and editor Michael Arndt. The suit alleged Crain's knowingly published a false June 2016 story that ruined the Foxes' good names, cost them income and caused emotional distress.
According to the suit, the story contained an incorrect line that a Chicago federal judge stated, in another suit involving the Foxes, he believed Joseph Fox had committed corporate misconduct. In addition, the Foxes claimed the headline, "Frustrated investors led on Fox hunt in L.A," wrongly suggested Joseph, who lived in Los Angeles, was hiding from investors. Avi Fox contended he was defamed through his association with Joseph in Ditto.
Cook County Judge Patricia O'Brien Sheahan dismissed the suit, finding the Foxes failed to show any malice on defendants' part. The judge further determined the statement about the judge and the headline were "substantially true," adding the headline could be "innocently construed."
The Foxes appealed, serving as their own attorneys.
Appellate Justice Cobb noted the Foxes did not follow procedure, such as citing legal authority. As a result, Cobb said she could have declined to address the appeal, but chose to proceed anyway.
Cobb made short work of Avi Fox's claims.
"He cannot state any defamation or false light claims based on the article because the two statements at issue" in the "complaint both specifically and exclusively refer to Joseph. A reasonable person would not find that Avi was also being defamed," Cobb said.
Looking at Joseph's situation, Cobb determined he was a "limited purpose public figure," because he thrust himself into the public arena to discuss the controversial use of online technology by amateur traders in the securities market. As a consequence, Joseph had to demonstrate that not only were the statements false, but Crain's knew they were false.
Cobb pointed out the Crain's reporter and editor believed the statements were true, so Joseph failed to show the required malice. Moreover, the statements were substantially true, Cobb added.
According to Cobb, the veracity of the headline was borne out by affidavits by investors, who said they were frustrated by Joseph's alleged lack of availability to answer questions. Besides, the headline was a play on Joseph's surname, not to be taken literally, Cobb concluded.
The Fox brothers also claimed there were eight other defamatory statements in the news article that the circuit court did not examine. However, Cobb said the brothers never pressed these statements in circuit court, so they waived their right to bring them up on appeal.
The Foxes have represented themselves in appellate court.
Crain's, Marek and Arndt have been defended by attorneys from the firm of Mandell, Menkes & Surdyk, of Chicago.
The Foxes have been involved with other litigation over Ditto.
Ditto was ordered to pay $2.7 million to former CEO Paul Simons, after Simons was fired for allegedly uncovering and reporting alleged violations of the federal Securities Act by Ditto under Joseph Fox's leadership.
Joseph countersued Simons and others, alleging intentional infliction of emotional distress, demanding $100 million. Joseph also sued his former lawyers, asserting they didn’t properly represent him in those proceedings.