RIVERSIDE, Calif. (Legal Newsline) - A company that issued news releases touting a new treatment for opioid overdoses can’t protect itself against lawsuits by citing a California law shielding statements of general public interest, an appeals court ruled.
California legislators amended the law to carve out an exception for commercial speech and the news releases, which briefly caused the tiny company’s stock to soar, fit the definition because they related directly to the company’s business, California’s Fourth Appellate District Court.
VDM Biochemicals and BioCorRx sued each other last year over a failed merger agreement and statements BioCorRx made about an overdose treatment VDM patented and BioCorRx was testing. BioCorRX issued news releases in 2018, 2019 and 2020 discussing the drug, including one in Nov. 2020 stating it was “very encouraged by some early preclinical data.” Shares in the publicly traded company spiked above $20 a share after the news releases, before subsiding below $2 again.
BioCorRx moved to dismiss VDM’s suit under California’s anti-SLAPP (for Strategic Lawsuit Against Public Participation) law, which allows the early dismissal of lawsuits over speech that courts consider to be in the public interest. Legislators became concerned the law was being abused by businesses and added an exception for statements that deal directly with a company’s business and are intended to promote sales of its products.
A trial court granted BioCorRx’s motion, finding its releases discussed topics of general public interest. The appeals court reversed, however, ruling that BioCorRx was actually talking about a promising new product it hoped to sell.
BioCorRx argued it wasn’t trying to sell anything yet, since the drug was in the early stages of development and nearly all its revenue came from research grants.
“We are not persuaded by this novel argument,” the appeals court said. “BioCorRx conducts research and development to create commercial products either for sale or for use in its treatment services.”
The court also rejected comparisons to a 2012 case where an executive sued his former employer over a press release said directors had lost confidence in him after an investigation into mishandled clinical test results. The court upheld an anti-SLAPP motion in that case, saying the statements were “tangential” to the company’s core business.
In another Fourth Appellate Division decision, however, the appeals court rejected an anti-SLAPP motion in a suit involving claims over a seizure medication that was still in clinical trials because they were intended to influence potential buyers of the drug. BioCorRx intended to sell the VDM drug someday and in the meantime was seeking to induce investors to buy its stock, the appeals court said.