How Controversial Chinese Billionaire Founder of Faraday Future Got a Gag Order Against Critic

Jia Yueting got an injunction from a Washington state court, forbidding critic Gu Yingqiong from "publish[ing] any posts or [online] commentary concerning" Jia.

Jia Yueting is a billionaire Chinese businessman and CEO of Faraday Future, a startup that's trying to build electric cars in Los Angeles. Financial questions have swirled around Jia and Faraday; CNN Money (Daniel Shane), for instance, reported today that,

[China's] markets watchdog on Monday demanded LeEco founder Jia Yueting return to China before the end of the year to fix his business empire's financial woes.

The China Securities Regulatory Commission said that Jia, whose whereabouts are unknown, has not made good on earlier promises to provide interest-free loans to the embattled company….

Jia made his ambitions known last year when LeEco invested in U.S.-based electric automaker Faraday Future, an apparent attempt to beat Tesla at its own game.

Late last year, the State Treasurer of Nevada described a proposed (now abandoned) Nevada branch of the Faraday project as a "Ponzi scheme" (Reuters); and there has been other speculation about Faraday's and Jing's financial problems.

Yingqiong Gu lives in the state of Washington, and has been harshly criticizing Jia on Chinese-language sites (apparently hosted in China but accessible to everyone). On Oct. 23, Jia sued Gu in Washington state court for libel, invasion of privacy, and intentional infliction of emotional distress; according to Jia's Complaint, the key allegations about Gu were:

On July 22, 2017, Gu published a post on WeChat titled, "Why Do We Call Yueting Jia A [Liar]?" In that post, Gu claimed that Mr. Jia kept "telling new stories" and used "new [investors'] money in old debt" in a "Ponzi scheme." Gu also compared Mr. Jia to Bernie Madoff (the convicted investment manager) and Enron. He concluded his post by observing that Madoff's "personal property was confiscated by the court for auctions—even his underwear" while Mr. Jia seems "to be living a comfortable life in [my] luxury house in the US."

On August 25, 2017, Gu published another post titled, "Exclusive. Two Things Yueting Jia is doing in the US." Gu claimed to have "credible local sources" and reviewed "relevant materials in LA" and stated that based on those sources he had learned that Mr. Jia deliberately misled investors by sending out "false information" about "negotiating for funding in Hong Kong" and been trying to "obtain [a] Green Card as soon as possible." The rest of Gu's post consists of a derogatory and false allegation that Mr. Jia had "no intention of going back to China" and had been trying to establish an irrevocable trust to avoid paying "a tribute to Uncle Sam." Gu also wrote, "Dear creditors, have you figured out? Whether it's in China or in the US 'Accountant Jia' always gets his way." …

On September 14, 2017, Gu wrote that Mr. Jia "can't [] love" suppliers, employees, or investors of LeECO, and had been trying to hide assets from creditors to avoid paying them.

On September 21, 2017, Gu published a post titled "Yueting Jia Uses 'Innocent Investors' Money' To Invest In Automobiles In US, Risks Becoming Empress Dowager Ci Xi In The Eyes of the Caucasian People." In this post, Gu claimed that Mr. Jia "used the money [I] obtained" from "Innocent Investors and gave it to the Caucasians, asking nothing in return." Gu also claimed he interviewed a former Faraday employee, and alleged that at Faraday Mr. Jia hired "Caucasian senior executives" who only "need Chinese money" from "dumb Chinese" investors. The post further asserted that at Faraday Mr. Jia sought to hire engineers from "third world" countries like "China, India and Iran" and favored "Iranians and Indians" to Chinese engineers.

On September 29, 2017 Gu published yet another false article entitled "The US Government Starts to Investigate Multibillionaire Hongbin Sun and Yueting Jia." In addition to falsely stating that Mr. Jia was under some sort of investigation, the article falsely claimed that Mr. Jia was involved in a transaction that could cause investor assets to "flow out of China into the US in order to repurchase back the assets and stocks of the other company. Everything is reasonable and legal, and it is just that at the end the innocent investors will pay for everything."

Defendant publicized the address and photographs of the residence Mr. Jia uses while he is in the United States for business. Specifically, on July 15, 2017, Defendant published a post titled, "A Tour Around Yueting Jia's House In America," in which Defendant disclosed property records for a residence in which he claimed Mr. Jia lives. In that same post, Defendant also claimed Mr. Jia "had Shanghai cuisine on July 12 evening" in Rancho Palos Verdes. Defendant implied that he was surveilling Mr. Jia on July 12 at the restaurant; the post included the comment, "He looked good at that time." Defendant concluded with the question, "He has lived in his own way, and what about you?" [EV adds: The residence might be the luxurious Los Angeles mansion discussed in various press accounts.]

On September 14, 2017, Defendant wrote in a post titled, "Who Does Yueting Jia Love Exactly?" that he had obtained, from an undisclosed source who worked at a law firm that Mr. Jia had retained, copies of an irrevocable trust created for the benefit of Mr. Jia's two daughters. In this post, Defendant included a copy of the irrevocable trust that purports to be signed by Mr. Jia and transfers funds "from Farad[ay] Company's capital pool" to his children. The document is a forgery and Defendant has falsely claimed to have access to a confidential source in a Los Angeles law firm Mr. Jia has retained.

After Defendant posted a copy of the forged, purported irrevocable trust, a journalist from sina.com, an influential Chinese website, contacted Defendant and interviewed him regarding, among other things, his sources of information about Mr. Jia. The sina.com article, titled "Living Trust Whistle-Blower: No Personal Enmity Between Yueting Jia And I And No Fear Of Being Sued," was published on September 15. It repeated Defendant's claims that Mr. Jia had "hired a couple of law firms in Los Angeles and had them draft" the above-mentioned, forged irrevocable trust.

Jia also claims that Gu was trying to extort money from Jia; according to Jia's Complaint, "In a WeChat post addressing a request by another Chinese businessman to remove false and harassing posts about him, Gu claimed he demanded 1.26 million Chinese RMB (approximately $190,000) to remove his posts" (apparently referring to Gu's posts about Jia).

Of course, if Gu's statements were indeed found at trial to be false and defamatory, then Jia would be entitled to damages. Indeed, under Washington law, he would likely be entitled to an injunction "restrain[ing] specific speech that has been determined false" (In re Marriage of Suggs (Wash. 2004)). But on the very same day that Jia filed the complaint, and after what Jia's later court filing seems to describe as an 15-to-20-minute-long hearing at which Gu represented himself, Jia got a temporary restraining order providing that,

1. Gu must remove "the posts on WeChat.com that contain defamatory statements concerning Plaintiff and/or reveal private information concerning Plaintiff and his family," and
2. Gu must not "publish[] or caus[e] to be published any posts or commentary concerning Plaintiff or his family on WeChat.com, TouTiao.com or any other internet location or website [except that] Defendant may post objective facts from public records which are otherwise available and open to the public but may not include any commentary, editorial comments, or other statements that attack plaintiff's credibility or reputation."

A preliminary injunction, issued Nov. 9, continued the prohibition, but without the exception in item 2—Gu is now barred from posting anything online about Jia, including objective facts from public records, other accurate information, and Gu's own opinions.

This strikes me as pretty clearly unconstitutional, not just under the First Amendment but under the Washington Constitution.

[1.] Injunctions against speech that has been found to be constitutionally unprotected — such as injunctions against libel — may well be constitutional. But that is so only when there has indeed been such a finding, after a full trial. Thus, for instance, the California Supreme Court in Balboa Island Village Inn, Inc. v. Lemen (2007) concluded:

An injunction, issued only following a determination at trial that the enjoined statements are defamatory, does not constitute a prohibited prior restraint of expression. "Once specific expressional acts are properly determined to be unprotected by the first amendment, there can be no objection to their subsequent suppression or prosecution."

And the focus on "following a determination at trial" was no accident; immediately after that, the court favorably cited a law review article for the proposition that,

In certain instances prior restraints are appropriately disfavored … because of the coincidental harm to fully protected expression that results from the preliminary restraint imposed prior to a decision on the merits of a final restraint. … Such interim restraints present a threat to first amendment rights … that expression will be abridged … prior to a full and fair hearing before an independent judicial forum to determine the scope of the speaker's constitutional right.

Likewise, the Kentucky Supreme Court held in Hill v. Petrotech Resources Corp.(2010) that "defamatory speech may be enjoined only after the trial court's final determination by a preponderance of the evidence that the speech at issue is, in fact, false, and only then upon the condition that the injunction be narrowly tailored to limit the prohibited speech to that which has been judicially determined to be false."

Here, there was no trial, no "final determination" and no "decision on the merits" — only a judgment of likelihood of success on the merits following a 15-to-20-minute-long hearing. I don't think it's permissible to order someone in such a situation to take down criticism of a prominent businessman's business practices (criticism that might ultimately be proved false, proved true, or found to be opinion).

[2.] But beyond this, the orders go far beyond libel or any alleged invasion of privacy. (It's not clear whether there is a disclosure-of-private-facts exception to the First Amendment, but, if there is, it's far narrower than the order here.) And, as Suggs and In re Marriage of Meredith (Wash. Ct. App. 2009) make clear, an order that "is not specifically crafted to prohibit only unprotected speech" "is an unconstitutional prior restraint." But, perhaps because Gu doesn't have a lawyer, the court doesn't seem to have focused on this argument.

As readers of this blog may recall, this "stop talking about plaintiff" order is part of a broader, troubling recent trend; I hope to blog more about this in months to come, and (likely in late February) to circulate for publication a law review article on the subject.