Libel

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.

|The Volokh Conspiracy |

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.

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  1. Obviously “stop talking about the plaintiff!” is problematic.

    But, what are you going to do with a serial libelist, who just keeps coming back with one libel after another, about the same plaintiff, despite losing previous libel suits? It’s a serious question.

    I’m not at all certain this case is exactly that, but surely it must happen?

    1. Sue him into bankruptcy I assume.

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      2. Why not reenact criminal libel, and knock some sense into the trolls of the Net? After all, we have the precedent set by our nation’s leading criminal “satire” case (documented at https://raphaelgolbtrial.wordpress.com/); in fact, the courts, as shown by that case, are extremely adept at distinguishing between false speech sent with the intent to “damage a reputation” and other false speech aimed merely at “calling attention to a viewpoint.” It might take them nine years to do it, but in the end they always get the job done.

        Take, for example, case A: someone sends out tweets falsely claiming that Jia has “confessed to corruption in dozens of emails that have been going around town.” That would (assuming at least that the underlying allegation of corruption is false) be an act of libel, no crime, no jail, maybe just an injunction, possibly money damages.

        Then take case B: someone sends out emails in Jia’s “name,” staging the same confession. The damage is the same, perhaps even less severe (because some recipients might mistake the emails for “parody” and the like), but here, in case B, we have a major crime punishable by prison (even if the underlying allegations of corruption are true).

        This is an illogical gap in our laws: clearly we should make A punishable by prison too. So what if international “human rights” groups disapprove of criminalizing libel? We here in America know what’s best for us, and we should stick to our principles and follow them wherever they lead.

        1. Please stop. Youve been coming here for years w your bizarro world rants & it stopped being fun quite some time ago. Have you tried a hobby? Something that would take u far away from computers & cell towers? Ice fishing or deep sea diving perhaps?

    2. You go to the merits and get an order prohibiting publishing false statements of fact about the plaintiff. The court may then use its contempt powers to enforce the order.

      The problem isn’t prior restraint, it’s broad, prior restraint from a preliminary order. A narrow injunction in a final order is okay (my opinion, obvs.; I don’t presume to speak for Prof. Volokh).

      1. I think Drewski is right. As I recall, federal courts look at 4 things in issuing PRELIMINARY injunctions (which are temporary ones, till the big trial).
        1. Which side is likely in the right.
        2. The uncompensatable harm on each side (if your damage can be compenstaed for by money later on, it doesn’t count now)
        3. “Balancing the equities”
        4. THe PUblic interest— other people besides the litigants.

        THee circuits are split on how these are to be applied. Judge Posner wrote up the sensible way to proceeds, which is to do (3) by weighing up the costs and benfeits of each side, adjusting by (2) since the side that doesn’t get its way now might be able to be compenstated later if it wins later. SOme circuits are confused and do a sequential step kind of test.

        The logic can be applied here just as in any other case, except that the public interest is a bit complicated, since it is that the truth be published bbut not falsehoods. Probably the defendants can’t compensate the millionaire monetarily if he loses, hwich tends twoards issuing the injunction. On the other hand, if the millionaire is going to be able to steal millions from people because of the delay, that is uncompensatable too (as far as this legal proceeding) and that tends towards non-issue.

    3. I think clearly you’d have to sue him again for the next libelous statements but perhaps some more can come of that
      A) if the claims are too close to the ones already found libelous then he violates the injunction and can incur further penalties for contempt (likely done civily instead of criminally)
      B) Perhaps it allows/increases punitive damages available

      Also,if the person is serial, particularly against the same person, and civil suits aren’t working many jurisdictions still have criminal libel statutes – I think this would be a situation in which using it may be appropriate.

    4. I missed the “losing previous libel suits” part of the article. Indeed, it looks kind of tacked on as a hypothetical piece of disjunction intended to suggest priors in a not altogether honest way. Is this injected here as a pretended amicus brief to influence commenters?

    5. It appears from what I have been reading, that it is at least mostly, not libel. It appears that most of his allegations are factual.

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  2. Publishing address and photographs of Jia’s home is pretty lowball. That could attract all kinds of bad attention.

    1. 1. I appreciate the ethical argument, but note that publishing addresses and photographs of homes is generally not tortious or otherwise illegal. (For instance, I don’t think these are generally considered private information — akin to, say, medical records or sexual history — that could lead to a disclosure of private facts claim.)

      2. As to the ethical point, would it matter if the house was bought with shareholder funds, and that there has been controversy about whether it is unduly luxurious (Google jia yueting palos verdes mansion)?

      1. It is apparently, not actually “his” home. It is all owned by a shell company and from what I have been reading, money gets moved from one place to another without any attention to normal business financial controls.

        One suggestion was that the entire collection of companies is nothing more that a mechanism to funnel money out of China. In any case, these are not private homes in any real sense.

    2. Lowball is still protected speech

  3. Global warming hysteria is a lucrative backdrop for peddling other flim-flams or panhandling bailouts and subsidies. Electric-car faith healing has been successful in exactly zero places, so if the laws of physics may intrude this is looking like a “denier” who needs to be coercively silenced to protect a subsidies scam. My worry is over US courts being bribed into inveiglements outside their jurisdiction and competence. Even allowing for there being an unusually large number of court interpreters for the language, I’d wager the judges are not competent to weigh in on the Chinese. Washington may have the best courts money can buy, and the law may say whatever you can get a court to say it says, but this has the odor of a Chinese Al Gore exploiting resentful Democrats whose carbon-tax extortion racket netted them only the wasted electoral votes of a stateful of ignorant dupes.

  4. > 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.

    Assuming no one gets an injunction against you…

    1. Oh, if someone gets an injunction against me, I’ll have even more interesting blog posts!

  5. Oh judges, when will ye learn that Prior Restraint is a Big Bag of Dicks?

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