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Genberg v. Porter

United States Court of Appeals, Tenth Circuit

February 22, 2018

CARL GENBERG, Plaintiff - Appellant,

         Appeal from the United States District Court for the District of Colorado D.C. No. 1:11-CV-02434-WYD-MEH

          Clayton E. Wire, Ogborn Mihm LLP, Denver, Colorado (James E. Fogg, Ogborn Mihm LLP, Denver, Colorado, with him on the briefs), for Plaintiff-Appellant.

          Robert Reeves Anderson, Arnold & Porter Kaye Scholer LLP, Denver, Colorado (Edwin P. Aro, Holly E. Sterrett, Jenna L. Goldstein, Jamen E. Tyler, Arnold & Porter Kaye Scholer LLP, Denver, Colorado, on the briefs), for Defendant-Appellee.

          Stephen M. Kohn, Kohn, Kohn & Colapinto, LLP, Washington, D.C., for Amicus Curiae.

          Before HARTZ, HOLMES, and BACHARACH, Circuit Judges.


         This appeal grew out of the firing of Mr. Carl Genberg, an executive for Ceragenix Corporation. Mr. Genberg allegedly suspected misconduct by Ceragenix's Board of Directors. When he acted on these alleged suspicions, he was fired.

         Mr. Genberg then sued Ceragenix's Chief Executive Officer, Mr. Steven Porter, for

. retaliation under the Sarbanes-Oxley Act of 2002 and
. defamation under Nevada law.

         The district court granted summary judgment to Mr. Porter on both claims. We reverse on the Sarbanes-Oxley claim and affirm on the defamation claim.

         I. Mr. Genberg battles the Board.

         The action arose from a dispute between Mr. Genberg and the Board.

         A. A merger results in a proxy for Ceragenix's new shareholders.

         In 2005, Mr. Porter and Mr. Genberg worked for a company that merged into Ceragenix. This merger entitled shareholders of the old company to shares in Ceragenix. With the merger, the shares went into escrow and the Ceragenix Board obtained a proxy to exercise voting rights for the escrowed shares. The new shareholders, including Mr. Genberg, believed that the shares would soon be distributed. But Board members continued to use the proxy for roughly five years, reelecting themselves and increasing their own compensation.

         B. Mr. Genberg ghostwrites an email for a Ceragenix shareholder.

         Objecting to continued use of the proxy, Mr. Genberg drafted an email under the name of one of Ceragenix's largest shareholders. The email urged the Ceragenix Board to abandon the proxy and allow the shareholders to exercise their own voting rights. When Mr. Genberg drafted this email, the shareholder was part of a group trying to take control of Ceragenix, a move opposed by the Ceragenix Board. The shareholder sent Mr. Genberg's email to the Ceragenix Board on March 2, 2010.

         C. The Board considers the email the next day.

         On March 3, the Board met to address the email and suspicion about Mr. Genberg's role. At this meeting, Mr. Porter told the Board that the email had been written by Mr. Genberg to aid another company's attempt to buy Ceragenix. Mr. Porter viewed Mr. Genberg as disloyal, suspecting him of helping the group to seize control of Ceragenix. Similar suspicions led other Board members to suggest that Mr. Genberg be fired. But Mr. Porter thought that the firing would need to wait because Mr. Genberg was actively engaged in fundraising efforts. In the meantime, the Board demanded that Mr. Genberg stop communicating with the shareholder who had sent the March 2 email.

         D. Mr. Genberg accuses Mr. Porter of insider trading.

         On March 4, Mr. Genberg sent an email to a Board member, accusing Mr. Porter of insider trading. In response, the Board hired an attorney to investigate

. the allegations of insider trading and
. Mr. Genberg's relationship with the group attempting to acquire Ceragenix.

         Though the attorney found no evidence of insider trading, he did confirm that Mr. Genberg had been involved in the effort to acquire Ceragenix.

         E. The Board fires Mr. Genberg, and Mr. Porter tells others of the firing.

         In response, the Board fired Mr. Genberg for cause. Afterward, Mr. Porter reported the firing to a public-relations consultant and two Ceragenix lenders. In these reports, Mr. Porter made four statements about Mr. Genberg that he regards as defamatory:

1. He had acted as "the Judas in house" who facilitated "a hostile takeover."
2. He had been terminated "for cause" and for "willful breach of fiduciary loyalty."
3. He had lacked any prior experience but was "a shit disturber deluxe."
4. He had been "an inside man" who "went over the line."

         Mr. Porter also filed a document with the SEC stating that Mr. Genberg had been terminated "for cause."

         II. Standard of Review

         We review de novo the district court's grant of summary judgment, applying the summary-judgment standard stated in Federal Rule of Civil Procedure 56. ClearOne Comms. v. Nat'l Union Fire Ins., 494 F.3d 1238, 1243 (10th Cir. 2007). Under this standard, summary judgment is appropriate if the evidence shows that "there is no genuine issue as to any material fact" and the party moving for summary judgment is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

         On an appeal from a grant of summary judgment, we draw all reasonable factual inferences in favor of the non-moving party. ClearOne Comms., 494 F.3d at 1243. A party is thus entitled to summary judgment if the evidence points only one way and no reasonable inferences could support the non-moving party's position. Auraria Student Housing at the Regency v. Campus Village Apartments, 843 F.3d 1225, 1247 (10th Cir. 2016).

         III. The Sarbanes-Oxley Claim

         Congress passed the Sarbanes-Oxley Act to "protect investors by improving the accuracy and reliability of corporate disclosures." Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, 745. To further this goal, the Act protects whistleblowing employees of publicly traded companies who tell superiors about a violation of federal securities law. 18 U.S.C. § 1514A. The Act supplies this protection by allowing suit against a publicly traded company or its officers for retaliation. Id.

         For a prima facie case of retaliation, a plaintiff must show that

. he or she engaged in protected activity,
. the employer knew of the protected activity,
. the plaintiff suffered an unfavorable employment action, ...

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