$12.5 Million Jury Verdict in Texas Internet Defamation Case

In February, a Texas jury awarded Orix Capital Markets, LLC $12.5 million in damages in a defamation case involving statements published on the cleverly named "gripe site" Predatorix.com. (The site is now disabled, but the curious can check it out on Internet Archive.)  We are a little late reporting this, but thought it merited a post because it is now the largest jury verdict in our legal threats database, beating out Scheff v. Bock by a cool $1.2 million. 

The facts of the underlying case are quite complicated.  According to the Dallas Morning News, Orix, which operates a real estate, finance, and asset management business that "cleans up the wreckage of defaulted mortgage-backed securities," foreclosed on a Louisiana apartment building owned by the Rafizadeh family of Houston. This foreclosure triggered a series of legal disputes between the Rafizadehs and Orix, and the Texas case began in 2006, when the Rafizadehs' company, Super Future Equities, Inc., brought a class action complaint against Orix and other defendants alleging breach of contract, negligence, breach of fiduciary duties, and violations of the federal Racketeer Influenced and Corrupt Organizations Act (RICO). 

The federal court in Texas dismissed these claims, but not before Orix filed a counterclaim against Super Future Equities, Schumann Rafizadeh, Cyrus Rafizadeh, Houman Thomas Arjmandi, and Keon Michael Arjmandi.  The counterclaim alleged that the defendants set up the Predatorix.com website and used it to published false and defamatory statements about Orix.  For example, Orix claimed that the website accused the company of committing tax fraud and being under federal investigation for violating racketeering laws.  Later, Orix filed an amended counterclaim to add a copyright infringement claim arising from Predatorix's re-posting of a page from the Orix website.

The defendants filed a motion for summary judgment, which, in March 2008, the court granted in part and denied in part.  The court dismissed Orix's claims for business disparagement, tortious interference, and copyright infringement (notably, the court found that Predatorix's use of the Orix page was fair use), but found that the defamation claim was sufficient to go to the jury.

In February 2009, after a two-week trial, the jury awarded Orix $2.5 million in compensatory damages and $10 million in punitive damages, split between the defendants, except Keon Michael Arjmandi, who was not found liable.  After the verdict, the parties settled the case on undisclosed terms.  After the settlement, the Rafizadehs published an apology on Predatorix, acknowledging that the postings were incorrect.

For more background information, see our database entry, Orix v. Predatorix.


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