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AFI Holdings of Illinois, LLC v. Waterman Broadcasting

United States District Court, M.D. Florida, Fort Myers Division

June 22, 2018

AFI HOLDINGS OF ILLINOIS, LLC d/b/a Happy Leaves, Inc., Plaintiff,



         This matter comes before the Court on review of defendant Joseph Dorn, M.D.'s Motion to Dismiss (Doc. #27) filed on April 13, 2018. Plaintiff filed a Response in Opposition (Doc. #36) on April 30, 2018. For the reasons set forth below, the Motion is denied.


         On June 27, 2017, plaintiff AFI Holdings, LLC d/b/a Happy Leaves, Inc., (“AFI”) filed suit in Lee County, Florida alleging defamation and commercial disparagement against Defendant Waterman Broadcasting (“Waterman”). The case was removed to the Middle District of Florida based on diversity jurisdiction. AFI filed an Amended Complaint (Doc. #22), adding the individual defendants. AFI alleges that defendants' statements during WBBH-TV's July 1, 2016 segment on AFI's sales of the hemp oil extract “Charlotte's Web” on Groupon defamed AFI and disparaged its product.

         The Amended Complaint alleges as follows: AFI d/b/a Happy Leaves distributes hemp oil extract for another company named CW Hemp, Inc., which manufactures “Charlotte's Web” in Colorado. (Doc. #22, ¶ 12.) Charlotte's Web is a commercially available full plant hemp extract. The active ingredient in Charlotte's Web is cannabidiol (CBD). CBD can be harvested from both hemp and cannabis. (Id., ¶ 13.) CBD oils harvested from hemp, such as Charlotte's Web, have very low levels of tetrahydrocannadion (THC) compared to those harvested from cannabis and they are not regulated in the same way. (Id., ¶ 14.) Plaintiff alleges that according to Florida Bill 893.02, which became effective on July 1, 2014, the term “cannabis” does not include any cannabis that contains 0.5 percent or less of THC and more than 15 percent of CBD. (Id., ¶ 15.) The Charlotte's Web hemp oil extract sold by AFI on Groupon contains less than 0.3 percent of THC and does not fall within the definition of “cannabis” under Florida law. (Id., ¶¶ 16, 18.) Hemp oil extract is separate and distinct from marijuana and marijuana oil extract is sold legally throughout all 50 states. Hemp oil extract is not “pot” or “medical marijuana” and industrial hemp products are currently distributed in thousands of health and wellness stores across the United States. (Id., ¶¶ 17, 22.)

         CW Hemp, Inc.'s business model allows for exclusive regional distributorships of Charlotte's Web. Prior to July 2, 2016, AFI enjoyed an exclusive agreement with CW Hemp, Inc. to sell Charlotte's Web on Groupon. AFI was CW Hemp's only distributor selling through Groupon. (Doc. #22, ¶ 23.) The Groupon account was particularly lucrative for AFI. In June 2016, AFI's monthly gross sales of Charlotte's Web on Groupon were approximately $75, 000. (Id., ¶ 24.)

         On July 1, 2016, defendants Lisa Spooner and Peter Busch were on-air anchors, and Graham Hunter was an on-air reporter for WBBH-TV, located in Fort Myers, Florida. The station is owned and operated by Waterman Broadcasting. (Doc. #22, ¶¶ 25-28.) During WBBH-TV's 11:00 p.m. newscast on that date, defendants aired a segment about AFI and Charlotte's Web. The segment identified defendant Joseph Dorn, M.D. as an “expert” on the subject. (Id., ¶ 29.)

         During the broadcast, defendants knowingly made false and/or reckless statements about AFI and Charlotte's Web in a way to sensationalize the story. (Doc. #22, ¶ 30.) Plaintiff alleges that defendants made the following statements: Ms. Spooner falsely claimed that Charlotte's Web was “medical marijuana” and that “200mg of Charlotte's Web Pot” could be purchased for “forty bucks.” She stated that “pot” and “medical marijuana' could now be purchased on Groupon via AFI. (Id., ¶ 31.) Mr. Busch falsely stated that “only five dispensaries in Florida are allowed to sell it under Florida law” in reference to the Charlotte's Web to imply AFI was violating Florida law. He also stated that “Graham Hunter spoke to an expert about how it's actually being sold in this ad” in referring to AFI's advertisement on Groupon. (Id., ¶ 32.) Mr. Hunter falsely claimed that “there's really no way to know exactly what's in this stuff without buying it and testing it.” (Id., ¶ 33.) Mr. Hunter also provided misleading pictures and videos for the segment, and also conducted street interviews. (Id., ¶¶ 34-35.) Hunter stated that he contacted Groupon to notify it of the story and sent an email to AFI's owner when in fact the email was only sent to AFI two hours before airing the segment, asking: “What is your product?” and “How is this legal to dispense to the U.S.?” (Id., ¶ 40.) The segment was aired before receiving a response.

         Particularly relevant to the instant Motion, plaintiff alleges that Dr. Dorn stated during the segment in reference to AFI that “somebody like this, they're not playing by the rules, so who in the world knows what they're selling.” (Doc. #22, ¶ 36.) Plaintiff alleges that this implies that AFI was violating Florida law by selling Charlotte's Web in Florida via Groupon. (Id.)

         As a result of the segment, Groupon discontinued all sales of Charlotte's Web on its website. (Doc. #22, ¶¶ 43-44.) Plaintiff states that Groupon would not have known about the story but for Waterman and Mr. Hunter notifying it. (Id., ¶ 45.) AFI was the only distributor of Charlotte's Web on Groupon and following the July 1, 2016 segment, AFI's total sales were reduced to zero. (Id., ¶ 46.)

         On July 14, 2016, Waterman posted an online statement retracting its July 1, 2016 story about AFI and Charlotte's Web, stating:

On July 1, 2016 published a story here about a (sic) Illinois based company called Happy Leaves selling a product called Charlotte's Web on Groupon.
In our story we characterized the product as ‘pot' and medical marijuana. It is not. According to their company, the product is derived from hemp and Charlott'e Web contains no illegal drugs or regulated drugs which require a special license to sell.
The active ingredient in Charlotte's Web is called CBD (cannabidiol). CBD can be harvested from both hemp and cannabis. CBD oils harvested from hemp have very low levels of tetrahydrocannadion (THC) than those ...

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