Back in 2013, oil and gas company SG Interests had problems. Those problems have yielded a highly questionable SLAPP suit in 2017.
One of SG Interests' problems was a qui tam lawsuit — that is, a lawsuit filed by a private individual on behalf of the government — claiming that SG Interests violated the False Claims Act by colluding with a company called Gunnison Energy Corporation not to bid against each other at Bureau of Land Management oil and gas lease auctions so each could get the leases at lower prices. The plaintiff, Anthony Gale — called a relator in a qui tam case — claimed that SG Interests falsely certified to the federal government that it had not colluded with anyone in connection with the bids, when in fact it had.
The other problem was bigger. The United States Department of Justice was after SG Interests, too. In a federal complaint filed in United States District Court in Colorado in 2012, the Department of Justice claimed that SG Interests and Gunnison violated the Sherman Antitrust Act through a similar scheme:
Prior to 2005, GEC and SGI were separately engaged in exploration and development of natural gas resources in the Ragged Mountain Area (or “RMA”) of Western Colorado.1 Recognizing that they would be the primary competitors to acquire three natural gas leases for exploration and development on federal lands in the RMA that were to be auctioned by the Bureau of Land Management (“BLM”) in February 2005, GEC and SGI executed a Memorandum of Understanding (the “MOU”) on the eve of the auction pursuant to which they agreed not to compete for the leases. Instead, under the MOU, SGI would bid at the auction and, if they won, assign a fifty percent interest in the acquired leases to GEC. The parties extended the MOU to include a fourth lease auctioned by the BLM in May 2005. As a result of the MOU, the United States received substantially less revenue from the sale of leases than it would have had SGI and GEC competed at the auctions.
SG Interests and Gunnison argued that they had defenses to both of these claims. It's complicated, but in short, such agreements might be legal when part of a joint or collaborative development of limited resources. Nevertheless, SG Interests and Gunnison settled both cases. The federal court — in a somewhat unusual move — rejected the initial settlement, saying that it didn't yield enough money or protect the public interest sufficiently. The parties — SG Interests, Gunnison, the relator, and the Department of Justice — reconvened and came up with a new structure. Under the new settlement, SG Interests and Gunnison paid the United States $275,000 each to settle the antitrust case, submitted to monitoring of their bidding on BLM oil and gas leases, and paid a separate amount of money ($206,250 for SG Interests and $245,000 for Gunnison) to settle the relator's claims. The federal court agreed that time, and so SG Interests settled the antitrust case, not admitting liability but paying the government $275,000 and providing the Department of Justice with information about any joint bidding for the next five years.
SG Interests had solved at least some of its problems.
But by November 2016, it had more. The Colorado Springs Post Independent reported that the Bureau of Land Management was cancelling some oil and gas leases, and noted that SG Interests was planning to sue the government over the decision, claiming "collusion" between the Obama administration and environmental activists. Peter Kolbenschlag, a public relations strategist, commented on the article using his Facebook account, noting the irony of SG Interests claiming "collusion" in light of its litigation history:
While SGI alleges "collusion" let us recall that it, SGI, was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers. Yes, these two companies owned by billionaires thought it appropriate to pad their portfolios at the expense of you and I and every other hard-working American.
"High Country Citizens’ Alliance public lands director Matt Reed said, “It seems to me that it’s proof of collusion to defraud the American public, to defraud the federal government. It makes me question that if [GEC and SGI] are going to be less than honest in a federal lease sale, how can the public trust them when they say they’ll be good environmental stewards and try to protect water quality and air quality?” He adds, “It certainly raises some questions.”
And from the US Justice Dept https://www.justice.gov/…/justice-department-settlement…
“Today’s unprecedented antitrust enforcement action involving illegal bidding at Bureau of Land Management auctions, demonstrates the U.S. government’s resolve to ensure there is vigorous competition for federal oil and gas rights,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “At a time of budgetary constraint, it is crucial that the federal government receive the most competitive prices for these important leases, which ultimately benefits American taxpayers.”
As you can see, Kolbenschlag linked the Department of Justice announcement about its antitrust settlement with SG Interests to support his statements.
This is America, so you know what happens next. SG Interests sued. In a complaint filed in Delta County, Colorado filed by attorney William Zimsky of Durango firm Abadie & Schill PC, SG Interests levied a claim of libel. They called out this portion of Kolbenschlag's statement as false, without explaining how it is false:
SGI . . .was actually fined for colluding (with GEC) to rig bid prices and rip off American taxpayers
SG Interests' complaint goes on to call out Kolbenschlag's public relations experience and suggest that he brought his experience to bear to smear SG Interests, and demanded an unspecified amount of damages.
This is a classic SLAPP suit — a company suing an environmental activist to retaliate and suppress critical comments. SG Interests will no doubt assert that Kolbenschlag's comment was false because, to be technical, the Department of Justice did not "fine" SG Interests for bid rigging. Instead, the Department of Justice sued SG Interests for bid-rigging, and SG Interests settled the case for a $275,000 payment and a bid monitoring program, which the government characterized as "requiring" SG Interests to pay money to resolve a bid-rigging claim.
SG Interests' claim is bogus in several ways. First, there's the substantial truth doctrine. Under that rule, if a statement is substantially true — if the "gist" or "sting" of it is true, and any inaccuracies do not materially alter the impact of the statement — it's not defamatory even if some details are inaccurate. Here, though technically the Department of Justice did not "fine" SG Interests for bid-rigging, it did file a federal antitrust action against them for bid-rigging, leading to SG Interests paying a $275,000 settlement and consenting to bid monitoring. Now, a civil settlement isn't an finding of fault or admission of guilt, but particularly given the colloquial flexibility of the term "fine" being used in the Facebook comments to a newspaper article, Kolbenschlag has a very strong argument that his statement was substantially true. That argument is strengthened substantially by the fact that Kolbenschlag linked the Department of Justice's press release in the comment, so that the reader could immediately see that what he was referring to as a "fine" was actually a settlement. In short, SG Interests' theory of defamation is highly questionable.
Second, SG Interests' theory of damages is preposterous. Their theory, necessarily, is that even though the United States Department of Justice sued them for antitrust violations for alleged bid-rigging and they settled the suit for $275,000 and the Department of Justice publicized the suit and the settlement, their reputation was harmed when a Facebook comment on a newspaper article — one of only three on the article — characterized that as a "fine." That's ridiculous.
This is plainly a harassment suit. Kolbenschlag is vigorously defending the suit, as he should — you can contribute a few bucks if you like. A motion to dismiss is imminent. Unfortunately Colorado doesn't have an anti-SLAPP statute, but the circumstances here are such that Kolbenschlag may well be able to get out on a plain-vanilla motion to dismiss.
Perhaps SG Interests had a valid defense to the antitrust suit, and only settled because the cost of defending it exceeded the cost of settling it. It could have said so. SG Interests' reputation should suffer substantially here — not because of its enforcement history, but because of the thuggish, vexatious, censorious behavior of the company and its attorney William Zimsky.
Last 5 posts by Ken White
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