Unpublished comments that an attorney allegedly made to a Forbes magazine reporter are the basis of a defamation suit that a Dallas businessman filed recently against two natural gas companies with which he formerly did business.
Dennis G. McLaughlin III alleges in his original petition in McLaughlin v. Duke Energy Trading and Marketing LLC and Duke Energy Field Services LLC, n/k/a DCP Midstream GP LLC that statements Houston solo John C. Wynne made to reporter Daniel Fisher constitute slander per se. According to the petition, the statements are “injurious to McLaughlin’s occupation and business operations and/or impute a crime was committed by McLaughlin.”
The suit, which McLaughlin filed on Jan. 5, is pending in the 270th District Court in Houston � the same court where, in 2001, Duke Energy Trading and Marketing (DETM) sued McLaughlin and three of his affiliated companies, alleging a number of causes of action, including fraud; breach of fiduciary duty; breach of contract; conversion; and libel, slander and business disparagement. [ See the petition.]
In its original petition in the 2001 suit, Duke Energy Trading and Marketing LLC v. McLaughlin, et al., DETM alleged that McLaughlin “originated a scheme to misappropriate funds from DETM through a fraudulent invoicing scheme” that caused DETM to pay twice for gas that it received from McLaughlin’s companies. As alleged in DETM’s petition, McLaughlin misappropriated about $26 million from DETM, which also named McLaughlin’s companies � Aurion Technologies Inc., ANG Holdings and GPR Holdings, formerly known as Aurora Natural Gas and Associated Products � as defendants in the 2001 suit.
With regard to the defamation claims, DETM alleged in its petition that McLaughlin and the companies made false allegations that DETM stopped paying amounts it owed for gas deliveries and that DETM was responsible for McLaughlin’s and his companies’ failure to make payments to suppliers.
McLaughlin alleges in the petition in his defamation suit against DETM and DCP Midstream that he “vigorously refuted and defended” against the allegations that DETM made in the 2001 suit. According to McLaughlin’s petition, DETM and McLaughlin settled the 2001 suit in February 2003 and released and waived all claims against each other. Wynne was one of DETM’s outside counsel for the 2001 suit and settlement.
As alleged in McLaughlin’s petition, Wynne made several inaccurate statements about the 2001 suit and McLaughlin to a Forbes reporter in December 2006. McLaughlin alleges in the petition that Wynne’s inaccurate statements included that McLaughlin and Aurora � a company McLaughlin founded in 1993 and for which he served as the chief executive officer until 2001 � had never refuted and defended the allegations in DETM’s suit. McLaughlin alleges in his petition that he vigorously refuted and defended the allegations DETM made.
McLaughlin further alleges in the petition that Wynne inaccurately stated that Aurora was a “ponzi scheme” and that McLaughlin’s mismanagement of Aurora was a cause of the company’s “collapse.”
“Duke was aware of the widely reported manipulation and subsequent fluctuation of the natural gas markets in 2000 and 2001 that led to the financial straits that eventually caused Aurora and other natural gas suppliers to cease operations,” McLaughlin alleges in the petition. McLaughlin also alleges that DETM knew or should have known that Aurora was not a “ponzi scheme,” as DETM entered into contracts with Aurora and received natural gas under those contracts for more than four years.
According to his petition, McLaughlin asked DETM to retract the false and defamatory statements that Wynne allegedly made to the Forbes reporter, but DETM didn’t do so. McLaughlin alleges in the petition that Forbes published an article on or about Dec. 20, 2006, that incorporated the false and defamatory statements. That article appeared online but a nearly identical article appeared in the Jan. 8 issue of Forbes.
The Forbes article is about Earth Biofuels, a small Dallas company trying to build a national chain of filling stations to dispense a brand of environmentally friendly diesel it calls “Bio Willie,” named after a shareholder, singer Willie Nelson. According to the article, McLaughlin is the chief executive of Earth Biofuels, and Fisher described McLaughlin’s “colorful background” in one paragraph of the article, but never quotes Wynne.
The term “Ponzi scheme” does not appear in the Forbes article, but those words do appear in DETM’s petition in its 2001 suit. DETM alleged in its petition that McLaughlin “intentionally misappropriated” funds from DETM in an attempt to keep his empire afloat. “As with all ponzi and kiting schemes, however, it demanded increasingly larger and continuous payments and was doomed to fail,” DETM alleged in its petition.
McLaughlin’s attorney, Bell Nunnally & Martin associate Neal J. Suit of Dallas, and Wynne, the attorney who allegedly made the statements that McLaughlin claims defamed him, decline comment on McLaughlin’s suit.
Randy Wheeles, DETM’s spokesman, says, “We don’t find this suit worthy to comment on.”
DCP Midstream does not believe McLaughlin properly named the company as a defendant in his suit, says Roz Elliott, a DCP Midstream spokeswoman. Elliott says Wynne did not represent DCP Midstream in the 2001 suit.
Fisher, the Forbes reporter, also declines comment. Kai Falkenberg, Forbes’ editorial counsel, says, “Our story on Earth Biofuels appeared in the Jan. 8 issue. It’s a matter of public record, but we don’t have any further comment.”
D. Bradley Kizzia of Dallas, a Strasburger & Price partner who represents clients in defamation suits but who is not involved in McLaughlin’s case, says, “It’s very unusual to see allegations based on alleged statements made to a reporter that are not published.”
By virtue of filing the suit, McLaughlin has made public the very statements that he alleges are defamatory but which have not been published, Kizzia says.
Kizzia says he’s sure there will be a “vigorous dispute” about whether Wynne even made the statements. “The fact that the statements were not published in the article raises a question about that,” he says.
But Kizzia also says that the fact the Forbes reporter did not specifically use the quotes that McLaughlin alleges are defamatory doesn’t necessarily mean the statements, if made, are not actionable.
Also, Kizzia says that if McLaughlin is a “limited purpose public figure” he must show that Wynne made the statements with malice. That means McLaughlin must show Wynne knew that the statements were false at the time he made them or had substantial doubts about the truth of the statements, but made them anyway, Kizzia says.