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Judge Dismisses Cheyenne Firm’s $10 Million Defamation Lawsuit Against News Organizations

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James Steidl, ThinkStock

Wyoming Corporate Services of Cheyenne, which registers hundreds of paper corporations with some possibly involved in illegal activities, lost its bid to sue two news organizations for $10 million for allegedly defaming it in a January article, according to court documents.

“A fair reading of the 2014 Article as a whole does not, as WCS alleges, leave the impression that WCS actively facilitates these illegal activities, or even knows about the illegal activities of some of its clients,” Chief Judge Nancy Freudenthal wrote last week.

“The First Amendment does not allow litigants, like WCS, to seize upon minor inaccuracies in a publication to sue a publisher for defamation,” Freudenthal wrote when she granted CNBC LLC and Reuters America LLC their request to dismiss the case.

In January, CNBC reprinted almost verbatim an article by Reuters from June 2011 titled “Investigation unearths secret of the Great Plains” about firms like Wyoming Corporate Services that operate in Wyoming, Delaware and Nevada.

The Silicon Alley Inside online news service reran the story that summer. Wyoming Corporate Services sued and settled with the news service in 2012.

After CNBC republished the story in January, Wyoming Corporate Services filed its complaint, alleging the article defamed it by saying it abets shady, if not illegal, business activities, according to court records.

“The original article suggested that Wyoming was the Grand Cayman Islands, a haven for tax shelters,” the firm’s attorney Graham Norris said in March. “They’re going to be guilty by association if they work with a company that has had such terrible things said about it.”

But CNBC and Reuters America responded the court should dismiss the lawsuit because Wyoming Corporate Services’ claims did not rise to the definition of defamation including holding the company up to hatred, contempt, ridicule, shame, or cause it to be shunned or have an injured reputation.

Freudenthal agreed.

For example, she wrote Wyoming Corporate Services wasn’t defamed when the article discussed the number of companies registered at its offices, the presence of lots of mail boxes, the use of a “bulky copy machine,” and employing someone to answer calls.

The company’s change of address from Thomes Avenue in 2011 to Pioneer Avenue later does show a discrepancy, but that’s not defamatory, Freudenthal wrote.

And some of the statements in the article, such as the company offering paper or “shelf” companies, are substantially true and not defamatory, she wrote.

Freudenthal also looked at the firm’s claims that the article implied it aided some registered companies to commit criminal acts.

The article did not intend for people to infer Wyoming Corporate Services was aiding others in committing criminal acts, she wrote. “The Article makes repeated references to the fact that WCS has never done anything illegal, and that the production and sale of paper business is perfectly legal.”

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