Judge allows case over HuffPo ownership to go forward, adds fraud claim

In a major development in the bitter court fight over the founding of the Huffington Post, a New York judge has for the second time refused the request of media moguls Arianna Huffington and Ken Lerer to dismiss the case. The new ruling also expands the scope of the case to include claims of fraud and unjust enrichment.

Thursday’s ruling comes as part of a case that begin in early 2011 when two Democratic political operatives, Peter Daou and James Boyce, filed a lawsuit stating that they had presented the idea for HuffPo in 2004. The pair claim that Huffington and Lerer then cut them out of the process, launching the site in 2005 and claiming the idea as their own.

In October 2011, New York Supreme Court Judge Charles Ramos threw out seven of eight claims in the case but allowed one claim — based on the state claim of idea misappropriation — to go forward. Since then, the parties have been wrangling over procedural issues and Daou and Boyce filed an amended complaint.

In addressing the amended complaint, Ramos allowed the idea theft claim to go forward as well as those for fraud and unjust enrichment; he tossed a fourth claim for breach of implied contract.

“Plaintiffs have adequately alleged that defendants took the information that plaintiffs provided, secretly shared it with another person, camouflaged the origin to make it appear as it came from that other person and, in effect, stole the idea and developed it with that other person,” Ramos wrote in letting Daou and Boyce go forward with the fraud claim.

In the same ruling, Ramos rejected Daou and Boyce’s request to subpoena the CEO of AOL, Tim Armstrong, rejecting arguments that Armstrong had essential knowledge about the founding of the Huffington Post. AOL bought the Huffington Post for $315 million in the spring of 2011.

Today’s ruling does not mean that Daou and Boyce have won the case. Instead, it means they have cleared a crucial procedural hearing and, thanks to the added claims, can proceed to a trial with a stronger hand.

“The court has made only a preliminary decision based solely on the uncontradicted allegations of the complaint and without any consideration of the proven facts,” a Huffington Post spokeswoman said. “As we have said from day 1, there is no merit to these allegations. They are make believe. With this ruling, we will now be able to move for summary judgment and lay out the actual evidence in this case. We look forward to the opportunity to present the full record to the court.”

Here’s the ruling:

Order upholding HuffPo complaint.pdf by

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This story was updated at 8:30 p.m. ET with a statement from the Huffington Post and at 9:30 p.m. ET with a slightly updated version of the statement from the Huffington Post.