Forbes Inc. and William P. Barrett v. Granada Biosciences, Inc. and Granada Foods Corporation

IN THE SUPREME COURT OF TEXAS

IN

THE SUPREME COURT OF TEXAS

N o .

01-0788

Forbes Inc. And William P.

Barrett

v.

Granada Biosciences, Inc.

And Granada Foods Corporation

On Petition for Review from

the

Court of Appeals for the

Fourteenth District of Texas

Argued on January 15, 2003

Justice O = Neill delivered the opinion of the

Court, in which Chief Justice

Phillips , Justice Hecht, Justice

Owen, Justice Jefferson, Justice Smith, Justice Wainwright, and Justice Brister

joined.

Justice Schneider did not participate

in the decision.

Granada Biosciences, Inc. and Granada Foods Corporation sued Forbes,

Inc., publisher of Forbes magazine, and writer William P. Barrett for

business disparagement. The trial

court rendered summary judgment for Forbes and Barrett, and the court of appeals

reversed. 49 S.W.3d 610 . We hold that the court of appeals erred

in reversing the trial court = s

summary judgment because the plaintiffs produced no evidence that Forbes and

Barrett acted with actual malice in publishing the article that is the subject

of this controversy. Accordingly,

we reverse the court of appeals =

judgment and render judgment for Forbes and Barrett.

I

In

its issue dated November 11, 1991, Forbes published an article entitled A The

Incredible Shrinking Empire. @ [1] The article, authored by Barrett,

focused on the financial condition of the Granada Corp., a privately held

company, and on its chairman, David Eller.

Granada Corp. was the parent of a number of other private and public

entities. While the Granada

organization consisted of dozens of entities, the article only named two of the

public entities, Granada Foods Corp. ( GFC ) and Granada

Biosciences, Inc. ( GBI ). In general, the Granada entities were

engaged in developing and applying advanced technology in the area of

agriculture, primarily cattle production.

The article noted that the Wall Street Journal had described

Granada Corp. as a A corporate

star[] of the future @

in 1989, and that the organization, under Eller = s

stewardship, had garnered much favorable publicity. But, the article said, A there

is less to Granada than meets the eye.

Actually, its total revenues, $1 billion as recently as 1988, will

scarcely be $200 million for 1991.

Profits: zilch. Granada = s

work force has shrunk to below 900 from 2,200; its cattle herd has dwindled to

25,000 from 1 million. @ The article identified GFC and GBI as the two publicly

traded stock companies within the Granada organization, and said that they were

A so

broke they haven = t

been able to publish their 1990 annual reports. @ It went on to say that A Granada

is beset with a series of serious shareholder lawsuits, @

including one filed by A Fort

Worth near-billionaire Edward Bass. @ It is undisputed that, while a person

with that name had sued one of the Granada entities, it was not the A Fort

Worth near-billionaire. @ Furthermore, the article described a

number of other signs of serious financial trouble: A Possibly

anticipating a bankruptcy filing, former Granada employees say officials in

recent months have moved some farm equipment and vehicles off Granada books and

gotten rid of backup documentation. @

According

to Barrett = s

affidavit, he used the term A Granada @

in a generic sense to describe the various entities controlled by Eller, and

when he A intended

to specifically address Granada Biosciences, Inc. or Granada Food Corporation,

[he] did so by name. @ The day the article was released, the

shares of GBI and GFC

dropped precipitously, and trading was permanently suspended in early

1992.

GBI , GFC , Eller, and his wife,

Linda, sued Barrett, Forbes, Inc., and Cheryl Munke ,

an employee of a former Granada affiliate, for damages allegedly caused by the

article = s

publication. Forbes and Barrett

(collectively A Forbes @ )

filed joint motions for summary judgment, which the trial court granted. On appeal, the Seventh District court of

appeals, to which the case was transferred, reversed, holding that Forbes = s

summary judgment motion did not address the plaintiffs =

business disparagement claims.

Granada Biosciences, Inc. v. Barrett , 958 S.W.2d 215, 221 (Tex.

App. B Amarillo

1997, pet. denied). [2] On remand, Forbes filed a renewed and

supplemental summary judgment motion under Rule 166a(c) and( i ), which specifically addressed the plaintiffs =

business disparagement claims. The

trial court again granted summary judgment in Forbes = s

favor, but the Fourteenth District court of appeals reversed, concluding that

several fact issues precluded summary judgment. The court determined that there were

fact issues concerning whether the article as a whole and several specific

passages in the article were false and disparaging. 49 S.W.3d at 621-22 . The court agreed with Forbes = s

contention that, to recover on their business disparagement claims, the

plaintiffs were required to satisfy the constitutional actual-malice standard

the United States Supreme Court established in New York Times v.

Sullivan , 376 U.S. 254 (1964), but held that a fact issue on Forbes = s

state of mind at the time of publication precluded summary judgment. We hold that GBI and GFC presented no evidence

of actual malice under the New York Times standard, and thus reverse the

court of appeals =

judgment.

II

To

prevail on a business disparagement claim, a plaintiff must establish that (1)

the defendant published false and disparaging information about it, (2) with

malice, (3) without privilege, (4) that resulted in special damages to the

plaintiff. Hurlbut v. Gulf Atl .

Life Ins. Co. , 749 S.W.2d 762, 766 (Tex. 1987). A business disparagement claim is

similar in many respects to a defamation action. Id . The two torts differ in that defamation

actions chiefly serve to protect the personal reputation of an injured party,

while a business disparagement claim protects economic interests. Id . In Hurlbut , a suit brought by an insurance agent against

his former employer, we noted that a business disparagement defendant may be

held liable A only

if he knew of the falsity or acted with reckless disregard concerning it, or

if he acted with ill will or intended to interfere in the economic interest

of the plaintiff in an unprivileged fashion . @ Id . (emphasis added) (quoting Restatement (Second) of Torts '

623A, cmt . g (1977)).

The

court of appeals noted in this case that GBI and GFC did not dispute Forbes = s

contention that they were A public

figures for the purpose of discussing their respective financial statuses, @

a conclusion that GBI and GFC do not challenge here. 49 S.W.3d at 615 n.2. The court then held that ill will or

intent to interfere with the plaintiff = s

economic interest will not suffice to establish malice in a business

disparagement claim brought by a public figure against a media defendant. Id . at 618. Instead, the court held that the

constitutional interests at stake B

A the

conflict between constitutionally-protected free expression and a state = s

power to award damages based on a defendant = s

statements @ B

require proof of actual malice under the standard the United States Supreme

Court articulated in New York Times . Id . at 618. Accordingly, the court held that

GFC and GBI must establish

that Forbes published the article with knowledge that it made false statements

about them, or with reckless disregard as to the statements =

truth. Id . In this Court, GBI and GFC do not challenge the

court of appeals =

application of the constitutional malice standard. We thus assume without deciding that the

New York Times actual-malice standard applies in a public figure = s

business disparagement suit against a media defendant. [3]

III

The

actual malice standard articulated in New York Times fortifies our

Constitution = s

guarantees of free speech and a free press. New York Times , 376 U.S. at

254 . The relatively demanding

standard honors our A profound

national commitment to the principle that debate on public issues should be

uninhibited, robust, and wide-open, and that it may well include vehement,

caustic, and sometimes unpleasantly sharp attacks @

on public figures. New York

Times , 376 U.S. at 270 . The

standard recognizes that A erroneous

statement is inevitable in free debate, and . . . it must be protected if the

freedoms of expression are to have the > breathing

space =

that they > need

. . . to survive. = @ Id . at 271 (quoting N.A.A.C.P . v. Button , 371 U.S. 415, 433

(1963)). Thus, public figures

cannot recover for damaging statements made about them absent proof of actual

malice. New York Times , 376

U.S. at 279-80 ; WFAA -TV, Inc. v. McLemore , 978 S.W.2d 568, 571

(Tex. 1998).

Actual

malice, in this context, A is

a term of art. @ It is not ill will, spite, or evil

motive. Huckabee v. Time Warner , 19 S.W.3d 413, 420

(Tex. 2000) (citing Casso v. Brand , 776

S.W.2d 551, 558 (Tex. 1989)).

Instead, A actual

malice @

requires proof that the defendant made a statement A > with

knowledge that it was false or with reckless disregard of whether it was true or

not. = @

Huckabee , 19 S.W.3d at 420 (quoting New York

Times , 376 U.S. at 279-80 ). To

establish reckless disregard, a public-figure plaintiff must prove that the

defendant A > entertained

serious doubts as to the truth of his publication. = @ Huckabee , 19 S.W.3d at 420 (quoting St. Amant v. Thompson , 390 U.S. 727, 731 (1968)). Reckless disregard is a subjective

standard, focusing on the defendant = s

state of mind. Bentley v. Bunton , 94 S.W.3d 561, 591 (Tex. 2002). Mere negligence is not enough. Id . Rather, the plaintiff must establish

A > that

the defendant in fact entertained serious doubts as to the truth of his

publication, = @

or had a A > high

degree of awareness of . . . [the] probable falsity = @

of the published information.

Id . (quoting Harte -Hanks Comm., Inc. v. Connaughton , 491 U.S. 657, 688 (1989)). Constitutional malice generally consists

of A > [c] alculated falsehood. = @

Bunton , 94 S.W.2d at 591 (quoting Garrison

v. Louisiana , 379 U.S. 64, 75 (1964)).

When the defendant = s

words lend themselves to more than one interpretation, the plaintiff must

establish either that the defendant knew that the words would convey a

defamatory message, or had reckless disregard for their effect. See Bunton , 94 S.W.3d at 603 .

Actual

malice must be proved by clear and convincing evidence at trial. Huckabee , 19 S.W.3d at 420 . However, we have declined to adopt the

clear-and-convincing standard for summary judgment purposes, because its

application would A suggest[]

that the trial court must weigh the evidence. @ Id . at 421-22. Accordingly, Forbes was entitled to

summary judgment unless the record reveals a fact issue as to actual malice.

IV

In

its no-evidence summary judgment motion, Forbes asserted that there was no

evidence of actual malice to support the plaintiffs =

claims. See Tex. R. Civ . P.

166a( i ).

In reviewing a no‑evidence summary judgment motion, we examine the record

in the light most favorable to the nonmovant ; if the

nonmovant presents more than a scintilla of evidence

supporting the disputed issue, summary judgment is improper. King Ranch v. Chapman , 118 S.W.3d

742, 750 (Tex. 2003); Wal‑Mart Stores, Inc. v. Rodriguez , 92 S.W.3d 502,

506 (Tex. 2002). A no-evidence

summary judgment is improper if the respondent brings forth more than a

scintilla of probative evidence to raise a genuine issue of material fact. Tex. R. Civ .

P. 166a( i ); Wal-Mart , 92 S.W.3d at

506 . A Less

than a scintilla of evidence exists when the evidence is > so

weak as to do no more than create a mere surmise or suspicion =

of a fact. @

King Ranch , 118 S.W.3d at 751 (quoting Kindred v. Con/ Chem , Inc. , 650 S.W.2d 61, 63 (Tex. 1983)). More than a scintilla of evidence exists

if it would allow reasonable and fair-minded people to differ in their

conclusions. King Ranch , 118

S.W.3d. at 751 (citing Merrell Dow Pharms ., Inc. v.

Havner , 953 S.W.2d 706, 711 (Tex. 1997)). Thus, if GBI and GFC presented evidence

creating more than a surmise or suspicion that Forbes published the article with

actual malice, summary judgment is improper. The court of appeals concluded that fact

issues about Forbes = s

state of mind at the time of publication precluded summary judgment. 49 S.W.3d at 627 . We disagree.

A

The

court of appeals rested its decision, in large part, on evidence suggesting that

Barrett misled Eller into believing that he would have an opportunity to review

the article for accuracy before its publication. 49 S.W.3d at 626 . In his affidavit, Eller stated that when

Barrett first contacted him about writing the article, Barrett agreed to let him

review it before it was published.

On Friday, October 25, 1991, Eller received a copy of A what

[Barrett] said was a draft of the article. @ According to Eller, he read the article

that day and telephoned Barrett, telling him that the article A contained

innumerable false statements and clearly misleading and false innuendos. @ Eller = s

affidavit maintains that he was misled in the conversation into believing that

the article could still be corrected, and that he told Barrett he would send him

a letter identifying the purported inaccuracies as quickly as possible. Eller transmitted the letter to a

courier for delivery by late the next day.

According to the court of appeals, this evidence A creates

a fact question as to Barrett = s

state of mind at the time of publication, provided that the article was not

published until after Barrett = s

representation. @ Id . at 625 (emphasis added).

The

actual malice inquiry focuses on the defendant = s

state of mind at the time of publication.

See Bose Corp. v. Consumers Union of United

States, Inc. , 466 U.S. 485, 512 (1984). It is undisputed, however, that the

article had been A locked

up @

B printed and mailed to subscribers B

on October 21st, before Barrett = s

October 25th conversation with Eller and before Forbes received Eller = s

letter. Nevertheless, the court of

appeals held that the record presented a fact issue on malice A [b] ecause the summary judgment proof raises a question as to

whether the October 25 conversation took place before the article was

published . @ 49 S.W.3d at 627 (emphasis added). The court concluded that the

conversation may have taken place before the article was published based on

authority holding that, for limitations purposes, A > publication

is complete on the last day of the mass distribution of copies of the printed

matter. = @ Id . at 626 (quoting Holloway

v. Butler , 662 S.W.2d 688, 692 (Tex. App. B Houston

[14 th Dist.] 1983, writ ref = d

n.r.e .)).

The

court of appeals erred in applying the Holloway limitations standard in

this context. Determining the date

of an article = s

publication for limitations purposes involves considerations entirely different

from those that apply when gauging whether actual malice exists at the time of

publication. In Holloway ,

the plaintiff sued for libel based upon an article that appeared in Texas

Monthly magazine. 662 S.W.2d at

690 . Like most mass-media

publishers, the defendant distributed its magazine through the mail and by

private delivery in the month prior to the month indicated on the issue

cover. Accordingly, distribution of

the March 1977 issue occurred on February 17 and 18, 1977. By special order, though, some back

issues were sold after February 22, 1977.

Plaintiff filed suit on February 22, 1978. In response to the defendant = s

assertion of limitations, the plaintiff relied on the A multiple-publication

rule, @

which recognizes a new cause of action each time a copy of the allegedly

libelous publication is sold.

Noting that such a rule would allow stale claims, encourage multiple

suits, and create a number of other problems, and recognizing that mass

publication of a single defamatory statement constitutes, in effect, a single

wrong, the court adopted what it referred to as the A single-publication

rule. @ Id . at 691. Under the court of appeals =

articulation of that rule, publication is complete A on

the last day of the mass distribution of copies of the printed matter @

because A [ i ]t is that day when the publisher, editors and authors have

done all they can to relinquish all right of control, title and interest in the

printed matter. @ Id . at 692. The court emphasized that defining

publication in this manner A provides

ample time for a diligent plaintiff to pursue a cause of action for libel and

also allows full recovery for any damages suffered. @ Id .

The

single-publication rule = s

definition of the publication date for limitations purposes is clearly designed

to protect publishers from repeated liability based on old publications that

might be reprinted or back ordered.

See Robert D. Sack, Sack

on Defamation: Libel, Slander, and Related Problems '

7.2 (2003). It has nothing to do

with determining the publisher = s

state of mind at the time of publication.

Applying the single-publication rule in this context could lead to

virtually uncontrollable liability and potentially absurd results. For example, a media defendant could be

held liable for knowingly publishing false information even if it did not become

aware of the error until the article has been printed and mailed to subscribers

or otherwise distributed. Such a result would have an

impermissible A > chilling =

effect . . . antithetical to the First Amendment = s

protection of true speech on matters of public concern. @ Philadelphia Newspapers, Inc. v.

Hepps , 475 U.S. 767, 778 (1986) (holding that

application of state law that did not require private media defamation defendant

to prove falsity violated First Amendment). Moreover, the focus of the actual-malice

inquiry is the defendant = s

state of mind during the editorial process. See Herbert v. Lando , 441 U.S. 153 (1979). Evidence concerning events after an

article has been printed and distributed, has little, if any, bearing on that

issue. Because the Forbes article

was printed and in distribution before Eller = s

October 25th conversation with Barrett,

the conversation cannot constitute evidence of actual malice at the time

of publication.

B

During

Barrett = s

October 25th conversation with Eller, he acknowledged that he had that day

become aware that he had misidentified the Edward Bass that had sued one of the

Granada entities. [4] GBI and GFC argue that this constitutes some evidence of actual

malice. For the same reason that

any misleading statements Barrett may have made in the October 25th conversation

are no evidence of malice, his acknowledgment that he had become aware of the

Bass error that day is no evidence of actual malice.

C

Finally,

the plaintiffs contend that the article made a number of negative statements

about A Granada @

that Forbes was aware were untrue as to GFC and GBI . By failing

to specifically distinguish the public corporations from other entities within

the Granada group, they argue, Forbes knowingly or recklessly juxtaposed true

statements to create the misleading impression that they applied to GFC and GBI . They argue that Barrett = s

affidavit itself provides some evidence of malice because he testified that he

used the term A Granada @

to describe A the

organization of subsidiaries, affiliates, limited partnerships, joint ventures

and other business organizations that were managed or otherwise under the

direction and control of David Eller, @

a group that includes GFC and GBI . Because

Barrett also testified that certain of the generic Granada references were not

intended to apply to GBI or GFC , the plaintiffs maintain that the article is admittedly

false with respect to those statements.

In essence, the plaintiffs contend that Forbes should have included

qualifying language specifically excluding GBI and

GFC whenever the article referred to A Granada. @

Read

fairly, Barrett = s

affidavit establishes, at most, that Forbes was A > guilty

of using imprecise language in the article B

perhaps resulting from an attempt to produce a readable article. = @ Bose ,

466 U.S. at 492 (quoting Bose Corp. v.

Consumers Union of United States, Inc. , 692 F.2d 189, 197 (1 st

Cir. 1982)). Both we and the United

States Supreme Court have repeatedly held that a media defendant = s

poor choice of words or content, without more, does not amount to actual

malice.

In

Turner v. KTRK Television, Inc. , 38 S.W.3d 103

(Tex. 2000), for example, we considered a political candidate = s

contention that a television news story suggesting that he had participated in a

multi-million dollar insurance scam defamed him. Turner had drafted a will for a man

named Foster shortly before Foster disappeared under suspicious

circumstances. Foster, the target

of several criminal investigations, signed the will three days before he was

reported to have drowned.

Foster = s

life had been insured for more than $1.7 million, and American authorities

learned some time later that he was alive in a Spanish prison. KTRK , a

Houston television station, broadcast a story about the connection between

Turner and Foster in the midst of Turner = s

campaign for mayor of Houston. The

story omitted several critical contextual facts and juxtaposed others in a

misleading manner in the course of suggesting that Turner had engaged in

unethical conduct. We therefore

held that the broadcast as a whole conveyed a false and defamatory message. Id . at 119. But we rejected Turner = s

contention that the story = s

discussion of the timing of his work on the will was evidence of actual

malice. Id . at 121. We agreed that a reasonable viewer could

take the segment to mean that A Turner

> drew

up =

the will three days before Foster disappeared. @ Id . But we concluded that even obviously

misleading statements, without more, were not enough to constitute clear and

convincing evidence of actual malice:

We

agree that there was a discrepancy in the segment = s

language and that it is possible that [the reporter] cleverly manipulated this

language to deceive viewers. But it

is equally possible that [the reporter] simply failed to choose his words with

proper precision, that is, by stating that Foster A drew

up @

rather than A signed @

the will (outside of Turner = s

presence) three days before he disappeared. Because there is no other evidence that

[the reporter] knew or strongly suspected that this segment would mislead

viewers, its lack of clarity alone is not clear and convincing evidence of

actual malice.

Id .

at 121-22.

In

Huckabee , we affirmed summary judgment granted

to a media defamation defendant that had been sued for statements in a

documentary about four southeast Texas cases in which family courts granted

custody of a child to the father after the mother accused him of child

abuse. Huckabee , 19 S.W.3d at 417 . One of the judges who presided over two

of the custody disputes sued Time-Warner, alleging that the documentary omitted

key information in an effort to depict him as biased or corrupt. We acknowledged that a publisher might

present such an incomplete or unbalanced picture of the facts as to constitute

evidence of actual malice.

Id . at 426. On the

facts of that case, however, we held that the record presented no evidence of

actual malice, even though the story might have been misleading:

Although

the facts omitted might or might not have led a reasonable viewer to suspend

judgment or even to reach an opposite conclusion regarding Judge Huckabee = s

order, their omission did not grossly distort the story. At most, HBO = s

failure to capture accurately all the story = s

details suggests an error in judgment, which is no evidence of actual

malice.

Id.

Similarly,

in Bose , the Supreme Court considered a

manufacturer = s

claim that a Consumer Reports article describing a new Bose speaker system disparaged the product. The district court had ruled that the

article falsely stated as fact that A instruments

heard through the Bose system > tended

to wander about the room, = @

and rendered judgment for Bose , the manufacturer. Bose ,

466 U.S. at 488 . Applying the

New York Times =

actual-malice standard, the Supreme Court rendered judgment for the

publisher. The Court observed that

the circuit court correctly concluded A that

there is a significant difference between proof of actual malice and mere proof

of falsity. @ Id . at 511 (citations

omitted). The district court had

found that the writer = s

actual perception was that sound moved A along

the wall @

rather than A about

the room. @ Id . Nevertheless, the Court held that the

writer = s

choice of language,

though

reflecting a misconception, does not place the speech beyond the outer limits of

the First Amendment = s

broad protective umbrella . . . .

The statement in this case represents the sort of inaccuracy that is

commonplace in the forum of robust debate to which the New York Times

rule applies . . . . A Realistically,

. . . some error is inevitable; and the difficulties of separating fact from

fiction convinced the Court in New York Times [and other cases] to limit

liability to instances where some degree of culpability is present in order to

eliminate the risk of undue self-censorship and the suppression of truthful

material. @

Id .

at 513 (citations omitted).

Here,

Barrett was charged with the task of producing a readable article about an

extremely complicated network of business entities related to the Granada

Corp. While it would have been more

accurate for Forbes to identify the precise entities within that group to which

it was referring, Forbes = s

careless use of the generic A Granada @

is no evidence that Forbes entertained serious doubts as to the statements =

truth or had a high degree of awareness of their falsity. See Turner , 38 S.W.3d at

121 .

V

The

record before us presents no evidence that Forbes published defamatory

statements about GBI and GFC

with actual malice. Accordingly, we

reverse the court of appeals =

judgment and render judgment that the plaintiffs take nothing.

__________________________________________

Harriet

O = Neill

Justice

OPINION

DELIVERED: December 19, 2003

Appendix:

Forbes article

[1] The

article is attached as an Appendix to this opinion.

[2] The

Amarillo court affirmed the summary judgment as to all claims against Munke , and she is no longer a party. Granada Biosciences, Inc. , 958

S.W.2d at 222 . It also affirmed the

summary judgments as to the Ellers = claims.

Id . at 222-25.

[3] We note,

however, that the United States Supreme Court has applied the New York Times

standard in contexts other than defamation, applying it to an intentional

infliction of emotional distress claim, Hustler Magazine v. Falwell , 485 U.S. 46, 56 (1988), and to a product

disparagement claim, Bose Corp. v. Consumers Union of United States,

Inc. , 466 U.S. 485, 511-14 (1984).

[4] The error was corrected in a later issue of the

magazine.