Dairy Stores, Inc. v. Sentinel Publishing Co.

GARIBALDI, J.,

concurring.

The plaintiff in this case has pursued a cause of action for defamation. The majority recognizes, however, that the cause of action could also be for product disparagement. Ante at 133. (Indeed, the majority assumes that the articles were not only defamatory, but also false and disparaging (ante at 135)). I find that plaintiff’s cause of action is solely one for product disparagement. I join in the Court’s judgment because I am satisfied that the requirement of actual malice should be applied in a product disparagement case.

I

Product disparagement and defamation are two distinct torts. Although they sometimes overlap, there are important differences between them that arise primarily from the unique interests that they are intended to protect. Product disparagement protects injured plaintiffs, corporate or individual, by compensating them for pecuniary harm caused by false statements about their products. Defamation protects those plaintiffs’ good name and character by compensating them for damage to their reputations. Succinctly stated, “[djefamation of a corporation injures the reputation of the corporation: product disparagement injures the reputation of its products.” Note, “Corporate Defamation and Product Disparagement: Narrowing the Analogy to Personal Defamation,” 75 Colum.L.Rev. 963, 969 (1975) [hereinafter cited as Corporate Defamation Note]. For example, if a defendant declares that a company refuses to pay its debts, the reputation of the company will be damaged, but *159 its ability to sell its product will not be. The statement is defamatory, but it does not disparage a product. Diplomat Elec. Inc. v. Westinghouse Elec. Supply Co., 378 F.2d 377 (5th Cir.1967). In contrast, if a defendant says that a company’s product is of poor quality, its sales will be hurt, but public perception of its integrity and its reputation will not be affected. The statement disparages a product, but it is not defamatory. Steak Bit of Westbury, Inc. v. Newsday, Inc., 70 Misc. 2d 437, 438 , 334 N.Y.S.2d 325, 328 (Sup.Ct.1972).

The elements of proof for product disparagement are much more stringent than those for defamation. 1 Therefore, courts generally have been reluctant to find that a disparaging statement that merely criticizes a product is also defamatory. “[Djefamation is found only where the imputation fairly implied is that the plaintiff is dishonest or lacking in integrity, or that he is deliberately perpetrating a fraud upon the public by selling a product which he knows to be defective.” W.P. Keeton, D. Dobbs, R. Keeton, D. Owen, Prosser and Keeton on Torts, 965 (5th ed.1985). Thus, unless the disparaging statement explicitly imputes to the corporation fraud, deceit, dishonesty, or reprehensible conduct in relation to the product, courts will not deem a merely critical statement to be defamatory. Zerpol Corp. v. DMP Corp., 561 F.Supp. 404, 409 (E.D.Pa. 1983), citing National Refining Co. v. Benzo Gas Motor Fuel *160 Co., 20 F.2d 763, 771 (8th Cir.), cert. denied, 275 U.S. 570 , 48 S.Ct. 157 , 72 L.Ed.2d 431 (1927).

In this case, one would have to read a great deal into Sentinel’s articles to find a statement implying such fraud, deceit, dishonesty, or reprehensible conduct on Krauszer’s part. Sentinel’s statements were merely about Krauszer’s product and affected only Krauszer’s ability to sell that product. Krauszer’s real concern was that its sales of bottled water and other products were hurt by the articles, precisely the type of injury for which a disparagement action is designed to compensate. Given the high standard that courts impose, I do not find Sentinel’s statement critical of Krauszer’s product to be defamatory. Thus, I need not reach the issue of what a corporate plaintiff in a defamation action must prove in order to receive damages from a media defendant. 2

II

In the urban and highly-industrialized state of New Jersey, there have been surprisingly few court decisions expressly involving suits for product disparagement. See System Operations v. Scientific Games Dev. Corp., 555 F.2d 1131 , 1140 (3d Cir.1977); Klein v. Millside Farms, 8 N.J. 240 (1951); Vaccaro v. DePace, Inc., 137 N.J.Super. 512 (Law Div.1975). For the closely-related tort of slander of title, see Lone v. Brown, 199 N.J.Super. 420 (App.Div.1985), certif. vacated, 103 N.J. 480 (1986); Wendy’s of South Jersey, Inc. v. Blanchard Manage *161 ment Corp. of New Jersey, 170 N.J.Super. 491 (Ch.Div.1979); Rogers Carl Corp. v. Moran, 103 N.J.Super. 163 (App.Div. 1968); Frega v. Northern New Jersey Mortg. Ass’n, 51 N.J.Super. 331 (App.Div.1958); Andrew v. Deshler, 45 N.J.L. 167 (E. & A. 1883).

In Andrew v. Deshler, this Court set forth the elements of the tort of product disparagement under New Jersey law as (1) publication (2) with malice (3) of false allegations about the plaintiff’s product or property (4) that cause special damages (pecuniary harm). 3 45 N.J.L. at 167 . These elements are substantially identical to the cause of action for product disparagement set forth in the Second Restatement:

One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if

(a) he intends for publication of the statement to result in harm to interests of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and

(b) he knows that the statement is false or acts in reckless disregard of its truth or falsity. [Restatement (Second) of Torts § 623AJ

Imposing this common-law actual malice standard on a plaintiff in a product disparagement action against a media defendant represents a proper accommodation between the public’s right to a free and uninhibited press and the plaintiff's right to recover for injury to its product. To overcome a media defendant’s strong constitutional right to print the news, a plaintiff must have a substantial countervailing interest such as the *162 right of a private figure to his or her reputation and good name. Sisler v. Gannett Co., Inc., 104 N.J. 256 (1986) (Garibaldi, J., concurring). A commercial entity’s economic interest in the reputation of its product is not nearly as significant as an individual’s interest in his or her reputation. See Bose Corp. v. Consumer’s Union of U.S., Inc., 508 F.Supp. 1249, 1270 (D.Mass.1981), rev’d, 692 F .2d 189 (1st Cir.1982), aff’d, 466 U.S. 485 , 104 S.Ct. 1949 , 80 L.Ed.2d 502 (1984). 4 Generally, a manufacturer or seller seeks public exposure for its product. By placing its products on the market, it invites examination and criticism, and has access to advertising further to explain and defend them.

In addition, the public has a substantial interest in gaming information about the quality and character of products. As the Supreme Court has said repeatedly, the First Amendment is designed to protect the reception of information as well as its publication. See Virginia Bd. of Pharmacy v. Virginia Consumer Council, 425 U.S. 748, 757 , 96 S.Ct. 1817, 1823 , 48 L.Ed. 2d 346, 355 (1976); Procunier v. Martinez, 416 U.S. 396 , 94 S.Ct. 1800 , 40 L.Ed.2d 224 (1974); Pell v. Procunier, 417 U.S. 817 , 94 S.Ct. 2800 , 41 L.Ed.2d 495 (1974). News reports that products are ineffective, dangerous, or even mislabeled are not merely useful, they are vital to citizens in a complex society *163 who cannot begin to understand, let alone evaluate, every product on the market. See Steaks Unlimited, Inc. v. Director, 623 F.2d 264 (3d Cir.1980). As one court has stated:

The public’s interest in obtaining information of this type is perhaps even greater than the corresponding interest in personal defamation actions, the interest in obtaining information about other people. Information obtained from product commentators often relates to health or safety problems in consumer products____ It would be unfortunate indeed if the threat of product disparagement actions stifled the free flow of such information. [Bose Corp, v. Consumers Union, 508 F.Supp. 1249, 1271 (D.Mass.1981) (citations omitted).]

To encourage the media to publish this consumer information it may be necessary to “protect some falsehood in order’ to protect speech that matters.” Gertz v. Welch, 418 U.S. 323, 341 , 94 S.Ct. 2997, 3007 , 41 L.Ed. 2d 789, 806 (1974).

III

Therefore, applying the vital and more appropriate New Jersey common law of product disparagement to the present case, I conclude that the plaintiff has failed to prove the actual malice and special damages necessary for it to recover. Furthermore, I agree with the majority that the independent expert (Paterson Clinical Laboratory) retained by Sentinel may properly be considered an integral part of news gathering and hence may be treated as a media defendant in this action. Accordingly, I concur in the Court’s judgment and would affirm the judgment of the Appellate Division.

Before the Supreme Court’s decision in New York Times v. Sullivan, 376 U.S. 254 , 84 S.Ct. 710 , 11 L.Bd.2d 186 (1964), state courts found defendants who intentionally published defamatory statements strictly liable or liable without consideration of fault. W.P. Keeton, D. Dobbs, R. Keeton, D. Owen, Prosser and Keeton on Torts § 804 (5th Ed.1984). Disparagement law was much less generous, requiring a showing of recklessness in most cases and negligence in many others. Id. at 969-70. In disparagement, truth was presumed and the plaintiff had to prove falsity, while in defamation falsity was presumed and the defendant had to show it was true. A disparagement plaintiff had to show special damages; in defamation, damages were presumed. Similarly, a disparagement plaintiff had to show that the plaintiff intended to cause injury; a defamation plaintiff did not. See Corporate Defamation Note, supra, 75 Colum.L.Rev. at 969-70.

I do not support, however, the majority’s position that the common law privilege of "fair comment” extends to factual statements. Along with the majority of states, I find that the "fair comment” privilege is relevant only to opinion. See Restatement (Second) of Torts § 606 (1977). The Second Restatement omits all reference to "fair comment" doctrine. Cf. Restatement of Torts § 606-10 (1934) (discussion of the "privileged criticism” doctrine). In Kotlikoff v. Community News, 89 N.J. 62, 65 (1982), we concluded "that the common law privilege of fair comment is no longer relevant” after Gertz v. Welch, 418 U.S. 323 , 94 S.Ct. 2997 , 41 L.Ed.2d 789 (1974). Hence, the doctrine of fair comment is inapplicable to this plaintiffs defamation action and offers no support for the majority's holding.

Andrew v. Deshler involved an action for slander of title. In New Jersey, the elements of product disparagement and slander of title are identical. System Operations v. Scientific Games Dev. Corp., 555 A.2d 1131 , 1140 (3d Cir.1977). Prosser treats the two actions together tinder the label "injurious falsehood.” Prosser on Torts (5th Ed.), supra, at 962-77. The Second Restatement of Torts takes a similar position. Restatement (Second) of Torts § 623-26. Section 624 of the Second Restatement entitled "Disparagement of Property — Slander of Title," adopts the rules of section 623A, "Liability for Publication of Injurious Falsehood — General Principle.” The applicability of section 623A to product disparagement is made explicit by section 626, which provides that rules as to liability for publication of injurious falsehood stated in section 623A apply to the publication of matter disparaging the quality of another’s land, chattels or intangible things.

In Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485 , 104 S.Ct. 1949 , 80 L.Ed.2d 502, 525 (1984), the Supreme Court, addressing only the issue of proof of actual malice, specifically expressed no view whether the New York Times v. Sullivan, 376 U.S. 254 , 84 S.Ct. 710 , 11 L.Ed.2d 686 (1964), standard of “actual malice” applies to product disparagement cases. The Appellate Division in its per curiam opinion in this case held that the Court in Bose did implicitly extend the New York Times v. Sullivan "actual malice” test to product disparagement.

Here the primary defendant is a newspaper; hence, I do not address whether the actual malice standard of proof should be imposed on a plaintiff seeking to recover for a disparaging statement made by a competitor. There may be additional limited commercial speech considerations in such cases. For a discussion of the relationship of product disparagement by competitors and non-competitors to the First Amendment, see Corporate Defamation Note, supra.