Amicus Curiae Brief — Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc.
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yr © No. 83-18
IN THE
Supreme Court Of The United States
OCTOBER TERM, 1983
DUN & BRADSTREET, INC.,
» Petitioner,
GREENMOSS BUILDERS, INC.,
Respondent.
ON WRIT OF CERTIORARI TO THE SUPREME
COURT OF THE STATE OF VERMONT
MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE
AND BRIEF AMICUS CURIAE IN SUPPORT OF
RESPONDENT GREENMOSS BUILDERS, INC.
WILLIAM E. MURANE
(Counsel of Record)
A. BRUCE JONES
HOLLAND & HART
2900 Anaconda Tower
555 Seventeenth Street
Post Office Box 8749
Denver, Colorado 80201
Telephone: (303) 295-8000
Counsel for Amicus Curiae
Sunward Corporation
” BEST AVAILABLE COPY
No. 83-18
IN THE
Supreme Court of the United States
OCTOBER TERM, 1983
DUN & BRADSTREET, INC.,
Petitioner,
GREENMOSS BUILDERS, INC.
Respondent.
ON WRIT OF CERTIORARI TO THE
SUPREME COURT OF THE STATE OF VERMONT
MOTION FOR LEAVE TO FILE BRIEF
AMICUS CURIAE IN SUPPORT OF RESPONDENT
GREENMOSS BUILDERS, INC.
Sunward Corporation respectfully moves for leave to file
the accompanying Brief Amicus Curiae. The consent of
Respondent Greenmoss Builders, Inc., has been obtained.
The consent of Petitioner Dun & Bradstreet, Inc. was
requested but refused.
The interest of Sunward Corporation in this case arises
from its position as a party to a case presently pending in the
United States Court of Appeals for the Tenth Circuit involv-
ing the issue of whether the limitations on awards of pre-
sumed damages for libel set forth in Gertz v. Robert Welch,
Inc., 418 U.S. 323 (1974), apply to nonmedia defendants.
Sunward Corp. v. Dun & Bradstreet, Inc., appeal docketed,
No. 83-2644 (10th Cir. Dec. 23, 1983).
In the instant case, the Vermont Supreme Court held
that Dun & Bradstreet was not entitled to a common law
qualified privilege (although the trial court had instructed
the jury regarding the privilege), and that Gertz does not
ii
prohibit presumed and punitive damages when a private
plaintiff sues a nonmedia defendant. While the Sunward case
to which Amicus Curiae is a party presents the same issue
regarding Gertz, the case differs in two critical respects from
the case before the Court: (1) the trial court in Sunward
followed the majority rule and extended a common law quali-
fied privilege to the credit reports of Dun & Bradstreet, and
(2) only presumed, and not punitive, damages were awarded.
Because the Vermont Supreme Court refused to extend a
common law privilege to Dun & Bradstreet, and the bulk of
the damages awarded were punitives, the parties in the case
before the Court may not fully address either the state inter-
est in allowing presumed damages, or the common law privi-
lege accorded credit reporting agencies. The following brief
focuses on these two aspects of the law of libel, which could
affect the Court’s disposition of the issue presented for
review.
Respectfully submitted,
/s/ William E. Murane
WILLIAM E. MURANE
(Counsel of Record)
A. BRUCE JONES
HOLLAND & HART
555 Seventeenth Street
Suite 2900
Post Office Box 8749
Denver, Colorado 80201
Telephone: (303) 295-8000
Counsel for Amicus Curiae
ili
TABLE OF CONTENTS
PAGE
Table of Authorities ...........5 50sec eee eees iv
Summary of Argument ........----e eee eeeee 1
ee 2
I. Background — The media/nonmedia
distinction is not dispositive of this case. .... 2
II. The states have a legitimate interest in
preserving the doctrine of presumed damages. . 5
Ill. The level of common law protection afforded
Dun & Bradstreet is adequate and
appropriate... ....... eee ee ee eee ee reee 9
IV. Credit report “speech” requires less protection
than does other speech. .........----++5>5 12
NE cc civebeccccccccceocecesesens 17
Appendix ... 1... ccc cece cece e rece cc eeeeees A-l
iv
TABLE OF AUTHORITIES
Cases
Babbitt v. United Farm Workers National
Union, 442 U.S. 289 (1979) .........-.
Beneficial Management Corp. v. Evans,
421 So.2d 92 (Ala. 1982) ............-.
Brown v. Skaggs-Albertson’s Properties,
Inc., 563 F.2d 983 (10th Cir. 1977) ......
Cantrell v. Forest City Publishing 419 U.S.
EE coc en eee es ab ehbenee en
Central Hudson Gas & Electric Co. v.
Public Service Commission, 447 U.S. 557
Serr rer sere eek
Collins v. Retail Credit Co., 410 F. Supp.
924 (E.D. Mich. 1976) ............+-+--
DeCarvalho v. daSilva, 414 A.2d 806 (R.1.
eee eee eee aes awe Oe 0
Denny v. Metz, 106 Wis. 2d 636, 318
N.W.2d 141, cert. denied, 103 S.Ct. 179
0 ee re re eee
Dun & Bradstreet, Inc. v. Grove, 404 U.S.
DD costes eebhessueeaneeees
Gertz v. Robert Welch, Inc., 418 U.S. 323
PD so 504 cheb e 6 Ue eee Neb ee nes 4s
Herbert v. Lando, 441 U.S. 153 (1979) ....
Hood v. Dun & Bradstreet, Inc., 486 F.2d
25 (5th Cir. 1973), cert. denied, 415 U.S.
Pry rer a Tre eee
Hutchinson v. Proxmire, 443 U.S. 111
Pe ee eye eee
In re Retailers Commercial Agency, Inc.,
342 Mass. 515, 174 N.E.2d 376 (1961)....
Maheu v. Hughes Tool Co., 569 F.2d 459
CG, BPE cs ch ccccsboccoueessens
PAGE
10
12, 13, 14, 15
4
2
a
———e
Metromedia, Inc. v. City of San Diego, 453
ol eddie ee enerees
Millstone v. O’Hanlon Reports, Inc., 528
F.2d 829 (8th Cir. 1976).............-
Miskousky v. Oklahoma Publishing Co., 51
U.S.L.W. 3284 (U.S. Oct. 12, 1982)......
New York Times v. Sullivan, 376 U.S. 254
GD 5 cc scaetedided wet cbt sense
Oberman v. Dun & Bradstreet, Inc., 460
F.2d 1381 (7th Cir. 1972) .............
Ohralik v. Ohio State Bar Association, 436
Fe Ff rrrrercriri errr er
Rasor v. Retail Credit Co., 87 Wash.2d 516,
£56 PPO8 BOGE GGe cc cc ccccsccceses
Roemer v. Retail Credit Co., 3 Cal. App.3d
368, 83 Cal. Rptr. 540 (1970) ..........
Rosenbloom v. Metromedia, Inc., 403 U.S.
0 eee
Rowe v. Metz, 195 Colo. 424, 579 P.2d 83
Sess seen eeeede eked neeGe 06
St. Amant v. Thompson, 390 U.S. 727
DP cihendeneeacesenesvsveseses
Smith v. Wade, 51 U.S.L.W. 4407 (U.S.
Apr. 20, 1963) .....ccccccccccsceces
Sunward Corp. v. Dun & Bradstreet, Inc.,
568 F. Supp. 602 (D. Colo. 1983) .......
Time, Inc. v. Firestone, 424 U.S. 448 (1976)
Virginia State Board of Pharmacy v.
Virginia Citizens Consumer Council, Inc.,
PS RL ere eee
Walker v. Colorado Springs Sun, Inc., 188
Colo. 86, 538 P.2d 450, cert. denied, 423
if = F Soarrerr rere rs se
Williams v. Burns, 463 F. Supp. 1278 (D.
Se, BED ce cceoseccacecesesceest
PAGE
12, 15
11
10
STATUTES
15 U.S.C. §§ 1681 to 1681t (1976) .......
OTHER AUTHORITIES
Anderson, The Origins Of The Press
Clause, 30 U.C.L.A. L. Rev. 455 (1983)...
Annot., Sufficiency of Showing of Malice or
Lack of Reasonable Care to Support
Credit Agency’s Liability for Circulating
Inaccurate Credit Report, 40 A.L.R.3d
Le errr eS eee ee
Christie, Injury to Reputation and the
Constitution: Confusion and Conflicting
Approaches, 75 Mich. L. Rev. 43 (1976) . .
L. ELDREDGE, THE LAW OF DEFAMATION
Det hecneendavenedUe see ee oe
Hunter, A Reprise on Herbert v. Lando
and The Law of Defamation, 71 Ky. L.J.
re 6 ab et woes 606 be 08
C. MCCORMICK, HANDBOOK OF THE LAW
OF DAMAGES (1935) ......2.0eeeccees
Note, Mediaocracy and Mistrust:
Extending New York Times Defamation
Protection to Nonmedia Defendants, 95
Harv. L. Rev. 1876 (1982) ..........-.-
Note, Developments in the Law —
Defamation, 69 Harv. L. Rev. 875 (1956).
R. SACK, LIBEL, SLANDER, AND RELATED
PRGRERRES CIB) ccc ccc ccc ceceweces
Shriffin, Defamatory Non-Media Speech
and First Amendment Methodology, 25
U.C.L.A. L. Rev. 915 (1978) ...........
PAGE
10
11
Ss
No. 83-18
IN THE
Supreme Court of the United States
OCTOBER TERM, 1983
DUN & BRADSTREET, INC.,
. Petitioner,
GREENMOSS BUILDERS, INC.,
Respondent.
ON WRIT OF CERTIORARI TO THE
SUPREME COURT OF THE STATE OF VERMONT
BRIEF AMICUS CURIAE IN SUPPORT OF
RESPONDENT
GREENMOSS BUILDERS, INC.
SUMMARY OF ARGUMENT
Presumed damages in business libel situations serve the
legitimate state interest of compensating defamed plaintiffs.
The majority of states, however, protect Dun & Bradstreet
from liability, and accordingly from presumed damages, by
extending a qualified privilege to credit reports. Thus, a
plaintiff cannot recover presumed damages except in
instances when Dun & Bradstreet has acted recklessly or
maliciously. Although this culpability requirement differs
from the reckless disregard standard defined in the Court’s
decisions in New York Times, St. Amant, and Gertz, it ade-
quately protects Dun & Bradstreet from self-censorship
because of the characteristics of the type of commercial
speech in which Dun & Bradstreet engages.
2
ARGUMENT
I. Background — The Media/Nonmedia Distinction Is Not
Dispositive of This Case.
In Gertz v. Robert Welch, Inc., 418 U.S. 323, 341 (1974),
the Court recognized that the states have a legitimate interest
in compensating plaintiffs for harm caused by defamatory
speech. This interest, however, must be balanced against the
concerns embodied in the First Amendment. After examining
these concerns, the Court held in Gertz that the states could
not allow presumed or punitive damages, at least in the
absence of knowledge of falsity or reckless disregard for the
truth by the defendant. Jd. at 349. It was unclear whether the
latter holding was a uniform pronouncement applicable to
both media and nonmedia defamation cases.! The Court has
since suggested on at least two occasions that the applicabil-
ity of Gertz to nonmedia cases is an open question. Hutchin-
son v. Proxmire, 443 U.S. 111, 133 n.16 (1979); Babbit v.
United Farm Workers National Union, 442 U.S. 289, 309
n.16 (1979). See also Miskousky v. Oklahoma Publishing Co.,
51 U.S.L.W. 3284 (U.S. Oct. 12, 1982) (Rehnquist, J., dissent-
ing from denial of cert.) (Gertz did not “wipe out” the com-
mon law of libe!).
State and lower federal courts are in conflict on the appli-
cation of Gertz. Some have limited Gertz to cases involving
media defendants, see, e.g., Denny v. Metz, 106 Wis.2d 636,
318 N.W.2d 141, cert. denied, 103 S. Ct. 179 (1982); Rowe v.
Metz, 195 Colo. 424, 579 P.2d 83 (1978); others have extended
its protection to all defendants, see, e.g., Beneficial Manage-
ment Corp. v. Evans, 421 So.2d 92 (Ala. 1982); DeCarvalho v.
1. Gertz involved a “media” defendant and the opinion repeatedly
used media references. See, e.g., 418 U.S. at 340 (“publisher or broad-
caster’), 341 (“news media”), 342 (“press”), 345 (“communications
media”). The Court’s opinion used such terms as “publisher or broad-
caster” and “news media” over 15 times. See Note, Mediaocracy and Mis-
trust: Extending New York Times Defamation Protection to Nonmedia
Defendants, 95 Harv.L.Rev. 1876, 1877 n.9 (1982).
3
daSilva, 414 A.2d 806 (R.I. 1980). As Dun & Bradstreet
stresses in its Brief, commentators have both decried this
further complication to the “chaotic” law of defamation and
criticized what they view as a baseless distinction between the
“press” and the “rest of us.” See, e.g., Christie, Injury to
Reputation and the Constitution: Confusion and Conflicting
Approaches, 75 Mich.L.Rev. 43, 58 (1976). They have argued
that consistency and fairness required uniform application of
Gertz. But see Stewart, Or Of The Press, 26 Hastings L.J. 631
(1975) (asserting that New York Times and its progeny are
based on the press clause). See also Anderson, The Origins of
the Press Clause, 30 U.C.L.A. L. Rev. 455 (1983) (challenging
historical view that speech and press clauses are equivalent or
redundant).
Dun & Bradstreet is a peculiar standard bearer to be
advancing the cause of the commentators. First, the alleged
chaos in state defamation law does not apply to Dun & Brad-
street. In fact, the law of defamation is rather consistent
regarding credit reporting agencies.? Congress has largely
preempted the common law concerning consumer reporting
agencies, 15 U.S.C. §§ 1681 to 1681t (1976), 3 and the majority
rule recognizes a common law qualified privilege for commer-
cial reporters such as Dun & Bradstreet.
On the surface, the argument that the First Amendment
should not play favorites presents a more difficult issue. In its
2. Even if defamation law for credit reporting agencies were inconsis-
tent, this alone would not mandate an across-the-board application of the
First Amendment. The possibility of different legal standards among the
states is inherent in our federal system. Gertz recognized this basic tenet of
federalism. 418 U.S. «t 345-46.
3. Acceptance of Dun & Bradstreet’s argument would raise questions
about the constitutionality of sections of the Fair Credit Reporting Act
(“FCRA”). If no distinctions can be drawn between the media and credit
agencies, the requirements imposed by the FCRA would appear to be
unconstitutional restraints on free speech. Even limiting the question to
presumed and punitive damages causes concern. The FCRA allows puni-
tive damages for “willfull” noncompliance with its requirements. 15 U.S.C.
§ 1681n. A credit agency might thus be liable for punitive damages based
4
Brief, Dun & Bradstreet exploits the many problems that
might arise from a media/nonmedia distinction. The hard
questions Dun & Bradstreet poses, however, are inapposite
here. Regardless of how one distinguishes between the media
and nonmedia, it is clear that Dun & Bradstreet belongs in
the latter category. Indeed, Dun & Bradstreet has never
claimed otherwise. More importantly, Dun & Bradstreet’s
broad-based argument has little to do with its credit reports.
These reports are not part of the “robust debate of public
issues,” which inspired New York Times v. Sullivan and its
progeny.‘
To resolve this case, the Court need not decide whether
the Constitution should distinguish between the media and
nonmedia. Instead, the critical inquiry is whether, in light of
the state interest in compensating defamed plaintiffs, pre-
sumed damages impermissibly cause self-censorship of a spe-
cific type of commercial speech. The answer to that question
requires an examination of the following factors: (1) the state
upon a culpability finding that differs from the Court’s “actual malice”
standard. See generally Collins v. Retail Credit Co., 410 F. Supp. 924 (E.D.
Mich. 1976). In Collins, the court found willful noncompliance with the
Act, as well as a common law libel. However, the court's findings are based
on the credit agency’s conduct; no mention is made of knowledge of falsity
or subjective doubts about the truth of the report. See also Rasor v. Retail
Credit Co., 87 Wash.2d 516, 554 P. 2d 1041, 1049 (1976) (regarding preemp-
tion of common law, “the intent of Congress in framing the Fair Credit
Reporting Act was simply to limit recovery for presumed injury to
instances of “malice and willful intent” . . . ). Common law “malice” or
“willful intent’? may differ substantially from the New York
Times/St. Amant protection requested by Dun & Bradstreet. See Part III
infra.
4. Dun & Bradstreet defends this aspect of its reports, which was
emphasized by the Vermont Supreme Court, by arguing that content-based
distinctions have been condemned by the Court. This not only ignores the
Court’s commercial speech cases, discussed in Part IV infra, it also over-
looks the concerns that underlay Gertz’ rejection of Rosenbloom v.
Metromedia, Inc., 403 U.S. 29 (1971). A credit report is a credit report. In
evaluating these reports, courts would not be called upon to make ad hoc
determinations of what is of “public interest” or “relevant to self-govern-
ment.” See Gertz, 418 U.S. at 346.
5
interest in allowing presumed damages, (2) the level of pro-
tection provided by the common law, and (3) the specific
nature of the speech engaged in by Dun & Bradstreet. Analy-
sis of these factors reveals that the concerns announced in
Gertz regarding presumed damages are inapplicable to
libelous Dun & Bradstreet credit reports. The common law
provides adequate protection for these reports and therefore
this Court should not intrude on state law via the
Constitution.5
II. The States Have A Legitimate Interest in Preserving The
Doctrine of Presumed Damages.
Gertz recognized that the states have a legitimate inter-
est in providing compensation to defamed plaintiffs. 418 U.S.
at 348. The doctrine of presumed damages is a method for
achieving this interest. The Colorado Supreme Court has
cogently stated the basis for the doctrine:
The rationale for this rule derived from the dif-
ficulty of proving damages in [slander per se situa-
tions]. This is particularly true where, as here, the
defamatory remarks are related to the conduct of an
individual’s business affairs. It is the rare case in
which a slander will destroy business profits in such
a way that the loss can be directly traced to the
slanderous remarks.
Rowe v. Metz, 195 Colo. 424, 579 P.2d 83, 84 (1978).
5. A noted commentator discusses First Amendment methodology in
terms of a distinction between the scope of protection provided by the First
Amendment, contrasted with the leve) of protection provided. Shriffin,
Defamatory Non-Media Speech and First Amendment Methodology, 25
U.C.L.A. L. Rev. 915 (1978). A ruling that Gertz applies only to the media
would arguably be a ruling based on the scope of the First Amendment. The
position of Amicus Curiae is a “level of protection” argument. In essence,
its position is that, even if the Constitution protects Dun & Bradstreet
reports, the protection provided by the common law equals or exceeds that
required by the Constitution.
6
Nowhere is this rationale more applicable than in situa-
tions involving Dun & Bradstreet reports. It may be
extremely difficult for a plaintiff to link directly the Dun &
Bradstreet report either to a decline in sales or to a loss of
potential business.
The harm resulting from an injury to reputation
is difficult to demonstrate both because it may
involve subtle differences in the conduct of the
recipients toward the plaintiff and because the
recipients, the only witnesses able to establish the
necessary casual connection, may be reluctant to
testify that the publication affected their relation-
ship with the plaintiff.
Note, Developments in the Law — Defamation, 69 Harv.L.
Rev. 875, 891-92 (1956) (hereinafter cited as Developments).
Not only are business people naturally reticent in revealing
the basis for a decision, but Dun & Bradstreet contributes to
this silence by insisting in its subscriber contracts that it not
be revealed as a source of information.* (A standard Dun &
Bradstreet subscriber contract is appended as Appendix A.)
A subscriber who revealed that Dun & Bradstreet was the
source of information would be in breach of this contract of
silence.’
6. It is ironic that Dun & Bradstreet relies so heavily on First Amend-
ment values, while at the same time placing such strict limitations on the
“free flow” of information contained in its reports.
7. The typical Dun & Bradstreet contract contains restrictions such as
the following:
All information furnished hereunder shall be held in strict confi-
dence and shall never be reproduced, revealed or made accessible in
whole or in part, in any manner whatsoever to any others unless
required by law.
Neither Dun & Bradstreet, Inc. nor the Reference Books and/or Direc-
tories will be identified by the subscriber as a source reference ... .
See Appendix 11 2 & 5, at A-2.
7
A plaintiff would be hard pressed to establish with any
certainty that a false Dun & Bradstreet report was decisive in
causing a lost sale, especially if the effect of the Dun & Brad-
street report was indirect (i.e., it caused a pernicious rumor,
which in turn affected the final business decision). In fact, in
the face of Dun & Bradstreet’s contracts of silence, a poten-
tial plaintiff might never learn that Dun & Bradstreet had
spoken ill of it, much less determine that Dun & Bradstreet
was the source of a damaging rumor.® The plaintiff also would
face tremendous problems in trying to locate or identify lost
potential business. One would not know which customers
failed to make initial contact because of either a Dun & Brad-
street report, or a rumor whose source was the report.
The doctrine of presumed damages, much like res ipsa
loquitur in a similar context, helps a plaintiff overcome these
formidable difficulties. Indeed, an analogy to res ipsa loqui-
tur is particularly appropriate in circumstances involving
Dun & Bradstreet reports. Even if a plaintiff cannot directly
establish lost sales because of a defamatory report, it is
counter-intuitive to assert that such a report by this ubiqui-
tous and highly respected organization is not harmful. With-
out the presumption of damages, however, a plaintiff which
has suffered substantial harm may not reach the jury because
of a lack of causal proof. Under these circumstances, the
appropriateness of the presumption is clear. See Develop-
ments at 892 (“The application of such presumptions should
depend upon the potentiality of harm to the particular plain-
tiff from the publication in question .. . .”).
In Gertz the Court recognized that presumed damages,
unlike punitives, are relevant to the state interest of compen-
sating defamed parties. 418 U.S. at 350. Somewhat contra-
dictorily, however, the Court called the presumption “an
oddity of tort law” because it “allows recovery of purportedly
compensatory damages without evidence of actual loss.” Jd.
at 349. While perhaps true in situations involving harm of a
8. This factor alone distinguishes Dun & Bradstreet from the news
media.
8
less tangible nature, this reasoning does not apply to the
typical business libel where the injury is real, but proof of
causation may be difficult. Additionally, it would be ironic to
deny the presumption in light of the Court’s statement that
“actual damages” may ‘aclude intangible harm such as men-
tal suffering. 418 U.S. at 350. Causal proof of these type of
damages is arguably easier to present than is proof of lost
business. See Time, Inc. v. Firestone, 424 U.S. 448 (1976).
Moreover, the value a jury might attach to these intangible
damages is largely unbounded.
The doctrine of presumed damages in a business libel
context does not leave a jury with unbridled discretion to
award any amount of damages it desires. Damages cannot be
based on pure speculation. They must bear some relationship
to the injuries sustained. See, e.g., Maheu v. Hughes Tool Co.,
569 F.2d 459, 474-77 (9th Cir. 1977). Thus, particularly in the
context of a business libel, a plaintiff will present evidence
either cf a decline in profits, or of a failure to achieve expected
growth following the defamatory statement.? The defendant
may challenge these figures or present proof attributing the
losses to other factors. The jury must resolve the evidentiary
disputes and arrive at a damage calculation. The trial judge is
available to ensure that this calculation is supported by the
evidence. Therefore, in the business libel context, rather than
being merely an “oddity of tort law,” presumed damages
serve an important function in allowing states to compensate
defamed parties.
9. When “special” damage need not be shown, “general” damage may
be recovered. That such damage has been suffered need not be
proved by the Plaintiff, for it is presumed, but it is customary to
make proof of some of the items. The elements of “general” damage
[include] . . . loss of business ... .
C. MCCORMICK, HANDBOOK OF THE LAW OF DAMAGES § 116 (1935).
9
Ill. The Level of Common Law Protection Afforded Dun &
Bradstreet is Adequate and Appropriate.
While Dun & Bradstreet bemoans the disparate treat-
ment it receives under the First Amendment as compared to
the media, in reality Dun & Bradstreet was a favorite child of
the common law long before this Court introduced the Con-
stitution to the law of defamation. In recognition of the
important role credit reports play in the commercial world,
the majority of states extend a common law qualified privi-
lege to Dun & Bradstreet reports. Sunward Corp. v. Dun &
Bradstreet, Inc., 568 F. Supp. 602, 607 (D. Colo. 1983) (citing
cases). The reason for this privilege is that
[t]hose about to engage in a commercial trans-
action like to know something about the persons
with whom they are dealing. Often they are unable
to get that information themselves and must obtain
it through mercantile agencies. In furnishing such
information, the agencies are supplying a legitimate
business need and ought to have the protection of
the privilege. Without such protection, few would
undertake to furnish the information, and the cost
would be high, if not prohibitive.
L. ELDREDGE, THE LAW OF DEFAMATION § 86, at 468-69
(1978) (quoting Jn re Retailers Commercial Agency Inc., 342
Mass. 515, 174 N. E.2d 376, 379 (1961)).'°
The standard of conduct necessary to overcome the priv-
ilege varies slightly from state to state.
Most require 2 showing of something more than
mere negligence to defeat the privilege. To prevail, a
40 Several courts, including the Vermont Supreme Court in the pre-
sent case, have questioned the wisdom of the reasoning underlying the
privilege. See, e.g., Hood v. Dun & Bradstreet, Inc., 486 F.2d 25 (5th Cir.
1973). This Brief will not pursue this dispute. Note, however, that Profes-
sor Eldredge feels that cases such as Hood “should lead some other courts
to reconsider their present rule in this situation.” L. ELDREDGE, supra p. 9,
§ 86, at 469 n. 70.
10
plaintiff generally must show the credit agency was
reckless in conducting its investigation. Bad faith,
intent to injure, or ill-will also defeat the privilege.
R. SACK, LIBEL, SLANDER, AND RELATED PROBLEMS 308
(1980) (footnotes omitted). See Annot., Sufficiency of Show-
ing of Malice or Lack of Reasonable Care to Support Credit
Agency’s Liability for Circulating Inaccurate Credit Report,
40 A.L.R. 3d 1049 (1971). Although a court might refer to the
standard as “reckless disregard for the truth,” recklessness is
often defined in the common law sense of “wanton and reck-
less disregard of the circumstances,” rather than as defined
by the Court in St. Amant v. Thompson, 309 U. S. 727 (1968)
(“reckless disregard” defined as subjective doubt about the
truth). See, e.g., Roemer v. Retail Credit Co., 3 Cal. App.3d
368, 83 Cal. Rptr. 540, 542 (1970). See also Cantrell v. Forest
City Publishing Co., 419 U. S. 245, 250 n.3 (1974) (in a “false-
light” case, trial court required reckless disregard for truth,
but defined “recklessly” as “wantonly, with indifference to
consequences”); Williams v. Burns, 463 F. Supp. 1278, 1283
(D. Colo. 1979) (discussing showing necessary to overcome a
qualified privilege under Colorado law). Similarly, a showing
of “malice” might overcome the privilege. This is not necessa-
rily “malice” in the sense of ill-will, or “actual malice” as
defined by this Court. Neither is it malice implied solely from
the defamatory statement itself. Rather “[mlJalice . . . can
consist of an unreasonable and wrongful act done intention-
ally, without just cause. . . . Malice may be inferred in the
situation where the defendant has no reasonable basis for
believing that the statement is true. This would be the case
where there had been a failure to make an adequate investiga-
tion.” Brown v. Skaggs-Albertson’s Properties, Inc., 563 F.2d
983, 986-87 (10th Cir. 1977) (applying Oklahoma law and
citing Oberman v. Dun & Bradstreet, Inc., 460 F.2d 1381 (7th
Cir. 1972)). Regardless of the exact definition of “reckless” or
“malice”, a high degree of culpability on the part of Dun &
Bradstreet is a predicate to liability. Therefore, in the major-
ity of states Dun & Bradstreet is subject neither to liability
11
without fault nor liability based on simple negligence.'! Since
presumed damages are irrelevant absent basic liability, Dun
& Bradstreet need not worry about these damages except
when its conduct is highly culpable.'”
The type of conduct that causes Dun & Bradstreet to lose
its privilege — recklessness or maliciousness — is seated in
well-developed concepts of tort law,'* which are arguably eas-
ier for the average juror to grasp than is the concept of “actual
malice.” See Hunter, A Reprise on Herbert v. Lando and the
Law of Defamation, 71 Ky.L.J. 569, 574-77 (1982-1983). The
facts of this case demonstrate that these tort concepts are
better suited for evaluating Dun & Bradstreet’s conduct than
is the subjective inquiry mandated by St. Amant and Herbert
v. Lando, 441 U.S. 153 (1979). Here, Dun & Bradstreet issued
a report based on information from an untrained high school
student without any verification of the information. Yet Dun
& Bradstreet blithely asserts in its brief that no “reckless
disregard for the truth” existed because no one questioned
the good faith of Dun & Bradstreet’s teenage reporter. In the
Sunward case, the Dun & Bradstreet reporter described the
information in the reports as “guesstimates.” These guessti-
mates portrayed Sunward as a company with annual sales,
11. In Gertz the Court. emphasized the potential chilling effect of
liability without fault. 418 U.S. at 346. Because of the common law privi-
lege, this concern is inapplicable to Dun & Bradstreet credit reports.
12. The applicability of presumed damages will also depend on
whether the statement is libelous per se, or , in most states, on whether the
statement would have been slanderous per se if spoken. In other words,
Dun & Bradstreet is subject to presumed damages when a report is libelous
on its face, or, in those states that have incorporated the four “slander per
se” categories into their law of libel, when a report would tend to injure a
plaintiff in his trade or business. See generally R. SACK, LIBEL, SLANDER,
AND RELATED PROBLEMS 96-98 (1980).
13. This is not to suggest that these concepts are free from doubt in
the abstract. See Smith v. Wade, 51 U.S.L.W. 4407 (U.S. Apr. 20, 1983).
They are, however, given meaning by their development in the tort law of
each state. See, e.g., Walker v. Colorado Springs Sun, Inc., 188 Colo. 86, 538
P.2d 450, 457, cert. denied, 423 U.S. 1025 (1975) (“term ‘reckless disregard’
has had rather frequent usage in the tort field in this state”).
12
according to Dun & Bradstreet, of less than $1 million, when
in fact sales approached $30 million. Dun & Bradstreet fails
to suggest why the Constitution should protect its recklessly
indifferent behavior. In fact, the Court’s commercial speech
cases suggest that the Constitution does not prohibit the
states from reaching conduct likely to produce such inaccu-
rate information.
IV. Credit Report “Speech” Requires Less Protection Than
Does Other Speech.
Under the common law of most states, Dun & Bradstreet
must be reckless or malicious before it feels the potential chill
brought on by presumed damages. This Brief now turns to
_ the question of whether the Constitution mandates an even
higher level of culpability before the states can allow pre-
sumed damages. This question will be addressed within the
context of the kind of speech in which Dun & Bradstreet
engages. When protection of commercial speech is balanced
against the states’ legitimate interest in allowing presumed
damages, the conclusion must be that the common law pro-
vides Dun & Bradstreet with adequate protection and that
constitutional intervention on the part of this Court is
unwarranted.
Approximately two years after Gertz, the Court
extended constitutional protection to commercial speech.
Virginia State Board of Pharmacy v. Virginia Citizens Con-
sumer Council, Inc., 425 U.S. 748 (1976). The Court distin-
guished then, and has continued to distinguish, commercial
speech from other speech. See, e.g., Central Hudson Gas and
Electric Co. v. Public Service Commission, 447 U.S. 557
(1980). Justice Powell’s opinion in Virginia State Board
noted that, because of its economic nature and ease of verifi-
cation, commercial speech is Icss subject to self-censorship
than other speech. 425 U.S. at 772 n.24. See also Ohralik v.
Ohio State Bar Association, 43€ U.S. 447, 462 n.20 (1978) (in
rejecting application of overbreadth doctrine to commercial
speech, the Court stated that “{c]ommercial speech is not as
likely to be deterred as noncommercial speech .. . .”). In
13
fact, Justice Powell noted that the protections set forth in
New York Times v. Sullivan, 376 U.S. 254 (1964), might be
unnecessary for commercial speech, and specifically com-
pared New York Times with a case in which Dun & Brad-
street was a party, Dun & Bradstreet, Inc. v. Grove, 404 U.S.
898 (1971) (denying cert.). The Court has reaffirmed the dis-
tinctive nature of commercial speech in more recent cases.
See, e.g., Hudson Gas, 447 U.S. at 564 n.6.
Justice Powell’s general analysis of commercial speech
fits perfectly in the specific context of Dun & Bradstreet
reports. First, these reports are undeniably commercial
speech. See Millstone v. O’Hanlon Reports, Inc., 528 F.2d
829, 833 (8th Cir. 1976) (opinion by Justice Clark). They are
about businesses, and are distributed to a limited audience
that pays for the reports. They assist that audience in evalu-
ating commercial transactions. See generally Hudson Gas,
447 U.S. at 561-62. Second, the information in a typical Dun
& Bradstreet report is easy to verify. The reports concern
sales figures, payment habits, financial status and the like.
Each of these matters tends to be a black or white fact. More-
over, Dun & Bradstreet has an elaborate system for obtaining
and verifying these facts.'4 Third, Dun & Bradstreet’s
financial status and the extent of its distribution system
reveal the economic hardiness of its reports. Dun & Brad-
street is a multi-million dollar enterprise (its net income in
1982 was $34,249,000), supplying information on “over 4.5
14. In cases in which Dun & Bradstreet follow its own training, super-
vision, and verification procedures, a plaintiff would be hard pressed to
establish the degree of culpability necessary for a finding of liability. Unfor-
tunately, these procedures were not followed in the instant case. Similarly,
Dun & Bradstreet failed to follow its own third-party verification require-
ments in the Sunward case. Note, however, that Dun & Sradstreet in
Sunward did follow its procedure of issuing prompt nctice to subscribers
upon notification of an error in its reports. The trial judge relied heavily on
this fact in refusing to submit the issue of punitive damages to the jury, and
in submitting an instruction regarding mitigation of damages.
14
million” businesses to over 80,000 subscribers.'5 Any argu-
ment by Dun & Bradstreet that it needs constitutional pro-
tection or else its voice will be chilled flies in the face of this
reality. In fact, even in states that refuse to extend a common
law privilege to credit reporting agencies, Dun & Bradstreet
appears to be thriving. See Hood v. Dun & Bradstreet, Inc.,
486 F.2d 25, 32 (5th Cir. 1973), cert. denied, 415 U.S. 985
(1974). Moreover, Dun & Bradstreet is in a superior position
compared to defamed plaintiffs to absorb the societal harm
its reports cause. Dun & Bradstreet can spread its costs
among its many subscribers.
These basic distinctions suggest a more fundamental
reason why the protections of Gertz and New York Times
should not apply to credit reports. The usefulness of commer-
cial speech is directly tied to its accuracy. Hudson Gas, 447
U.S. at 563. Unlike false information concerning public
issues, see New York Times, 376 U.S. at 279 n.19, inaccurate
commercial speech has no redeeming value whatever. Not
only is accuracy important for the businesses on which Dun &
Bradstreet reports, it is important to Dun & Bradstreet’s
subscribers. Given this need for accuracy on the part of all
concerned parties, Dun & Bradstreet’s argument that appli-
cation of Gertz is necessary to avoid self-censorship is unten-
able. No societal goal is served in allowing Dun & Bradstreet
to put forth defamatory material maliciously or after a grossly
inadequate investigation.
Dun & Bradstreet will no doubt respond that the argu-
ment of Amicus Curiae is “content based.” In its decisions
developing the commercial speech doctrine, however, the
Court has recognized “the ‘commonsense’ distinction”
between commercial speech and other varieties of speech.
Hudson Gas, 447 U.S. at 562. In fact, “[i]f commercial speech
is to be distinguished, it ‘must be distinguished by its con-
tent.’ ” Metromedia, Inc. v. City of San Diego, 453 U.S. 490,
504 n.11 (1981) (quoting Virginia State Board, 425 U.S. at
15. This information is derived from documents supplied to Sunward
Corporation by Dun & Bradstreet during discovery.
15
761). 16 While the problems inherent in content regulation
might apply to other speakers in other contexts, they are not
applicable to commercial speakers such as Dun & Bradstreet.
Moreover, in examining commercial speech, the Court has
stated that the two features of commercial speech noted
above — economic hardiness and ease of verification — per-
mit regulation of its content. Id. at 564 n.6. In fact, in Ohralik
v. Ohio State Bar Association, 436 U.S. 447, 462-66 (1978),
the Court rejected an argument that actual injury was neces-
sary before a state could regulate an attorney’s commercial
speech. The Court noted that the state interest in prohibiting
the dangers inherent in attorney solicitation justified a pro-
phylactic rule, regardless of whether actual injury occurred.
Similarly, the great likelihood that a defamatory credit report
will cause harm, accompanied by the difficulty in linking that
harm to the report, justifies a state in ailowing presumed
damages.
The type of speech in which Dun & Bradstreet engages is
fundamentally different from the speech that spawned New
York Times and its progeny. Gertz expressed a fear that juries
might use presumed damages to punish unpopular speech.
418 U.S. at 349. This possibility is not likely to occur in a
situation involving Dun & Bradstreet. The topics on which
Dun & Bradstreet speaks are not controversial topics likely to
draw a jury’s ire. As demonstrated above, presumed damages
are based on compensating the plaintiff, and the jury is so
16. Content, however, is not all that distinguishes commercial speech.
The audience and purpose behind the speech are also critical. For example,
Dun & Bradstreet asks why a distinction should be drawn between infor-
mation it provides, and the same information published in a newspaper.
Petitioner’s Brief 29. The newspaper is providing newsworthy information
to the general public. Dun & Bradstreet is providing its subscribers with
information for the purpose of evaluating commercial transactions. The
latter is the essence of commercial speech as discussed in Hudson Gas. It is
less subject to self-censorship than is the newspaper report.
16
instructed.'’ If Dun & Bradstreet is recklessly indifferent in
its investigation or acts maliciously, then forcing it to pay for
this conduct should not be deemed unconstitutional.
The law of defamation, while undoubtedly complex, has
gradually evolved in the states. Influenced by the reasoning of
New York Times and its progeny, it continues to do so. The
Court should resist the urge to interfere with this process,
especially when premised on such broad-based arguments as
those presented by Dun & Bradstreet. Although certain duc-
trines may be arcane or based on little more than historical
accident, this is not the case with the law regarding defama-
tory credit reports. State and lower federal courts, as well as
Congress, are addressing the issues with modern reasoning
and responses. They should be allowed to continue to seek the
best balance between the competing interests involved. Dun
& Bradstreet’s position, divorced as it is from the facts,
should be rejected.
17. Contrast this with punitive damages where the jury is instructed
that the purpose of these damages is to punish the defendant and deter
future misconduct. Even here, however, the focus is on the defendant’s
conduct rather than its speech.
17
CONCLUSION
Based upon the foregoing, Amicus Curiae Sunward Cor-
poration respectfully requests the Court to affirm the judg-
ment of the Vermont Supreme Court.
Dated this 20th day of January, 1984.
Respectfully submitted,
/s/ William E. Murane
WILLIAM E. MURANE
(Couns: of Record)
A. URUCE JONES
HOLLAND & HART
555 Seventeenth Street
Suite 2900
Post Office Box 8749
Denver, Colorado 80201
Telephone: (303) 295-8000
Counsel for Amicus Curiae
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‘SU@YIO AQ UOI|GUOSQNS Siy Je@pUN ePeW oq 0} S}seNbe WUUEd JOU ‘S1e4IJO JO BSN ay} 10} UOHFEUUOUI ISeNbeu seyyeu jeUS
JOQUISANS Oy} JEU) POO|SI@PUN AjSSwsXe S! y “GWES JO HEIQNS Ou) YM MEAG JO/PUB UONEIYUSA 10) “DUj "}@@SPBIG F UNG 0} PeEjeJ
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Ul BIQISSES0B SPBw 10 PajBands ‘Peonpoideu Og JOASU I/EYS PUB BOUSPYyUCD JOUIS UI Pjay 9q |/BYS JePUNSIEY PeYsIWINy UONEUUOJU! IIy ‘Z
‘yuawAodwe (Z) 10
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B SE UONBULOJU! YONS BSN 0} Peyquydud Ajssaudxe Si y "YON se saiyIeded s19y) UI SP@AO;dWE JO SIOJ@UdOI ‘susULIE ‘suedIyO ‘su0}DE1D
‘SISPJOYHOOIS SSIYIUS YONS 10 SOUS WOsd-UOU JO JWeWWEADE ‘ssauISNG JeUJO 10 Ssdiysuojeudaid aj0s ‘sdiysueuyed ‘sucijesodico
0} Gunejes sucisioep sseulsng 18y)0 10 Suneyew ‘SOUBINSU! “YPG1D S$ JBQUISQNS ay) UI 10}9B} GUO Se AjajOS JequoSqns ay) jO es/n
SAISN}OXS 34} 40} SI JUSWEEIBY Si) Oj JUBNSUNd “dU; ‘JeeuISPeIg FUNG Aq JequOSsgns ay} 0} PeysIWWN) SessauUISNG UO UOHBUUOJU! IIy *1
INSW33xH9V 40 SWHSL
A-2
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