Appendix — CBS Inc. v. Brown & Williamson Tobacco Corp.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

CBS INc., a New York Corporation,

and WALTER JACOBSON,

Petitioners,

v.

BROWN & WILLIAMSON TOBACCO CORPORATION,

Respondent.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Of Counsel:

DOUGLAS P. JACOBS

CBS Inc.

51 W. 52nd St.

New York, NY 10019

P. CAMERON DEVORE *

MARSHALL J. NELSON

STUART R. DUNWOODY

DAVIS WRIGHT & JONES

2600 Century Square

1501 Fourth Avenue

Seattle, WA 98101-1688

(206) 622-3150

* Counsel of Record

WILSON - Epes Printinc Co., Inc.

- 789-0096 - WASHINGTON, D.C. 20001

APPENDIX INDEX

Seventh Circuit Opinion, August 12, 1987 .........00000.....

Seventh Circuit Order Denying Appellants’ Motion for

Stay of Mandate, November 25, 1987 ................00000.......

Seventh Circuit Opinion on Post-Judgment Interest,

I RO aca asta raccctc sruchdamnsceianestniiccadedoncenice

Seventh Circuit Opinion, July 14, 1983 _.......00--0..

District Court Docket Entry Order, August 7, 1986 ......

District Court Memorandum Opinion and Order, Au-

Ee ep. RRR NEP to eT Ot ne Oey fae PE RTE CR NTO

District Court Order of Dismissal, July 6, 1982 ...........

Seventh Circuit Judgment, August 12, 1987 _................

Seventh Circuit Order Denying Petition for Rehearing,

oR. ER ete ean ee ee ee

Transcript of Perspective Broadcast, November 11,

fs. Siena er ear aee Bex mee Or CSP a ope NNT Di RC, ONT ROPE

Excerpts of Federal Trade Commission Report, May,

TN ioc tsc acer ined pind acct on cat ate alee

la

APPENDIX

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 86-2474 and 86-2475

BROWN & WILLIAMSON TOBACCO CORPORATION,

Plaintiff-Appellee—Cross Appellant,

Vv.

WALTER JACOBSON and CBS, INC.,

Defendants-A ppellants—Cross-A ppellees.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division

No. 82 C 1648—William T. Hart, Judge.

ARGUED APRIL 3, 1987—-DECIDED AUGUST 12, 1987

Before BAUER, Chief Judge, Woop, JR., and POSNER,

Circuit Judges.

BAUER, Chief Judge. This case is the sequel to Brown

& Williamson v. Jacobson, 713 F.2d 262 (7th Cir. 1983),

in which we reinstated a libel suit that had been brought

by Brown & Williamson Tobacco Corporation, which pro-

duces and markets Viceroy cigarettes, against CBS, Inc.

Following our remand, the district court held a jury trial

that resulted in a verdict against CBS and an award of

$3,000,000 in compensatory damages and an award of

2a

$2,050,000 in punitive damages. Following post-trial mo-

tions, the district court reduced the compensatory damage

award to $1.00 but upheld the punitive damage award.

See Brown & Williamson v. Jacobson, 644 F. Supp. 1240

(N.D. Ill. 1986). We affirm the district court’s decision

on liability and punitive damages but reverse its compen-

satory damage ruling and reinstate $1,000,000 of the

$3,000,000 originally awarded by the jury.

I.

The attitude of most knowledgeable and disinterested:

persons toward the tobacco industry is certainly negative;

at least it has been negative for the past decade. In such

an atmosphere, it becomes difficult to imagine how the

tobacco people can be libeled. The bashing of the industry

by government and private groups has become a virtual

cottage industry. This case, however, demonstrates that

general bum raps against the whole tobacco industry are

different from specific accusations of skulduggery by a

specific company or person. And this case involves some

very specific statements against a very specific company

in the tobacco industry. The facts are as follows: Walter

Jacobson, an employee of the CBS-owned Chicago tele-

vision station WBBM-TV, has served for a number of

years as the co-anchor for the 10 p.m. weekday news-

casts.’ In addition to fulfilling his duties as an anchor-

man, Jacobson also delivers a nightly feature known as

“Walter Jacobson’s Perspective.” When Jacobson delivers

his Perspectives, he moves from his normal location at

the anchor desk, which is located in the station’s news-

room rather than in a separate studio, to a special “Per-

spective” section of the newsroom. During the feature,

the word Perspective appears on the screen with Mr.

Jacobson’s signature below it. The Perspective segments

1The 10 p.m. news follows prime time programming in the cen-

tral time zone.

3a

are rebroadcast the following day during WBBM’s early

evening news broadcasts.

As part of its activities promoting the quality of its

news personalities, CBS ran ads which stated that

“Cwlith ten years of experience on our anchor desk,

[Walter Jacobson] has established himself as the city’s

most savvy political reporter . . . with contacts as solid

as his credentials.” Jacobson was touted by CBS as some-

one who “pulls no punches” and “lays it on the line.”

According to the ads, he is a journalist who will “make

you angry. Or make you cheer. Walter Jacobson is li-

able to evoke all kinds of reactions ... and he’ll always

leave you informed.” When he delivered his Perspective

on November 11, 1981, he made the Brown & Williamson

Tobacco Corporation very angry.

Jacobson’s November 11 Perspective was the third in

a series on the cigarette industry. The first in the series

dealt with the political influence of tobacco manufac-

turers while the second in the series discussed the failure

of cigarette manufacturers to incorporate fire prevention

features into their products. The final segment in the

series, which was promoted on the day of the broadcast

as “[t]obacco industry hooks children . . . Tonight at

10:00,” dealt with the marketing practices of the ciga-

rette industry. After Jacobson had moved to the Perspec-

tive section of the newsroom, his co-anchor, Harry Porter-

field, introduced Jacobson’s Perspective by stating:

For the past two nights in Perspective, Walter has

been reporting on the companies that make ciga-

rettes and the clout they carry in Washington.

Tonight he has the last in his series of special

reports, a look at how the cigarette business gets its

customers.

Jacobson then delivered his Perspective:

4a

Ask the cigarette business how it gets its cus-

tomers and you will be told over and over again,

that it’s hard these days to get customers; that the

good ‘old days are gone forever. The good old ads for

cigarettes cannot be used anymore. Old St. Nick, for

example, pushing Lucky Strikes because . . . “Luck-

ies are easy on my throat.” The cigarette business

can’t count on that kind of an ad anymore. Or the

doctors pushing Camels; more doctors smoke Camels

than any other cigarette. The business can’t count

on an ad like that anymore, either.

Nor can it count anymore on television. Pushing

cigarettes on television is prohibited. Television is

off limits to cigarettes. And so the business (the

killer business) has gone to the ad business in New

York for help; to the slicksters on Madison Avenue,

with a billion dollars a year for bigger and better

ways to sell cigarettes.

Go for the youth of America. Go get ’em, guys.

Get some young women, give them some samples.

Pass them out on the streets, for free, to the teen-

agers of America. Hook ’em while they’re young.

Make ’em start now. Just think how many cigarettes

they’ll be smoking when they grow up.

Oh, here’s another cigarette-slickster idea. The

Merit report wants your opinion; a survey, they say,

on current events. A $270,000 Merit wagon. Walk

in, children, and let us know what you think about

President Reagan. Get involved, children. Thank

you, on behalf of Merit cigarettes. Or another ciga-

rette-slickster idea. Go for the children through

sports. You’ll never guess who’s likely to be a win-

ner at the Winter Olympics. How about Rudd Pyles,

from Colorado? But better than that, how about

Benson & Hedges? At-a-way. The best possible way

to addict the children to poison. There are more

5a

subtle ways, as well. A scene, for example, in Super-

man II. A bus crashing into a truck. Could be any

truck, couldn’t it? But, in a movie that’s being seen

by millions of children who love Superman, the bus

crashes into a Marlboro truck.

Jacobson then reached the portion of his Perspective that

the jury and the district court found libeled Brown &

Williamson:

The cigarette business insists, in fact, it will swear

up and down in public, it is not selling cigarettes to

children; that if children are smoking (which they

are, more than ever before), it’s not the fault of the

cigarette business. Who knows whose fault it is,

says the cigarette business.

That’s what Viceroy is saying. Who knows whose

fault it is that children are smoking? It’s not ours.

Well, there is a confidential report on cigarette ad-

vertising in the files of the federal government right

now, a Viceroy advertising [sic]. The Viceroy strat-

egy for attracting young people (starters, they are

called) to smoking.

"“For the young smoker a cigarette falls into the

same category with wine, beer, shaving, or wearing

a bra,” says the Viceroy strategy. “A declaration of

independence and striving for self-identity. There-

fore, an attempt should be made,” says Viceroy, “to

present the cigarette as an initiation into the adult

world, to present the cigarete as an illicit pleasure,

a basic symbol of the growing-up maturity process.

An attempt should be made,” says the Viceroy slick-

sters, “to relate the cigarette to pot, wine, beer, and

sex. Do not communicate health or health-related

points.”

That’s the strategy of the cigarette-slicksters, the

cigarette’s business which is insisting in public. . .

we are not selling cigarettes to children.

They’re not slicksters. They’re liars.

:

6a

While Jacobson was making his statements about Vice-

roy, superimposed on the screen was a current Viceroy

ad featuring two packs of Viceroy Rich Lights, a golf

ball, and a part of a golf club. The relation of that par-

ticular ad to “pot, wine, beer, and sex” advertisements

is not clear. Jacobson testified that the golf club ad was

used only as a means of identifying the brand name for

the viewer.

The “confidential report in the files of the federal gov-

ernment” referred to by Jacobson was a report by mem-

bers of the staff of the Federal Trade Commission

(FTC). The report first came to the attention of Jacob-

son’s researcher, Michael Radutzky, in the summer of

1981 when Radutzky saw an article in a Kentucky news-

paper that referred to the FTC report. Radutzky, who

went on to become the producer of the 5:00 p.m. and then

the 10:00 p.m. news at WBBM-TV, received copies of

the pertinent pages of the FTC report from the author

of the newspaper article.

The FTC report stated that documents obtained from

Brown & Williamson and one of its advertising agencies,

Ted Bates & Company, “set forth the development of an

advertising strategy for Viceroy cigarettes designed to

suppress or minimize public concern about the health ef-

fects of smoking.” The report stated that the documents

showed that Bates, which had the Viceroy account in

1975, requested a marketing and research firm, Market-

ing and Research Counselors, Inc., (MARC) to assist

Bates im developing a marketable image for Viccroy

cigarettes. After conducting a number of focus group in-

terviews on the subject of smoking, MARC delivered a

report, which was authored by N. Kennan, to Bates.

The MARC report made recommendations on what its

author thought were the important elements of a success-

ful cigarette advertising campaign. As summarized by

the FTC report, “the basic premise of the [MARC] re-

Ta

port’s recommendations is that since there ‘are not any

real, absolute, positive qualities and attributes in a ciga-

rette,’ the most effective advertising is designed to ‘reduce

objections’ to the product by presenting a picture or situ-

ation ambiguous enough to provide smokers with a ra-

tionale for their behavior and a means of repressing

their health concerns about smoking.”

The MARC report discussed in a later chapter how

“starters” could be introduced to the Viceroy brand. The

FTC report quoted the MARC report’s discussion of how

the young smoker related to cigarettes. “For them,” the

MARC report opined, “a cigarette, and the whole smok-

ing process, is part of the illicit pleasure category. .. .

In the young smoker’s mind a cigarette falls inte the

same category with wine, beer, shaving, wearing a bra

(or purposely not wearing one), declaration of independ-

ence and striving for self-identity. For the young starter,

a cigarette is associated with introduction to sex life, with

courtship, with smoking ‘pot’ and keeping late studying

hours.” FTC report at 17 (quoting MARC report) (em-

phasis in MARC report). The MARC report went on to

suggest’ a strategy for attracting “starters” to the Vice-

roy brand based “on the following major parameters”:

Present the cigarette as one of a few initiations into

the adult world.

Present the cigarette as part of the illicit pleasure

category of products and activities.

In your ads create a situation taken from the day-

to-day life of the young smoker but in an elegant

manner have this situation touch on the basic sym-

bols of the growing-up, maturity process.

To the best of your ability, (considering some legal

constraints), relate the cigarette to “pot,” wine,

beer, sex ete.

Don’t communicate health or health-related points.

8a

FTC report at 18 (quoting MARC report). The FTC

report then stated that Brown & Williamson had adopted

many of the ideas contained in the MARC report in the

development of an advertising campaign for Viceroy.

Specifically, the report noted that in a document it had

received directly from Brown & Williamson, rather than

from an advertising agency or a firm hired by the adver-

tising agency, Brown & Williamson had indicated that it

must prove consumers with a rationalization for smok-

ing and a “means of repressing their health concerns

about smoking a full flavor Viceroy.”” FTC report at 18

(quoting Viceroy strategy paper dated March 3, 1976).

The Viceroy strategy paper also indicated that other

major full flavor brands had either consciously or un-

consciously “coped” with the smoking and health issues

in advertising by appealing to repression. The strategy

paper suggested that Viceroy’s advertising objective

should be to “communicate effectively that Viceroy is a

satisfying flavorful cigarette which young adult smokers

enjoy, by providing them a rationalization for smoking,

or, a repression of the health concern they appear to

need.”” FTC report at 19 (citing Viceroy strategy paper).

The FTC report then cited three Viceroy advertising

strategies that were used in a six-month media cam-

paign conducted in three test cities in 1976. The first

campaign was the “satisfaction” campaign which was

intended to provide a “rationalization.” Specifically, the

intention was to convey the message that “Viceroy is so

satisfying that smokers can smoke fewer cigarettes and

still receive the satisfaction they want.” The second

campaign, the “tension release” campaign, was intended

to convince the smoker that Viceroy’s satisfying flavor

would help the smoker in a tense situation. The third

campaign, the “feels good” campaign, was intended to

repress concerns that smokers might have about smok-

ing by justifying it with the simple slogan “if it feels

good, do it; if it feels good, smoke it.” FTC report at

9a

20 (citing internal memorandum dated July 14, 1976).

None of these campaigns was cited in the FTC report

as an example of Viceroy implementing the MARC re-

port strategy to relate the cigarette to “pot,” wine, beer,

and sex. The FTC report stated, however, that Brown

& Williamson documents did indicate that the company

had “translated the advice on how to attract young

‘starters’ into an advertising campaign featuring young

adults in situations that the vast majority of young peo-

ple probably would experience and in situations demon-

strating adherence to a ‘free and easy, hedonistic life-

style.’”” FTC report at 20 (citing document titled Vice-

roy Marketing/Advertising Strategy dated January 26,

1976).

After reviewing the report, Radutzky contacted mem-

bers of the FTC staff who had drafted the report to con-

firm that the partial copy of the report he had received

from the Kentucky newspaper was accurate. The staff

members told Radutzky that they could not send him the

confidential documents cited in the report but did confirm

‘ that the report and its findings were accurate.

Radutzky also spoke on at least two occasions with

Brown & Williamson public relations officer Thomas

Humber. At trial, CBS introduced two internal Viceroy

documents, which were written by Humber for his su-

periors, that relate the substance of the conversations

that Humber had with Radutzky. In a conversation on

November 4, 1981, Humber stated that the internal Vice-

roy memoranda could only be understood in context. The

context included the fact that the Ted Bates agency was

told prior to their submission of the memo that it was

in trouble on the Viceroy account because Brown & Wil-

liamson was unhappy with its work. Humber told

Radutzky that Brown & Williamson had not requested

any ad campaign similar to the one suggested by Bates.

Moreover, he stated that Brown & Williamson had re-

jected the strategy embodied in the documents submitted

10a

by Bates. Humber also noted that “thus far [we] have

been unable to find copies of the proposed ads, to the

best of our knowledge, no ads as described by the memo

were ever actually published.” Radutzky was also in-

formed that partly as a result of Brown & Williamson’s

dissatisfaction with the specific proposal submitted by

Bates, Brown & Williamson had terminated Bates’ par-

ticipation in Viceroy advertising. In a conversation with

Radutzky on November 5, Humber told Radutzky that

all Brown & Williamson ads must have the approval of

the legal department and the highest levels of senior

management. He also stated that the legal department

did not get involved in the creative process and did not

review the ads until they “are at the point of worked-up

ads.”” Humber stated that the proposals referred to in

the FTC report were similar to a proposed libelous story

that a young inexperienced reporter might submit to his

editors but that was corrected by a news organization’s

editors and attorneys. Humber stated that in such a

case no legitimate criticism could be leveled at the news

organization. He clearly implied that because Brown &

Williamson had never run any of the controversial pro-

posals as ads, it would be unfair to criticize Brown &

Williamson simply because such proposals had been made

by individuals who could not authorize an ad campaign.

In addition to contacting Brown & Williamson, Ra-

dutzky, on Jacobson’s request, conducted a search for

“pot,” wine, beer and sex ads that were used by Vice-

roy. Unable to locate any such ads, Radutzky reported

the result of his search to Jacobson. Radutzky also com-

mented to Jacobson prior to the broadcast that Jacobson’s

script for the broadcast omitted Brown & Williamson’s

statement that it had never adopted a “pot,” wine, beer

or sex strategy. Jacobson did not alter his script.

During the course of this investigation, Radutzky made

contemporaneous interview notes and extensive hand-

written notes on his copy of the FTC report. In addi-

aac

lla

tion, he developed an eighteen-page sample script for the

broadcast. The sample script, which was duplicated at

least six times and distributed to various people in the

newsroom including Walter Jacobson, reported “both

sides of the issue.” The jury never saw much of Ra-

dutszy’s work product. Prior to trial, Radutzky de

stroyed all of his contemporaneous interview notes, five

of the ten pages of the FTC report including those pages

that contained the recommendations from the MARC re-

port, and fifteen of the original eighteen pages of his

sample script. CBS was unable to produce any of the

copies of the sample script that Radutzky had distributed

in the newsroom.

Radutzky testified that he destroyed his materials as

part of a general housecleaning after the original com-

plaint in this case had been dismissed by the district

court but before he became aware that Brown & William-

son appealed that dismissal. His destruction of the docu-

ments contravened a CBS retention policy that provides

that once litigation has commenced “any and all related

‘materials should be retained until specifically released.”

The policy also provides that “[o]bviously if there is a

. . . pending legal action, our policy is to retain all per-

tinent materials unless specifically released by the Law

Department.” Although Radutzky conceded that he did

destroy the documents without the approval of the Law

Department at CBS, he stated that he was unaware that

the policy existed.

When Radutzky destroyed the documents, he was no

longer assigned to the Perspective unit and therefore his

desk was in a completely different section of the news-

room. Nonetheless, he apparently made a point of “clean- |

ing house” in the Perspective section of the newsroom

even though he had not worked there for several months.

Brown & Williamson attempted to prove that Jacob-

son’s charges were false by introducing every Viceroy

12a

advertisement published between 1975 and 1982. They

argued to the jury that none of these advertisements was

a “pot,’’ wine, beer, or sex ad. In addition, Robert Pitt-

man, the Brown & Williamson Vice President whose ap-

proval was required before any Viceroy ad could be pub-

lished, testified that he had never seen the MARC report

prior to litigation in this case. Pittman also stated that

Brown & Williamson had never asked Bates to design

any “pot,” wine, beer, and sex ads. William Scholz, the

Bates employee in charge of the Viceroy account, con-

firmed that Brown & Williamson had never asked Bates

to utilize a “pot,” wine, beer, and sex strategy in de-

veloping advertisements.

Brown & Williamson put forth evidence that it ad-

hered vigorously to the Cigarette Advertising Code, which

bars advertising to persons under 21. In addition to

adhering to the Code, Brown & Williamson took the

additional step of establishing a detailed procedure to

ensure that its advertising agencies did not use models

who either were or appeared to be younger than 25.

When undertaking advertising campaigns that involved

the distribution of samples, Brown & Williamson re-

quired the individuals distributing the samples to sign

statements promising not to distribute cigarettes to peo-

ple under 21.

Walter Jacobson also testified at trial. Jacobson indi-

cated that he had read the FTC report prior to delivering

his Perspective and was aware that the FTC report

was quoting a document prepared by Market and Re-

search Counselors. He agreed that the way in which the

Perspective was delivered, with the Viceroy graphics on

the screen at the time he was referring to the “pot,”

wine, beer, and sex strategy, would convey the impres-

sion that the “pot,” wine, beer, and sex comment was

made by Viceroy itself rather than MARC. After agree-

ing that such an impression would be created, Jacobson

added that “I even said that, ‘Viceroy says.’ ”

13a

Jacobson’s testimony indicated that he had reviewed

Radutzky’s sample script prior to delivering the Perspec-

tive. Jacobson corroborated part of Radutzky’s testi-

mony by confirming that Radutzky had told him that he

had been unable to find any ads showing that Brown &

Williamson had implemented a “pot,” wine, beer, and sex

advertising strategy. Jacobson was also aware that Ra-

dutzky had spoken with Brown & Williamson and that

the company denied adopting the strategy and therefore

had no advertisements that they could supply that would

reflect that strategy. According to Jacobson, he para-

phrased Viceroy’s denial in the broadcast when he stated

“Viceroy insists . . . whose fault is it that children are

smoking? It’s not ours.” 3

Jacobson also agreed, at least at one point, that it

would be fair to say that when he wrote the Perspective

script he wrote it in the present tense with respect to

Viceroy and the purported “pot,” wine, beer, and sex

strategy. For example, he agreed that when he used a

phrase such as “/t]hat’s what Viceroy is saying,” he

- realized that it would be interpreted by any reasonable

listener as referring to the present tense. At other points

during his testimony, however, Jacobson appeared to state

that some language used during the broadcast was past

tense. While recognizing that there was no indication

in the Perspective that the strategy mentioned in the

MARC report had been recommended in 1975, six years

before the broadcast, Jacobson testified that because the

FTC report described it as “the Viceroy strategy” he

did not believe that he gave the viewer “an impression

of time that varies from the facts.” Under further ques-

tioning, Jacobson did agree that the phrase “[a]n at-

tempt should be made, says the Viceroy slicksters to re-

late the cigarette to ‘pot,’ wine, and beer’ would be

“more current” than the phrase “the Viceroy strategy.” °

2 Jacobson also agreed that when he said “Viceroy slicksters”

he was talking about Brown & Williamson and the people who

make Viceroy cigarettes as opposed to their advertising agency.

l4a

Jacobson also noted that there was a distinction be-

tween a report, an analysis, a commentary and an edi-

torial. An example of a report, according to Jacobson,

would be if a newsperson went on the air and said

“tlhe FTC says that Viceroy did such and such, and

Viceroy says it did not.” He agreed that when deliver-

ing such a statement a reporter should try to be fair and

accurate. Jacobson also stated that “[mly life is re

search” and indicated that what he said in the Perspec-

tive was “absolutely true.”

On direct examination, Jacobson’s counsel brought out

his client’s state of mind at the time of the broadcast.

Jacobson asserted that he “believed” at the time he de-

livered the Perspective that it was truthful and that it

was a fair and accurate summary of what the Federal

Trade Commission had said about Viceroy cigarettes.

Jacobson also testified about what he “intend[ed]” to

inform the viewers about Viceroy when he “sat down to

write” the Perspective. When cross examined, Jacobson

confirmed that he had testified on direct examination

about what he was thinking when he wrote the script and

attempted to refute the allegation that he “really [had]

no recollection at all of what [he] thought about in”

preparing the script by stating that such an assertion

was “absolutely untrue.” Brown & Williamson’s counsel

then read Jacobson’s 1984 deposition in which the follow-

ing exchange took place:

Question: I just want to know if you have a

recollection whether in 1981, when you called the

manufacturers of Viceroy cigarettes liars, you were

attempting then to be objective?

Jacobson: I don’t remember what I was think-

ing now when I wrote that three and a half years

ago.

Question: Can you recall whether when you

wrote the November 11, 1981 script, you were try-

ing to fairly present both sides of the question?

l5a

Jacobson: I don’t remember what I was thinking

when I wrote that script. It’s hard to remember

three and a half years ago.

Question: You don’t remember what was in your

mind?

Jacobson: Right.

Question: You do remember you wrote the script

though?

Jacobson: I don’t remember writing it. I do see

it.

Question: You don’t remember writing it?

Jacobson: Yes, I mean—I don’t remember sitting

at my typewriter, what I was thinking and how my

hands were working. I see the script. It has a date.

I wrote it, obviously, and I remember being involved

in a series of reports on that subject.

On redirect examination, Jacobson asserted that his rec-

ollection of his state of mind at the time of the broadcast

had improved from the time of his deposition to the time

of the trial because he had “gone over everytning that

ha[d] been given [him] by a whole team of lawyers”

including the script that he used during his Perspec-

tive and the videotape of the actual broadcast. Jacob-

son stated that as a consequence his memory was jarred

and he was able to “just recall more specifically some

things that I didn’t recall from before.”

II.

Concerned that traditional state law actions for defa-

mation might interfere with the First Amendment guar-

antees of free expression, the Supreme Court held in the

landmark case of New York Times v. Sullivan, 376 U.S.

254 (1964), that a public official could recover in a libel

action only if the official was able to show that the al-

leged defamatory statement was made with “ ‘actual

malice’—that is with knowledge that it was false or with

reckless disregard of whether it was false or not.” Jd.

at 279-80. This constitutional standard, which was ex-

16a

tended to public figures such as Brown & Williamson in

Curtis Publishing Co. v. Butts, 388 U.S. 130 (1967),

requires that the plaintiff prove by “clear and convincing

evidence” that the defendant either knew the statement

was false or “in fact entertained serious doubts as to

[its] truth... .” St. Amant v. Thompson, 390 U.S.

727, 731 (1968).

In New York Times, the Supreme Court also outlined

the role that a reviewing court must play in insuring

that the First Amendment is not infringed upon. In re-

viewing a defamation verdict, courts must exercise par-

ticularly careful review. They “must ‘make an independ-

ent examination of the whole record,’ . . . so as to assure

[themselves] that the judgment does not constitute a for-

bidden intrusion on the field of free expression.” New

York Times, 376 U.S. at 285 (quoting Edwards v. South

Carolina, 372 U.S. 229, 235 (1963)); see also Tavou-

lareas v. Piro, No. 83-1605, slip op. at 24-27 (D.C. Cir.

Mar. 13, 1987) (en banc). In Bose v. Consumers Union,

466 U.S. 485 (1984), the Court reaffirmed the New York

Times mandate of independent appellate review that it

had applied “uncounted times before.” Jd. at 514. The

Court stated that “[t]he question whether the evidence

in the record in a defamation case is of the convincing

clarity required to strip the utterance of First Amend-

ment protection is not merely a question of the trier of

fact.” Id. at 511. The Court held that appellate judges

“must exercise independent judgment and determine

whether the record establishes actual malice with con-

vicing clarity.” Jd. Jacobson and CBS argue that Bose

mandates independent appellate review of all issues of

“constitutional fact,” see Bose, 466 U.S. at 508, n.27,

which they contend includes the issues of falsity and opin-

ion. Brown & Williamson counters that Bose allows ex-

panded appellate review “solely of the issue of actual

malice, and of no other question.” Appellee’s Brief at 7

(citing Bose, 466 U.S. at 514 n.31). There is also a dis-

17a

pute about what independent appellate review means.

The District of Columbia Circuit in Tavoulareas v. Piro,

slip op. (D.C. Cir. 1987), recently summarized the two

positions. “Under one view, Bose’s mandate of de novo

review means precisely that, with no deference at all to

be accorded any jury finding germane to actual malice.

Under the contrary view, Bose does not alter the tradi-

tional rules governing the review of jury verdicts and

thus judicial deference is constitutionally mandated to

presumed jury findings of underlying facts, evaluations

of credibility, and the drawing of inferences.” Slip op.

at 24-25.

The extent to which Bose mandates independent appel-

late review “as to findings of underlying facts, evalua-

tions of credibility, and the drawing of inferences” is

still an open question. See Tavoulareas, slip op. at 25

(declining to decide the issue). But see Tavoulareas, slip

op. at 4 (Wald, C.J., concurring in judgment) (arguing

that Tavoulareas majority does “reexamine and reject

‘permissible’ inferences which the jury might have drawn

to support their verdict”). We decline to “tackle the

knotty constitutional issue regarding what constitutes in-

dependent review under Bose...” Tavoulareas, slip op.

at 26. We also decline te decide whether Brown & Wil-

liamson is correct in arguing that Bose’s mandate of in-

dependent appellate review encompasses only the issue of

actual malice.

We can avoid these issues by accepting, for purposes of

this case only, the defendants’ argument that Bose man-

dates a wide-ranging appellate review, with little or no

deference to the jury’s findings, of all aspects of this case

including falsity and opinion. We emphasize that we are

not deciding the correctness of the defendants’ interpre-

tation of Bose. Rather, we are applying their interpre-

tation because we can avoid the difficult issues left un-

resolved by Bose without affecting the outcome of this

case because both deferential and de novo review yield

the same result.

18a

Of course, even under defendants’ interpretation of

Bose, there is a limit to the amount of independent re-

view that an appellate court can engage in. For example,

we are incapable of making complete credibility deter-

minations because we are unable to observe the demeanor

of witnesses. We can, however, review the transcript of

a witness’s testimony and determine whether the record

would give us any reason to question the jury’s credibil-

ity findings. When the record fully supports the jury’s

determinations, as in this case, Bose obviously requires

the appellate court to affirm the decision below. In short,

we do not believe, nor do defendants argue, that Bose

requires an appellate court to believe the unbelievable

and to accept the untenable. At most, Bose requires an

appellate court to review all the findings below, to the

extent that it can within the confines of an appellate rec-

ord, and determine whether the judgment below is cor-

rect. In our discussion, we will undertake a thorough

review of all aspects of this case including opinion, fals-

ity, fair summary, and actual malice and determine

whether the evidence supports the jury verdict.

ITI.

CBS and Jacobson raise three main liability defenses.

First, they contend that the broadcast was an expression

of editorial opinion protected by the First Amendment.

Second, they argue that the statements of fact that were

in the broadcast, including the summary of the FTC re-

port, were substantially true. Finally, they assert that

Brown & Williamson did not meet its burden of proving

actual malice.

A. Opinion

Both parties ask us to apply a test used by the District

of Columbia Circuit, see Ollman v. Evans, 750 F.2d 970

(D.C. Cir. 1984) (en banc} (plurality opinion of Starr,

J.), cert. denied, 471 U.S. 1127 (1985), in deciding

=

19a

whether Jacobson’s Perspective was opinion protected

from a defamation suit by the First Amendment.’ Under

the test, a court must first analyze whether the statement

has “a precise core of meaning for which a consensus of

understanding exists or, conversely, whether the state-

ment is indefinite and ambiguous.” 750 F.2d at 979.

Second, a court must consider whether the statement is

capable of being objectively characterized as true or false.

Third, a court should review the full context of the state-

ment because the language surrounding an alleged de-

famatory statement may influence “the average reader’s

readiness to infer that a particular statement has factual

content.” Jd. Fourth, in addition to considering the im-

mediate context in which a statement is made, a court

should also consider the broader social context into which

the statement fits. Jd. at 983.

In support of their argument that the literary and so-

cial context in which the Perspective was made requires

this court to conclude that the Perspective was opinion

protected by the First Amendment, defendants note that

Jacobson delivered his Perspective away from the anchor

desk With the word “Perspective” written on the screen

near Jacobson’s signature. They also argue that because

the Perspective was delivered in a vehement and caustic

manner and the phrase “the killer business’ was used

near the beginning of the Perspective, viewers should

have been alerted to Jacobson’s harsh opinion of the

-techniques of cigarette advertisers. They cite as an ex-

ample Jacobson’s statement that the cigarette “slicksters

. . are not slicksters, they’re liars.” In addition, defend-

ants argue that the use of phrases such as “slicksters,”

3’ Although we are using the test embodied in Judge Starr’s opin-

ion, we do so only at the request of the parties. Because the par-

ties agree on the Ollman test, we need not decide whether that

test is the appropriate one to assist a court in differentiating fact

from opinion. See generally McCabe v. Rattiner, 814 F.2d 839 (1st

Cir. 1987).

20a

“the killer business,” “hook ’em while they’re young,”

“addicting the children to poison,” and “they’re liars,”

show that the broadcast when considered in context is

really protected opinion. CBS’s opinion argument appears

to be best summarized by their contention that “|t]he

tone of the broadcast should have immunized CBS and

Mr. Jacobson from liability—not exposed them to it.”

Appellant’s Brief at 34.

In making its “context is determinative” argument,

CBS ignores some important facts. First, Jacobson’s co-

anchor began his introduction for the Perspective by stat-

ing that “Walter has been reporting [for the past two

nights] on the companies that make cigarettes and the

clout they carry in Washington.” (Emphasis added.) In

completing the introduction, Jacobson’s co-anchor stated

that “[t]onight he has the last in his series of special

reports, a look at how the cigarette business gets its cus-

tomers.” The Perspective was also promoted during the

day of the broadcast as “[t]obacco industry hooks chil-

dren... Tonight at 10:00.” The introduction itself and

the promotional advertisements would appear to lead

reasonable viewers to believe that what they were about

to hear was a news report by Walter Jacobson. In addi-

tion, the literary context in which the statement was

made also provides no assistance to CBS. CBS concedes,

as it must, that the entire Perspective was filled with spe-

cific examples of cigarette marketing techniques that

would attract young people. Rather than preparing the

viewer for Jacobson’s opinion about Viceroy, the literary

context prepared the viewer for an example of how Vice-

roy went about attracting young smokers. An example

(whether true or not) is exactly what Jacobson provided.

The defendants appear to realize that the literary and

social context does not automatically immunize the entire

broadcast as opinion because they concede that “not...

every statement in the broadcast is automatically immune

from factual analysis.” Appellant’s Brief at 37 n.14. De-

2la

spite this concession, the defendants have failed, with one

minor exception, to argue to this court what specific

statements constitute protected opinion.* The defendants

probably prefer to avoid specifics because even a cursory

analysis of the relevant parts of the broadcast using the

first two factors in the Ollman analysis (‘‘core meaning”

and the extent to which a statement can be characterized

as true or false) reveals that the statements are factual.

“The cigarette business insists ... it is not selling ciga-

rettes to children. . . . That’s what Viceroy is saying.

Who knows whose fault it is [that children are smoking

more]? It’s not ours.” There is an obvious “core mean-

ing,” see Oliman, 750 F.2d at 979, to this statement

(Viceroy says it is not selling cigarettes to children)

that is either true or false. It is not an indefinite or am-

biguous statement. /d. Jacobson also says that “[wlell,

there is a confidential report on cigarette advertising in

the files of the federal government right now, a Viceroy

advertising [sic]. The Viceroy strategy for attracting

young peopie (starters, they are called) to smoking.” The

Perspective then states what the “Viceroy strategy says”

and what “the Viceroy slicksters say.” The critical pas-

sages of the Perspective are without question factual

under the first two Ollman factors. The only issue is

whether the quoted statement is true or false.

We note that in holding that the broadcast is fact and

not opinion, we simply agree with the view that Jacob-

son expressed at trial. Jacobson, in attempting to draw

a distinction between a report, an analysis, a commen-

tary, and an editorial, stated that a report would be if

a reporter went on the air and said “|t|he FTC says that

Viceroy did such and such, and Viceroy says it did not.”

4 The only relevant part of the broadcast that the defendants con-

tend is opinion is Jacobson’s closing statement that “they’re liars.”

As Brown & Williamson points out, even assuming that “they’re

liars” can be characterized as opinion, it does not make the various

other allegations against Brown & Williamson any less factual.

22a

Jacobson’s example of a report is, of course, essentially

what he delivered to his viewers on November 11, 1981.

The fact that a report is delivered in a caustic tone does

not turn a statement of fact into a statement of opinion.

Our holding on this issue is also supported by the state-

ments of Jacobson’s trial counsel. In closing argument, it

was asserted that the statements Jacobson made (as in-

terpreted by Jacobson and CBS) were “absolutely, totally,

100% true.” While an opinion can be right or wrong,

it cannot be true or false. Jacobson’s trial counsel recog-

nized this and so do we.

B. Falsity

In their closing argument at trial, CBS argued at three

separate points that “when you look at the Perspective

closely you will see that there is no statement whatsoever

about any advertising being run, and the suggestion made

[by Brown & Williamson] that advertising is being run

. is only an attempt to take your eye off the ball of

what the real issue in this case is.” CBS also stated that

Jacobson “never in his Perspective said anything about

running pot, wine, beer and sex advertisements.” It re-

iterated this point later in its closing argument: “|a] gain,

I ask you: Is there a word? Is there a single word that

says that Viceroy ever ran an ad featuring pot, wine, sex

and beer?” The defendants answered the question them-

selves: “Of course there is no such statement. And it’s

ridiculous to suggest that they ever did run such a cam-

paign.”’

It may be ridiculous to suggest that such a campaign

was run but this is exactly what CBS now argues before

this court. We reject CBS’s argument not only because

CBS waived it but also because it is not convincing. CBS

contends that three advertisements, which were run as

part of a six month test market campaign in three cities,

were the implementation of the “pot,” wine, beer and sex

strategy recommended in the MARC report. These adver-

23a

tisements, according to CBS, were the “more refined and

acceptable expression of the MARC strategy” to present

the cigarette as part of the illicit pleasure category of

products and activities. Responsive Brief at 2. The ads,

as described by CBS, show “a well-dressed young woman

wading in a public fountain while her date looks on, a

young man poised to throw a cream pie at the camera,

and a young woman dousing her head under a water

pump.” At the top of the ads is the slogan “If it feels

good, do it. If it feels good, smoke it.” According to CBS,

the first sentence is “a common slogan of the sexual rev-

olution” while the second sentence is “a thinly-veiled

reference to marijuana.” At the bottom of each advertise-

ment is a picture of a package of Viceroy cigarettes

Under the package is the slogan “Viceroy. It feels good.”

We agree with trial counsel that these ads cannot be

fairly characterized as “refined” versions of “pot,” wine,

beer, and sex ads. In the fountain ad, the woman is fully

clothed in a dress and a shirt jacket. The water in the

fountain is coming up to her knees and her dress appears

to be about five inches above her knee on the right leg

and eleven inches above the knee on her left leg, which

is extended forward. The man in the ad is fully clothed

and about ten feet away from the woman. She appears

from the picture to be having a good time even though

she is not involved in any sexual adventure. The ad seems

to imply that this is a woman who has done something

(wade in the fountain) because “it feels good.” The ad

also implies that this woman,-who is holding a cigarette

in her hand, is smoking that cigarette because it feels

good. (“If it feels good, smoke it.”) The connection to

Viceroy is at the bottom of the ad where it states “Vice-

roy. It feels good.” As we read the ad in context, the full

message is that an individual should do things that feel

good and that because Viceroy (not marijuana) feels

good when one_smokes it, the American consumer should

choose Viceroy. The other two ads convey essentially the

24a

same message. The age range of the models in the adver-

tisements appears to be from the mid to late twenties to

the mid thirties. We conclude that these ads are not,

even in somewhat refined form, “pot,” wine, beer, and

sex ads.

It is true that the phrase “if it feels good, do it” can

under certain circumstances have sexual connotations.

When the ads are read in context, however, there is only

an attempt to relate pleasurable experiences (which could

include sex but in the ads do not) to smoking Viceroys.

Our reading of these ads is also supported by the FTC

report which cited these ads as an attempt by Brown &

Williamson to implement a strategy that attempted to pro-

vide consumers “with a rationale for smoking a full flavor

Viceroy ....” These ads were not cited by the FTC as

an attempt by Viceroy to attract “starters” or to imple-

ment the “pot,” wine, beer, and sex strategy that had

been proposed by MARC. Moreover, even if these ads

could be characterized as sex ads, CBS has failed to

show the truthfulness of the “pot,” wine, and beer allega-

tion. )

In a related challenge, CBS argues that the district

court erred in excluding a document referred to at trial

as the final MARC report. The final MARC report was

submitted by MARC to Bates in May 1976. The final

MARC report is not the May 1975 “pot,” wine, beer, and

sex MARC report authored by N. Kennan. The final

MARC report, which was not referred to in the FTC

report, is a 243 page document that gives the details of

testing of several “comp” ads, which are artists’ render-

ings of possible advertising approaches. Two primary rea-

sons support the district court’s decision not to allow the

final MARC report to be published to the jury. First,

there was no showing that the content of the final report

could be fairly attributed to Brown & Williamson since

it had been written by MARC. Therefore, some of the

contents of the report which the defendants argue con-

tain some sexual themes might be unfairly attributed by

25a

the jury to Brown & Williamson rather than MARC. Sec-

ond, although there were similarities between some of the

composite ads and the test market campaign actually run

by Viceroy, the published ads themselves, and not the

composite ads, were the only probative and nonprejudicial

material that could be fairly attributed to Brown & Wil-

liamson.

CBS argues in this court that by excluding the final

MARC report, the district court excluded “the critical

evidence” of truth. The defendants contend that by see-

ing the final report, the jury would have understood that

Brown & Williamson did implement the “pot,” wine, beer,

and sex strategy in an advertising campaign. The defend-

ants point to the fountain ad as an example. In the final

report, there was an ad similar to the fountain ad de-

scribed above but with the slogan “If you don’t have a

hangup about pleasure.” In addition to changing the

slogan before the ad was test marketed, Brown & Wil-

liamson also changed the ad, according to the defendants,

“slightly to diminish its more overt sexual connotations.”

If the ads were truly similar to the ones used in the cam-

‘paign, the defendants should have argued to the jury that

the published ads, which were admitted into evidence,

were indeed “pot,” wine, beer, and sex ads. The defend-

ants would not have needed the composite ads to make

this argument. Of course, CBS and Jacobson declined

to make such an argument apparently because they be-

lieved, as do we, that such an argument would have

failed. Moreover, as the FTC report made clear, the

fountain ad was not used to implement the “pot,” wine,

beer, and sex strategy for “starters” but was used to

provide all consumers a rationale for smoking a full-

flavor Viceroy. We conclude that the district court did

not abuse its discretion in excluding the final MARC

report.

5 The defendants also challenge Judge Hart’s decision to exclude

evidence of Brown & Williamson’s advertising efforts for the other

brands of cigarettes that it markets. Judge Hart also limited

OEE

26a

CBS and Jacobson also argue that the Perspective was

a fair summary of the FTC report. In Brown & William-

son v. Jacobson, 713 F.2d 262 (7th Cir. 19838) (Brown &

Williamson I), we had to decide whether the fairness of

Jacobson’s summary of the FTC report “emerges so in-

controvertibly from a comparison of the [FTC report]

with the broadeast that no rational jury” could conclude

that Jacobson had distorted the report. Jd. at 271 (hold-

ing that under Illinois law fair summary was a question

of fact for the jury to decide). We remanded the case for

trial, holding that a rational jury could find that Jacob-

son’s broadcast was not a fair summary of the FTC

report. In remanding for trial, we stated that the FTC

report could be interpreted to convey the “following mes- .

sage: six years ago a market-research firm submitted to

Brown & Williamson a set of rather lurid proposals for

enticing young people to smoke cigarettes and Brown &

Williamson adopted many of its ideas (though not neces-

sarily the specific proposals quoted in the report) in an

advertising campaign aimed at young smokers which it

conducted the following year.” Jd. We held that a jury

could find that Jacobson’s Perspective carried a greater

sting, and therefore was not a fair summary, if it con-

cluded that Jacobson conveyed “the following message:

Brown & Williamson currently is advertising cigarettes

in a manner designed to entice children to smoke by as-

sociating smoking with drinking, sex, marijuana, and

other illicit pleasures of youth.” Jd. In answer to a

special interrogatory, the jury found that Jacobson’s

broadcast was not a fair summary of the FTC report.

The jury’s finding normally would be the end of the

matter. However, subsequent to our decision in Brown

& Williamson I, the Supreme Court decided Bose. Be-

Brown & Williamson to introducing evidence directly concerning

practices that applied to Viceroy. This was a reasonable limita-

tion in a libel trial that dealt with charges that were made spe-

cifically against the Viceroy brand. Judge Hart acted well within

his discretion.

27a

cause we have accepted for purposes of this case (and

only this case) the defendants’ contention that Bose man-

dates appellate review with no deference to the jury’s

findings, we will independently review the fair summary

issue. The defendants contend that our conclusion on the

fair summary issue should differ from Brown & William-

son I because trial testimony supports their position on

the fair summary issue. We do not agree. The trial record

simply reinforces the result we hinted at in Brown &

Williamson I. At trial, Jacobson stated that the Perspec-

tive attributed the “pot,” wine, beer, and sex language

to Viceroy rather than to the MARC report—“I even said

that, ‘Viceroy says.’”’ Jacobson also agreed that the lan-

guage in the broadcast would lead viewers to believe that

Jacobson was “making a present tense statement about

current Viceroy strategy.”’ These concessions simply rein-

force the conclusion we hinted at in Brown & William-

son I and the one that Judge Hart reached in his opin-

ion. Judge Hart correctly pointed out that “there are sev-

eral differences between the FTC report and the broad-

.cast that would allow a jury to find that the one was not

a fair summary of the other.” Judge Hart gave four

examples:

1. The broadcast used the present tense to repre-

sent that the tactics were currently being used while

the FTC staff report indicated that the quoted lan-

guage came from a report written six years earlier.

2. The broadcast implied that the quotations from

the MARC report come directly from [Brown & Wil-

liamson] while the FTC staff report clearly indicated

that they were from the MARC report...

3. The broadcast used the term “children” to refer

to the object of this strategy, while the report used

the terms “young smokers” and “starters.”

4. The report did not cite any published Viceroy

advertisement that implemented a pot, wine, beer or

CC

28a

sex strategy to attract children to smoke cigarettes.

The broadcast clearly implied such ads existed.

644 F. Supp. at 1253-54. We agree with Judge Hart’s

observations. The defendants have given us no reason to

disagree with the jury’s conclusion that the Perspective

was not a fair summary of the FTC report. See also

Brown & Williamson I, 713 F.2d at 271.°

C. Malice

Even according no deference to the jury’s findings, we

conclude that Brown & Williamson proved by clear and

convincing evidence that the defendants either knew the

Perspective was false or in fact entertained serious

doubts as to its truth. See St. Amant v. Thompson, 390

U.S. at 731; see also New York Times v. Sullivan, 376

U.S. at 279-80.

The most compelling evidence of actual malice sub-

mitted to the jury was the intentional destruction of

critical documents by Jacobson’s researcher, Michael Ra-

dutzky. The story that emerges from Radutzky’s tes-

timony is that at some point after this litigation com-

menced in early 1982, he destroyed various documents

that in all likelihood would have established that both

he and Jacobson were aware that the “tobacco industry

hooks children” Perspective was false at the time that it

was delivered. The documents that Radutzky destroyed

included: an eighteen-page sample script which was dis-

tributed to Jacobson and others in the newsroom, Ra-

6 Defendants also claim that this case is controlled by the Illinois

rule of innocent construction. See Fried v. Jacobson, 99 Ill. 2d 24,

457 N.E.2d 392 (1983); Chapski v. Copley Press, 92 Ill. 2d 344,

442 N.E.2d 195 (1982). Under that rule, if the defendants are able

to show that the alleged defamatory statements are capable of a

reasonable construction that is “innocent,” then the defendant will

not be liable for defamation. The rule does not apply to this case,

however, because defendants have not submitted to this court any

reasonable construction of Jacobson’s Perspective that is “inno-

cent.”

29a

dutzky’s annotated copy of the FTC report, and various

contemporaneous interview notes that Radutzky had

taken while investigating the Perspective. Radutzky,

however, did not destroy all of these documents. Ra-

dutzky only destroyed the parts of the documents that

would have been relevant to this litigation. Radutzky de-

stroyed fifteen of the eighteen pages of his copy of the

sample script. Although there is no evidence that Ra-

dutzky destroyed the additional six or seven copies of

the sample script that had been distributed to various

individuals in the newsroom, CBS was unable to produce

any of the copies of the sample script. Radutzky tes-

tified that he also went to Jacobson’s desk (when he was

no longer a member of the Perspective work unit) and

disposed of some documents from Jacobson’s desk that

might have included the sample script. Radutzky also

destroyed five of the ten pages from his copy of the

FTC report. As “luck” would have it, the five destroyed

pages were the pages that contained the quotations of the

“pot,” wine, beer, and sex recommendations from the

‘MARC report.

Radutzky’s sample script, which Radutzky admitted

reported both sides of the story, was reviewed by Jacob-

son before he prepared the final draft of the Perspective.

Radutzky’s selective destruction of this document, along

with all the other document destruction that he under-

took, is strong evidence of actual malice. A court and a

jury are entitled to presume that documents destroyed in

bad faith while litigation is pending would be unfavor-

able to the party that has destroyed the documents. See

Coates v. Johnson & Johnson, 756 F.2d 524, 551 (7th

Cir. 1985); S.C. Johnson & Son v. Louisville & Nashville

Railroad, 695 F.2d 253, 258-59 (7th Cir. 1982); see also

Nation-Wide Check v. Forest Hills Distributors, 692 F.2d

214, 217-19 (1st Cir. 1982).

Because Radutzky did have an “innocent” explanation

for his activities, we must also consider whether the evi-

———

30a

dence indicates that Radutzky destroyed the documents

in bad faith. We conclude that even a cursory review

of his story reveals that the jury was justified in find-

ing that it was a complete fabrication. Radutzky told

the jury that he destroyed the documents while he was

cleaning out his section of the newsroom. Radutzky also

told the jury that he cleaned up Jacobson’s desk in the

Perspective section of the newsroom where Radutzky

was no longer assigned. Radutzky testified that he de-

cided to do the housecleaning after he heard that the

libel case had been dismissed by the district court but

before he heard that the dismissal would be appealed.

As the district court pointed out, his emphasis on de-

stroying the documents after the case had been dismissed

confirms that Radutzky was aware of the common-sense

notion that important documents should not be destroyed

while litigation is pending.’

For several reasons, Radutzky’s story is not believable.

First, Radutzky’s explanation that he was unaware that

Brown & Williamson had a right to appeal the initial

dismissal is implausible. We do not think it immodest of

us to suggest that many people know that an appellate

court such as the Seventh Circuit exists. Radutzky, a

college graduate who majored in history, worked “con-

stantly” on stories involving legal matters. For a person

of his experience, it is completely implausible that he

would be unaware that a party who lost in a lower court

had a right to challenge the decision in an appellate

court. Moreover, Radutzky testified that he had “heard

of an appellate process” which is all the knowledge that

Radutzky needed to know to omit the documents from

his housecleaning operation.

7 Radutzky apparently had some trouble verbalizing his thoughts

at trial because at one point he stated that “I just know that I

had disposed of [the documents] after I learned that the case had

been appealed.” After plaintiff’s counsel had the statement read

back, Radutzky tesified that he, of course, had meant dismissed.

8la

A second factor undercuts Radutzky’s “innocent” ex-

planation. Although he was supposedly engaged in a gen-

eral housecleaning operation, he threw out only part of

the FTC report and part of the sample script. Radutzky

had no explanation for why he destroyed only certain

parts of the documents. The unexplained selective de-

struction would have allowed (almost compelled) the jury

to reach two conclusions. First, Radutzky’s “houseclean-

ing” explanation was a complete fabrication. Nobody

cleans house as selectively as Radutzky did. Second, be-

cause Radutzky destroyed only the parts of the documents

that would have contained statements and notations rele-

vant to this litigation, the full documents, if they had

been produced, would have severely damaged CBS’s case.

In addition, Radutzky had no explanation for why he

would be cleaning off Jacobson’s desk in addition to his

own. Under normal circumstances, it would be difficult

to believe that a research assistant would clean off his

boss’s desk without permission. In this case, Radutzky’s

story suffers from an additional defect because at the

' time that he removed documents from Jacobson’s desk,

he was'no longer working for Jacobson and, in fact, no

longer worked in the Perspective section of the news-

room. Radutzky had gone on to become the producer of

the 5:00 p.m. news.

In destroying the documents, Radutzky also violated a

CBS retention policy that provided:

Once the station is notified of a claim pertaining to

any of the following material, the litigation section

of the Law Department should be notified and any

and all related materials should be retained until

specifically released.

Some materials are retained indefinitely on a selected

basis. Our policy is to review the files in January to

determine what should be selectively retained. Ob-

viously if there is a... pending legal action, our

ee

32a

policy is to retain all pertinent materials unless spe-

cifically released by the Law Department.

Radutzky admitted that he was not given permission by

CBS’s attorneys to destroy any documents but claimed

that he was unaware that CBS had a retention policy.

The defendants ask us in exercising independent appel-

late review to credit Radutzky’s testimony. Our review

indicates, however, that the evidence overwhelmingly sup-

ports an inference that Radutzky destroyed the docu-

ments in bad faith. In order for the jury to have cred-

ited Radutzky’s testimony that the document destruction

was not an attempt to conceal evidence of actual malice,

it would have had to believe the following: (1) Radut-

zky was unaware that a party can appeal an adverse

judgment of a trial court; (2) Radutzky decided to clean

house by disposing of only certain parts of some docu-

ments; (3) Radutzky believed that it was his duty to

clean off the desk of his former boss; (4) Radutzky did

not adhere to the CBS retention policy because he was

unaware that it existed. We conclude that the evidence

fully supports the jury’s decision not to believe Radut-

zky’s “innocent” explanation. Because Radutzky de-

stroyed the documents in bad faith, the jury was allowed

to infer that the destroyed documents would have seri-

ously damaged the defendants’ case. See, e.g., Nation-

Wide Check, 692 F.2d at 217-19. The destruction of the

documents is strong evidence of actual malice.

Brown & Williamson also points to Walter Jacobson’s

testimony as evidence of actual malice. Jacobson’s testi-

mony revealed that he had received and reviewed Radut-

zky’s sample script prior to delivering the broadcast. In

addition, he knew that Radutzky’s search for “pot,” wine,

beer, and sex ads had been unsuccessful. Jacobson had

also read the FTC report and was aware that the “pot,”

wine, beer, and sex language in the report was not from

a document prepared by Brown & Williamson but was

actually from a document prepared by MARC. Nonethe-

33a

less, his testimony indicated that he had intended to

create the impression that the “pot,” wine, beer, and sex

comment had been made by Viceroy itself. (“I even said

that, ‘Viceroy says.’”) His assertion that he intended to

create the impression that the “pot,” wine, beer, and sex

statement was made by Viceroy indicates that Jacobson

acted with actual malice since he admitted that he knew

that the statement was made by MARC rather than Vice-

roy.*

Defendants cite other Jacobson testimony in support of

their argument that Jacobson only inadvertently created

the impression that Viceroy was running “pot,” wine,

beer, and sex ads. Specifically, they contend that the

following exchange during Jacobson’s direct examination

supports their argument:

Question: When you sat down to write this Per-

spective, and then when you got on the air and de-

livered it, did you intend to inform your viewers

that Viceroy was actually running advertising that

contained pot, wine, beer and sex?

"Jacobson: No, no way. I didn’t say it. I didn’t

think it. I was reporting on the federal government

report. And I put the quotes on the air. And I was

not making a statement whatever about advertise-

ments, certain advertisements that might have been

implemented. I was simply saying what the report

said, that this was a Viceroy strategy, that this

strategy might have been there for ten years, twenty

years, two years, or whatever.

Defendants ask us to credit this testimony and conclude

that because Jacobson did not intend to create a false im-

pression about Viceroy advertising, he did not act with

actual malice. Brown & Williamson counters that the

8 As discussed in more detail below, even if we were to disregard

Jaccbson’s admission on this point, the other evidence supports

the jury’s verdict on actual malice.

34a

language and graphics used in the broadcast itself indi-

cate that Jacobson could not have delivered the broadcast

without intending to inform viewers that he was talking

about current Viceroy advertising. The district court,

in its thorough opinion, dealt with these arguments this

way:

[T]he jury could have rejected Jacobson’s testi-

mony that he did not intend to communicate a mes-

sage about actual Viceroy advertising. The theme

of the broadcast was cigarette advertising. The state-

ments made in the broadcast relating to the “‘Vice-

roy strategy” were made in the context of explaining

why so many children take up smoking. The state-

ment was made by Jacobson that television adver-

tising of cigarettes is off limits; so the “killer busi-

ness has gone to Madison Avenue with a billion dol-

lars a year for bigger and better ways to sell

cigarettes.” Just prior to describing “the Viceroy

strategy,”’ Jacobson stated in the broadcast:

The cigarette business insists, in fact, it will

swear up and down in public, it is not selling

cigarettes to children, that if children are smok-

ing (which they are, more than ever before),

it’s not the fault of the cigarette business. ‘‘Who

knows whose fault it is?” says the cigarette

business. “Who knows whose fault it is that

children are smoking? It’s not ours.”

Jacobson immediately goes on to describe “a Viceroy

advertising, the Viceroy strategy for attracting

young people, starters they are called, to smoking.”

The reference to “Viceroy advertising” and “the

Viceroy strategy” at that point can be understood

as demonstrating how and why children begin smok-

ing, and that it was Viceroy’s fault (at least as one

advertiser).

A “strategy” that was not implemented, that was

nothing more than a report in a drawer, could not

35a

explain why children smoke. Only advertising that

children see can persuade them of anything... .

Jacobson [at the end of the Perspective] stated that

the cigarette companies were liars because they were

in fact selling cigarettes to children. And the clear

message is that Viceroy was doing this through the

use of its advertising that relates the cigarette to

pot, wine, beer, and sex.

644 F. Supp. at 1250. Judge Hart continued:

[T]he statement made by Jacobson is a powerful

statement indicting the cigarette industry and Vice-

roy in particular. It communicates the message that

Viceroy was using actual advertisements to hook

children on cigarettes.

The evidence was such that the jury could have

found it incredible that Jacobson gave this impres-

sion inadvertently. Jacobson is a veteran newsman

and commentator who writes hundreds of Perspec-

tive scripts each year>... The entire broadcast dealt

with methods actually used by the cigarette industry

to-entice children to smoking, such as advertising in

popular movies and distributing cigarettes on the

street. The visual portion of the broadcast included

pictures of cigarettes being distributed to young

people on the street. Defendants admitted that this

footage was taken from its archives and that Vice-

" roy cigarettes were not being distributed

[T]he evidence does not support a conclusion that

Jacobson inadvertently sent the message that Brown

& Williamson was actually using such ads... .

644 F. Supp. at 1251 (emphasis in original). We agree

with Judge Hart’s excellent analysis. The plain language

of the broadcast undermines Jacobson’s testimony that he

did not intend to make a statement about Viceroy’s cur-

rent advertising practices. Moreover, Jacobson’s deposi-

tion testimony also reveals that he did not accurately

36a

testify about his state of mind at the time of the broad-

cast. At his deposition in the summer of 1984, Jacobson

said that he did not remember what he was thinking

when he wrote the script and did not even remember

writing the script. As Jacobson himself pointed out at

the deposition, “[{i]t’s hard to remember... .”” We con-

clude that the evidence supports the jury’s decision not

to credit his later claim that his recollection had been

refreshed.

Disregarding Jacobson’s testimony (including his ad-

mission that he intended to attribute the MARC language

to Viceroy), the evidence shows that Jacobson received

and reviewed the FTC report. In addition, he was aware

that Radutzky’s search for “pot,’’ wine, beer, and sex ads

had been unsuccessful and that Brown & Williamson had

denied publishing ads implementing the strategy. Defend-

ants argue vigorously that each of these facts, standing

alone, cannot provide clear and convincing proof of actual

malice. Responsive Brief at 26-31 (citing Time, Jne. v.

Pape, 401 U.S. 279, 289-92 (1971) (rational misinter-

pretation of government report that “bristled with am-

biguities” does not create jury issue on actual malice) ;

Edwards v. National Audubon Society, Inc., 556 F.2d

113, 121 (2d Cir.), cert. denied, 434 U.S. 1002 (1977)

(actual malice cannot be predicated solely on mere de-

nials}); see also Bose, 466 U.S. at 511 (there is a sig-

nificant difference between proof of actual malice and

mere proof of falsity); Woods v. Evansville Press, 791

F.2d 480, 489 (7th Cir. 1986) (reporter’s journalism

skills are not on trial in a libel case). The cases defend-

ants cite are unlike this one because none of them com-

bines a distortion of a government report with a vehe-

ment denial of the “pot,” wine, beer, and sex charge and

an investigation by the journalist that tended to corro-

borate the denial. Moreover, none of those cases had

evidence of document destruction. We conclude that when

the intentional destruction of the sample script (which

il

37a

Jacobson did review prior to delivering the broadcast) is

considered along with the distortion of the FTC report,

Brown & Williamson’s denial, and the corroboration of

the denial, Brown & Williamson has met its burden of

proving that Walter Jacobson and CBS acted with ac-

tual malice.®

IV.

In general, damages remedies in defamation cases can

include: (1) compensatory damages which may be either

general or special; (2) punitive or exemplary damages;

and (3) nominal damages. See Sunward Corp. v. Dun

& Bradstreet, Inc., 811 F.2d 511, 5382 (10th Cir. 1987)

(quoting Prosser and Keeton on Torts § 116A (5th ed.

1984) ). Illinois adheres to the general rule. See Babb

v. Minder, 806 F.2d 749, 757-58 (7th Cir. 1986) (dis-

cussing Illinois law); see also Erickson v. Aetna Life &

Casualty Co., 127 Ill. App. 3d 753, 469 N.E.2d 679 (2d

Dist. 1984). In seeking compensatory damages, a plain-

tiff may attempt to prove “special damage, that is, of

directly linking specific [economic] loss to the [defama-

tory material] by competent evidence.” Sunward, 811

F.2d at 532; see also Prosser and Keeton on Torts, § 116A

at 844. In certain actions in which the defamatory ma-

terial is characterized as defamatory per se, the plaintiff

* Brown & Williamson also argues that pressures to produce in-

teresting stories brought on by the November “sweeps” is “strong

proof of actual malice.” Ratings during “sweeps” months such as

November and May are especially important in determining the

rates that advertisers will pay to stations to promote their prod-

ucts. The extent to which journalistic pressures to produce can

constitute evidence of actual malice has caused some debate among

members of the federal bench. Compare Tavoulareas v. Piro, slip

op. at 66-68 with Tavoulareas, slip op. at 53-56 (MacKinnon, J..,

dissenting). Because we have concluded that there is clear and con-

vinecing evidence of actual malice without considering the “sweeps”

evidence, we need not enter this debate. We do note that CBS

has not objected to the district court’s admission of the “sweeps”

evidence.

38a

may recover general compensatory damages without prov-

ing special damages. This is called the doctrine of pre-

sumed damages and it allows the assessment of dam-

ages “without proof by the plaintiff that there [has] been

any impairment of reputation.” Prosser and Keeton on

Torts, § 116A at 843. Under that doctrine, presumed

damages is “an estimate, however rough, of the probable

extent of actual loss a person had suffered and would suf-

fer in the future, even though the loss could not be iden-

tified in terms of advantageous relationships lost, either

from a monetary or enjoyment-of-life standpoint.” Jd.

The doctrine of presumed damages applies to this case

because the libelous material prejudiced Brown & Wil-

liamson in its trade or business in a manner that is “ ‘so

obviously and naturally hurtful to [Brown & William-

son] that proof of [its] injurious character can be, and

is, dispensed with.’” Brown & Williamson I, 713 F.2d

at 268 (quoting Reed v. Albanese, 78 Ill. App. 2d 53,

58, 223 N.E.2d 419, 422 (1966)). At trial, Brown &

Williamson did not attempt to prove special damages but

relied instead on the doctrine of presumed damages. The

jury returned a verdict of $3,000,000 in compensatory

damages which in this case is composed only of pre-

sumed damages. The district court reduced the compen-

satory damage award to $1.00. 644 F. Supp. at 1260-65.

Brown & Williamson appeals that decision.

Punitive damages may also be awarded under Illinois

law by a jury when a public figure such as Brown &

Williamson proves that a defendant has defamed it with

actual malice. See Babb v. Minder, 806 F.2d 749, 758

(7th Cir. 1986). The purpose of punitive damages, of

course, ig te punish the defendant for the improper con-

duct and to deter him from any future transgression.

The jury awarded $2,050,000 in punitive damages

against CBS and Jacobson and the district court upheld

the award. 644 F. Supp. at 1260-65. In this court, CBS

and Jacobson challenge the punitive damage award as

both excessive and inappropriate.

———————————eeEeeer

39a

A. Compensatory Damages

During the damage portion of the bifurcated trial,

Brown & Williamson introduced a variety of evidence in-

tended to show that its reputation had been harmed by

Jacobson’s statement. First, Brown & Williamson’s gen-

eral counsel testified that after the broadcast there were

ealls from the field sales force indicating that their con-

tacts were asking “how in the world could Brown & Wil-

liamson have done such a thing.” Second, a department

sales manager for Brown & Williamson testified that

sales managers in the Chicago area had received negative

comments from distributors, retailers, and consumers.

The reports he received indicated that the sales staff had

been disrupted in their normal activities by questions

from retailers and consumers about the broadcast. Third,

the former Vice President of Marketing for Brown &

Williamson testified that the company had 2 reputation

it eared about and that he believed that Viceroy’s cus-

tomers care about the reputation of the company from

which they buy cigarettes. He also testified that the com-

‘pany’s reputation among governmental entities was im-

portant because the cigarettte industry is such a closely

regulated industry. Fourth, the company introduced evi-

dence that the Perspective (including its rebroadcasts)

was seen by over 2.5 million people in the Chicago area.

In addition, over two million people read a 1984 article

in the Saturday Evening Post which repeated some of

the most damaging portions of the Perspective. Brown &

Williamson also argued that the Perspective was espe-

cially devastating because Chicago area viewers believe

that Jacobson’s Perspectives are reliable.

Although Brown & Williamson asked the jury for

$7,000,000 dollars in compensatory damages, the jury

was only willing to award $3,000,000. In setting aside

the award, the district court relied primarily on the fail-

ure of Brown & Williamson to put forth any evidence

that “Viceroy lost sales, lost a distributor, lost profits, or

40a

had an employee quit or stop working as effectively and

enthusiastically as he used to, or that any individual

stopped smoking Viceroys.” 644 F. Supp. at 1261. The

court concluded that “[Brown & Williamson] clearly did

not prove any actual damages... .” Jd. The district

court recognized that this was a case of libel per se and

that therefore Brown & Williamson was entitled to pre-

sumed damages. See Brown & Williamson I, 713 F.2d at

267-69. Nonetheless, it set aside the damage award.

In addition to the failure to prove any pecuniary dam-

ages, the court cited two other reasons for its decision

to reduce the damage award to $1.00. First, the court

held that under Illinois law, substantial damages are not

presumed. 644 F. Supp. at 1261 (citing Bloomfield v.

Retail Credit Co., 14 Ill. App. 3d 158, 170, 302 N.E.2d

88, 97 (1st Dist. 1973) ). Second, the court found that

any residual effect of the broadcast was greatly reduced

if not eliminated by the jury’s verdict in favor of Brown

& Williamson and the accompanying publicity.*®

The- district court incorrectly relied on Brown & Wil-

liamson’s failure to prove any actual damages such as lost

sales. As noted above, under Illinois law, Brown & Wil-

liamson could choose, as it did, to forego any proof of

special damages and seek to recover compensatory dam-

ages under the doctrine of presumed damages. See Babb

v. Minder, 806 F.2d 749, 757-58 (7th Cir. 1986) (apply-

ing Illinois law). Brown & Williamson is entitled in this

case to recover under the doctrine of presumed damages

because Jacobson’s Perspective was libelous per se. See

Brown & Williamson I, 718 F.2d at 268-69; see also

10 The court was correct in holding that testimony that employees

were emotionally upset is not relevant because a corporation is

not capable of mental suffering, which ordinarily will be an im-

portant component of an individual’s damage award for libel. See

Gertz v. Robert Welch, Inc., 680 F.2d 527, 540 (7th Cir. 1982), cert.

denied, 459 U.S. 1226 (1983). Although a corporation is not capable

of mental suffering, it is of course still entitled to be compensated

for damages to its reputation.

4la

Brown v. Farkas, No. 85-3012, slip op. at 5 (1st Dist.

Dec. 31, 1986) (presumed damages, which include in-

jury to reputation, “arise by inference of law and are

not required to be proved by evidence’) (petition for

rehearing pending).

It is true that the harm to Brown & Williamson’s repu-

tation cannot be measured easily. See Brown & William-

son I, 7138 F.2d at 269. As the Tenth Circuit recently

stated, “[a]scertainment of presumed general damages is

difficult at best and unavoidably includes an element of

speculation.” Sunward Corporation v. Dun & Bradstreet,

Inc., 811 F.2d 511, 588 (10th Cir. 1987).1' Nonetheless,

presumed general damages are permissible under Illinois

law and under the United States Constitution. Babb, 806

F.2d at 758. The failure to prove specific pecuniary dam-

ages does not in any way impair the right of Brown &

Williamson to recover for the libelous broadcast. In fact,

an attempt to show specific pecuniary loss, while still

electing the presumption of general damages, is under cer-

tain circumstances impermissible. See Sunward, 811 F.2d

.at 539. We conclude that in setting aside the damage

award the district court impermissibly took into account

Brown & Williamson’s failure to show specific pecuniary

harm.

11 Ascertainment of actual damages is often not much easier. This

is why it “has been the experience and judgment of history that

‘proof of actual damage will be impossible in a great many cases

... W. Prosser, Law of Torts §112 ... As a result, courts for

centuries have allowed juries to presume that some damage oc-

curred from many defamatory utterances and publications ....

This rule furthers the state interest in providing remedies for

defamation by ensuring that those remedies are effective.” Dun

& Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749,

760-61 (1985) (plurality opinion). The reason for such a rule is il-

lustrated by this case. Even if Brown & Williamson were able to

show that there was a decline in Viceroy sales after Jacobson’s

Perspective, it would be extremely difficult to prove that the de-

cline was the result of the libelous broadcast. Cf. Sunward, 811

F.2d at 539-41 (discussing flaws in a specific actual damage theory).

42a

Brown & Williamson also challenges the district court’s

conclusion that media coverage of its victory at trial was

“fair” and therefore it “ameliorates whatever injury

Brown & Williamson might have .. . suffered.” 644 F.

Supp. at 1262. In making its finding, the court took ju-

dicial notice of the “fact” that the coverage of the liability

verdict was “fair.” “Fair” media coverage is not the kind

of undisputed “fact” that is proper for judicial notice.

See Fed. R. Evid. 201(b). In addition, even if the media

coverage could be characterized as fair, it does not neces-

sarily mean that the effect of the libelous statements will

be ameliorated. For example, much of the post-verdict

publicity reported Jacobson’s vehement denials of the

charges and included assurances by the defendants that,

like many libel defendants, they would be victorious in

the appellate court. Moreover, some of the commentary

that occurred in the wake of the verdict questioned the

correctness of the verdict and included some suggestions

that the defendants had lost simply because they were

“out-lawyered.” We conclude that the district court er-

roneously relied on the post-verdict publicity in setting

aside the damage award.

In striking the compensatory damage award, the dis-

trict court also relied on a statement in an Illinois appel-

late court decision that substantial damages are not pre-

sumed. 644 F. Supp. 1261 (citing Bloomfield v. Retail

Credit Co., 14 Ill. App. 3d 158, 302 N.E.2d 88 (1st Dist.

1973)). In Bloomfield, the Puritan Life Insurance Com-

pany had requested a background report on Harold

Bloomfield whom it was considering for a position as an

insurance agent. The defendant in Bloomfield, the Re-

tail Credit Company, supplied a background report to

Puritan that contained defamatory material about Bloom-

field. Bloomfield became aware of the defamatory report

through a friend at another company who, apparently out

of curiosity, had requested the report on Bloomfield.

After the friend notified Bloomfield of the defamatory

~

43a

material, Bloomfield contacted Retail Credit and ar-

ranged a meeting. Following the meeting and some fur-

ther investigation, Retail Credit’s report was amended in

October 1964 to exclude most (and perhaps all) of the

incorrect defamatory material. The amended report was

sent to Puritan and negotiations between Bloomfield and

Puritan continued until November 1964. However, no

employment agreement was ever signed.

The jury in Bloomfield awarded $50,000 in compen-

satory damages and $100,000 in punitive damages. The

appellate court ordered a new trial on damages because

there was a great deal of improperly admitted evidence

that probably prejudiced the jury. For example, although

the evidence showed that the defamatory report had been

sent to only one potential employer (Puritan), the plain-

tiff was allowed to introduce evidence that ‘permitted the

jury to conclude that plaintiff was forever barred from

further reasonable employment... .” 14 Ill. App. 3d at

171, 302 N.E.2d at 98. In addition, Bloomfield’s counsel

had suggested during his opening statement that the

President of Puritan would testify that he had refused

to hire Bloomfield because of the Retail Credit report. Jd.

No such evidence was introduced at trial and there was

some indication in the record that Puritan’s refusal to

hire Bloomfield was usrelated to the Retail Credit Report.

Id. In short, the evidence showed that there had been

only one publication of the defamatory material, that it

had been corrected only one month after it was issued,

and that it may not have had any effect at all on Bloom-

field’s employability with Puritan. It was in this context

that the appellate court made the statement that ‘“‘sub-

stantial damages are not presumed.” 14 Ill. App. 3d at

170, 302 N.E.2d at 97 (emphasis in original).

In Bloomfield, it was clear to the appellate court that

$50,000 in compensatory damages was excessive. The

defamatory material was published to only one potential

employer and because it was corrected promptly, it had

44a

very little effect on Bloomfield’s reputation in the com-

munity. There was also a serious question whether the

report had any significant impact on Bloomfield’s rela-

tionship with Puritan. We conclude that Bloomfield pro-

vides us with very little assistance in deciding this case.

It simply gives a broad guideline that substantial dam-

ages, a term whose meaning is not clear, will not be pre-

sumed.

A case decided subsequent to the district court’s deci-

sion here provides us with some additional assistance in

interpreting the meaning of substantial damages. In Cos-

tello v. Capital Cities Communications, 153 Ill. App. 3d

956, 505 N.E.2d 701 (5th Dist. 1987) (petition for re-

view pending), the plaintiff, Jerry Costello, sued the

Belleville News-Democrat which is a general circulation

newspaper in St. Clair County, Illinois. Costello, who had

just been elected Chairman of the County Board of St.

Clair County, was attacked in a December 31, 1980, edi-

torial as a Chairman who “blew his first chance’”’ because

he had failed at his first board meeting to “militantly

oppose the implementation of any new tax without first

seeking the voters’ approval through a referendum.” Tie

editorial stated that this action had run directly con-

trary to what he had promised the newspaper when he

had sought and received its endorsement. The paper ac-

cused Costello of lying and concluded its editorial with

the observation ‘‘!j]ust think, we’ve got two more years

of the Costello brand of lying leadership.” The jury

award Costello $450,000 in presumed damages. The ap-

pellate court agreed with the defendants’ assertion that

substantial damages may not be presumed, 153 Ill. App.

3d at 973, 505 N.E.2d at 712 (citing Bloomfield), and

reduced the jury award to $200,000. The $200,000, while

perhaps not “substantial” under Illinois law, certainly is

a sizable figure especially when one considers that the

editorial apparently had no effect on Costello’s political

career because he was reelected as Chairman in 1982.

45a

We read the holding in Costello as advising an appel-

late court to give some deference to the jury’s deter-

mination of presumed damages while also considering

whether it considers the jury award of presumed dam-

ages excessive. If it finds the award excessive, the court

may exercise its discretion and reduce the award to what

it considers a more appropriate figure. One obvious fac-

tor in deciding how much deference to give a jury ver-

dict on presumed damages is the extent to which the

court believes that the jury may have been carried away

by passion and prejudice. See Douglass v. Hustler Maga-

zine, 769 F.2d 1128, 1143 (7th Cir. 1985), cert. denied,

106 S. Ct. 1489 (1986). In this case, the jury appears

not to have been carried away by passion and prejudice.

Brown & Williamson asked for $7,000,000 in presumed

damages but the jury only awarded $3,000,000. Brown

& Williamson asked for $10,100,000 in punitive damages

but the jury awarded only $2,050,000. At the very least,

both of these awards indicate that the jury was not mere

putty in the hands of the plaintiff. The strongest evi-

dence that the jury was not carried away by passion and

prejudice’is its award of only $50,000 in punitive dam-

ages against Jacobson. Brown & Williamson had asked

for $100,000 which in light of Jacobson’s net worth of

over $5,000,000 does not strike us as an especially ab-

surd figure to seek as punitive damages. Nonetheless,

the jury, despite hearing evidence of post-verdict recal-

citrance (Jacobson said he would not hesitate to deliver

the same broadcast again), assessed a reasonable punitive

damage figure against Jacobson personally. We conclude

that the jury was not carried away by passion and pre}-

udice and that it fulfilled its duty in attempting to

assess a reasonable amount of compensatory damages.

Although the jury did conscientiously fulfill its duty in

this case, we are hesitant to uphold the entire award.

Illinois law requires appellate courts to examine jury

awards under the doctrine of presumed damages with

46a

great care to determine whether they are “substantial’’

or within an acceptable range. See Costello; Bloomfield;

cf. Brown v. Farkas, slip op. at 10 (reducing punitive

damage award from $1,000,000 to $50,000). We hold

that an award of $1,000,000 in compensatory damages is

appropriate in this case. The $1,000,000 in presumed

damages is sizable but on the facts of this case it is not

“substantial” under Illinois law. We grant that it is

difficult to draw a distinction but that in effect is what

the Costello court calls for in applying the test. Unlike

Costello, this broadeast was made not in a relatively

small community but in one of the largest television mar-

kets in the country. The defamatory material here was

not published once but was broadcast four separate times

and was seen by a total viewership of approximately 2.5

million people. It was delivered on what was the most

popular news broadcast in Chicago and was delivered by

a veteran journalist who was trusted by the public and

promoted by his employer as someone who “always leave

you informed.” Moreover, the text of the broadcast car-

ried a very substantial sting that must have hurt both

the reputation of Brown & Williamson and its parent

company (which as CBS’s counsel pointed out at trial

owns one of the most respected department stores in Chi-

cago). In addition, the libelous material was a television

broadcast and not a newspaper editorial. Television is a

more intense and more focused medium. It allows the

libeler to come into peoples’ homes and deliver essentially

in person a powerful libelous statement using various

voice inflections to add power to the message. Television

also allows for the use of graphics to emphasize the libel-

ous material. Our review of the videotape of the broad-

cast indicates that Walter Jacobson relied on these attri-

butes of television using both graphics and voice inflec-

tions to further convince the viewer that Brown & Wil-

liamson was using a “pot,” wine, beer, and sex strategy

to attract children to Viceroy cigarettes. We agree with

the district court that the message that Jacobson deliv-

47a

ered was an extraordinarily powerful one. We also con-

clude that the power of Jacobson’s Perspective was

greatly enhanced because of the medium through which

it was delivered.

We recognize that this is a very inexact and somewhat

arbitrary process. Nonetheless, the process is inherent in

the doctrine of presumed damages. An appellate court

must, under Illinois law, use its judgment in determin-

ing the extent to which a jury award of presumed dam-

ages will be upheld. Our judgment is $1,000,000.

B. Punitive Damages

Punitive damages are available under Illinois law when

a plaintiff has proven actual malice. See Brown, slip op.

at 10; see also Babb, 806 F.2d at 758." Several factors

can be considered by the jury in arriving at a punitive

damage award. First, and most importantly for purposes

of this case, the jury was entitled to consider the amount

of attorney’s fees incurred by the plaintiff in bringing the

libel action. See Hazelwood v. Illinois Central Gulf Rail-

road, 114 Ill. App. 3d 703, 711, 450 N.E.2d 1199, 1206

(4th Dist. 1983) ; Anvil Investment Limited Partnership

v. Thornhill Condominiums, 85 Ill. App. 3d 1108, 1121,

407 N.E.2d 645, 654 (1st Dist. 1980); Glass v. Burkett,

64 Ill. App. 3d 676, 683, 381 N.E.2d 821, 826 (5th Dist.

1978). Second, the jury was entitled to take into account

the defendants’ wealth. See Hazelwood, 114 Ill. App. 3d

at 113, 450 N.E.2d at 1207 ‘punitive damages should be

large enough to provide retribution and deterrence but

should not be so large that the award destroys the de-

fendant). Finally, because the purpose of punitive dam-

12 Without citing any authority, the Costello court held that

“where actual malice is the gist of an action for libel, as here,

both compensatory and punitive damages cannot be recovered.”

153 Ill. App. 3d at 976, 505 N.E.2d at 713. Costello stands alone

among the Illinois cases and consequently we decline to follow it.

See Babb, 806 F.2d at 758.

48a

ages is deterrence, the jury was entitled to consider evi-

dence of post-verdict recalcitrance in determining the

punitive damage award. See Goldwater v. Ginzburg, 414

F.2d 324, 341 n.27 (2d Cir. 1969), cert. denied, 396 U.S.

1049 (1970).

Taking only the first two factors into account, we

conclude that the district court’s decision upholding the

jury’s punitive damage award was clearly correct. Brown

& Williamson’s attorney’s fees were $1,360,000 prior to

post-trial motions. Jacobson’s net worth including his

contract with CBS was over $5,000,000, while CBS’s

net worth was approximately one and one-half billion

dollars. The punitive damage award of $50,000 against

Jacobson is a modest one considering his net worth. See

Brown, slip op. at 10. It might provide some deterrent

value without being destructive. In light of the attor-

ney’s fees that Brown & Williamson incurred and CBS’s

substantial net worth, the $2,000,000 award against CBS

is reasonable. The award might provide some deterrence

to future misconduct and yet will not burden CBS with

a debt that it cannot easily discharge." See also Gertz

v. Robert Welch, Inc., 680 F.2d 527, 540 (7th Cir. 1982),

cert. denied, 459 U.S. 1226 (1983) (upholding $300,000

punitive damage award).

V.

One of the most important functions of the court sys-

tem in the United States is to protect the freedom of

the press. See, e.g., Bose v. Consumers Union, 466 U.S.

485 (1984); New York Times v. United States, 403 U.S.

713 (1971); New York Times v. Sullivan, 376 U.S. 254

'S Defendants also argue that the punitive damage award violates

the Eighth Amendment which provides that “[e]xcessive bail shall

not be required, nor excessive fines imposed, nor cruel and unusual

punishments inflicted.” Even if we were to accept the defendants’

argument that the excessive fines clause applies to civil proceed-

ings, we conclude that the punitive damage award in this case is

not excessive.

49a

(1964). The federal courts of appeals including this one

nave played an important role in fulfilling this function.

See, e.g., Tavoulareas v. Piro, F.2d (D.C. Cir.

1987) (en bane) ; Sunward Corporation v. Dun & Brad-

street, Inc., 811 F.2d 511, 588 (10th Cir. 1987); Woods

v. Evansville Press, 791 F.2d 480, 489 (7th Cir. 1986).

In considering the merits of this case, this court has

granted the defendants the fullest possible review; the

standard of review that we have used, giving essentially

no deference to the jury’s findings, may be far broader

than the review to which the defendants are entitled. See

Bose, 466 U.S. at 499-500 (constitutionally based rule of

independent review permits reviewing courts to give “due

regard” to the trial court’s opportunity to observe the

demeanor of the witnesses). After conducting such a re-

view, it is unfortunate that we are forced to conclude

that this case does not involve freedom of the press.

Rather, it is one in which there is clear and convincing

evidence that a local television journalist «cted with ac-

tual malice when he made false statements about Brown

. & Williamson Tobacco Corporation. Because false state-

ments of fact made with actual malice are not protected

by the First Amendment, this court is required to affirm

the district court’s finding that Jacobson and CBS libeled

Brown & Williamson.

AFFIRMED IN PART, REVERSED IN PART.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

~ 50a

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Chicago, Illinois 60604

November 25, 1987

Before

HON. WILLIAM J. BAUER, Chief Judge

86-2474

"86-2475

BROWN & WILLIAMSON TOBACCO CORPORATION,

Plaintiff-A ppellant,

Cross-A ppellee,

VS.

Nos

| WALTER JACOBSON and CBS, INC.,

Defendants-A ppellees,

Cross-A ppellants.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division

No. 82 C 1648—Judge William T. Hart

This matter comes before the court for its considera-

tion upon the “APPELLANT’S MOTION FOR STAY

OF MANDATE?” filed herein on November 20, 1987.

On consideration thereof,

IT IS ORDERED that said motion is DENIED.

5la

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 86-2474 and 86-2475

BROWN & WILLIAMSON TOBACCO CORPORATION,

Plaintiff-Appellee Cross-Appellant,

Vv.

WALTER JACOBSON and CBS, INC.,

Defendants-Appellants Cross-A ppellees.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 82 C 1648—William T. Hart, Judge.

ARGUED APRIL 3, 1987—-DECIDED AUGUST 12, 1987

POSTJUDGMENT BRIEFS FILED

SEPTEMBER 23, 1987—-DECIDED NOVEMBER 6, 1987

Before BAUER, Chief Judge, Woop, and POSNER, Cir-

cuit Judges.

PER CURIAM. For the first time, this court must de-

cide when to award postjudgment interest pursuant to

Rule 37 of the Federal Rules of Appellate Procedure.

This issue comes before us after we affirmed in part and

reversed in part the district court’s judgment in this

libel action. Brown & Williamson v. Jac#bson, 827 F.2d

1119 (7th Cir. 1987).

Our earlier opinion discusses in detail the facts of this

case. We summarize here only the facts necessary to re-

solve the postjudgment interest issue. On December 5,

1985, the jury below awarded Brown & Williamson $3

ee

52a

million compensatory damages, $2 million punitive dam-

ages against CBS, and $50,000 punitive damages against

Jacobson, for a total of $5,050,000. The district court

entered judgment on the verdict the same day. Defend-

ants moved for judgment n.o.v. or a new trial. In August

1986, the district court denied defendants’ motion with

respect to liability and punitive damages, but granted

judgment n.o.v. with respect to the compensatory dam-

ages award, reducing it to $1.00 “nominal compensatory

damages.” Brown & Williamson v. Jacobson, 644 F.Supp.

1240 (N.D. Ill. 1986). In a decision rendered on August

12, 1987, we affirmed the judgment of the district court

upholding the punitive damages verdict, but reversed the

district court’s decision to reduce the compensatory dam-

ages award to $1.00. We agreed with the reduction on a

different theory but set the figure at $1 million in dam-

ages to Brown & Williamson.

Brown & Williamson now asks this court to grant post-

judgment interest on the $1 million compensatory damage

award dating from the district court’s judgment on the

original jury verdict, rather than the date of this court’s

mandate.’ We reject this view and hold that postjudg-

ment interest should run from the date of our mandate.

Federal Rule of Appellate Procedure 37 provides that

where

a judgment for money in a civil case is affirmed,...

interest . . . shall be payable from the date the judg-

ment was entered in the district court. If a judg-

ment is modified or reversed with a direction that a

judgment for money be entered in the district court,

the mandate shall contain instructions with respect

to allowance of interest.

1The parties do not dispute that the postjudgment interest on

the $2,050,000 punitive damages should run from the date of the

original judgment. Rule 37 dictates this result.

58a

Several Circuit Courts have interpreted this rule in con-

junction with 28 U.S.C. §1961(a).2. The Eighth and

Ninth Circuits have held that after a reversal of a judg-

ment n.o.v., interest should run from the date of the

original jury verdict and not from the mandate of the

appellate court. Turner v. Japan Lines, Ltd., 702 F.2d

752, 755 (9th Cir. 1983); Buck v. Burton, 768 F.2d 285,

287 (8th Cir. 1985). (In both cases the appellate court

reinstated the jury verdict without any modification. )

The Second Circuit rejected this view and held that in-

terest should not begin to run prior to the date of the

appellate court’s mandate. Powers v. New York Cent.

R.R., 251 F.2d 818, 818 (2d. Cir. 1958). The Fifth Cir-

cuit, sitting en banc, has chosen a middle path based on

the ‘“‘equities” of each case, refusing to draw a bright

line rule. Affiliated Capital Corp. v. City of Houston, 793

F.2d 706, 710 (5th Cir. 1986).

We agree with the approach adopted by the Fifth Cir-

cuit and follow it here. Although a case by case ap-

proach can be problematic, this solution is an inherent

‘outgrowth of Rule 37, which grants the appellate court

discretion with respect to allowing interest. Rule 37;

Notes of Advisory Committee on Appellate Rules. Often,

when the appellate court reverses a judgment n.o.v.,

there is no justification for imposing interest dating

from the original judgment. For example, if the de-

fendant is not liable for damages after the court enters

the judgment n.o.v., the defendant obviously is unable

to toll the running of interest by paying the plaintiff.

Similarly, when judgment n.o.v. is entered, the plaintiff

is not entitled to any damages. On the other hand, this

should not preclude allowing interest to run from the

original judgment in all cases where the appellate court

2 Section 1961(a) provides in pertinent part:

Interest shall be allowed on any money judgment in a civil

case recovered in a district court .... Such interest shall be

calculated from the date of the entry of the judgment... .

54a

reverses a judgment n.o.v. The jury’s original verdict

may reflect the present value of money equal to the

amount of damages sustained by the plaintiff at the date

of judgment. When the appellate court reinstates the

jury’s verdict for the identical amount some time in the

future, the value of the jury verdict is diminished by the

lost time value of money. Allowing postjudgment inter-

est to date back to the original judgment in such a case

compensates the injured plaintiff and prevents the de-

fendant from reaping any windfall during the course of

appeal.

The equities of this case dictate that postjudgment in-

terest run from the date of the entry of our mandate.

If interest runs from the date of our mandate, the plain-

tiffs would not suffer the lost time value of the vacated

$3 million verdict. Nor will this result unfairly punish

the defendants, who were unable to toll the running of

interest until our decision.

We hold, therefore, that postjudgment interest should

run on the $1 million compensatory damages from the

date of this court’s mandate.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

55a

UNITED STATES COURT OF APPEALS

SEVENTH CIRCUIT |

No. 82-2115

BROWN & WILLIAMSON TOBACCO CORPORATION,

Plaintiff-A ppellant,

v.

WALTER JACOBSON and CBS, INC.,

Defendants-A ppellees.

Argued April 12, 1983

Decided July 14, 1983

Before POSNER and COFFEY, Circuit Judges, and

GRANT, Senior District Judge.*

POSNER, Circuit Judge.

This diversity suit brought by Brown & Williamson,

the manufacturer of Viceroy cigarettes, charges CBS and

Walter Jacobson with libel and other violations of II-

linois law. Jacobson is a news commentator for WBBM-

TV, a Chicago television station owned by CBS. The

defendants moved to dismiss the complaint on a variety

of grounds. Without writing an opinion the district

court granted the motion “for the reasons set forth in

defendants’ memoranda,” adding only: ‘“to deny this

* Hon. Robert A. Grant of the Northern District of Indiana,

sitting by designation.

56a

motion would unduly restrict the freedom of the press

and the right of a journalist to express opinions freely.”

Brown & Williamson appeals.

In 1975, Ted Bates, the advertising agency that had

the Viceroy account, hired the Kennan market-research

firm to help develop a new advertising strategy for Vice-

roy. Kennan submitted a report which stated that for

“the younger smoker,” “a cigarette, and the whole smok-

ing process, is part of the illicit pleasure category. .. .

In the young smoker’s mind a cigarette falls into the

same category with wine, beer, shaving, wearing a bra

(or purposely not wearing one), declaration of inde-

pendence and striving for self-identity. For the young

starter, a cigarette is associated with introduction to

sex life, with courtship, with smoking ‘pot’ and keeping

late studying hours. .. .” The report recommended, there-

fore, the followng pitches to “young smokers, starters”:

“Present the cigarette as part of the illicit pleasure cate-

gory of products and activities. ... To the best of your

ability, (considering some legal constraints), relate the

cigarette to ‘pot’, wine, beer, sex, ete. Don’t communicate

health or health-related points.” Ted Bates forwarded

the report to Brown & Williamson. According to the al-

legations of the complaint, which on this appeal we must

accept as true, Brown & Williamson rejected the “illicit

pleasure strategy” proposed in the report, and fired Ted

Bates primarily because of displeasure with the proposed

strategy.

Years later the Federal Trade Commission conducted

an investigation of cigarette advertising, and in May

1981 it published a report of its staff on the investiga-

tion. The FTC staff report discusses the Kennan report,

correctly dates it to May 1975, and after quoting from

it the passages we have quoted states that “B & W

adopted many of the ideas contained in this report in the

57a

development of a Viceroy advertising campaign.” In

support of this assertion the staff report quotes an in-

ternal Brown & Williamson document on “Viceroy Strat-

egy,” dated 1976, which states, “The marketing efforts

must cope with consumers’ attitudes about smoking and

health, either providing them a rationale for smoking

a full flavor VICEROY or providing a means of repress-

ing their concerns about smoking a full flavor VICE-

ROY.” The staff report then quotes a description of

three advertising strategies. Although the description

contains no reference to young smokers or to “starters,”

the staff report states: “B & W documents also show

that it translated the advice [presumably from the Ken-

nan report] on how to attract young ‘starters’ into an

advertising campaign featuring young adults in situa-

tions that the vast majority of young people probably

would experience and in situations demonstrating ad-

herence to a ‘free and easy, hedonistic lifestyle.’”” The

interior quotation is from another 1976 Brown & Wil-

liamson document on advertising strategy.

On November 4, 1981, a reporter for WBBM-TV called

Brown & Williamson headquarters and was put in touch

with a Mr. Humber in the corporate affairs department.

The reporter told Mr. Humber that he was preparing a

story on the tobacco industry for Walter Jacobson’s

“Perspective” program and asked him about the part of

the FTC Staff report that dealt with the Viceroy adver-

tising strategy. Humber replied that Brown & William-

son had rejected the proposals in the Kennan report and

had fired Ted Bates in part because of dissatisfaction

with those proposals.

Walter Jacobson’s “Perspective” on the tobacco in-

dustry was broadcast on November 11 and rebroadcast

on November 12 and again on March 5, 1982. In the

broadcast, Jacobson, after stating that “pushing ciga-

TE

58a

rettes on television is prohibited,” announces his theme:

“Television is off limits to cigarettes and so the business,

the killer business, has gone to the ad business in New

York for help, to the slicksters on Madison Avenue with

a billion dollars a year for bigger and better ways to sell

cigarettes. Go for the youth of America, go get ’em guys

.... Hook ’em while they are young, make ’em start now

—just think how many cigarettes they’ll be smoking when

they grow up.” Various examples of how cigarette mar-

keting attempts “to addict the children to poison” are

given. The last and longest concerns Viceroy.

The cigarette business insists, in fact, it will swear

up and down in public, it is not selling cigarettes to

children, that if children are smoking, which they

are, more than ever before, it’s not the fault of the

cigarette business. “Who knows whose fault it is?”

says the cigarette business. That’s what Viceroy is

saying, “Who knows whose fault it is that children

are smoking? It’s not ours.”

Well, there is a confidential report on cigarette

advertising in the files of the Federal Government

right now, a Viceroy advertising, the Viceroy strategy

for attracting young people, starters they are called,

to smoking—“FOR THE YOUNG SMOKER ....

A CIGARETTE FALLS INTO THE SAME CATE-

GORY WITH WINE, BEER, SHAVING OR WEAR-

ING A BRA... .” says the Viceroy strategy—

“A DECLARATION OF INDEPENDENCE AND

STRIVING FOR SELF-IDENTITY.” Therefore, an

attempt should be made, says Viceroy, to “. . .

PRESENT THE CIGARETTE AS AN INITIA-

TION INTO THE ADULT WORLD,” to “. . . PRE-

SENT THE CIGARETTE AS AN ILLICIT PLEAS-

URE... A BASIC SYMBOL OF THE GROWING-

UP, MATURING PROCESS.” An attempt should be

made, says the Viceroy slicksters, “TO RELATE

OOOO

|

59a

THE CIGARETTE TO ‘POT’, WINE, BEER, SEX.

DO NOT COMMUNICATE HEALTH OR HEALTH-

RELATED POINTS.” That’s the strategy of the

cigarette slicksters, the cigarette business which is

insisting in public, “We are not selling cigarettes to

children.”

They’re not slicksters, they’re liars.

While Jacobson is speaking those lines the television

screen is showing Viceroy ads published in print media

in 1980. Each ad shows two packs of Viceroys alongside

a golf club and ball.

The complaint charges that the broadcast made state-

ments about Brown & Williamson that the defendants

knew to be false and that not only were libelous per se

and injurious to Brown & Williamson but also wrongfully

interfered with Brown & Williamson’s business relations

and violated two Illinois statutes, the Consumer Fraud

and Deceptive Business Practices Act, Ill.Rev.Stat.1981,

ch. 12114, I] 261 et seg., and the Uniform Deceptive Busi-

ness Trade Practices Act, Ill.Rev.Stat.1981, ch. 121%,

©{ 311 et sey. We begin with the defamation count. Since

the district court accepted all of the grounds for dismissal

advanced by the defendants, we must decide whether any

of these grounds—other than those abandoned in this

court, as some have been—supports dismissal.

One ground is that the broadcast is not libelous per se.

If it is not, the complaint does not state a claim under

the Illinois common law of defamation (the parties agree

that Illinois law governs all of the substantive issues in

this diversity case) unless it adequately alleges special

damage, which the district court found it did not.

Under traditional principles, a finding of libel per se

(“per se” in defamation law meaning just that pecuniary

damage—“‘special damage”—need not be proved) requires

only that the defamatory character of the statement al-

leged to be libelous be apparent on the face of the state-

|

60a

ment, or in other words that “extrinsic facts” not be

necessary to make the statement defamatory. (If the

statement was that Mrs. Jones had given birth on Janu-

ary 11, 1939, the extrinsic fact necessary to complete the

libel might be that Mrs. Jones had married the child’s

father the previous month.) The defendants admitted at

oral argument that the fact that Walter Jacobson’s broad-

cast did not mention Brown & Williamson by name was

not an extrinsic fact in this sense. See Hambric v. Field

Enterprises, Inc., 46 Ill.App.2d 355, 359, 196 N.E.2d

489, 492 (1964); Harwood Pharmacal Co. v. National

Broadcasting Co., 9 N.Y.2d 460, 214 N.Y.S.2d 725, 174

N.E.2d 602 (1961). The reason for distinguishing be-

tween statements that are and statements that are not

libelous on their face is that the impact of an apparently

innocuous statement will be limited to the presumably

small group of readers who know additional facts, so

damage cannot be presumed but must be proved. The

Jacobson broadcast was not innocuous on its face, and

the fact that Brown & Williamson was not mentioned by

name is relevant not to whether the broadcast was libel

per se but to the distinct question whether it would be

understood as referring to Brown & Williamson rather

than to someone else. The defendants do not deny it

would be.

So the broadcast is libel per se in the traditional sense—

unless the aspersions that it casts on Brown & William-

son’s corporate character cannot be considered defama-

tory at all, which is hardly tenable. But Illinois has

abolished the distinction between slander and libel and

in the process has_assimilated libel per se to the quite

different concept of slander per se, rather than vice

versa. E.g., Mitchell v. Peoria Journal-Star, Inc., 76 Tl.

App.2d 154, 158-60, 221 N.E.2d 516, 519-20 (1966);

Grabavoy v. Wilson, 87 Ill.App.2d 193, 202, 230 N.E.2d

581, 585 (1967); American Pet Motels, Inc. v. Chicago

Veterinary Medical Ass'n, 106 Ill.App.3d 626, 629 and

6la

n. 1, 62 Ill. Dec. 325, 328 and n. 1, 435 N.E.2d 1297, 1300

and n. 1 (1982). (Stanley v. Taylor, 4 Ill.App.3d 98, 104,

278 N.E.2d 824, 828 (1972), looks the other way, but is

unclear as well as outnumbered.) Slander per se unlike

libel per se depends on the character as well as complete-

ness of the defamatory statement. Under traditional prin-

ciples, an utterance is slander per se only if it imputes to

the plaintiff (1) crime, (2) unchastity (if the plaintiff is

female), (3) a loathsome disease, or (4) anything likely

to discredit the plaintiff in his trade or business. Prosser,

Handbook of the Law of Torts 756-60 (4th ed. 1971).

Jacobson’s broadcast fits the fourth category. The de-

fendants argue that since a cigarette company cannot

survive in the long run if young people do not take up

smoking, the broadcast will be understood in the business

community as complimenting Brown & Williamson for

its aggressive efforts to hook the young on smoking. But

we doubt that a cigarette company could survive in the

short run and thus be around to enjoy the long run if it

flouted the strong public policy against encouraging chil-

dren to smpke, a policy expressed for example in the ban

on cigarette television advertising in section 6 of the

Public Health Cigarette Smoking Act of 1969, 15 U.S.C.

$ 1335. The Senate Report on the bill asked the FTC to

include in the biennial reports on cigarette labeling and

advertising that are required by section 8(a) of the Act,

15 U.S.C. § 1337(a), “an analysis of public opinion polls

and other relevant information indicating the extent to

which the American public, especially young people, have

been made fully aware of the hazards of smoking... .”

S.Rep. No. 566, 91st Cong., Ist Sess. 11 (1969), U-S.

Code Cong. & Admin.News 1970, pp. 2652, 2662. The Re-

port adds: “The committee cannot overstate its strong

desire that the cigarette industry not only honor its state-

ment carefully to limit print advertising so as not to

appeal to youth, but that it will also exercise restraint

in the overall use of print advertising and other forms

62a

of promotion.” Jd. See also IIl.Rev.Stat.1981, ch. 23,

‘{ 2357-58, making it an offense to sell cigarettes to

minors.

A modern American corporation, especially one owned

by a foreign company (Brown & Williamson is the wholly

owned subsidiary of an English conglomerate corpora-

tion), cannot proclaim “the public be damned” as its

motto. If it openly defied the views passionately held by

a substantial segment of the public, the Congress, and

government agencies such as the FTC, it would be in-

viting serious trouble on many fronts. Obviously it would

have been grossly defamatory for Walter Jacobson to

have accused Brown & Williamson of poisoning children;

yet that is what he did in effect—indeed in those words,

though used figuratively rather than literally. It is ir-

relevant that some unreconstructed businessmen might

approve of what Walter Jacobson accused Brown & Wil-

liamson of doing. “If the advertisement obviously would

hurt the plaintiff in the estimation of an important and

respectable body of the community, liability is not a ques-

tion of majority vote.” Peck v. Tribune Co., 214 U.S.

185, 190, 29 S.Ct. 554, 556, 53 L.Ed. 960 (1909) (per

Holmes, J.).

We have been assuming that in merging libel and

slander Illinois merely extended the traditional categories

of slander per se to written (or what is nowadays treated

as the same thing, broadcast) statements. But those cate-

gories have long been thought anachronistic and two of

them, in today’s moral climate, are merely quaint. So it

is not surprising that in the course of merging libel and

slander the Illinois courts have altered the traditional

categories. Chastity has been dropped; “loathsome dis-

ease” has been replaced with “a communicable disease

which would exclude one from society”; and discrediting

people in their trades or businesses has become two cate-

gories—“imput[ing] ... inability to perform or want

of integrity in the discharge of duties of office or employ-

peal

63a

ment” and “prejudic({ing] a person in his profession or

trade.” American Pet Motels, Inc. v. Chicago Vetinary

Medical Ass’n, supra, 106 Ill.App.3d at 629, 62 IIl.Dee.

at 328, 435 N.E.2d at 1300. And even a statement that

falls within one of those categories is not necessarily

slander per se any more. The statement must be suffi-

ciently defamatory to justify an award of damages with-

out proof of actual damage. “Words are libelous per se

if they are ‘so obviously and naturally hurtful to the

person aggrieved that proof of their injurious character

can be, and is, dispensed with.’” Jd., quoting Reed v.

Albanese, 78 Ill.App.2d 53, 58, 223 N.E.2d 419, 422

(1966). See also Costello v. Capital Cities Media, Inc.,

111 Ill.App.3d 1009, 1011, 67 Ill.Dec. 721, 723, 445 N.E.2d

13, 15 (1982).

Under contemporary as under traditional Illinois law,

Jacobson’s broadcast is libelous per se. Accusing a ciga-

rette company of what many people consider the immoral

strategy of enticing children to smoke—enticing them by

advertising that employs themes exploitive of adolescent

vulnerability—is likely to harm the company. It may

make it harder for the company to fend off hostile govern-

ment regulation and may invite rejection of the com-

pany’s product by angry parents who smoke but may not

want their children to do so. These harms cannot easily

be measured, but so long as some harm is highly likely the

difficulty of measurement is an additional reason, under

the modern functional approach of the Illinois courts, for

finding libel per se rather than insisting on proof of

special damage. In the American Pet Motels case the

alleged libel consisted of a statement that persons who

were not veternarians had treated a cat at the plaintiff’s

pet “motel” for a parasite infection and that the state’s

attorney would be notified of the incident. The statement

may have prejudiced the plaintiff in its business but the

likely prejudice was too slight to dispense with proof of

special damage. See 106 Ill.App.3d at 629, 62 IIl.Dec. at

64a

328, 485 N.E.2d at 1300. The libel in the present case

falls in one of the new as well as old per se categories—

it prejudices the plaintiff in its trade—and it also has

the required gravity.

But the defendants argue that Illinois has special and

restrictive rules governing the defamation of a corpora-

tion. They cite a 1965 decision by this court which states

that to allow a corporation to recover on a theory of libel

per se under Illinois law “there must be a showing that

it has been accused of fraud, mismanagement, or financial

instability.” Continental Nut Co. v. Robert L. Berner

Co., 345 F.2d 395, 397 (7th Cir.1965). For this state-

ment, not further amplified in the opinion, the court cited

only Interstate Optical Co. v. Illinois State Soc’y of

Optometrists, 244 Ill.App. 158 (1927). Since the plaintiff

in Interstate Optical Co., had been accused of unethical

conduct rather than fraud in any financial sense, Conti-

nental Nut probably uses the word “fraud” in a broad

sense; and, defined broadly, “fraud” describes the conduct

that Walter Jacobson attributed to Brown & Williamson.

The promotion of cigarettes to susceptible youngsters is

analogous to overreaching—“fraud” in an acceptable sense

—by a child’s guardian. In Continental Nut a competitor

accused the plaintiff of importing nuts that were not

properly cured and would therefore shrink and become

mouldy, and added that “somebody is going to be in

trouble” if the Food and Drug Administration’s inspectors

determined that the nuts did not meet proper standards.

345 F.2d at 397. This was product disparagement, which

as we shall see is a tort distinct from defamation; if

there was defamation of the company, as distinct from

disparagement of its product, it was far milder than in

the present case.

No Illinois case before or after Continental Nut sug- |

gests that the standards for proof of defamation are

different for corporations than for other plaintiffs. The

cases treat corporate plaintiffs just like individuals. See,

“-

65a

eg., Halpern v. News-Sun Broadcasting Co., 53 Ill.App.

3d 644, 11 Ill.Dec. 454, 868 N.E.2d 1062 (1977). Ob-

viously some types of defamation—imputations of un-

chastity, for example—are not applicable to corporate

plaintiffs. Probably, therefore, this court’s statement in

Continental Nut that the plaintiff had to show “fraud,

mismanagement, or financial instability” was an effort to

summarize the types of defamation to which corporations

are susceptible, rather than an assertion, without any

basis in Illinois law, that corporations are disfavored

plaintiffs in defamation cases. A corporation cannot have

a reputation for chastity but it can have a reputation for

adhering to the moral standards of the community in

which it sells its products and if that reputation is

assailed in a fashion likely to harm the corporation seri-

ously the corporation has been libeled under Illinois law.

Although Brown & Williamson therefore did not have

to plead special damage in order to resist dismissal of its

defamation count, such damage, if proved, may of course

be recovered in a per se as well as in a per quod suit.

But “when items of special damage are claimed, they

shall be specifically stated.” Fed.R.Civ.P. 9(g). Whether

this requirement is satisfied in a diversity case is a matter

of federal rather than state law, for reasons explained in

Note, The Definition and Pleading of Special Damage

Under the Federal Rules of Civil Procedure, 55 Va.L.Rev.

542, 553-58 (1969).

The complaint states that “BROWN & WILLIAMSON

has been injured and is likely to continue to suffer in-

jury as a result of the natural tendency of the defendants’

false and malicious statements to undermine BROWN &

WILLIAMSON’s general reputation for honesty and to

decrease its sales and good will by falsely portraying the

manufacturer of VICEROY cigarettes as immoral, de-

generate and criminal. In addition, the defendants’ con-

tinuing rebroadcast of the false and malicious Cigarette

Advertising Broadcast threatens to destroy or nearly de-

66a

stroy the value of BROWN & WILLIAMSON’s invest-

ment in VICEROY advertising between 1978 and 1981.”

The reference to injury through the natural tendency of

the alleged libel to decrease Brown & Williamson’s sales,

and the reference to the danger that the value of Brown

& Williamson’s recent Viceroy advertising will be de-

stroyed or nearly destroyed (perhaps implying that it has

already been injured), may well be attempts to plead

actual, realized pecuniary injury. But such special dam-

age is not explicitly, and therefore not specifically, alleged.

In Continental Nut, “plaintiff listed specific figures of its

gross sales before and after the publication and averred

that the decrease in sales was the ‘natural and proximate

result’ of the letter,” 345 F.2d at 397; and in Fleck

Bros. v. Sullivan, 385 F.2d 223, 225 (7th Cir.1967), the

plaintiff alleged that the libel had caused it to make an

expenditure of money. Thus in both cases actual pecuniary

damage was alleged, with enough if not great specificity.

Although the Note in the Virginia Law Review proposes

in effect to read the words, “shall be specifically stated,”

out of Rule 9(g), as being inconsistent with the notice-

pleading philosophy of the Federal Rules, and there is

judicial support for this approach, see, e.g., Rannels v.

S.E. Nichols, Inc., 591 F.2d 242, 247 (3d Cir.1979), we

do not consider ourselves authorized to rewrite the rule.

We are not even sure the requirement of specificity has

no function. It enables groundless per quod defamation

cases to be dismissed at an early stage in the litigation;

and although that policy is not applicable to this case we

cannot ignore the unqualified command of the rule. Bar-

ton v. Barnett, 226 F.Supp. 375, 377-78 (N.D.Miss.1964),

which supports our approach to the interpretation of

Rule 9(g), was cited with approval by this court in

Grzelak v. Calumet Publishing Co., 543 F.2d 579, 583-

84 (7th Cir.1975).

But Brown & Williamson must be allowed to plead over

(unless the dismissal of the complaint can be upheld on

67a

other grounds). The defendants’ argument that by ap-

pealing from the district court’s judgment dismissing the

complaint rather than moving for leave to file an amended

complaint Brown & Williamson elected to stand on the

original complaint is untenable. Since the district court

dismissed the complaint on a variety of grounds, only one

of which related to special damage, the court would also

have had to deny any motion to file an amended complaint

for the purpose of curing the deficiency in the plea for

special damage. The filing of such a motion would there-

fore have been futile, and was not required.

The defendants also argue and the district court also

found that the libel was privileged as a fair and accurate

summary of the Federal Trade Commission staff’s report

on cigarette advertising. The parties agree as they must

that Illinois recognizes a privilege for fair and accurate

summaries of, or reports on, government proceedings and

investigations. See Lulay v. Peoria Journal-Star, Inc.,

34 [ll.2d 112, 214 N.E.2d 746 (1966) ; Halpern v. News-

Sun Broadcasting Co., supra, 53 Ill.App.3d at 644, 11

Tll.Dec. at, 461, 368 N.E.2d at 1069. They agree that the

privilege extends to a public FTC staff report on an in-

vestigation. But they disagree over whether Jacobson’s

summary of the FTC staff report was “fair,” that is,

whether the overall impression created by the summary

was no more defamatory than that created by the original.

See Restatement (Second) of Torts § 611, Comment f

(1977). Since this is a question of fact, Newell v. Field

Enterprises, Inc., 91 Ill.App.38d 735, 749, 47 Ill.Dec. 429,

441, 415 N.E.2d 434, 446 (1980); Tunney v. American

Broadcasting Co., 109 Tll.App.3d 769, 776, 65 Ill.Dec. 294,

299, 441 N.E.2d 86, 91 (1982), and‘ the case was dis-

missed on the pleadings, all we need decide is whether the

fairness of the Jacobson summary emerges so incontro-

vertibly from a comparison of the FTC staff report with

the broadeast that no rational jury considering these

documents with the aid of whatever additional evidence

68a

Brown & Williamson might introduce could consider the

summary unfair.

Although the FTC report (and the Kennan report from

which it quotes) refers to the targets of the Viceroy ad-

vertising campaign as “young smokers” and “starters,”

not as children, the broadcast implies that the campaign

is aimed at children; for after quoting from the Kennan

report as quoted by the FTC staff, Jacobson comments:

“That’s the strategy of the cigarette slicksters, the ciga-

rette business which is insisting in public, ‘We are not

selling cigarettes to children.’ They’re not slicksters,

they’re liars.” Also, although the quotations in the broad-

east are from the Kennan report rather than from any

document written inside Brown & Williamson, and this is

clearly indicated in the FTC staff report, the broadcast

implies that they are quotations from Brown & William-

son. For example, Jacobson states that “an attempt

should be made, says Viceroy”—and there follow quota-

tions from the Kennan report without identification of the

true source. This is misleading. True, the FTC staff

report does state that Brown & Williamson “adopted

many of the ideas in” the Kennan report, and does not

say which these were. But its quotations from Brown &

Williamson’s “Viceroy Strategy” paper imply that they

were the ideas of repressing any concerns about the

health hazards of smoking and of attracting young

smokers by an advertising campaign -associating smoking

with a “free and easy, hedonistic lifestyle”; there is no

suggestion that Brown & Williamson adopted Kennan’s

specific proposal, quoted by Jacobson, “to relate the ciga-

rette to ‘pot’, wine, beer, sex,” or to “wearing a bra.”

Jacobson also deleted the qualification, “considering some

legal constraints,” and omitted mention of the fact that

the Kennan report had been written six years before and

that the advertising campaign which the FTC staff

thought based in part on that report had been conducted

five years before. The omission was misleading because

69a

the juxtaposition of the audio portion of the broadcast

with current Viceroy advertising implied that Viceroy

was continuing to employ the disreputable methods recom-

mended by the Kennan report (though the connection

between golf and a strategy of enticing children is

obscure).

The fact that there are discrepancies between a libel

and the government report on which it is based need not

defeat the privilege of fair summary. Unless the report

is published verbatim it is bound to convey a somewhat

different impression from the original, no matter how

carefully the publisher attempts to summarize or para-

phrase or excerpt it fairly and accurately. An unfair

summary in the present context is one that amplifies the

libelous effect that publication of the government report

verbatim would have on a reader who read it carefully—

that carries a “greater sting,” Tunney v. American

Broadcasting Co., supra, 109 Ill.App.3d at 775, 65 Ill.Dec.

at 298, 441 N.E.2d at 90. The FTC staff report conveys

the following message: six years ago a market-research

firm submitted to Brown & Williamson a set of rather

lurid proposals for enticing young people to smoke ciga-

rettes and Brown & Williamson adopted many of its

ideas (though not necessarily the specific proposals quoted

in the report) in an advertising campaign aimed at young

smokers which it conducted the following year. The

Jacobson broadcast conveys the following message: Brown

& Williamson currently is advertising cigarettes in a

manner designed to entice children to smoke by associat-

ing smoking with drinking, sex, marijuana, and other

illicit pleasures of youth. So at least a rational jury

might interpret the source and the summary, and if it did

it would be entitled to conclude that the summary carried

a greater sting and was therefore unfair.

Brown & Williamson argues that even if the Jacobson

broadcast fairly summarized the FTC staff report the

defendants forfeited the privilege of fair summary be-

70a

cause they knew that the staff report was false in a

crucial particular—the assertion that Brown & William-

son had adopted many of the ideas in the Kennan report.

The defendants reply that the mere fact that Brown &

Williamson told their reporter that the assertion was

false does not either make it false or mean they knew it

was false. This is correct but we must assume for pur-

poses of this appeal that Brown & Williamson can prove

that the defendants knew the assertion to be false. The

question is whether this would save the defamation count

if the jury found that the broadcast was a fair summary

after all.

In Lulay v. Peoria Journal-Star, Inc., supra, 34 Il.2d

at 115, 214 N.E.2d at 748, the Illinois Supreme Court

adopted the formulation of the privilege of fair sum-

mary of government proceedings or reports in the first

Restatement. In this formulation the privilege is for-

feited if the summary is “made solely for the purpose of

causing harm to the person defamed.” Restatement of

Torts §611(b) (1938). This—the everyday—sense of

malice is sometimes called “express malice” to distinguish

it from “actual malice,” which in the modern law of def-

amation means knowledge that a statement is false or

reckless disregard for its truth or falsity. The first Re-

statement contains no suggestion that actual malice

would defeat the privilege of fair summary of govern-

ment reports, nor does Lulay; and the second Restate-

ment, published after Lulay, deleted section 611(b), a

change that implies that the draftsmen thought the privi-

lege absolute. Restatement (Second) of Torts § 611

(1977). Yet in Catalano v. Pechous, 83 Ill.2d 146, 168-

70, 50 Ili.Dee. 242, 252-53, 419 N.E.2d 350, 360-61

(1980), the Illinois Supreme Court appears to have

treated the question whether the privilege is forfeited by

proof of actual malice as open. And in our recent deci-

sion in Gertz v. Robert Welch, Inc., 680 F.2d 527, 535

{7th Cir.1982), and the Illinois Appellate Court’s recent

Tla

decision in Tunney v. American Broadcasting Co., supra,

109 Ill.App.3d at 775, 65 Ill.Dec. at 298, 441 N.E.2d at

90, Catalano is cited as authority for the proposition

that the privilege is forfeited by such proof. Both these

decisions can be criticized, however, for having read more

into Catalano than can fairly be found there; and though

we are bound by authoritative state court rulings on mat-

ters of state law whether or not we consider those rulings

well reasoned, we are not bound to follow a state inter-

mediate appellate ruling (Tunney) that is inconsistent

with a state supreme court ruling (Lulay). But besides

Tunney there is Halpern v. News-Sun Broadcasting Co.,

supra, 53 Ill.App.2d at 653-54, 11 Ill.Dec. at 461, 368

N.E.2d at 1069, which preceded Catalano and which held

that actual malice is evidence of express malice—though

maybe only when the summary is inaccurate.

The truth is that Illinois law is in disarray on the

question whether actual malice defeats the privilege of

fair summary. This is not suprising; it is a difficult

question. The facts of Gertz illustrate the case for using

actual malice to defeat the privilege in at least some cir-

cumstances. The plaintiff there had been described as a

“Communist-fronter,” “Leninist,” and “Marxist” in a

long and radically uncomplimentary article about him in

the defendant’s magazine. Only one statement in the ar-

ticle—that the plaintiff had been a member of the Na-

tional Lawyers’ Guild—was even arguably a fair sum-

mary of material appearing in a government document

(a 1951 report of a congressional committee), and it was

with reference to that statement alone that we held that

the privilege was forfeited if publication had been with

actual malice. See 680 F.2d at 537. If you embellish a

defamatory statement with accusations you know to be

false, taken from ancient government reports that have

no claim to contemporary credence, your repetition of

those stale accusations is not privileged; that is as far as

Gertz need be interpreted to go.

72a

Suppose instead that a newspaper merely publishes

without comment the daily transcript of a sensational

criminal trial. The transcript includes scurrilous accu-

sations against the defendant which the newspaper’s staff

believes to be false and which are in fact false, as shown

by the fact that not only is the defendant acquitted but

the prosecutor later apologizes for having prosecuted an

innocent man. It is unclear that the privilege of repub-

lishing government documents (which a trial transcript

is, in effect) in fair and accurate fashion would be for-

feited in such a case. The trial would be newsworthy and

the newspaper could reasonably believe that its readers

ought to be allowed to form their own conclusions regard-

ing the truth of the accusations. In such a case the IIli-

nois courts might—tthe very recent decision in Emery v.

Kimball Hill, Ine., 112 Ill.App.3d 109, 114, 67 IIl.Dec.

767, 770, 445 N.E.2d 59, 62 (1983), suggests they would

—hold that the privilege was not forfeited; and if they

held it was, a serious First Amendment question would

be raised. But we need not decide on this appeal whether

or when the privilege to republish government reports is

forfeited by proof of actual malice. The issue will be-

come moot if the jury finds that the Jacobson broadcast

was not a fair summary of the FTC staff report, as well

it may. We merely express our doubts that Gertz goes

as far as a quick reading of our opinion in that case

might appear to indicate or that Tunney and Halpern are

authoritative on the question whether actual malice al-

ways forfeits the privilege of fair summary of govern-

ment documents.

Apart from concern that blanket recognition of an

actual-malice exception to the privilege of summarizing

government documents might make it difficult for the

media to keep the public abreast of government activity

—which may be the concern behind the district court’s

brief allusion to the First Amendment—there are no

First Amendment issues before us on this appeal. The

73a

defendants do not argue that as a large corporation

Brown & Williamson is a “public figure.” See Bruno &

Stillman, Ine. v. Globe Newspaper Co., 633 F.2d 583,

586-93 (1st Cir.1980), and cases cited there, on the gen-

eral question. Whether they have waived any such argu-

ment by their silence is not a question we need decide

here, but we observe in passing that if the purpose of the

public figure-private person dichotomy is to protect the

privacy of individuals who do not seek publicity or en-

gage in activities that place them in the public eye, there

seems no reason to classify a large corporation as a pri-

vate person. (The First Circuit rejected this argument

in Bruno & Stillman, however; see 633 F.2d at 590.)

But at least for purposes of this appeal Brown & Wil-

liamson is a private person, and as such its way is not

barred by the First Amendment provided that it does not

advance a theory of strict liability and does not seek gen-

eral and punitive damages without being prepared to

prove actual malice. Gertz v. Robert Welch, Inc., 418 U. S.

323, 347, 349- 50, 94 S.Ct. 2997, 3010, 3011-12, 41 L.Ed.

2d. 789 (1974). It does seek such damages but is pre-

pared to prove actual malice; and Illinois law requires

proof of negligence in defamation cases as the minimum

condition for establishing liability. See Gertz v. Robert

Welch, Inc., supra, 680 F.2d at 537 n. 17. Of course if

Brown & Williamson does prove actual malice it can re-

cover damages—actual, general, and punitive—even if it

is a public figure.

This completes our discussion of the defamation count

and we turn to the others, which were aiso dismissed—

and which are makeweights that require only brief dis-

cussion. If one person persuades another to break a con-

tract with a third, he commits the tort of wrongful in-

terference with business relations. City of Rock Falls v.

Chicago Title & Trust Co., 13 Ill.App.3d 359, 300 N.E.

2d 331 (1973). Any libel of a corporation can be made

to resemble in a general way this archetypal wrongful-

74a

interference case, for the libel will probably cause some

of the corporation’s customers to cease doing business

with it; and whether this involves an actual breaking of

contracts or merely a withdrawal of prospective business

would make no difference under the modern law of

wrongful interference. But this approach would make

every case of defamation of a corporation actionable as

wrongful interference, thereby enabling the plaintiff to

avoid the specific limitations with which the law of defa-

mation—presumably to some purpose—is hedged about.

We doubt that the Illinois courts would allow this end

run around their rules on defamation, and we therefore

need not consider any constitutional implications of their

doing so. Crinkley v. Dow Jones & Co., 67 Ill.App.3d

869, 880, 24 Ill.Dec. 573, 581, 385 N.E.2d 714, 722

(1978), is instructive. The court dismissed the wrongful-

interference counts in a suit, not unlike the present one,

against a publisher because there was no allegation that

the defendant intended to interfere with the plaintiff’s

relationship with third parties. This was a pleading point

but it is evident that Brown & Williamson does not be-

lieve that the defendants’ interest was otherwise than to

attract viewers to Jacobson and CBS; the complaint al-

leges that the broadcast was “designed solely to increase

the audience ratings of and attract attention to WBBM-

ve

Crinkley also disposes of Brown & Williamson’s claim

that the defendants violated the Illinois Consumer Fraud

and Deceptive Business Practices Act and the Uniform

Deceptive Trade Practices Act. See 67 IIl.App.3d at 877,

24 I1l.Dec. at 578-79, 385 N.E.2d at 719-20. These Acts

provide a remedy for disparagement of a product, but

that is different from the disparagement of the producer,

i.e., from defamation. The Jacobson broadcast does not

suggest that Viceroy cigarettes are defective, or any more

unhealthful than other brands of cigarettes; so there is

no product disparagement, and we need not decide

75a

whether, if there were, it would be actionable when the

disparagement was by the news media rather than by a

competing producer.

The judgment dismissing Count I of the complaint

(defamation) is reversed and the case is remanded for

further proceedings consistent with this opinion. The

judgment dismissing the other counts is affirmed. There

will be no award of costs in this court, and Circuit Rule

18 shall apply on remand.

76a

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 82 C 1648

WILLIAM T. Hart, Judge

BROWN & WILLIAMSON TOBACCO Co.

V.

WALTER JACOBSON and CBS, INC.

DOCKET ENTRY

August 7, 1986

Pursuant to Memorandum Opinion and Order, IT IS

ORDERED that: (1) Defendants’ motion for judgment

notwithstanding the verdict or a new trial is denied as to

liability. (2) Defendants’ motion for judgment notwith-

standing the verdict is granted as to compensatory dam-

ages and the court enters judgment in the amount of

$1.00 as nominal compensatory damages. (3) Defend-

ants’ motion for judgment notwithstanding the verdict,

a new trial, or a remittitur as to punitive damages is

denied. Punitive damages shall stand at two million dol-

lars as to CBS and fifty thousand dollars as to Jacobson.

/s/ William T. Hart

WILLIAM T. HART

Judge

For further detail see order attached to the original

minute order form.

Notices mailed by judge’s staff.

77a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DISTRICT

No. 82 C 1648

BROWN & WILLIAMSON TOBACCO CORPORATION,

Plaintiff,

Vv.

WALTER JACOBSON and CBS, INCc.,

Defendants.

MEMORANDUM OPINION AND ORDER

Defendants Walter Jacobson and CBS, Inc. move to

vacate the judgment entered against them and to enter

judgment in their favor notwithstanding the verdicts or,

in the alternative, for a substantial remittitur of dam-

ages or a new trial.

The complaint upon which this case was tried was ini-

tially cismissed. On appeal it was upheld and the case

was remanded for trial. Brown & Williamson Tobacco

Corp. v. Jacobson, 713 F.2d 262 (7th Cir. 1983). The

Court of Appeals held that a television broadcast stating

that advertising designed to attract children to smoke

by associating smoking with pleasurable illicit activity—

pot, wine, beer and sex—was libelous per se because it

accused plaintiff Brown & Williamson Tobacco Co.

(“B&W”) of immoral conduct.

The Court of Appeals accurately described the nature

of this case (as shown by the evidence at trial) as fol-

lows:

In 1975, Ted Bates, the advertising agency that

had the Viceroy account, hired the Kennan market-

earner

78a

research firm to help develop a new advertising stat-

egy for Viceroy. Kennan submitted a report which

stated that for “the younger smoker,” “a cigarette,

and the whole smoking process, is part of the illicit

pleasure category. ... In the young smoker’s mind

a cigarette falls into the same category with wine,

beer, shaving, wearing a bra (or purposely not wear-

ing one), declaration of independence and striving

for self-identity. For the young starter, a cigarette

is associated with introduction to sex life, with court-

ship, with smoking ‘pot’ and keeping studying hours.

..” The report recommended, therefore, the follow-

ing pitches to “young smokers, starters”: “Present

the cigarette as part of the illicit pleasure category

of products and activities. ... To the best of your

ability, (considering some legal constraints), relate

the cigarette to ‘pot,’ wine, beer, sex, etc. Don’t

communicate health or health-related points.” Ted

Bates forwarded the report to Brown & Williamson.

... Brown & Williamson rejected the “illicit pleasure

strategy” proposed in the report, and fired Ted

Bates primarily because of displeasure with the pro-

posed strategy.

Years later the Federal Trade Commission con-

ducted an investigation of cigarette advertising, and

in May i981 it published a report of its staff on the

investigation. The FTC staff report discusses the

Kennan report, correctly dates it to May 1975, and

after quoting from it the passages we have quoted

states that “B & W adopted many of the ideas con-

tained in this report in the development of a Viceroy

advertising campaign.” In support of this assertion

the staff report quotes an internal Brown & William-

son document on “Viceroy Strategy,” dated 1976,

which states, “The marketing efforts must cope with

consumers’ attitudes about smoking and _ health,

either providing them a rationale for smoking a full

79a

flavor VICEROY or providing a means of repress-

ing their concerns about smoking a full flavor VICE-

ROY.” The staff report then quotes a description

of three advertising strategies. Although the descrip-

tion contains no reference to young smokers or to

“starters,” the staff report states: “B & W docu-

ments also show that it translated the advice [pre-

sumably from the Kennan report] on how to attract

young ‘starters’ into an advertising campaign fea-

turing young adults in situations that the vast ma-

jority of young people probably would experience and

in situations demonstrating adherence to a ‘free and

easy, hedonistic lifestyle.” The interior quotation

is from another 1976 Brown & Williamson document

on advertising strategy.

On November 4, 1981, a reporter for WBBM-TV

called Brown & Williamson headquarters and was

put in touch with a Mr. Humber in the corporate

affairs department. The reporter told Mr. Humber

that he was preparing a story on the tobacco indus-

try for Walter Jacobson’s “Perspective” program

and asked him about the part of the FTC staff re-

port that dealt with the Viceroy advertising strat-

egy. Humber replied that Brown & Williamson had

rejected the proposals in the Kennan report and had

fired Ted Bates in part because of dissatisfaction

with those proposals.

Walter Jacobson’s ‘Perspective’ on the tobacco

industry was broadcast on November 11 and re-

broadcast on November 12 and again on March 5,

1982. In the broadcast, Jacobson, after stating that

“nushing cigarettes on television is prohibited,” an-

nounces his theme: “Television is off limits to ciga-

rettes and so the business, the killer business has

gone to the ad business in New York for help, to

the slicksters on Madison Avenue with a billion dol-

lars a year for bigger and better ways to sell ciga-

80a

rettes. Go for the youth of America, go get ‘em

guys. ... Hook ’em while they are young, make ’em

start now—just think how many cigarettes they’ll be

smoking when they grow up.” Various examples of

how cigarette marketing attempts “to addict the chil-

dren to poison” are given. The last and longest con-

cerns Viceroy.

The cigarette business insists, in fact, it will

swear up and down in public, it is not selling ciga-

rettes to children, that if children are smoking,

which they are, more than ever before, it’s not the

fault of the cigarette business. That’s what Viceroy

is saying, “Who knows whose fault it is that chil-

dren are-smoking? It’s not ours.”

Well, there is a confidential report on cigarette

advertising in the files of the Federal Government

right now, a Viceroy advertising, the Viceroy strat-

egy for attracting young people, starters they are

called, to smoking—‘FOR THE YOUNG SMOKER.

... A CIGARETTE FALLS INTO THE SAME

CATEGORY WITH WINE, BEER, SHAVING OR

WEARING A BRA... .” says the Viceroy strategy

—“A DECLARATION OF INDEPENDENCE AND

STRIVING FOR SELF-IDENTITY.” Therefore, an

attempt should be made, says Viceroy, to ‘.. . PRE-

SENT THE CIGARETTE AS AN INITIATION

INTO THE ADULT WORLD,” to “. .. PRESENT

THE CIGARETTE AS AN ILLICIT PLEASURE

... A BASIC SYMBOL OF THE GROWING-UP,

MATURING PROCESS.” An attempt should be

made, says the Viceroy slicksters, “TO RELATE THE

CIGARETTE TO ‘POT,’ WINE, BEER, SEX. DO

NOT COMMUNICATE HEALTH OR HEALTH-

RELATED POINTS.” That’s the strategy of the

cigarette slicksters, the cigarette business which is

insisting in public, “We are not selling cigarettes to

children.”

8la

They’re not slicksters, they’re liars.

Id. at 266.

The liability and damage issues were bifurcated with

the same jury hearing the evidence on both liability and

damages. Pursuant to Rule 49(a) of the Federal Rules

of Civil Procedure, the jury made separate findings on

the liability issues. The jury found that: (1) plaintiff

proved by a preponderance of the evidence that defend-

ants’ broadcast was “of and concerning’ B&W; (2)

plaintiff proved by a preponderance of the evidence that

defendants’ broadcast was substantially false; (3) plain-

tiff proved by clear and convincing evidence that defend-

ants knew the broadcast was false or recklessly disre-

garded whether or not the broadcast was false; and (4)

defendants did not prove by a preponderance of the

evidence that the broadcast was a “fair summary” of

portions of a government report. After hearing evidence

with respect to damages the jury awarded B&W $3 mil-

lion in general damages, $2 million in punitive damages

from CBS, and $50,000 in punitive damages from Jacob-

son.

Defendants contend that they are entitled to post-trial

relief because the jury’s findings and verdicts are

against the manifest weight of the evidence; evidence

offered by plaintiff was improperly received or evidence

offered by defendants was improperly excluded; instruc-

tions tendered were improperly given or refused; de-

fendants were precluded from asserting to the jury the

defense of opinion; punitive damages are unconstitu-

tional; and the amount of compensatory and punitive

damages was excessive. Defendants request in the alter-

native that the court order a remittitur.

I. Liability

Under Illinois law, which governs in this diversity

case, judgment notwithstanding the verdict is granted

“only in those cases in which all of the evidence, when

82a

viewed in its aspect most favorable to the opponent, so

overwhelmingly favors movant that no contrary verdict

based on the evidence could ever stand.” Pedrick v.

Peoria and Eastern Railroad, 37 IIll.2d 494, 510, 229

N.E.2d 504, 513-14 (1967); General Foam Fabricators,

Inc. v. Tenneco Chemicals, Inc., 695 F.2d 281, 285-86

(7th Cir. 1982). The standard of review for a new trial

is also strict. The court may not second guess a jury or

substitute its view for that of the jury. Robison v. Les-

crenier, 721 F.2d 1101, 1104 (7th Cir. 1983) ; Continen-

tal Airlines, Inc. v. Wagner-Morehouse, Inc., 401 F.2d

23, 30 (7th Cir. 1968). All disputes concerning the

reasonable inferences to be drawn from the evidence must

be resolved against the moving party. The credibility of

the witnesses is a matter for the jury and not for the

court. Oberman v. Dun & Bradstreet, Inc., 507 F.2d

349, 353 (7th Cir. 1974).

To assure that the judgment does not constitute a for-

bidden intrusion in the field of free expression, an inde-

pendent examinatian of the record must be made to

determine whether the jury’s finding of actual malice is

supported by clear and convincing evidence. Bose Corp.

v. Consumers Union of United States, Inc., 466 U.S.

485 (1984); Anderson v. Liberty Lobby, Inc., 54

U.S.L.W. 4755 (U.S. June 25, 1986). While Bose re-

quires this review of the record, the Bose court specifi-

cally noted that “due regard” should be given to the

factfinder’s opportunity “to observe the demeanor of the

witnesses; the constitutionally-based rule of independent

review permits this opportunity to be given its due.”

466 U.S. at 499-500.

Keeping these principles in mind the court must deter-

mine whether or not the evidence presented at trial sup-

ports the fact findings made by the jury.

83a

A. Of and Concerning BEW

The jury first found that the broadcast was of and

concerning B&W. Though B&W was not mentioned by

name in the broadcast it is admittedly the only manu-

facturer of Viceroy cigarettes. The name and address of

B&W is on every package of Viceroy brand cigarettes.

Photographs of Viceroy cigarettes were displayed on the

television screen while the broadcast was underway. The

broadeast concerned B&W if viewers of the broadcast

reasonably understood the statement to refer to B&W.

The statement need not mention B&W by name and it

is not necessary that everyone who saw the broadcast

actually understood the statement to refer to it. It is

sufficient that persons who know B&W would understand

the statement to refer to it. Archibald v. Belleville News

Democrat, 54 Ill.App.2d 38, 203 N.E.2d 281, 283 (5th

Dist. 1964). Given the evidence presented, the jury’s

finding that plaintiff proved by a preponderance of the

evidence that the broadcast complained of was under-

stood to be about B&W is supported by substantial evi-

‘dence and is not against the manifest weight of the

evidence.’

B. Falsity

The jury found that plaintiff proved by a preponder-

ance of the evidence that defendants’ broadcast was

substantially false. The evidence shows that on Novem-

ber 11-12, 1981, Jacobson broadcast a ‘‘Perspective’”’ on

CBS’s WBBM-TV station in Chicago concerning ciga-

rette advertising. As he spoke them, those parts of

Jacobson’s statement that he characterized as quotations

from a confidential government report purportedly deal-

ing with Viceroy’s advertising and advertising strategy

1The Court of Appeals opinion indicates that defendants con-

ceded this point on appeal. Brown & Williamson, 713 F.2d at 267.

Because defendants had not answered the complaint when the case

was before the Court of Appeals, they were permitted to dispute

this element at trial.

84a

were printed on the screen-alongside pictures of a portion

of an actual Viceroy advertisement showing two packs

of Viceroy Rich Lights, a golf ball, and part of a golf

club.

B&W put before the jury what the evidence showed to

be every ad published by Viceroy from 1975 to 1982.

The jury could reasonably have found from an examina-

tion of those advertisements that there was no pot, wine,

beer and sex ad in this group. Defendants do not con-

tend otherwise. Indeed, on cross examination defend-

ant Jacobson admitted that he did not know of any such

advertisements and that he did not believe that Viceroy

ever ran such advertisements (Tr. 1246).

B&W preesnted the testimony of individuals with

knowledge regarding Viceroy advertising and B&W’s re-

lationship with its ad agency, Ted Bates and the MARC

research firm which provided the so-called Kennan report

for Ted Bates and B&W. These witnesses stated that

there was no strategy or plan designed to attract chil-

dren to smoke by reference to pot, wine, beer and sex

or any other device. Rather, they testified B&W had a

policy forbidding any advertising directed to persons un-

der 21 and that policy was in accordance with a cigarette

manufacturers’ code forbidding such advertising.

An exhibit not put before the jury, defendants’ Ex-

hibit 57, was a collection of proposed ads, or artists’

renderings which were characterized as exploitive of a

sex theme. As there was no showing that these ads had

in fact been accepted or actually utilized in a Viceroy

advertisement they were excluded as not probative.

Defendants sought to call Matthew Myers, a former

FTC attorney who worked on an

This text is long and has been trimmed here. Open the source document for the complete record.