Appendix — American Broadcasting Cos. v. Lundell Manufacturing Co.
Supreme Court brief1997
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UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Submitted April 10, 1996 Decided Oct. 15, 1996
No. 95-3473
LUNDELL MANUFACTURING COMPANY, INC.,
Plaintiff-Appellant,
—_—V—
AMERICAN BROADCASTING COMPANIES, INC.,
Defendant-Appellee.
Rehearing and Suggestion for Rehearing En Banc
Denied Nov. 26, 1996*
Paul Dean Lundberg, argued, Sioux City, IA, for plaintiff-
appellant.
Kasey W. Kincaid, argued, Des Moines, IA, for defendant-
appellee.
. Chief Judge Richard S. Arnold, Judge McMillian, and Judge
Murphy would grant the suggestion. Judge Magill took no part in the
consideration or decision of this case.
RS
2a
Before
WOLLMAN, JOHN R. GIBSON, and HANSEN,
Circuit Judges.
JOHN R. GIBSON, Circuit Judge.
Lundell Manufacturing Company appeals from the district
court’s order granting American Broadcasting Companies
judgment as a matter of law, and setting aside a jury verdict
of just over one million dollars for Lundell on its libel action.
ABC broadcast a story on “World News Tonight with Peter
Jennings,” reporting that a garbage recycling machine man-
ufactured by Lundell “does not work.” Lundell sued for libel,
a jury returned a verdict in its favor, and the district court set
aside the jury verdict. On appeal, Lundell argues that the dis-
trict court erred in setting aside the jury verdict because there
was substantial evidence that the “sting” of the defamatory
statement was false. Lundell also contends that the court erred
in setting aside the lost profits award because there was evi-
dence of lost profits damages. We reverse.
On July 2, 1992, ABC broadcast a story on “World News
Tonight with Peter Jennings” as part of the program’s con-
tinuing “Anger in America” reports. Jennings introduced the
story:
Our final report tonight is about garbage, which in the
case of a smail rural county in Georgia, is making an
awful lot of people angry. What we have here is another
example of why people are frustrated or angered by
government.
ABC reporter, Rebecca Chase, began the story by explain-
ing the predicament of Berrien County taxpayers. An on-
3a
screen graphic labeled “Garbage Tax” appeared at the begin-
ning of the story, and Chase began her report:
In this south Georgia county of tobacco farms and
pecan groves, taxpayers are angry that they are stuck
with a three million dollar debt for this garbage recy-
cling machine that they never approved and does not
work,
(Emphasis added).
The story continued with Chase interviewing an upset tax-
payer, and then describing the background of the controversy:
In 1988, Berrien County had no place to put its
garbage because the landfill was full. So the county com-
mission decided to buy this garbage machine with rev-
enue bonds which do not require voter approval.
As Chase made this statement, television viewers saw a cor-
responding video showing the Lundell machine in Berrien
County.
Further in the story, viewers were shown another recycling
machine sorting solid waste as Chase stated:
The machine was supposed to work like this one in
Tennessee, sorting and recycling up to ninety percent of
the county’s garbage and paying for itself by selling the
recycled materials and charging user fees. That is how
then-commissioner Joe Stallings promised it would work
here. It did not.
Chase then interviewed the former Commissioner, Joe
Stallings, who stated: “There’s nothing physically wrong with
the machine. It’s the people.”
Chase continued:
Stallings blames people for not giving the machine a
chance. But most people here blame him for misleading
them about how much it cost to operate the plant. It was
five times more expensive than he said it would be. The
machine turned the garbage into fuel pellets and com-
post, but no one found a buyer. So the unsold material
4a
piled up outside—nothing more than exposed trash. The
state has now ordered the plant shut down as an envi-
ronmental hazard.
The story then detailed citizen responses, including a class
action lawsuit to void the taxpayers’ obligation to pay for the
recycling project. The story concluded by telling that Berrien
County taxpayers now must have their garbage hauled to
another county for disposal.
Lundell sued ABC, alleging that the statement that the
recycling machine “does not work” falsely implied that the
recycling machine was not mechanically operable.' ABC con-
cedes that the recycling machine was mechanically sound, and
that the reason Berrien County no longer used the machine
was because the county could not sell the by-products at a
price sufficient to cover the machine’s operating expenses.
ABC defends the statement, arguing that the phrase “does not
work” accurately implied that the Lundell machine and
Berrien County’s recycling plan did not work as intended or
promised because the system did not work in a financially
viable manner.
ABC filed a motion for summary judgment, arguing that
Lundell could not demonstrate that the statement that the
machine “did not work” was false, and that the challenged
statement was not actionable because it was substantially true.
The district court ruled that Lundell must bear the burden of
proving that the challenged statement was false. See In re IBP
Confidential Business Documents Litigation, 797 F.2d 632,
647 (8th Cir.1986) (en banc), cert. denied, 479 U.S. 1088, 107
S.Ct. 1293, 1294, 94 L.Ed.2d 150 (1987). The court recog-
nized, however, that even if the statement was false, Lundell
could not recover for defamation if the “gist” or “sting” of the
report was substantially true. See Behr v. Meredith Corp., 414
, Lundell also alleged that two other statements in the story were
defamatory: the statement that “no one found a buyer” for the fuel pel-
lets produced by the machine, and the statement that “taxpayers are now
forced to have their trash hauled to another county’s landfill.” The dis-
trict court dismissed both of these claims, and Lundell does not raise
these issues on appeal.
Sa
N.W.2d 339, 342 (lowa 1987). Nevertheless, the court denied
ABC’s motion, holding that a disputed question of fact
existed as to the “sting” of the report and, therefore, the jury
must decide the question. At the close of Lundell’s evidence,
the court directed a verdict for ABC on Lundell’s claim of
actual malice. The court concluded that Lundell was a “pri-
vate figure plaintiff” and, therefore, must show by a pre-
ponderance of the evidence that ABC breached the standard
of care of reasonably prudent professional broadcast news
employees in broadcasting the report. See Gertz v. Robert
Welch, Inc., 418 U.S. 323, 347, 94 S.Ct. 2997, 3010-11, 41
L.Ed.2d 789 (1974); Jones v. Palmer Communications, Inc.,
440 N.W2d 884, 898 (lowa 1989).
Following an eight-day trial, the jury returned a verdict for
Lundell assessing $900,000 in damages for injury to reputa-
tion and $158,000 in damages for lost profits. Later, the court
granted ABC’s renewed motion for judgment as a matter of
law, ruling that the news report was substantially true as a
matter of law. The court also ruled that if it had not entered
judgment as a matter of law, it would have set aside the
$158,000 lost profits award because of insufficient evidence.
Lundell appeals.
I.
A critical dispute in this case is over our standard of
review. Lundell argues that there is substantial evidence that
ABC’s statement that the machine did not work is false, and,
therefore, the court could not decide that the report was sub-
stantially true as a matter of law, and neither the district court
nor this court can disturb the jury’s finding.
Lundell argues that we are guided by our usual standard for
reviewing a district court’s decision to enter judgment as a
matter of law. Under that standard, we ask whether there is
sufficient evidence to support a jury verdict. White v. Pence,
961 F.2d 776, 779 (8th Cir.1992) (standard for granting a
motion for judgment as a matter of law). We analyze the evi-
dence in the light most favorable to Lundell, and we do not
6a
weigh or evaluate the evidence or consider questions of cred-
ibility. Jd. To sustain a motion for judgment as a matter of
law, all the evidence must point one way and be susceptible of
no reasonable inference sustaining Lundell’s position. /d.
ABC, on the other hand, contends that we are not restrained
in this First Amendment case by the deference ordinarily
accorded jury findings. Citing New York Times Co. v. Sulli-
van, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), ABC
argues that we must “make an independent examination of the
whole record,” unrestrained by the deference ordinarily
afforded to the jury, in order to ensure that no “forbidden
intrusion on the field of free expression” has occurred. /d. at
285, 84 S.Ct. at 729 (internal quotation and citation omitted).
To remove the chilling effect of defamation laws and to
encourage “uninhibited, robust, and wide-open” debate, the
Supreme Court created a constitutional rule protecting the
good faith criticism of government officials in New York
Times, 376 U.S. at 270-71, 84 S.Ct. at 720-21. Because free-
doms of expression require “breathing space,” id. at 272, 84
S.Ct. at 721-22, the Court held that the Constitution “pro-
hibits a public official from recovering damages for a defam-
atory falsehood relating to his official conduct unless he
proves that the statement was made with ‘actual malice.’ ” /d.
at 279-80, 84 S.Ct. at 725. Actual malice is a statement made
“with knowledge that it was false or with reckless disregard
of whether it was false.” Id. at 280, 84 S.Ct. at 726. To ensure
no forbidden intrusion on these First Amendment liberties, an
appellate court’s review of a trial court’s finding of actual
malice is not controlled by the “clearly erroneous” standard
of Federal Rule of Civil Procedure 52(a). Bose Corp. v. Con-
sumers Union of United States, Inc., 466 U.S. 485, 498-511,
104 S.Ct. 1949, 1958-65, 80 L.Ed.2d 502 (1984). “Judges, as
expositors of the Constitution, must independently decide
whether the evidence in the record is sufficient to cross the
constitutional threshold that bars the entry of any judgment
that is not supported by clear and convincing proof of ‘actual
malice.’ ” Jd. at 511, 104 S.Ct. at 1965.
Ta
The Supreme Court examined the protection for media
defendants in suits brought by private individual in Gertz, 418
U.S. 323, 94 S.Ct. 2997. The Court determined that the New
York Times’ actual malice standard was inappropriate in suits
brought by private persons attempting to prove injury to their
reputation on a matter of public interest. Jd. at 344-47, 94
S.Ct. at 3009-11. The Court nevertheless imposed two other
constitutional limitations. First, the Court held that the states
could not impose liability without fault. Jd. at 346-47, 94
S.Ct. at 3010-11. Thus, a private figure cannot recover against
a media defendant without showing that the statement at issue
was false and the media defendant was at fault in publishing
the statement. /d. at 347, 94 S.Ct. at 3010-11. Second, the
Court held that the states could not permit recovery of pre-
sumed or punitive damages without a showing of actual mal-
ice. Id. at 349-50, 94 S.Ct. at 3011-12.
ABC argues that Philadelphia Newspapers, Inc. v. Hepps,
475 U.S. 767, 106 S.Ct. 1558, 89 L.Ed.2d 783 (1986), made
the finding of falsity a constitutional rule requiring us to inde-
pendently review the record to determine whether there has
been any “forbidden intrusion on the field of free expression.”
New York Times, 376 U.S. at 285, 84 S.Ct. at 729.
In Philadelphia Newspapers, a series of newspaper articles
linked the plaintiffs to organized crime. The Court decided
that the common-law presumption that defamatory speech is
false cannot stand when a plaintiff seeks damages against a
media defendant for speech of public concern. 475 U.S. at
777, 106 S.Ct. at 1564. After examining the case law con-
cerning the constitutional limits on defamation suits, the
Court explained:
When the speech is of public concern and the plaintiff is
a public official or public figure, the Constitution clearly
requires the plaintiff to surmount a much higher barrier
before recovering damages from a media defendant than
is raised by the common law. When the speech is of pub-
lic concern but the plaintiff is a private figure, as in
Gertz, the Constitution still supplants the standards of
the common law, but the constitutional requirements are,
8a
in at least some of their range, less forbidding than when
the plaintiff is a public figure and the speech is of pub-
lic concern. When the speech is of exclusively private
concern and the plaintiff is a private figure, as in Dun &
Bradstreet [v. Greenmoss Builders, Inc., 472 U.S. 749,
105 S.Ct. 2939, 86 L.Ed.2d 593 (1985)] the constitu-
tional requirements do not necessarily force any change
in at least some of the features of the common-law land-
scape.
Id. at 775, 106 S.Ct. at 1563 (emphasis added).
The Court emphasized that “the common-law presumption
that defamatory speech is false cannot stand when a plaintiff
seeks damages against a media defendant for speech of pub-
lic concern.” Jd. at 777, 106 S.Ct. at 1564.
From this language in Philadelphia Newspapers, ABC
argues that the findings of falsity and substantial truth are
subject to constitutional rules requiring this court to inde-
pendently evaluate the findings in a suit brought by a private
figure against a media defendant. ABC contends that we can-
not focus on the literal truth or falsity of the statement, but
rather we must decide whether the challenged statement meets
the constitutional requirements of a false statement. “Minor
inaccuracies do not amount to falsity so long as ‘the
substance, the gist, the sting, of the libelous charge be justi-
fied.’ ” Masson v. New Yorker Magazine, Inc., 501 U.S. 496,
517, 111 S.Ct. 2419, 2433, 115 L.Ed.2d 447 (1991) (quoting
Heuer v. Kee, 15 Cal.App.2d 710, 59 P.2d 1063, 1064 (1936)).
A statement is not false unless “it would have a different
effect on the mind of the reader from that which the pleaded
truth would have produced.” /d. (internal quotation omitted).
Lundell responds that the independent review mandated in
New York Times only applies to a lower court finding of actual
malice, and not to findings of falsity or substantial truth. Lun-
dell argues that the issues of falsity and substantial truth are
simply not controlled by the “constitutional rule” set forth in
New York Times. Lundell points out that the court correctly
instructed the jury on the false statement requirement and
9a
ABC’s defense of substantial truth, and we cannot overturn
the findings of the jury.
There is no question that the independent review required
by New York Times applies to a trial court finding of actual
malice. 376 U.S. at 284-86, 84 S.Ct. at 728-29. Accord Bose
Corp., 466 U.S. at 514, 104 S.Ct. at 1967 (“We hold that the
clearly-erroneous standard of Rule 52(a) of the Federal Rules
of Civil Procedure does not prescribe the standard of review
to be applied in reviewing a determination of actual malice in
a case governed by New York Times Co. v. Sullivan.”). Here,
however, we are not reviewing a finding of actual malice. The
district court categorized Lundell as a private figure plaintiff.
Thus, the issue boils down to whether findings of falsity or
substantial truth are constitutional rules requiring us to inde-
pendently evaluate the record.
When the Court in Philadelphia Newspapers discussed
overriding the common law because of First Amendment pro-
tections, it focused on the allocation of the burden of proof.
See 475 U.S. at 777, 106 S.Ct. at 1564. The Pennsylvania
Supreme Court, reversing the trial court, held that a Penn-
sylvania statute placed the burden of proving truth on the
publisher, and that this did not violate the Federal Consti-
tution. Jd. at 770-71, 106 S.Ct. at 1561-62. The Supreme
Court reversed, holding that the common-law presumption
that defamatory speech is false is unconstitutional when a
plaintiff seeks damages against a media defendant for speech
of public concern. Jd. at 777, 106 S.Ct. at 1564. The Court
identified the burden of proof, not the element of falsity, as
the constitutional requirement. To decide the case, the Court
only held that the Constitution placed the burden of proving
falsity on the plaintiff. Indeed, the Court emphasized that it
did not consider what quantity of proof of falsity that a pri-
vate figure plaintiff must present to recover. /d. at 779 n. 4,
106 S.Ct. at 1565 n. 4; Accord Bose Corp., 466 U.S. at 514 n.
31, 104 S.Ct. at 1967 n. 31 (commenting that there might be
many other questions of fact in a defamation case that are
irrelevant to the constitutional standard of New York Times
10a
Co. v. Sullivan, and to which a “clearly erroneous” standard
of appellate review applies).
In Masson, the Supreme Court addressed whether a writer’s
alteration of quotations attributed to the subject of an inter-
view could establish the actual malice required for a defama-
tion suit by a public figure. 501 U.S. at 499, 111 S.Ct. at
2424. The Supreme Court’s analysis of actual malice required
it to consider the concept of falsity. Jd. at 513, 111 S.Ct. at
2431. The Court examined six different published passages to
determine whether the published passages were materially
different from the tape-recorded statements, thereby creating
an issue of fact for the jury as to falsity. Jd. at 522-25, 111
S.Ct. at 2435-37. The Court concluded that one of the pas-
sages did not materially alter the meaning of the tape-
recorded statemeni and therefore, was not actionable. /d. at
524, 111 S.Ct. at 2436-37. With respect to the other five pas-
sages, however, the Court decided that a reasonable jury could
find a material difference between the meaning of the pub-
lished passages and that of the tape-recorded statements. /d.
at 522-25, 111 S.Ct. at 2435-37. Because a jury could find the
differences in the statements exposed the interviewee to con-
tempt, ridicule, or obloquy, the Court held that it could not
decide the issue of falsity as a matter of law. Jd. Masson
makes abundantly clear that in reviewing a summary judg-
ment ruling, which involves a similar standard as a review of
a directed verdict ruling, we examine the evidence in the light
most favorable to the plaintiff and decide if there is sufficient
evidence to support a jury finding of falsity. Jd. at 520-21,
111 S.Ct. at 2434-35.?
Recently, we reviewed the district court’s grant of summary
judgment to a defendant television station on a defamation
. “On summary judgment, we must draw all justifiable inferences
in favor of the nonmoving party, including questions of credibility and
of the weight to be accorded particular evidence.” Masson, 501 U.S. at
520, 111 S.Ct at 2435 (citing Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986)). We exam-
ine the evidence in a light most favorable to the nonmoving party, to see
if there is sufficient evidence to support a jury finding. Anderson, 477
U.S. at 255, 106 S.Ct. at 2513-14.
lla
claim. Toney v. WCCO Television, Midwest Cable & Satellite,
Inc., 85 F.3d 383 (8th Cir.1996). We reversed the district
court’s grant of summary judgment as to one of the seven
statements alleged to be defamatory. Jd. at 389. The district
court ruled that the statement was not actionable because even
if the statement was defamatory, it was true. Jd. at 386. In an
opinion written by Justice White, we agreed with the district
court’s conclusion that one of the statements “could be
defamatory,” and, therefore, the issue was one for a jury to
decide. Jd. at 388. We disagreed, however, with the district
court’s conclusion that the statement was “so plainly true that
it could be so characterized as a matter of law.” Jd. We
directed that this question should be decided by a jury. /d. at
389.
This is not a situation where the underlying facts as to the
gist or sting of the defamatory charge are undisputed so that
the trial court may determine substantial truth as a matter of
law. Compare Campbell v. Quad City Times, Inc., 547 N.W.2d
608, 610 (Iowa. Ct.App.1996), with Jones, 440 N.W.2d at
891. As the Third Circuit held in Schiavone Construction Co.
v. Time, Inc., “a jury must resolve the question of the sting
because reasonable persons could differ on that question.” 347
F.2d 1069, 1084 (3d Cir.1988).
There are other issues in defamation actions which courts
have reserved for the jury to decide. For example, in
Milkovich v. Lorain Journal Co., 497 U.S. 1, 110 S.Ct. 2695,
111 L.Ed.2d 1 (1990), the Supreme Court rejected the argu-
ment that opinions are absolutely protected by the First
Amendment, /d. at 18-19, 110 S.Ct. at 2705-06, recognizing
that “expressions of ‘opinion’ may often imply an assertion of
objective fact,” Jd. at 18, 110 S.Ct. at 2705. The Court
allowed the defamation action to go forward, ruling that a rea-
sonable trier of fact could find that the so-called opinion
could be interpreted as a false assertion of fact. Jd. at 21, 110
S.Ct. at 2707. Had the Court believed it must independently
decide whether a statement constituted a false statement of
fact, the Court would not have used this inquiry. Accord Part-
ington v. Bugliosi, 56 F.3d 1147, 1153 (9th Cir.1995) (stan-
12a
dard for summary judgment is whether a reasonable factfinder
could conclude that the statements imply a false assertion of
objective fact).
Philadelphia Newspapers, Masson, and, in a sense,
Milkovich, all point to our determination that the First
Amendment commands in a defamation case brought by a pri-
vate plaintiff against a media defendant only that we review
the record to determine whether a reasonable trier of fact
could find that the statement could be interpreted as a false
assertion of fact. In essence, these cases support a sufficiency
of the evidence analysis.
We are further supported in this conclusion by Harte-Hanks
Communications, Inc. v. Connaughton, 491 U.S. 657, 109
S.Ct. 2678, 105 L.Ed.2d 562 (1989), where the Supreme
Court, in reviewing an actual malice determination, stated that
the clearly erroneous standard could be applied to the credi-
bility determinations, but the reviewing court must determine
whether the statements are the character which the First
Amendment protects. Jd. at 686-88, 109 S.Ct. at 2695-96. On
review of the record, it agreed with the Court of Appeals that
the evidence supported a finding of actual malice. Jd. at 689,
109 S.Ct. at 2696-97.
Within the context of deciding whether there is substantial
evidence to support the jury’s finding of falsity, we must also
discern whether there has been any intrusion on the protec-
tions of the First Amendment. Thus, if no reasonable jury
could conclude that the statement was a false statement of
material fact, the libel defendant is protected from a defama-
tion suit. See, e.g., Haynes v. Alfred A. Knopf, Inc., 8 F.3d
1222, 1228 (7th Cir.1993) (“The rule making substantial truth
a complete defense and the constitutional limitations on
defamation suits coincide.”); Campbell, 547 N.W.2d at 610.
The question of whether there has been any intrusion on First
Amendment principles is seemingly subsumed in the inquiry
as to whether there is substantial evidence to support the
jury’s findings as to falsity and substantial truth. See, e.g.,
Norse v. Henry Holt & Co., 991 F.2d 563, 567 (9th Cir. 1993)
(summary judgment for author appropriate when no reason-
13a
able jury could understand the statement, when read in con-
text, to be defamatory); Beverly Hills Foodland, Inc. v. United
Food & Commercial Workers Union, Local 655, 39 F.3d 191,
195-96 (8th Cir.1994) (summary judgment for union appro-
priate when its statements could not reasonably be read to be
false assertions of fact).
II.
Regardless of our standard of review, ABC contends that
the district court correctly granted judgment to it because
Lundell did not prove the-falsity of the statement. Alterna-
tively, ABC argues that it is entitled to judgment as a matter
of law because Lundell is a public figure for purposes of this
action, and did not prove actual malice as defined in New York
Times.
A.
In this diversity case, we review the district court’s inter-
pretation of Iowa law de novo, and give no deference to the
district court’s interpretation of state law. Salve Regina Col-
lege v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d
190 (1991). Of course, Iowa courts must apply the governing
federal constitutional standards in this defamation case.
Toney, 85 F.3d at 386.
In Iowa, libel “is the malicious publication, expressed
either in printing or in writing, or by signs and pictures, tend-
ing to injure the reputation of another person or to expose the
person to public hatred, contempt, or ridicule or to injure the
person in the maintenance of the person’s business.” Vinson
v. Linn-Mar Community Sch. Dist., 360 N.W.2d 108, 115
(Iowa 1984) (internal citation and quotation omitted). Under
Iowa law, whether a statement is defamatory “must be deter-
mined by giving to the subject-matter thereof, as a whole, that
meaning which naturally belongs to the language used.” Kiner
v. Reliance Ins. Co., 463 N.W.2d 9, 14 (lowa 1990). Iowa rec-
Ognizes substantial truth as an absolute defense in a defama-
l4a
tion action. Palmer Communications, 440 N.W.2d at 891.
“The libel defendant need not establish the literal truth of
every detail of the broadcast so long as the ‘gist’ or ‘sting’ of
the broadcast in question is substantially true.” Jd. The “gist”
or “sting” is determined by “looking at the highlight of the
broadcast, the pertinent angle of it, and not to the items of
secondary importance which are inoffensive details, imma-
terial to the truth of the defamatory statement.” Jd. (quoting
Behr, 414 N.W.2d at 342).
ABC argues that the phrase “does not work” used as part of
the description of events in Berrien County constitutes the use
of language in accord with one of its accepted meanings, and,
therefore, the phrase is not materially false. ABC expands on
its argument by characterizing the phrase “does not work,” as
including more than Lundell’s interpretation that the machine
was mechanically inoperable. ABC explains that a publication
is substantially true when the allegedly false statement
involves the use of language consistent with an accepted
meaning. Because the machine failed to function on a finan-
cially self-sufficient basis, failed to solve the county’s waste
disposal crisis, and had not operated since its permit had been
suspended, ABC contends the phrase is substantially true.
In Bose Corporation, a manufacturer sued Consumer
Reports based on statements disparaging a new type of Bose
speakers. 466 U.S. at 487-88, 104 S.Ct. at 1952-54. The Court
concluded that the statement was not an assessment of events
that speak for themselves, but “one of a number of possible
rational interpretations of an event that bristled with ambi-
guities and descriptive challenges for the writer.” Jd. at 512,
104 S.Ct. at 1966 (internal quotation omitted). The Court did
not allow recovery for choice of language which, though per-
haps reflecting a misconception, represented ‘the sort of inac-
curacy that is commonplace in the forum of robust debate to
which the New York Times rule applies.” Jd. at 513, 104 S.Ct.
at 1966. Similarly, in Janklow v. Newsweek, Inc., 788 F.2d
1300 (8th Cir.) (en banc), cert. denied, 479 U.S. 883, 107
S.Ct. 272, 93 L.Ed.2d 249 (1986), we stated that we “will not
make editorial judgments about specific word choice in order
15a
to portray a plaintiff in the best possible light, particularly
when the ‘sting’ of the implication. . . is still present when
the full chronology is laid out.” Jd. at 1306.
Contrary to ABC’s interpretation, the statement did not
identify the system as not working, but the machine itself.
The statement was specific: “[T]his garbage recycling
machine. . . does not work.” See Kiner, 463 N.W.2d at 14.
The court used the exact words of the broadcast in submitting
the question of falsity to the jury. The jury returned a general
verdict in Lundell’s favor, requiring it to find that the state-
ment was false. The sting of the broadcast is the heart of the
matter in question—the hurtfulness of the utterance. Jones,
440 N.W.2d at 891 (quoting Behr, 414 N.W.2d at 342). If the
underlying facts as to the gist or sting are undisputed, sub-
stantial truth may be determined as a matter of law. Jones,
440 N.W.2d at 891; Behr, 414 N.W.2d at 342. Here, however,
it is evident that the underlying facts as to the gist of the
statement are the subject of a reasonable dispute, whether the
statement goes to the operability of the machine, or its eco-
nomic shortcoming. When the language used is capable of
two meanings, including the one ascribed by a complainant,
it is for the jury to decide the meaning conveyed. Vinson, 360
N.W.2d at 116. ABC’s position that the statement “does not
work” meant only that the machine did not operate in a finan-
cially viable manner is not expressly included in the story
itself. Although Stallings said the machine worked and Chase
later discussed the financial aspect of the machine, the story,
as a whole, never clarified the original statement that the
machine “does not work.” The statement is not nearly as
ambiguous as the statements in Bose Corporation or Janklow.
The phrase “does not work” is specific and is not the sort of
inaccuracy that is “commonplace in the forum of robust
debate.” Masson, 501 U.S. at 514, 111 S.Ct. at 2431 (quoting
Bose Corp., 466 U.S. at 513, 104 S.Ct. at 1966). We, there-
fore, cannot conclude that the story, as a whole, was sub-
stantially true as a matter of law.
There is substantial evidence from which a reasonable jury
could conclude that the statement was false, and from which
l6a
a reasonable jury could conclude that the sting of the story
was that the Lundell machine was mechanically inoperable.
After carefully examining the videotape, we are satisfied that
a reasonable jury could conclude from the plain meaning of
the words used, that the statement that the machine “does not
work” meant that the machine was inoperable. Even accord-
ing ABC the independent review it requests, we are confident
that there has been no forbidden intrusion on First Amend-
ment principles.
This conclusion is reinforced by other evidence in the
record. There is evidence that the very genesis of ABC’s
report was based on the false premise that the machine was
broken. Chase initiated the story after reading an article in the
Atlanta Journal-Constitution concerning the Berrien County
facility and local government revenue bond financing. The
article stated that the facility had financial problems, but it
did not state that the Lundell machine did not work. Never-
theless, Chase prepared a proposal for a news story about the
situation in Berrien County, and her proposal included the
statement that the recycling machine “has never worked.”
Chase acknowledged at trial that she had not interviewed any-
one with knowledge of the Berrien County facility before
making her story proposal, and that she had no knowledge of
who, if anyone, her producer, Elissa Weldon, had interviewed.
Chase also admitted that at the time of the broadcast she
believed that the machine had a broken main shredder, and
this was one reason why she reported that the machine did not
work. David Gaskins, the former plant manager for the
Berrien County Resource Recovery facility, testified that the
entire system, including the main shredder, was operable at
the time ABC prepared its report. Others corroborated this
testimony.
Before airing the story, Chase contacted Vernon Lundell.
Lundell told Chase that the Lundell system in Berrien County
worked, that opposition to the system was political, and that
he had stayed out of the political dispute in Berrien County.
A few days before the broadcast, Gary Lamberson, an inde-
pendent sales representative for Lundell, contacted Chase and
17a
advised her that any story on the Berrien County facility
based on information provided only by local political oppo-
nents would not tell the true story of the facility. Lamberson
urged Chase to interview the former plant managers to learn
the true facts about operation of the system. Lamberson tes-
tified that Chase left him with the impression that she was
“too busy” to conduct further interviews and that the story
was “a done deal.”
ABC contacted Gaskins to arrange filming of the recycling
system. Gaskins was not interviewed by Chase or Weldon
prior to the broadcast. No one from ABC ever asked Gaskins
if the Lundell system was capable of processing garbage.
When the ABC camera crew came to the recycling plant, one
of the crew members remarked to Gaskins that he understood
that the plant was broken down. Gaskins responded that all he
needed was some garbage to process and “III fire it up.”
After ABC broadcast the story, Lundell contacted ABC seek-
ing a retraction. ABC responded with a letter stating:
Contrary to your letter, the report does not state that
the “system” does not work. What the report does say is
that the garbage recycling machine purchased by Berrien
County does not work. This is in fact completely true. At
the time of our broadcast the Berrien County machine
was not functioning. As I am sure you are aware, the
main shredder broke down and has not been repaired.
Indeed the Georgia Department of Natural Resources has
acted to close the facility down.
This evidence amply demonstrates that ABC actually
believed that its broadcast stated that the machine was
mechanically inoperable, and ABC does not dispute that the
machine was mechanically sound. Accordingly, there is sub-
stantial evidence from which a reasonable jury could find that
the sting of ABC’s broadcast was false.
Finally, ABC contends that other parts of the story negate
any false implication derived from the statement that the
machine was mechanically inoperable: (1) the report included
footage showing the machine operating; (2) the report noted
18a
that the machine did turn garbage into fuel pellets and com-
post and showed fuel pellets made by the machine; (3) the
report included the express statement that “there’s nothing
physically wrong with the machine. It’s the people”; and (4)
the report showed footage of another Lundell machine oper-
ated by Tennessee officials.
These other parts of the story do not change our conclu-
sion.’ The report did not actually show the machine operating,
but only included footage showing a worker sorting garbage
and fuel pellets made by the machine. The conclusion drawn
from the footage of the Tennessee machine is also inconsis-
tent with ABC’s argument. Along with the footage she ving
the Tennessee machine, Chase states:
The machine was supposed to work like this one in
Tennessee, sorting and recycling up to ninety percent of
the county’s garbage and paying for itself by selling the
recycled materials and charging user fees. That is how
then-commissioner Joe Stallings promised it would work
here. It did not.
A reasonable jury could easily conclude from Chase’s com-
parison of the Berrien County machine with the Tennessee
machine that the Tennessee machine worked, and the Berrien
County machine did not. Cf. Treutler v. Meredith Corp., 455
F.2d 255, 258 (8th Cir. 1972). Although Stallings stated that
there was nothing physically wrong with the machine, a rea-
sonable juror could discredit the statement, as the story
painted Stallings as someone who had misrepresented the
machine to the Berrien County taxpayers.
For these reasons, we conclude there is a disputed question
of fact as to the sting of the story, and substantial evidence to
support the jury’s finding of a false statement, making the dis-
’ ABC also argues that the district court correctly granted it judg-
ment as a matter of law because Lundell failed to sustain its burden of
proving: (1) that the broadcast was “of and concerning” Lundell; and (2)
that ABC violated the standard of care practiced by professional jour-
nalists. We have carefully considered these arguments and conclude there
is substantial evidence to support the jury’s findings.
ore
19a
trict court’s entry of judgment for ABC erroneous. We reverse
the district court’s entry of judgment for ABC as a matter of
law.
B.
ABC argues in the alternative that the district court’s ruling
may he upheld because Lundell is a public figure for the pur-
pose of this action, and did not prove actual malice as defined
in New York Times.
The determination of a plaintiff’s status as a private or pub-
lic figure is an issue of law. Bagley, 797 F.2d at 644: Jones.
440 N.W.2d at 894 (determination of plaintiff’s status is a
question of law governed by federal constitutional law).
In Gertz, the Court identified two categories of public fig-
ures to whom the New York Times standard applies:
The first category is “general purpose” public figures,
those who have attained a position “of such persuasive
power and influence,” and of “such pervasive fame or
notoriety,” that he or she may be considered “a public
figure for all purposes and in all contexts.” The second,
more common, type of public figure is the “limited pur-
pose” public figure. The court defined this type as a per-
son who voluntarily injects himself or are drawn into a
particular public controversy, and thereby becomes a
public figure for a limited range of issues.
418 U.S. at 351, 94 S.Ct. at 3013. The Court also noted that
“{h]ypothetically, it may be possible for someone to become
a public figure through no purposeful action of his own, but
the instances of truly involuntary public figures must be
exceedingly rare.” Jd. at 345, 94 S.Ct. at 3009.
In determining whether an individual should be considered
a limited public figure, we must focus our attention on the
“nature and extent of an individual’s participation in the par-
ticular controversy giving rise to the defamation.” Gertz, 418
U.S. at 352, 94 S.Ct. at 3013. By so doing, we then can deter-
mine whether the individual has voluntarily and purposefully
20a
injected himself into that controversy in an attempt to influ-
ence the resolution of the controversy. Jd. at 345, 94 S.Ct. at
3009-10.
Applying these factors, we must first identify the particu-
lar public controversy giving rise to the defamatory speech.
Bagley, 797 F.2d at 645. Here, the particular controversy giv-
ing rise to ABC’s report was the garbage disposal problem in
Berrien County. This controversy is clearly a public contro-
versy involving questions of “public concern.” See Dun &
Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749,
761-62, 105 S.Ct. 2939, 2946-47, 86 L.Ed.2d 593 (1985) (plu-
rality opinion); Waldbaum v. Fairchild Publications, Inc., 627
F.2d 1287, 1296-97 (D.C.Cir.) (defining a public controversy
as one raising issues that might reasonably be expected to
have an impact beyond the parties directly enmeshed in the
particular controversy), cert. denied, 449 U.S. 898, 101 S.Ct.
266, 66 L.Ed.2d 128 (1980); Joonson v. Nickerson, 542
N.W.2d 506, 511 (lowa 1996) (same).
After identifying the particular controversy giving rise to
the defamation, we then examine the “nature and extent” of
Lundell’s involvement. Bagley, 797 F.2d at 645. This inauiry
is necessary to determine whether Lundell has “thrust [itself]
to the forefront of [this] particular public controvers[y] in
order to influence the resolution of the issues involved.”
Gertz, 418 U.S. at 345, 94 S.Ct. at 3009.
The Supreme Court faced a situation very similar to this
case in Hutchinson v. Proxmire, 443 U.S. 111, 99 S.Ct. 2675,
61 L.Ed.2d 411 (1979). Hutchinson did research with primates
and received research grants from three federal agencies. /d.
at 115, 99 S.Ct. at 2678. Senator William Proxmire began a
public campaign to expose wasteful government spending by
giving a “Golden Fleece” award to federal agencies who
funded what Proxmire considered to be wasteful projects. /d.
at 114, 99 S.Ct. at 2677-78. After denying protection under
the Speech and Debate Clause, id. at 123-33, 99 S.Ct. at
2682-87, the Court reversed lower court rulings that Hutchin-
son was a public figure, id. at 133-36, 99 S.Ct. at 2687-89.
The Court observed that Hutchinson’s activities and public
21a
profile were like many members of his profession, and that
his public writings reached a relatively small category of pro-
fessionals concerned with research ir human behavior. /d. at
135, 99 S.Ct. at 2688. “To the extent the subject of his pub-
lished writings became a matter of controversy, it was a con-
sequence of the Golden Fleece Award.” Jd. The Court
emphasized that, “those charged with defamation cannot, by
their own conduct, create their own defense by making the
claimant a public figure.” Jd. The Court also reasoned that
Hutchinson did not “thrust himself or his views into public
controversy to influence others,” and at most, the public con-
troversy consisted of concerns about general public expen-
ditures. Jd. The Court rejected the arguments that
Hutchinson’s applications for and receipt of federal grants and
publications in professional journals elevated him to public
figure status. Jd. The Court’s determination was also influ-
enced by the fact that Hutchinson’s only access to the media
was limited to responding to the announcement of the Golden
Fleece award, and that Hutchinson did not have regular and
continuing access to the media, one of the accouterments of
being a public figure. Jd. at 136, 99 S.Ct. at 2688-89.
The Supreme Court also reversed lower court rulings that a
plaintiff was a limited purpose public figure in Wolston v.
Reader’s Digest Ass’n, 443 U.S. 157, 99 S.Ct. 2701, 61
L.Ed.2d 450 (1979). There, publishers of a book described
Wolston as being a Soviet agent. Ja. at 159, 99 S.Ct. at 2703.
Sixteen years before the book’s publication, Wolston had
received newspaper coverage because he had failed to comply
with a grand jury subpoena and had been subject to contempt
proceedings. /d. at 162-63, 99 S.Ct. at 2704-05. Although
Wolston’s decision not to appear before a grand jury was
likely to attract media attention, the Court concluded that this
was not the type of activity that established public figure sta-
tus. Jd. at 167, 99 S.Ct. at 2707. Wolston did not discuss the
matter with the press, and limited his involvement to defend-
ing the contempt charges. Furthermore, Wolston did not fail
to appear in order to influence the public with respect to any
controversy, and did not voluntarily thrust or inject himself
22a
into the controversy concerning Soviet espionage. /d. at 168,
99 S.Ct. at 2707-08. The Court said: “It would be more accu-
rate to say that [Wolston) was dragged unwillingly into the
controversy.” Jd. at 166, 99 S.Ct. at 2707. “A private indi-
vidual is not automatically transformed into a public figure
just by becoming involved in or associated with a matter that
attracts public attention.” Jd. at 167, 99 S.Ct. at 2707. “A libel
defendant must show more than mere newsworthiness to jus-
tify application of the demanding burden of New York Times.”
Id. at 167-168, 99 S.Ct. at 2707.
Lundell’s status mirrors that of Hutchinson. Lundell did not
inject itself into the Berrien County controversy. See Bagley,
797 F.2d at 645-46. Cf. National Found. for Cancer Research,
Inc. v. Council of Better Business Bureaus, Inc., 705 F.2d 98,
101-02 (4th Cir.), cert. denied, 464 U.S. 830, 104 S.Ct. 108,
78 L.Ed.2d 110 (1983). Indeed, Chase admitted that she “did
not uncover any evidence from any source that [Lundell] had
attempted to inject [itself] into [the] political debate of
Berrien County.” Although Lundell contracted with the
county for the sale of the machine, the Supreme Court makes
clear in Hutchinson and Wolston that it is the plaintiff’s role
in the controversy, not the controversy itself, that is deter-
minative of public figure status. See Hutchinson, 443 U.S. at
135, 99 S.Ct. at 2688; Wolston, 443 U.S. at 167, 99 S.Ct. at
2707. Even though the garbage disposal problem was a mat-
ter of public concern, we focus on Lundell’s role in the con-
troversy, not the public nature of the controversy itself. ABC
does not direct us to any evidence that Lundell placed itself
into the controversy to influence the issues involved. See
Gertz, 418 U.S. at 351-52, 94 S.Ct. at 3012-13 (plaintiff not
a limited purpose public figure even though he represented a
client on a matter related to the controversy at issue). Fur-
thermore, ABC cannot, by its own conduct, create its own
defense by making Lundell a public figure. Like the circum-
stances in Hutchinson, there is no evidence that Lundell! had
access to the media to refute the ABC report. 443 U.S. at 136,
99 S.Ct. at 2688-89. Indeed, ABC denied Lundell’s request
for a retraction of the story. For these reasons, we reject
ABC’s alternative argument.
a
RS Oo ae rt Olan
be mon
23a
III.
ABC attacks the award of damages on several grounds.
First, ABC contends that Lundell cannot recover separate
damages for reputational harm and lost profits. Second, ABC
contends Lundell failed to prove actual damages and lost
profits. The district court instructed the jury to consider three
different types of loss: damage to reputation, past lost prof-
its, and future lost profits. The jury awarded no damages for
future lost profits, $158,000 for past lost profits, and
$900,000 for damage to reputation.
A.
Citing Martin Marietta Corp. v. Evening Star Newspaper
Co., 417 F.Supp. 947 (D.D.C. 1976), ABC argues that a cor-
poration cannot recover for both lost profits and injury to rep-
utation.
The law of libel has long reflected the distinction
between corporate and human plaintiffs by limiting cor-
porate recovery to actual damages in the form of lost
profits . . . “Although a corporation may maintain an
action for libel, it has no personal reputation and may be
libeled only by imputation about its financial soundness
or business ethics.”
Id. at 955 (quoting Golden Palace, Inc. v. National Broad-
casting Co., 386 F.Supp. 107 (D.D.C.1974)).
ABC sets forth a policy argument that we should adopt the
reasoning of the district courts of the District of Columbia.
The Iowa courts, however, appear to uniformly allow business
entities to recover damages for injury to their reputation as
well as lost profits. See, e.g., Vojak v. Jensen, 161 N.W.2d
100, 106, 110-11 (lowa 1968); G & H Soybean Oil, Inc. v.
Diamond Crystal Specialty Foods, Inc., 796 F.Supp. 1214,
1217 (S.D.lowa 1992) (applying Iowa law). We therefore
reject ABC’s argument.
24a
We also reject ABC’s argument that there is insufficient
proof of actual damages. Vernon Lundell testified that Lun-
dell began operating in 1945 and had always had an excellent
reputation in the industry and in Iowa. Another witness tes-
tified that just before the broadcast, Lundell was the industry
leader for this type of equipment. Several witnesses testified
that after the broadcast, interest in the machine vanished. It is
undisputed that Lundell never sold another machine follow-
ing the broadcast. This evidence is more than sufficient to
sustain the jury’s finding that Lundell was damaged by the
story. There is also competent evidence to support the jury’s
monetary award. See Gertz, 418 U.S. at 350, 94 S.Ct. at 3012.
The historical sales data, as well as evidence that Lundell
spent $2 million dollars in the development of the recycling
system, constitutes competent evidence of the dollar value of
the injury.* See id.
B.
ABC contends that even if we reverse the district court’s
entry of judgment, we must affirm the court’s alternative rul-
ing that Lundell failed to prove lost profits resulting from the
broadcast. ABC contends that in order to recover lost profits,
Lundell must identify the sales it lost because of the report.
Lundell contends that the district court can only reverse the
jury verdict if the verdict is against the great weight of the
evidence. See White, 96! F.2d at 780. Lundell confuses the
standard for reviewing a ruling on a motion for a new trial on
the ground that the verdict is against the weight of the evi-
dence with the standard for reviewing a ruling on a motion for
judgment as a matter of law. Jd. at 779-80. Here, the district
court entered judgment as a matter of law because there was
a lack of evidence of lost profits. Accordingly, our standard
of review is whether there is sufficient evidence to support
the verdict, not whether the verdict is against the great weight
of the evidence. See id.
. For those reasons, we also reject ABC’s contenion that the award
is excessive.
——————————————
NOW LET SEIS LEI D fee 2t OE AA LADD
figersi~ oe
SECEDE AMES NGL FOES NEEDING YI. PME CAE AES ASA NI IR
25a
The level of proof required to establish the exact amount of
lost profits is not as high as the level of proof required to
establish that some loss occurred. Orkin Exterminating Co. v.
Burnett, 160 N.W.2d 427, 430 (Iowa 1968). As the Iowa
Supreme Court explained:
Courts have recognized a distinction between proof of
the fact that damages have been sustained and proof of
the amount of those damages. If it is speculative and
uncertain whether damages have been sustained, recov-
ery is denied. If the uncertainty lies only in the amount
of damages, recovery may be had if there is proof of a
reasonable basis from which the amount can be inferred
Or approximated.
Id.
The Iowa Supreme Court has rejected the argument that a
plaintiff must identify specific lost sales to recover lost prof-
its damages. Page County Appliance Ctr., Inc. v. Honeywell,
Inc., 347 N.W.2d 171, 178 (lowa 1984). Decreased income
after the defendant’s damaging conduct is sufficient to sup-
port an award for lost profits so long as the record discloses
a reasonable basis from which the amount can be inferred or
approximated. /d. “Simply because the loss of profits cannot
be shown with precision, defendant who caused the damages,
may not be heard to say that no damages may be awarded.”
Orkin, 160 N.W.2d at 430 (quoting Exercycle of Mich. Inc. v.
Wayson, 341 F.2d 335, 337 (7th Cir. 1965)).
The district court set aside the lost profits award for two
reasons. First, it concluded that there were “tremendous prob-
lems” with the machines sold by Lundell, and that Lundell
had to take back most machines it sold through litigation or
otherwise. Second, the court concluded that Lundell’s evi-
dence concerning lost sales was inconsistent. Vernon-Lundell
testified that Lundell would have sold over twenty systems in
the two years following the story. Vernon Lundell’s son-in-
law and vice-president of the company, Steve Paulsen, testi-
fied that he thought the company could have only sold four
systems.
26a
Although Lundell’s and Paulsen’s testimony is inconsistent,
it does not cause us to conclude that there was no reasonable
basis for calculating lost profit damages. The jury was free to
accept or reject the opinion of either one of these witnesses.
The discrepancy between the two witnesses does not make the
damage amounts lacking in a reasonable basis, but only
demonstrates the opinions of different witnesses. Further,
there was other evidence to support the lost profits award.
First, there was evidence that before the report there was sub-
stantial interest in the Lundell machine, and following the
report, Lundell could not sell a single machine. There was
evidence that in the years before the report, Lundell sold an
average of two recycling systems per year, and that each
machine had a gross profit of approximately $240,000. The
historical sales figures for the years preceding the story also
provide a reasonable basis for approximating lost profits dam-
ages. Indeed, Lundell earned $158,000 in 1987 on sales of
over $1.5 million, representing the sale of one machine.
Furthermore, the issue of whether the machines had
“tremendous problems” was conflicting. Lundell presented
extensive evidence that the defamatory statements in the ABC
report killed interest and sales of the Lundell machine. ABC
refuted this theory, presenting evidence that the loss of sales
was caused by intrinsic problems with the machine. There was
evidence supporting both theories, and it was an issue for the
jury, not the court, to resolve.
Thus, we conclude that a reasonable basis existed to sup-
port an award of lost profits. We reverse the district court’s
alternative ruling setting aside the lost profits award.
We reverse the district court’s entry of judgment for ABC.
We remand to the district court with directions that the court
reinstate the jury verdict for Lundell and award of damages
for Lundell, including damages for lost profits.
RAM RERANCH RR
a a a a a a
27a
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
No. C92-4060
Filed: September 28, 1995
LUNDELL MANUFACTURING COMPANY, INC.,
Plaintiff,
—vs.—
AMERICAN BROADCASTING COMPANIES, INC.,
Defendant.
ORDER
This matter comes before the court pursuant to plaintiff’s
Motion to Alter or Amend Judgment, Docket #104; defen-
dant’s Motion for Judgment as a Matter of Law or for a New
Trial, Docket #106; and defendant’s Motion to Exceed Page
Limitation, Docket #109. The court held oral argument on
these motions. Defendant’s Motion for Judgment as a Matter
of Law is granted. Defendant’s Motion for a New Trial is
denied as moot. Plaintiff’s Motion to Alter or Amend Judg-
ment is denied as moot. Defendant’s Motion to Exceed Page
Limitation is granted.
This is an action for libel arising out of the July 2, 1992
broadcast of “World News Tonight with Peter Jennings” in
which ABC broadcast a story by employee Rebecca Chase
concerning a solid waste recycling system in Berrien County,
Georgia. The recycling system was manufactured by the
28a
plaintiff Lundell Manufacturing Company. Lundell claimed
| that the news report was libelous as to it in three respects.
First, the broadcast stated that taxpayers in Berrien County,
Georgia “are angry that they are stuck with a $3 million debt
for this garbage recycling machine that they never approved
and does not work.” The second statement was that “the
machine turned the garbage into fuel pellets and compost, but
no one found a buyer.” Finally, the report stated, “Taxpayers
are now forced to have their trash hauled to another county’s
landfill fifty miles away and pay yet again to get rid of their
garbage.”
In an order filed April 13, 1994, the court dismissed the
third specification of libel pursuant to the defendant’s Motion
for Summary Judgment. The case proceeded to trial and, at
the close of the plaintiff’s case, the court directed a verdict in
favor of the defendant with respect to the second statement.
Accordingly, the case went to the jury on the sole claim aris-
ing out of the statement that the garbage recycling machine
“did not work.” The jury returned a verdict in favor of the
plaintiff in the amount of $1,058,000 which consists of lost
profit damages in the amount $158,000 and $900,000 damage
to the company’s reputation.
MOTION FOR JUDGMENT AS A MATTER OF LAW
Pursuant to Federal Rule of Civil Procedure 50(b):
Renewal of Motion for Judgment After Trial; Alternative
Motion for New Trial. Whenever a motion for a judg-
ment as a matter of law made at the close of all the evi-
dence is denied or for any reason is not granted, the
court is deemed to have submitted the action to the jury
subject to a later determination of the legal questions
raised by the motion. Such a motion may be renewed by
service and filing not later than ten days after entry of
judgment. A motion for a new trial under Rule 59 may
be joined with a renewal of the motion for judgment as
a matter of law, or a new trial may be requested in the
PSAP E ORTH RR
29a
alternative. If a verdict was returned, the court may, in
disposing of the renewed motion, allow the judgment
to stand or may reopen the judgment and either order a
new trial or direct the entry of judgment as a matter of
law. If no verdict was returned, the court may, in dis-
posing of the renewed motion, direct the entry of judg-
ment as a matter of law or may order a new trial.
A motion for judgment as a matter of law presents a legal
question to the district court as to whether there is sufficient
evidence to support a jury verdict. The evidence is viewed in
a light most favorable to the prevailing party and the court
must not engage in a weighing or evaluation of the evidence
or consider questions of credibility. Smith v. World Insurance
Company, 38 F.3d 1456, 1460 (8th Cir. 1994). This is the
Same rigorous standard that the court employed when con-
sidering motions for judgment notwithstanding the verdict.
Larson By Larson v. Miller, 55 F.3d 1343, 1348, n.3 (8th Cir.
1995).
The court must (a) consider the evidence in the light most
favorable to the prevailing party; (b) assume that the jury
resolved all conflicts of evidence in favor of that party; (c)
assume as true all facts which that party’s evidence tended to
prove; (d) give that party the benefit of all favorable infer-
ences which may reasonably be drawn from the proved facts;
and (e) deny the motion if in light of the above reasonable
jurors could differ as to the conclusions that could be drawn
from the evidence. Farley v. Henson, 11 F.3d 827, 831 (8th
Cir. 1993).
The Eighth Circuit Court of Appeals has recently noted that
there is an issue as to whether state or federal law should be
applied to motions for judgment notwithstanding the verdict
in a diversity case. However, because the standards under
federal and Iowa law are the same, the question has no signif-
icance in this case. Chadima v. National Fidelity Life Insur-
ance Company, 55 F.3d 345, 347, n.5 (8th Cir. 1995).
In its Renewed Motion for Judgment as a Matter of Law,
the defendant argues that the plaintiff failed to sustain its bur-
30a
den of proving that the broadcast was “of and concerning” the
plaintiff. This question was addressed early in the life of this
case and was rejected in the context of a Motion for Judgment
on the Pleadings. See Order, dated July 23, 1993, Docket #31.
At trial, the court leaned a great deal of information about
the context in which ABC aired this story. It was done as a
part of a series on taxpayer anger or activism in America. The
court believed before trial and still believes that a reasonable
juror could find that the focal point of anger in this case was
on the purchase of a machine that did not work. Although
Lundell is not named in the story, the Lundell logo can briefly
be seen. Most importantly, the identity of the manufacturer of
this machine that “did not work” would not be a secret to
those in the industry or those contemplating the purchase of
such a machine. Accordingly, the court found that the ques-
tion as to whether the story was of and concerning the plain-
tiff should be submitted to the jury. The court believes that it
accurately instructed the jury on this subject as the first ele-
ment that the plaintiff was required to prove. See Instruction
No. 3. The court is convinced that a jury issue was presented
and that the jury was properly instructed on this element of
the plaintiff’s burden of proof.
The defendant also continues to argue that the plaintiff was
a limited purpose public figure such that it would have to
prove actuai malice before it could recover damages. The
court directed a verdict in favor of the defendant on the issue
of actual malice. (Tr. 776).' No party has yet alleged error in
this regard. Further, after a discussion of all the relevant fac-
tors with counsel, the court found that Lundell is a private-
figure plaintiff. (Tr. 776-777). Again, the cour? is convinced
that Lundell is a private-figure plaintiff as it has never thrust
itself into public controversy and has simply sold machines to
industries or endeavors that are significantly regulated. Lun-
dell never attempted to influence the outcome of the public
controversy in Berrien County, Georgia. When controversy
arose, Lundell refused to get involved. An excellent discus-
Transcript of trial, Volume 5.
dicageenager ani,
3la
sion of these same issues in an analogous context is found in
Jones v. Palmer Communications Incorporated, 440 NW 2d
884 (lowa 1989).
The defendant next argues that the plaintiff failed to pro-
duce expert testimony concerning the standard of care
employed by journalists to assist the jury in determining
whether the defendant was negligent in airing the story. The
court again looked to Jones vy. Palmer Communications,
supra, in which the Supreme Court of Iowa held that custom
in the trade is relevant but not controlling. The Supreme
Court also looked to the factors set forth in Restatement (2d)
of Torts, Section 580B. These factors were accurately set
forth in Instruction No. 3 to the jury.
The court recognizes that there is a split of authority on the
issue of whether expert testimony has to be produced on
the standard of care for journalists in libel cases. See gener-
ally Annotation, Libel and Slander: Necessity of Expert Tes-
timony to Establish Negligence of Media Defendant in
Defamation Action by Private Individual, 37 ALR 4th 987
(1985). However, in this case the court concludes that expert
testimony was not required to assist the jury in determining
whether the defendant was negligent in stating that the
machine “did not work” as opposed to stating that the
machine did not work in the intended or financially viable
manner. The court concludes that this is a matter within the
common understanding of lay persons.’
The most difficult question presented in the Renewed
Motion for Judgment as a Matter of Law concerns the defense
of substantial truth. Again, the court is convinced that the jury
was accurately instructed on this defense. See Instruction No.
5. However, the court concludes that although the question is
close, this is a case in which it can be determined 2s a matter
of law that the report was substantially true.
2
The defendant produced the conclusory opinions of Elissa Wel-
don to the effect that the standards of journalistic competence were met
in this case. However, there was nothing about Ms. Weldon’s testimony
in this regard that was helpful in determining what the standards were or
why her expertise assisted the jury in making that determination.
32a
This subject was addressed at length in this court’s order of
April 13, 1994, beginning at page 9. A brief recap of the news
story and the evidence is important. The story announced at
the outset that the garbage recycling machine did not work.
At that point in the story, the term “work” was not defined
and, without more, one might be left with the conclusion that
the machine did not physically operate. Later in the story,
Rebecca Chase explains that the Berrien County machine was
supposed to work like a Lundell machine that was shown in
operation in Tennessee, sorting the trash and paying for itself
by selling the recycled materials and charging user fees. It is
followed by a clip from Berrien County Commissioner Joe
Stallings in which he states, “There’s nothing physically wrong
with the machine. It’s the people.”
In this court’s order of April 13, 1994, the court found it
was “at least arguabl[e]” that the report stated that the
machine itself did not work. /d., at 13. The court further
stated that Mr. Stallings’ statement could at least arguably be
interpreted by a jury as an excuse or an attempt to shift the
blame for purchasing a machine that did not function prop-
erly. Jd. The court also noted that it is not until almost one-
third of the way through the report that there is an implication
that the machine functioned adequately, but did not work in
the sense of being financially viable.
The court now concludes that its concern about the delay in
defining what is meant by the phrase “did not work” is not a
sufficient concern to take this matter out of the doctrine of
substantial truth. When a trial court can find as a matter of
law that a challenged publication is substantially true, it may
properly grant judgment for the defendant. Moldea v. New
York Times Company, 15 F.3d 1137, 1150 (D.C. Cir. 1994),
modified on other grounds, 22 F.3d 310 (D.C. Cir. 1994).
Generally, the law in this area was accurately set forth in
this court’s order of April 13, 1994 and need not be set forth
here again. However, it bears repeating that:
The rule of substantial truth is based on a recognition
that falsehoods which do no incremental damage to the
ILE RRL ALLELE LEE LYALL OLED IEE L CCPL ISIVOLE LAME LIE IIT
33a
plaintiff’s reputation do not injure the only interest that
the law of defamation protects. A news report that
contains a false statement is actionable “only when ‘sig-
nificantly greater opprobrium’ results from the report
containing the falsehood than would result from the
report without the falsehood.” Herron v. King Broad-
casting Co., supra, 776 P.2d at 102. Even when the
plaintiff in a defamation suit is not a public figure, the
Supreme Court insists in the name of the First Amend-
ment that unless the author is deliberately lying or is
recklessly indifferent to the truth or falsity of what he
Says (neither is a plausible hypothesis here), the plaintiff
must prove actual though not necessarily pecuniary harm
in order to recover damages. Gertz v. Robert Welch, Inc.,
418 US 323, 349-50, 94 S.Ct. 2997, 3011-12, 41 L.Ed.
2d 789 (1974). Falsehoods that do not harm the plain-
tiff’s reputation more than a full recital of the true facts
about him would do are thus not actionable. The rule
making substantial truth a complete defense and the con-
stitutional limitations on defamation suits coincide.
Haynes v. Alfred A. Knopf, Inc., 8 F.3d 1222 (7th Cir. 1993) at
1228. See also Jones v. Palmer Communications, 440 NW 2d
884 (Iowa 1989).
The importance of placing the allegedly defamatory state-
ments in the context of the work as a whole has been stressed
on occasions too numerous to cite. See generally Chapin v.
Knight-Ridder, Inc., 993 F.2d 1087 (4th Cir. 1993) (“A mag-
nifying glass is no aid to appreciating a Seurat, and the pat-
tern of a complex structure is often discernible only at some
distance.”) Jd., at 1098.
After elucidation of the context throughout the jury trial,
this court now concludes that Norse v. Henry Holt and Com-
pany, 991 F.2d 563 (9th Cir. 1993) is helpful authority on the
issue of substantial truth. In that case the plaintiff contended
that the following sentence contained about him in a book
was libelous: “Harold thought of himself as ‘dark-horse
Norse,’ ignored and unpublished.” The Ninth Circuit Court of
34a
Appeals held that, in context, the word “unpublished” does
not mean literally that Norse had not been published. Rather,
it reflected Norse’s own perception of himself as an artist who
was unfairly neglected and ignored. In a footnote, the Court
set forth its impression of the work as a whole indicating that
it was generally complimentary of poet Harold Norse.
In context, the ABC story stated that Lundell’s machine in
Berrien County, Georgia was supposed to work like the Lun-
dell machine in Tennessee which paid for itself by selling
recycled fuel pellets and charging user fees. The story noted
that Lundell-made recyclable fuel pellets but cast blame by
implication on local authorities for their failure to find a
buyer for the pellets.* The court distinguished Norse in its
April 13, 1994 order. Frankly, that distinction now escapes
the court and the court concludes that this authority solidly
favors the defendant.‘
. Ironically, the statement about a failure to find a buyer for the
pellets was inaccurate as a local Archer-Daniels-Midland plant had pur-
chased pellets and there was evidence that a member of the ABC crew
knew this. The court granted judgment as a matter of law to the defendant
on this point at the close of the plaintiff’s case because the statement was
not “of and concerning” the plaintiff. However, in the context of the
statement about the machine not working, this inaccuracy favors the
plaintiff in that it shows that the machine made the pellets, but there sim-
ply was not a market for them in Georgia.
The court’s conclusions concerning the doctrine of substantial
truth render moot plaintiff's motion for prejudgment interest and the
defendant’s other arguments concerning the plaintiff’s proof of damages.
For the sake of completenéss, the court notes that it would have struck
plaintiff's damages in the amount of $158,000 for lost profits in any
event. The defendant contends that these damages were too speculative
to be submissible. The plaintiff contends that it produced a reasonable
basis from which uncertain damages could be approximated.
Iowa law is clear that there is a distinction between proof of the fact
that damages have been sustained and proof of the amount of damages.
If it is speculative and uncertain whether damages have been sustained,
recovery is denied. If the uncertainty lies only in the amount of damages,
recovery may be had if there is proof of a reasonable basis from which
the amount can be inferred or approximated. Kanzmeier v. McCoppin,
35a
Pursuant to FRCP 50(c), if the renewed motion for judg-
ment as a matter of law is granted, the court shall also rule on
the motion for a new trial, if any, by determining whether it
should be granted if the judgment is thereafter vacated or
reversed, and shall specify the grounds for granting or deny-
ing the motion for the new trial. In determining whether a
verdict is against the weight of the evidence, the trial court
can rely on its own reading of the evidence—it can weigh the
evidence, disbelieve witnesses, and grant a new trial even
where there is substantial evidence to sustain the verdict.
White v. Pence, 961 F.2d 776, 780 (8th Cir. 1992).
The defendant requests a new trial contending that the evi-
dence is insufficient to support the jury’s finding in favor of
the plaintiff. This is really an argument in favor of judgment
as a matter of law, rather than a request for a new trial. Sim-
ilarly, other reasons urged in support of ABC’s request for a
new trial such as error in instructing on damage to reputation,
398 NW 2d 826, 833 (Iowa 1987). See also Hayes v. Hettinga, 228 NW
2d 181, 186 (Iowa, 1975). Under Iowa Law, the jury need not make the
computation of damages with mathematical exactness. It is enough if
there is proof of a rational basis for computation. Lakota Girl Scout
Council v. Harvey Fundraising Management, Inc., 519 F.2d 634 (8th Cir.
1975); Hoover v. Valley West Des Moines, 823 F.2d 227 (8th Cir. 1987).
The court is convinced that this story did damage to Lundell Manu-
facturing. There was tremendous interest in the plaintiff's recycling prod-
ucts up until the time that the story aired. Lundell was selling a relatively
small number of these machines, but it was relatively consistent for sev-
eral years before the July 2, 1992 story. The problem as far as the plain-
tiff’s proof at trial was two-fold. First, the machines that Lundell sold
had tremendous problems and the defendant did a very credible job of
showing that most of these machines that were sold had to be taken back
by Lundell through litigation or otherwise. Second, plaintiff’s own evi-
dence concerning lost sales was very inconsistent. On one day at trial,
Vernon Lundell testified that but for the ABC story the plaintiff would
have sold over twenty garbage recycling systems in the two years fol-
lowing the story. (Tr. 81). The next day, Vernon Lundell’s son-in-law and
vice-president of the plaintiff testified that the company would have sold
three to four systems in the two years following the story. (Tr. 522).
Because of these problems, the court is left with the conclusion that there
has not been proof of a reasonable basis from which the amount of Lun-
dell’s lost profits could be inferred or approximated.
36a
on the burden of proof, in the admission of evidence, and the
form of the verdict, are not appeals to the discretion of the
court to prevent a miscarriage of justice but are rather invi-
tations to change legal rulings in the context of another trial.
Except to the extent noted above, these requests are denied.
The only request for a new trial that asks the court to
reweigh the evidence is the defendant’s argument that the ver-
dict of the jury was so excessive as to shock the conscience.
The request for a new trial on this ground is denied. A verdict
in the amount of $900,000 for damage to reputation is not
excessive when one considers the size and age of this com-
pany and the evidence concerning the impact that ABC’s story
had on plaintiff’s business. A verdict in the amount of
$900,000 does not seem excessive when one considers the
investment alone that Lundell made in retooling its plant to
manufacture these garbage recycling machines. The plaintiff
presented evidence from which the jury could reasonably find
that the plaintiff’s reputation in the industry was damaged to
the extent that the investment that plaintiff had made is now
worthless. Under these circumstances, the request for new
trial is denied.
Upon the foregoing
IT Is ORDERED that
1. Plaintiff’s Motion to Alter or Amend the Judgment,
Docket #104, is denied as moot.
2. Defendant’s Motion for Judgment as a Matter of Law,
Docket #106, is granted. Its Motion for a New Trial is denied
as moot.
3. Defendant’s Motion to Exceed Page Limitation, Docket
#109, is granted.
September 28, 1995.
/s/ JOHN A. JARVEY
John A. Jarvey
Chief Magistrate Judge
UNITED STATES DISTRICT COURT
37a
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
No. C92-4060
Filed: September 28, 1995
LUNDELL MANUFACTURING COMPANY, INC..,
—V,—
CAPITAL CITIES/ABC, INc. —_
and AMERICAN BROADCASTING COMPANIES, INC.,
JUDGMENT IN A CIVIL CASE
CJ Jury Verdict. This action came before the Court for a
trial by jury. The issues have been tried and the jury has
rendered its verdict.
(4 Decision by Court. This action came to trKXK O€ hear-
ing before the Court. The issues have been trKKK Kr
heard and a decision has been rendered.
IT Is ORDERED AND ADJUDGED
THAT plaintiff, Lundell Manufacturing Company, Inc., take
nothing from defendants, Capital Cities/ABC, Inc. and Amer-
ican Broadcasting Companies, Inc.
September 28, 1995 /s/ WILLIAM J KANAK
Date ——n
/s/ ILLEGIBLE
(By) Deputy Clerk
38a
EXCERPTS FROM BENCH DECISION
ON MOTION FOR A DIRECTED VERDICT
[770] THE COURT: Thanks. Your clients weren’t told to be
here, but are they going to be here before 9 or just 9 o’clock?
MR. LUNDBERG: I don’t know, Your Honor.
THE CourRT: I’m about to take away part of their case; and
so I don’t like to do that when they’re not here, but I didn’t
ask them to be here.
| MR. LUNDBERG: Let me see if they’re here.
I don’t see them, Your Honor. As far as I’m concerned we
can go ahead.
THE CourRT: Yeah, that’s fine. I mean, I want people to
understand that when they [771] lose certain things that it
| was the product of deliberation and that the matters were fully
and freely discussed and that the law was considered and that
sort of thing.
The motion for a directed verdict is granted with respect to
the “no one found a buyer” statement. It’s also granted with
respect to actual malice on the it “did not work” statement.
It’s denied or ruling is reserved in all over respects.
With respect to the statement that the machine turned
garbage into compost and pellets but no one found a buyer, in
order for that statement to be of and concerning the plaintiff
there has to be some implication that it’s the fault of the
machine or Lundell Manufacturing.
When it is said that no one found a buyer it has to mean
that there was no market for this stuff, the pellets, or that
there is—there is a market but that the Berrien County offi-
cials didn’t know or were unable or couldn’t, didn’t how to
sell it.
The question is whether that statement implies that there
was—that it’s the machine itself or that the pellets were of
poor [772] quality; but from the words that were used in the
broadcast and the reasonable inferences therefrom, the fact
Ee ae TT
39a
that they can’t sell them or that no one found a buyer is nota
criticism of the quality of the pellets and the machine.
The story did not really, I don’t think, come close to criti-
cizing the quality of the pellets. What it was at that point was
critical of Joe Stallings for his—perhaps his failure to inves:
tigate a market or whatever, but it’s—it was the concern about
his promises that he made in terms of the—what the machine
would do.
- Of course, this is not a question of involving what the
Court believes but rather a question of what a reasonable juror
could find from the evidence that has been presented, taking
that evidence in a light most favorable to the plaintiff.
And as we know from all of our research, I think we all
agree that for something to be of and concerning the plaintiff
there must be an inference—by inference or otherwise it must
refer to the plaintiff in some intelligent way.
[773] That, of course, is not a standard that’s easily or
mathematically applied. But here it must—it must refer to
them in some way as to suggest that there was a—an obliga-
tion, a duty or some other form of responsibility on the part of
Lundell Manufacturing for the failure to find a buyer for these
pellets.
There is, of course, no direct reference; but that’s not nec-
essary. Under the law, you know, an inference is permissible.
Of course, the direct reference here is to—I’m not sure if it’s
joe Stallings or the county commissioners. It seems to me like
Joe Stallings is the primary one who’s taking the brunt of the
blow here; but whether it’s him or the commissioners, it
doesn’t matter.
It’s just simply without more I don’t believe that a jury
could find that this particular statement about the failure to
find a buyer is a statement of and concerning Lundell. For
that reason, the motion for a directed verdict is granted with
respect to that particular claim.
Going on to the question of actual [774] malice, we know
from Anderson v. Liberty Lobby that where there’s a factual
dispute concerning actual malice, the appropriate directed
40a
verdict standard will be whether there is evidence in the
record that could support a reasonable jury’s finding of actual
malice by clear and convincing evidence or with convincing
clarity. Courts must take into consideration the burden of
proof there, and the difference in that burden of proof from
the ordinary preponderance standard in determining whether
a reasonable jury could so find.
Actual malice as applied to a media defendant does not
refer to its ill will. The primary focus has to be on the defen-
dant’s attitude toward the truth of the statements rather than
the defendant’s attitude towards the plaintiff.
And as we know from New York Times v. Sullivan that a
statement that is made with actual malice—or a statement is
made with actual malice if it is made with knowledge that it
is false or with reckless disregard of whether it is false or not.
A failure to exercise ordinary or [775] reasonable care in
ascertaining the truth of the published material does not
standing alone render a publisher liable for punitive damages
with the actual malice standard for defamation of a private
figure.
In order to establish recklessness the plaintiff must prove
that the defendant had a high degree of awareness of the prob-
able falsity of the statements published. The standard is based
on the defendant’s actual state of mind, and the recklessness
of the conduct is not measured by whether a reasonably pru-
dent person would have published the material or would have
investigated before publishing it.
We do know that the failure to investigate will sustain a
claim of actual malice where there is information in the pub-
lisher’s hands that obviously contradicts the information that
they have.
In this-case the—with respect to the statement it “does not
work,” the showing of the machine in operation, the interview
on the broadcast with Joe Stallings, the demonstration of the
machine in Tennessee, and other facts in the record show that
there could not have been a [776] high degree of awareness
of the probable falsity of statements published concerning
4la
whether the machine worked. And for that reason, the motion
for a directed verdict is also granted with the—with respect to
the claim of actual malice.
The defendant thinks that the directed verdict on the actual
malice standard means that the case is over, but the Court dis-
agrees. Lundell is a private-figure plaintiff, and I’ve not seen
anything to change my opinion on that in the evidence here
this week.
Lundell has not thrust itself into public controversy. In fact,
the evidence is that they—what evidence there is on that sub-
ject is that it attempted to avoid that, the public controversy
that arose in Berrien, Georgia.
The mere fact that Lundell Manufacturing sold to a gov-
ernment entity is not sufficient evidence to establish that it is
a public figure. It is true that Lundell sells to entities in a
highly regulated industry; but it itself, Lundell, has not been
shown to be the subject of regulations other than, you know,
[777] what one would assure all manufacturers are—how
they’re regulated.
The regulations that we were talking about have to do not
with the manufacture or the selling of these machines but
rather in the manner in which the material that’s sent through
their machine is handled. And that does not place Lundell
Manufacturing in such a position of a regulated industry such
that the—it makes them a public—or a public-figure defen-
dant—plaintiff, I’m sorry.
There are cases that ABC had cited that Says the corpora-
tion never has a private life. It think those are the minority of
authority, and I think the case law to the contrary, specifically
there are cases cited in the plaintiff’s brief from the First Cir-
cuit and perhaps other places, that demonstrate that a corpo-
ration is entitled under appropriate circumstances to be
treated as a private plaintiff.
42a
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
No. C 92-4060
Filed: April 13, 1994
LUNDELL MANUFACTURING COMPANY, INC.,
Plaintiff,
—V5.—
CAPITAL CITIES/ABC, INC.,
Defendant.
ORDER
This matter comes before the court pursuant to defendants’
February 7, 1994, motion for summary judgment (docket
number 41). Plaintiff resisted the motion on March 8, 1994.
The motion is granted in part and denied in part.
UNDISPUTED FACTS
On July 2, 1992, the defendants, Capital Cities/ABC, Inc.,
and American Broadcasting Companies, Inc. (collectively
“ABC”), as part of the ABC nightly news program, “World
News Tonight with Peter Jennings,” broadcast a story by
employee Rebecca Chase concerning a solid waste recycling
system in Berrien County, Georgia (the County), manufac-
tured by plaintiff Lundell Manufacturing Co., Inc. (Lundell).
Lundell alleges that three statements made in that report are
false and libelous.
43a
In March of 1987, Berrien County Commissioner Joe
Stallings (Stallings) travelled to Lundell’s plant in Cherokee,
Iowa, as part of his investigation of ways to resolve the
County’s solid waste disposal problems. Following Stallings’s
report to the County Commission, the Commission voted to _
purchase a garbage recycling machine from Lundell (the Lun-
dell machine) for which they were eventually billed
$1,012,877.74. The Lundell machine sends garbage through
a series of sorting stations on conveyer belts. Recyclable
materials are removed, then the remaining trash is made into
compost or into fuel pellets of compressed trash.
The County set up a separate entity, the Berrien County
Resource Recovery Development Authority (the Authority),
and entered into an intergovernmental contract with it under
which the Authority was to operate the Lundell machine and
to provide garbage and waste disposal services for the
County. The Authority financed purchase of the Lundell
machine and set-up costs for the waste disposal project by
issuing $2 million in revenue bonds. The issuance of these
bonds did not require voter approval.
The Authority was intended to be financially self-sufficient.
Revenue for operations and to retire the bonds was to come
from “tipping fees” and sale of recyclable materials produced
by the Lundell machine, including the compost and fuel pel-
lets. However, the County agreed to pay any deficit between
revenues generated by the Authority and the amount required
for its operations and to pay the principal and interest on the
revenue bonds. While the Authority was operating the Lundell
machine, the County was required to supplement the revenues
collected by the Authority.
In 1990, the Authority attempted to increase the tipping
fees to help finance its operations. That attempt resulted in lit-
igation between the Authority and municipalities in the
County. Residents of the County filed a class action suit in
October of 1991 for declaratory judgment and injunctive
relief to prevent the County from making further supple-
mental payments to the Authority and to invalidate the
County’s obligation to cover the bonds.
44a
The Authority was not able to sell all of the recyclable
items produced by the Lundell machine. Compost and fuel
pellets were stoied outside on the property where the Lundell
machine was housed. In May of 1992, the Georgia Depart-
ment of Natural Resources revoked the permit authorizing the
Authority to operate the Lundell machine. The County now
has garbage hauled to a landfill in another county.
| The problems and litigation involving the County’s waste
disposal project led first to a report in the Atlanta Journal-
Constitution on June 21, 1992, then to the ABC World News
Tonight report in question here on July 2, 1992. ABC News
personnel conducted an investigation prior to airing the July
| 2, 1992, report. They reviewed documents from the litigation
involving the Authority, county commission documents, audit
information, and documents from the Georgia Department of
Natural Resources. They also interviewed present and former
County officials, County residents, Lundell personnel, includ-
ing company president, Vernon Lundell, but did not interview
the Authority’s plant manager, David Gaskins.
Lundell filed a libel complaint against ABC on August 10,
1992, and an amended complaint on August 11, 1992. The
complaint and amended complaint allege that three statements
in the broadcast of July 2, 1992, were false and libelous. The
first statement is that taxpayers in Berrien County, Georgia,
“are angry that they are stuck with a 3 million dollar debt for
this garbage recycling machine that they never approved and
does not work.” The second statement is, “The machine
turned the garbage into fuel pellets and compost, but no one
| found a buyer.” The third statement is, “The final :nsult: tax-
payers are now forced to have their trash hauled to another
county’s landfill 50 miles away and pay yet again to get rid of
their garbage.”' Although Lundell is never named, its logo
appears in pictures of the recycling machine.
The full text of the broadcast is provided in Exhibit 2 of ABC’s
motion for judgment on the pleadings (docket no. 22). A videotape of the
full broadcast is provided in Exhibit 1 of the same motion.
EE
45a
ABC answered Lundell’s complaint on October 9, 1992.
ABC has now moved for summary judgment on the ground-
that as a matter of law Lundell cannot prove either liability or
damages as the result of its July 2, 1992, report. Specifically,
ABC argues that Lundell cannot demonstrate that the chal-
lenged statements were false. ABC next argues that the state-
ments are not actionable because they were substantially true.
ABC also argues that Lundell cannot demonstrate that ABC
was negligent, such that ABC could be liable for actual dam-
ages, and further, that Lundell cannot demonstrate the
requisite evidence of actual damages. Finally, ABC argues
that Lundell cannot show ABC acted with “actual malice,”
such that ABC can be held liable for presumed or punitive
damages.
CONCLUSIONS OF LAW
A. Standards For Summary Judgment
On a motion for summary judgment, the court considers the
entire record. Federal Rule of Civil Procedure 56 governing
summary judgment states, in pertinent part:
Rule 56. Summary Judgment
(b) For Defending Party. A party against whom a
claim. . . is asserted. . . may, at any time, move for
summary judgment in the party’s favor as to all or an
_part thereof. }
(c) Motion and Proceedings Thereon. . . . The judg-
ment sought shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of
law.
|
|
46a
Fed. R. Civ. P. 56(b) & (c) (emphasis udded); See also Celo-
tex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Burk v.
Beene, 948 F.2d 489, 492 (8th Cir. 1991); Moore v. Webster,
932 F.2d 1229, 1231-32 (8th Cir. 1991).
“Only disputes over facts that might affect the outcome of
the suit under the governing law will properly preclude the
entry of summary judgment.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986). The moving party bears the bur-
den of showing that no genuine issue of fact exists. Reed v.
Woodruff County, Ark., 7 F.3d 808, 810 (8th Cir. 1993). Once
the movant has met that burden, the non-moving party must
designate specific facts showing that a genuine dispute about
a material fact remains for trial. Jd. Although “direct proof is
not required to create a jury question, . . . to avoid summary
judgment, ‘the facts and circumstances relied upon must
attain the dignity of substantial evidence and must not be such
as merely to create a suspicion.’ ” Metge v. Baehler, 762 F.2d
621, 625 (8th Cir. 1985), cert. denied, 474 U.S. 1057 (1986).
Libel in Iowa is the “malicious publication, expressed
either in printing or in writing, or by signs and pictures, tend-
ing to injure the reputation of another person or to expose [the
person] to public hatred, contempt, or ridicule or to injure
[the person] in the maintenance of [the person’s] business.”
Vinson v. Linn-Mar Community School Dist., 360 N.W.2d 108,
115 (lowa 1984). It is not necessary that the allegedly defam-
atory publication identify the plaintiff by name, only that it
“by inference or innuendo at least refer in an intelligent way
| to the person libeled.” Boardman & Cartwright v. Gazette
- Co., 281 N.W. 118, 120 (lowa 1938); See also Brown v. First
Nat’l Bank of Mason City, 193 N.W.2d 547, 553 (Iowa 1972)
(plaintiff not named in news item, but identity clear from cir-
cumstances). Whether a publication is understood as defam-
atory “must be determined by giving to the subject-matter
thereof, as a whole, that meaning which naturally belongs to
the language used.” Kiner v. Reliance Ins. Co., 463 N.W.2d 9,
| 14 (Iowa 1990) In Jones v. Palmer Communications, Inc.,
| 440 N.W.2d 884, 891 (lowa 1989), the Iowa Supreme Court
stated that
OR eR ee ee eee
54 47a
[i]n considering the content of any television broadcast,
it is important to see the actual broadcast. A written
summary is insufficient to provide the full impact cf the
telecast.
It is for the court to determine whether the words are capable
of a defamatory meaning, and for the jury to determine
whether they were so understood. Kiner, at 14; Brown, at 553.
The United States Supreme Court has made it clear that a
libel plaintiff must bear the burden of proving that the chal-
lenged statements were false. In re IBP Confidential Bus.
Documents Litigation: Bagley v. lowa Beef Processors, Inc.,
797 F.2d 632, 647 (8th Cir. 1986) (hereinafter Bagley) (citing
Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 775
(1986)). In order to recover actual damages, the libel plaintiff
who is a private figure? must establish the “fault” of the
defendant in publishing those false statements. Id.; see also
Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 775
(1986); Gertz v. Robert Welch, Inc., 418 U:S. 323 (1974).
Finally, in order to recover presumed or punitive damages, the
libel plaintiff who is a private figure must in addition to prov-
ing falsity prove by clear and convincing evidence that the
defendant’s actions in publishing the challenged statements
constituted “actual malice” as defined in New York Times v.
Sullivan, 376 U.S. 254 (1964). Id. If the libel plaintiff is a
public figure, and the allegedly libelous statements involve a
matter of public concern, the plaintiff must prove “actual mal-
ice” on the part of the defendant to establish liability and to
recover any damages. Gertz, supra, at 335-36; Curtis Pub-
lishing Co. v. Butts, 388 U-S. 130, 162 (1967); New York
Times, supra, at 279-80. It follows from the cases cited above
2 ‘The parties dispute whether Lundell is a private or public figure
and whether the issue involved in the July 2, 1992, report was a matter ie
of private or public concern. Neither party has moved for summary judg-
ment on these issues and it is not necessary for the court to decide them
here. In the context of the present motion, the court need only determine
whether Lundell can meet any standard of proof necessary for liability
and damages.
Seaacsunaneanennees
48a
that ABC will be entitled to summary judgment only if it can
establish that there is no genuine issue of material fact as to
falsity, substantial truth, fault, actual damages, or actual mal-
ice and that ABC is entitled to judgment as a matter of law on
each of these issues.
B. Falsity And Substantial Truth
Lundell must first establish that the challenged statements
in the July 2, 1992, report are false. Bagley, supra, at 647.
True statements, no matter how damaging to the plaintiff, may
never provide the foundation for a libel claim. Garrison v.
Louisiana, 379 U.S. 64 (1964); New York Times, supra. In
Bagley, the Eighth Circuit Court of Appeals reversed judg-
ment in favor of a libel plaintiff because the plaintiff had not
been required to prove the falsity of the challenged state-
ments. /d.
A libel plaintiff may not succeed by combining the dam-
aging nature of certain true statements with the falsity of
other, immaterial statements in order to provide the basis for
a libel claim. AJDS Counseling & Testing Centers v. Group W
TV, 903 F.2d 1000, 1004 (4th Cir. 1990). Summary judgment
in favor of the defendant is proper where the statements
shown to be false are immaterial. Jd. However, the “truth” of
the challenged statement “must be as broad as the defamatory
imputation or ‘sting’ of the statement.” Schiavone Constr. Co.
v. Time, Inc., 847 F.2d 1069, 1084 (3d Cir. 1988).
The falsity of a statement and the defamatory “sting” of
the publication must coincide—that is, where the alleged
defamatory “sting” arises from substantially true facts,
the plaintiff may not rely on minor or irrelevant inac-
curacies to state a claim for libel.
Chapin v. Knight-Ridder, Inc., 993 F.2d 1087, 1092 (4th Cir.
1993); see also AIDS Counseling & Testing Centers, supra, at
1004 (“if the gist or ‘sting’ of a statement is substantially
true, ‘minor inaccuracies will not give rise to a defamation
49a
claim’ ”). Statements must not be judged in isolation, but
within the context in which they are made. Norse v. Henry
Holt & Co., 991 F.2d 563, 567 (9th Cir. 1993).
Lundell asserts that each of the statements in question is
false, or at the very least that there is a genuine issue of mate-
rial fact as to falsity. First, Lundell asserts that the statement
that the “machine. . . does not work” suggests that it was
mechanically inoperative, but that the machine does work and
always has worked as designed. ABC asserts that the state-
ment that the “machine. . . does not work” meant, in context
of the July 2, 1992, report, that the entire trash disposal plan,
including tipping fees and sale of recyclable products, was
not financially viable. ABC argues that there can be no gen-
uine issue of material fact that the Berrien County waste dis-
posal program was not financially viable.? ABC also argues
that at best Lundell has suggested an “ambiguity” and such an
ambiguity cannot meet the constitutional standards for a libel
action. ABC cites Hepps, supra, at 776, and Unelko Corp. v.
Rooney, 912 F.2d 1049, 1057 (9th Cir. 1990), cert. denied,
499 U.S. 961 (1991), for this last proposition.
The court is not perusaded by ABC’s argument. Neither
Hepps nor Rooney held that an ambiguous statement cannot
be the basis for a libel action. Rather, both held that where
evidence of the truth or falsity of a statement was inferential
or ambiguous, the constitutional standards had not been met.
See Hepps, supra at 776; Rooney, supra, at 1057. In Rooney,
the ambiguous evidence was on the question of whether or not
Andy Rooney had actually used the product he said “did not
work” in a broadcast. Jd. The parties did not suggest contra-
dictory or ambiguous meanings to the phrase, “did not work.”
Id. What is ambiguous in the present case is the meaning of
the statements, not the evidence as to their truth.
° ae argues that Vernon Lundell, in deposition testimony, con-
ceded that the County’s waste disposal System was not financially viable.
Whether he did or not, Vernon Lundell’s statement is not a concession
that the challenged statement, that the machine “does not work,” means
what ABC says it does.
shen
i
Similarly, ABC argues that the Ninth Circuit Court of
Appeals held in Norse, supra, at 567, that where a Jibel plain-
tiff concedes the underlying accuracy of the challenged state-
ment, but attributes a different meaning to it, the plaintiff has
not demonstrated falisty. Rather, the holding in Norse was
that “because [the plaintiff] does not dispute the accuracy of
the [challenged statement], but rather ascribes to the state—
ment a meaning it does not carry,” summary judgment in
favor of the defendant should be granted. Norse, supra, at
567-68 (emphasis added). The phrase “does not work” in the
context of the report presently being challenged could rea-
sonably carry the meaning Lundell has offered.
Furthermore, because determination of the gist or “sting” of
a challenged statement is necessary to resolution of a libel
claim, in determining whether a statement is true, the first
question the court must ask is: what did the defendant say?
Schiavone Constr. Co., supra, at 1084. In Schiavone, the
Third Circuit Court of Appeals “perceive[d] a range of pos-
sible answers” to that question, including both the interpre-
tation of the challenged statement offered by the plaintiff and
the one offered by the defendant. Jd. The court concluded that
“a jury must resolve the question of the sting because reason-
able persons could differ on that question.” Jd. ABC argues
that no reasonable jury could give the challenged statements
the meaning Lundell offers in the context in which the state-
ments are offered. The court does not agree. The context of
the first challenged statement is illustrative. Rebecca Chase’s
report begins by stating
[iJn this south Georgia county of tobacco farms and
pecan groves, taxpayers are angry that they are stuck
with a 3 million dollar debt for this garbage recycling
machine that they never approved and does not work.
The report at least arguably states that it is the machine itself
that does not work.‘ It is not until almost one-third of the way
. The statement is also inaccurate to the extent that it could be
interpreted as stating the cost of the Lundell machine to be $3 million.
The record demonstrates that the cost of the Lundell machine was
Sl-
through the report that any implication arises that the machine
is functioning adequately, but that other factors are involved.°
The court concludes that there is a genuine issue of material
fact for the jury to decide as to what is meant by the statement
that the machine “does not work,” and as a consequence,
whether that statement is either false or substantially true.
The court concludes that there is also a genuine issue of
material fact as to the falsity or substantial truth of the second
of the challenged statements. The record shows that there is
a dispute as to whether or not fuel pellets made by the Lun-
dell machine were sold,* which precludes summary judgment
on the falsity or substantial truth of the statement that “no one
found a buyer” for those pellets.
As to the third challenged statement, Lundell appears to
challenge the implication that trash must be hauled to another
$1,012,877.74. The total cost of the project, including set-up of the waste
disposal project, the Lundell machine, operation of the Authority, and
interest on the revenue bonds issued by the Authority is approximately
$3 million.
5 Rebecca Chase explains at that point, while showing another
Lundell machine in Tennessee, that the Berrien County machine was sup-
posed to “work” by both serting the trash and “paying for itself by sell-
ing the recycled materials and charging user fees.” It is still not clear at
this point in the report whether the Berrien County machine failed the
first or second criterion. The next statement is by Commissioner Joe
Stallings. Stallings says, “There’s nothing physically wrong with the
machine. It’s the people.” ABC places great weight on Stallings’s state-
ment as showing that the “sting” of the report was not whether the
machine was operable, but whether it was financially viable. Stallings’s
statement could at least arguably be interpreted by a jury as an excuse or
shifting of the blame for buying a machine that did not function properly.
® Lundell argues that the record shows that Archer Daniels Mid-
land did purchase a substantial amount of fuel pellets over some time.
ABC argues that its statement in the report that “no one found a buyer”
is merely inaccurate, not false, if there was only one buyer of fuel pellets
during the time the Lundell system was working in Berrien County. ABC
points to the undisputed fact that there were unsold fuel pellets stored on
the Authority’s property. The court concludes that if a jury finds that
there was even one buyer of fuel pellets, the categorical statement that
“no one found a buyer” would be false, not merely inaccurate.
52a
county because the Lundell machine does not work. ABC
asserts that the last challenged statement must be considered
in the context of financial viability of the entire trash recy-
cling program. It is undisputed that the County at the time of
the report had trash hauled to another county. Where a plain-
tiff challenges a statement on the falsity of the implications,
rather than the facts literally related by the statement, the
defamatory implication must be present in the plain and
natural meaning of the words used. Carwile v. Richmond
Newspapers, Inc., 196 Va. 1, 82 S.E.2d 588, 591-92
(1954). Moreover, because the constitution provides a
sanctuary for truth, a libel-by-implication plaintiff must
make an especially rigorous showing where the
expressed facts are literally true. The language must not
only be reasonably read to impart the false innuendo, but
it must also affirmatively suggest that the author intends
or endorses the inference. White v. Fraternal Order of
Police, 909 F.2d 512, 520 (D.C. Cir. 1990).
Chapin, supra, at 1092. The court concludes that, although
the third challenged statement might “be reasonably read to
impart the false innuendo,” Lundell cannot as a matter of law
meet the requirement that the statement “also affirmatively
suggest that the author intends or endorses the inference.”
The third challenged statement affirmatively suggests that as
a result of the entire chain of events, trash must now be
hauled to another county. Both of the other challenged state-
ments refer directly to the Lundell machine, its cost, function,
or products it produces, and therefore “by inference or innu-
endo at least refer in an intelligent way to” Lundell. Board-
man & Cartwright v. Gazette Co., 281 N.W. 118, 120 (lowa
1938). The third challenged statement does not. ABC’s
motion for summary judgment must be granted to the extent
that any of Lundell’s claims for relief are based on the third
challenged statement.
The court concludes that there is a genuine issue of mate-
rial fact as to the falsity or substantial truth of the first two
53a
challenged statements. ABC’s motion for summary judgment
on the falsity or substantial truth of these statements must be
denied. ABC’s motion for summary judgment must be granted
as to the third challenged statement.
C. Liability For Damages
In addition to proving the falsity of the challenged state-
ments, the libel plaintiff must meet the standards of recovery
applicable to the plaintiff’s status as either a public or private
figure. Bagley, supra, at 643. If the libel plaintiff is a public
figure, and the allegedly libelous statements involve a matter
of public concern, the plaintiff must prove “actual malice,” as
defined in New York Times, on the part of the defendant to
recover any damages. Gertz, supra, at 335-36; Curtis Pub-
lishing Co. v. Butts, 388 U.S. 130, 162 (1967); New York
Times, supra, at 279-80. The private figure plaintiff must
prove New York Times “actual malice” by clear and convinc-
ing evidence in order to recover presumed or punitive dam-
ages, Bagley, supra, at 647, but to recover actual damages,
the private figure plaintiff must only establish the “fault” of
the defendant in publishing false statements. Id.; see also
Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 775
(1986);-Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974).
Because the standards of recovery for presumed or punitive
damages applicable to a private figure encompass the more
stringent standards for recovery of any damages by a public
figure, the court’s analysis here is made in terms of a private
figure plaintiff.
1. Proof Of Fault
The United States Supreme Court concluded that states
should be given significant leeway in providing legal reme-
dies to defamed private individuals both because they were
more deserving of recovery and because they were more vul-
nerable to injury. Bagley, supra, at 643.
54a
With this in mind, the Court left the states largely free to
develop standards of recovery applicable to private fig-
ures, limited only by the requirement that the states not
impose liability without fault. [Gertz, supra,] at 347, 94
S.Ct. at 3010.
Id. at 643-44. Iowa has adopted a negligence standard for pri-
vate plaintiffs in a defamation or libel action. Jones v. Palmer
Communications, Inc., 440 N.W.2d 884, 898 (Iowa 1989).
Even though we adopt a negligence standard, we are
aware of the special protection traditionally provided to
the media. We respect the essential role that the media
play in preserving our democratic rights. The balance
between the public interest in the free press and the pro-
tection of a private individual injured by defamation can
be maintained by a standard of negligence which takes
into account the unique role of the press. Here, we apply
the professional standard of care, which is that degree of
care which ordinarily prudent persons in the same pro-
fession usually exercise under similar conditions. The
private plaintiff must establish by a preponderance of the
evidence that this standard of care has been breached.
Id. (Citations omitted; emphasis added). If Lundell is a pri-
vate figure, Lundell will therefore have to show by a pre-
ponderance of the evidence that ABC’s employees breached —
the standard of care of reasonably prudent professional broad-
cast news employees in broadcasting the July 2, 1992, report.
The Palmer Communications court went on to identify sev-
eral factors that the finder of fact should consider to deter-
mine if the above standard of care has been breached by a
media defendant:
1. Whether the material was topical and required
prompt publication, or whether sufficient time was avail-
able for a thorough investigation of its contents;
2. The newsworthiness of the material and public
interest in promoting its publication;
55a
3. The extent of damage to the plaintiff’s reputation
should the publication prove to be false;
4. The reliability and trustworthiness of the source.
Id. (citing Restatement (Second) of Torts, § 580B, comments
g and h). The thoroughness of the accuracy check a reason-
able person would make before publishing a defamatory state-
ment will vary, depending on the relative weight of these
factors and the circumstances of the case. Jd. Ordinarily,
issues of negligence are not susceptible of summary adjudi-
cation but should be resolved by trial in the ordinary manner.
Id.
ABC argues that Lundell cannot meet this standard. First,
ABC argues that its employees checked facts, reviewed doc-
uments, and conducted interviews in an extensive investiga-
tion before broadcasting the July 2, 1992, report. Second,
ABC argues that Lundell has not designated an expert witness
from whom testimony could be elicited on the professional
standard of care and its breach in this case.
Lundell argues that ABC was negligent because its employ-
ees never consulted David Gaskins, the Authority’s recycling
plant manager, about such facts as whether or not the machine
functioned properly or if there was a buyer for the fuel pellets
it produced. Members of an ABC camera crew did talk to
Gaskin while shooting videotape of the Lundell machine for
the story. Lundell asserts that some of the people ABC did
interview referred ABC to Gaskins if ABC was to get an
accurate picture of the recycling project. Lundell asserts that
had ABC consulted with Gaskins, he would have told them
that the machine functioned properly and that a buyer had
been found for every fuel pellet produced over the last nine
months before the story was broadcast. Lundell also asserts
that Gaskins was one of the most knowledgeable sources con-
cerning operations of the Lundell machine and the County’s
recycling program, and therefore any reasonable professional
would have contacted him prior to airing the report. Lundell
also argues that because Gaskin actually told ABC personnel
56a
on the camera crew that the machine was operational, demon-
strated the truth of that statement by running the machine, and
told them that all of the fuel pellets made in the last nine
months had been sold to ADM, ABC had information in its
possession before airing the story that tended to cast doubt on
the truthfulness of its story. Lundell also argues that expert
testimony is not necessary on the standard of care where
breach of that standard can be recognized by lay persons.
The court agrees that under Iowa law, it is not necessary to
present expert testimony to prove breach of a professional
standard of care if negligence can be recognized with the
common experience and knowledge of lay persons. See, e.g.,
Welte v. Bello, 482 N.W.2d 437, 441 (lowa 1992) (no expert
testimony required for jury to decide whether doctor
breached professional standard of care by injecting incorrect
medication resulting in chemical burns); Oswald v. LeGrand,
453 N.W.2d 634, 639-40 (Iowa 1990) (no expert required in
medical malpractice case for poor patient relations); Devine
v. Wilson, 373 N.W.2d 155, 157 (lowa App. 1985) (no expert
required in suit against attorney for breach of duty of pro-
fessional care). The court concludes that whether or not ABC
met the standards of professional care articulated above in
this case is within the capabilities of a jury to determine.
There is also a genuine issue of material fact as to whether
ABC conducted an adequate investigation when it failed to
interview the manager of the plant that was at the center of
the controversy it was reporting on and ignored the infor-
mation the plant manger provided to the ABC camera.
Whether or not Lundell can make the requisite showing of
fault in this matter is therefore for the jury to decide.
2. Actual Damages
ABC argues that even if Lundell could prove fault. Wundell
could not prove any actual damages. ABC argues that Lun-
dell’s “actual damages” are limited to special damages or
actual pecuniary loss. ABC argues that Lundell has cited only
two “prospective sales” that were lost as a result of the July
S7a
2, 1992, report. ABC asserts that neither of these prospective
customers was ever conducting more than preliminary nego-
tiations with Lundell and that both ultimately decided not to
buy recycling equipment from any manufacturer. Thus, ABC
argues, no sale would have occurred whether or not the report
had been broadcast.
Lundell argues that there is no such limitation of actual
damages to special damages or actual pecuniary loss. Rather,
Lundell argues, actual damages include damage to reputation
and standing in the community, humiliation, mental anguish
and suffering. Lundell asserts that there is a genuine issue of
material fact as to such damages in this case and as to dam-
ages for lost sales.
The court concludes that Gertz does stand for the proposi-
tion that actual damages in a libel case are not limited as ABC
argues. Gertz, supra, at 350. The Court in Gertz stated,
We need not define “actual injury,” as trial courts have
wide experience in framing appropriate jury instructions
in tort actions. Suffice it to say that actual injury is not
limited to out-of-pocket loss. Indeed, the more custom-
ary types of actual harm inflicted by defamatory false-
hood include impairment of reputation and Standing in
the community, personal humiliation, and mental anguish
and suffering. Of course, juries must be limited by
appropriate instructions, and all awards must be sup-
ported by competent evidence concerning the injury,
although there need be no evidence which assigns an
actual dollar value to the injury.
Id. Lundell has put forward the affidavits of Vernon Lundell
and Nat Mundy as evidence of reputational damage to Lundell
as the result of the ABC report and as evidence that specific
sales weré lost as the result of the report. The court concludes
that there is a genuine issue of material fact as to Lundell’s
actual damages precluding summary judgment on that issue.’
? The court is concerned with the adequacy and admissibility of
Lundell’s evidence of lost profits and lost investment. Such evidence
must be more than speculative to create a jury question. Nonetheless,
58a
3. Actual Malice
Finally, ABC argues that Lundell cannot make the requisite
showing of “actual malice” to be entitled to presumed or
punitive damages, if Lundell is a private figure, or to any
damages, if Lundell is a public figure. ABC argues that its
extensive pre-broadcast investigation precludes a finding of
actual malice. Furthermore, ABC argues, none of its employ-
ees entertained serious doubt concerning the truth of the
broadcast. Lundell argues that ABC’s investigation was
flawed because ABC did not heed contrary information or
pursue sources suggested by others that would have cast con-
siderable doubt on the truth of its broadcast.
“Malice” under New York Times does not refer to ill will.
Price v. Viking Penguin, Inc., 881 F.2d 1426, 1433 (8th Cir.
1989). The primary focus must be on the defendant’s attitude
toward the truth of the statements, rather than on the defen-
dant’s attitude toward the plaintiff. Jd. A statement is made
with “actual malice” if it is made “with knowledge that it was
false or with reckless disregard of whether it was false or
not.” Bagley, supra, at 643 (citing New York Times, supra, at
279-80). The actual malice standard must be established by
clear and convincing evidence. /d.
The lack of New York Times actual malice is proper ground
for summary judgment and the judge must “view the evidence
presented through the prism of the substantive evidentiary bur-
den.” Anderson v. Liberty Lobby, 477 U.S. 242, 254 (1986).
Nonetheless, “the evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in his favor.” /d. at
255. The inquiry for the trial judge on a motion for summary
judgment is
whether the evidence presented is such that a jury applying
the evidentiary standard could reasonably find for either the
plaintiff or the defendant. Thus, where the factual dispute
Lundell has not yet been put to the proof on these issues. The question
here is whether Lundell can prove actual damages as identified in
Gertz. The court concludes that there is at least as genuine issue of
material fact on actual damages.
59a
concerns actual malice, clearly a material issue in a New
York Times case, the appropriate summary judgment
question will be whether the evidence in the record could
support a reasonable jury /inding either that the plaintiff
has shown actual malice by clear and convincing evi-
dence or that the plaintiff has not.
Id. at 255-56.
Malice in this context exists only if the defendant know-
ingly falsifies or “in fact entertained serious doubts as to the
truth of his publication.” St. Amant v. Thompson, 390 U.S.
727, 731 (1968); Dworkin v. Hustler Magazine, Inc., 867 F.2d
1188, 1195 (9th Cir. 1989). The standard is based on the
defendant’s actual state of mind, and the recklessness of the
conduct is not measured by whether a reasonably prudent per-
son would have published the material or would have inves-
tigated before publishing it. Price, supra, at 1441 (citing
Secrist v. Harkin, 874 F.2d 1244, 1252 (8th Cir. 1989), and
Speer v. Ottaway Newspapers, Inc., 828 F.2d 475, 478 (8th
Cir. 1987), cert. denied, 485 U.S. 970 (1988)); Schiavone,
supra, at 1089 (citing St. Amant, supra, at 731). Thus, “reck-
less disregard for the truth” means that defendant had a “sub-
jective awareness of probable falsity.” Id. (citing Gertz,
supra, at 335 n.6). The focus is on the information within the
defendant’s possession. Price, supra, at 1433 (citing St.
Amant, supra, at 733).
A plaintiff may “rarely be successful in proving awareness
0. falsehood from the mouth of the defendant himself.” Her-
bert v. Lando, 441 U.S. 153, 170 (1979). A defendant subject
to the actual malice standard “cannot... automatically
insure a favorable verdict by testifying that he published with
a belief that the statements were true.” St. Amant, supra, at
732; Schiavone, supra, at 1090. Therefore, ABC’s assertions
that none of its employees had any doubts as to the truth of
the story is to no avail. Objective circumstantial evidence can
suffice to demonstrate actual malice. Schiavone, supra, at
1090; Bose Corp. v. Consumers Union of United States, 692
F.2d 189, 196 (1st Cir. 1982), aff’d, 466 U.S. 485 (1984)
60a
(“A court typically will infer actual malice from objective
facts. . . . These facts should provide evidence of negli-
gence, motive, and intent such that an accumulation of the
evidence and appropriate inference supports the existence of
actual malice.”).
More specifically, mere evidence that a media defendant
did not investigate properly does not rise to the level of actual
malice. Curtis Publishing Co., supra, at 154-54; New York
Times, supra, at 287; Schiavone, at 1090. A failure to inves-
tigate may sustain liability if there was already good reason ~
to doubt the truth of the information in hand. Price, supra, at
1433 (citing St. Amant, supra, at 733). Neither an erroneous
interpretation of the facts nor the fact that the information
presented turns out to be false allows an inference of actual
malice. Schiavone, supra, at 1090 (citing St. Amant, supra, at
732, and Time v. Pape, 401 U.S. 279, 292 (1971)). However,
the actual malice test could be met if the defendant had “obvi-
ous reasons to doubt the veracity of the informant or the accu-
racy of his reports.” St. Amant, supra, at 732. For example,
where the defendant finds internal inconsistencies or appar-
ently reliable information that contradicts its libelous asser-
tions, but nevertheless publishes those statements anyway, the
New York Times actual malice test can be met. Curtis Pub-
lishing Co., supra, at 161 n.23; Schiavone, supra, at 1090.
Actual malice might also be found where there was evidence
that the story was fabricated, it was inherently improbable,
the sources were entirely anonymous and their reports unver- ~
ified, or if there were particular reasons to doubt sources.
Price, supra, at 1445.
The court concludes in this case that there is a genuine
issue of material fact generating a jury question as to actual
malice. A reasonable jury could conclude that ABC acted with
actual malice in failing to interview the Authority’s plant
manager, the person with the most firsthand information con-
cerning the operation of the Lundell machine, the sale of
recyclable products produced by the machine, and general
operation of the Authority’s recycling program, and pre-
6la
sumably the person with custody of relevant records of oper-
ation and sale of products from the Lundell machine. ABC
failed to interview this person even after others ABC con-
tacted referred ABC to him as the best source of accurate
information on certain points at issue here. Failure to contact
the plant manager is evidence of negligence, could have been
motivated by a desire not to cloud the waters by discovering
or presenting contradictory evidence, and could indicate an
intent to publish the report without regard to its truth.
More importantly, ABC had information available to it
prior to the broadcast that created internal irconsistencies or
contradictions that, a jury could find, should have cast doubt
on the truth of its story. According to the deposition of Gask-
ins, the plant manger, Gaskins told the ABC camera crew that -
the machine was operational in response to the statement of a
member of the camera crew that they had heard that the
machine was broken down. Deposition of David Gaskins, p. 7.
Gaskins then demonstrated that the machine was operational
by running garbage through it. Jd. A member of camera crew
also asked if the Authority had sold any of the fuel pellets. Jd.
at p. 8. Gaskins told him that all of the pellets made in the last
nine months had been sold to ADM in Valdosta, Georgia.® /d.
Rebecca Chase testified in deposition that she had been
unable to confirm that any fuel pellets had been sold to ADM
because ADM did not return several of her telephone calls,
and, when they did, would not confirm anything, but referred
her to the corporate public relations office in Decatur, Illinois.
Deposition of Rebecca Chase Williams, p. 45.
Rebecca Chase also testified that other information in
ABC’s possession prior to the broadcast of the story indicated
that there was a buyer for the fuel pellets produced by the
. Gaskins further explained in his deposition that the fuel pellets
stored on the site, all produced prior to Gaskins’s employment by the
Authority, had gotten wet, and therefore could not be sold as fuel, and
until they could be reshredded, could not be reused in making more fuel
pellets. It is unclear from the deposition testimony whether Gaskins
also conveyed this information to the ABC camera crew.
62a
Lundell machine in Berrien County. /d. at 43-44. Chase tes-
tified that ABC had received a copy of a letter from the Geor-
gia Department of Natural Resources dated March 2, 1992, to
Mr. Vinson Griffin regarding the Authority’s problems with
that agency, which stated that, “There is one user of the fuel
pellets.” Jd. This statement, presumably reliable, contradicts
ABC’s broadcast statement that “no one found a buyer” for
the fuel pellets.
There is therefore an accumulation of evidence and appro-
priate inferences that support the existence of actual malice
in this case. ABC’s motion for summary judgment on the
issue of actual malice must be denied.
Upon the foregoing,
IT Is ORDERED
That defendants’ February 7, 1994, motion for summary
judgment (docket number 41) is granted to the extent that
plaintiff’s claims founded on the third challenged statement
are dismissed and denied in all other respects.
April 13, 1994.
/s/ JOHN A. JARVEY
John A. Jarvey
Chief Magistrate Judge
UNITED STATES DISTRICT COURT
63a
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 95-3473NISC
November 26, 1996
LUNDELL MANUFACTURING CoO., ETC.,
Appellant,
—vs.—
AMERICAN BROADCASTING COMPANIES, ETC..
Appellee.
Order Denying Petition for Rehearing and
Suggestion for Rehearing En Banc
The suggestion for rehearing en banc is denied. Chief Judge
Richard S. Arnold, Judge McMillian, and Judge Murphy
would grant the suggestion.
The petition for rehearing by the panel is also denied.
Judge Magill took no part in the consideration or decision
of this case.
Order Entered at the Direction of the Court:
/s/ MICHAEL E. GANS
Clerk, U.S. Court of Appeals, Eighth Circuit
—
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