___________
No. 95-3473
___________
Lundell Manufacturing Company, *
Inc., *
*
*
Plaintiff - Appellant, * Appeal from the United States
* District Court for the
* Northern District of Iowa.
v. *
*
American Broadcasting Companies,*
Inc., *
*
Defendant - Appellee. *
___________
Submitted: April 10, 1996
Filed: October 15, 1996
___________
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 manufactured
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 district 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 evidence 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 continuing "Anger in America"
reports. Jennings introduced the story:
Our final report tonight is about garbage, which in the
case of a small 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 explaining the
predicament of Berrien County taxpayers. An on-screen graphic labeled
"Garbage Tax" appeared at the beginning 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 recycling machine that
they never approved and does not work.
(Emphasis added).
The story continued with Chase interviewing an upset taxpayer, 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 commission
decided to buy this garbage machine with revenue bonds which do
not require voter approval.
As Chase made this statement, television viewers saw a corresponding video
showing the Lundell machine in Berrien County.
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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 compost, but no one found a
buyer. So the unsold material piled up outside -- nothing more
than exposed trash. The state has now ordered the plant shut
down as an environmental 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.1 ABC concedes
1
Lundell also alleged that two other statements in the story
were defamatory: the statement that "no one found a buyer" for the
fuel pellets produced by the machine, and the statement that
"taxpayers are now forced to have their trash hauled to another
county's landfill." The district court dismissed both of these
claims, and Lundell does not raise these issues on appeal.
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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 (1987). The court recognized,
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 N.W.2d 339, 342 (Iowa 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 "private figure plaintiff" and,
therefore, must show by a preponderance 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 (1974); Jones v. Palmer Communications, Inc., 440 N.W.2d 884,
898 (1989).
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Following an eight-day trial, the jury returned a verdict for Lundell
assessing $900,000 in damages for injury to reputation 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 substantially 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
evidence in the light most favorable to Lundell, and we do not weigh or
evaluate the evidence or consider questions of credibility. Id. 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. Id.
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. Sullivan, 376 U.S. 254 (1964), ABC argues that
we must "make an independent examination of the whole record," unrestrained
by the deference ordinarily
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afforded to the jury, in order to ensure that no "forbidden intrusion on
the field of free expression" has occurred. Id. at 285 (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. Because freedoms of
expression require "breathing space," id. at 272, the Court held that the
Constitution "prohibits a public official from recovering damages for a
defamatory falsehood relating to his official conduct unless he proves that
the statement was made with `actual malice.'" Id. at 279-80. Actual
malice is a statement made "with knowledge that it was false or with
reckless disregard of whether it was false." Id. at 280. 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. Consumers Union of United States, Inc., 466
U.S. 485, 498-511 (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.'" Id.
at 511.
The Supreme Court examined the protection for media defendants in
suits brought by private individuals in Gertz, 418 U.S. 323. 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. Id. at 344-47.
The Court nevertheless imposed two other constitutional limitations.
First, the Court held that the states could not impose liability without
fault. Id. at 346-47. Thus, a private figure cannot recover against a
media
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defendant without showing that the statement at issue was false and the
media defendant was at fault in publishing the statement. Id. at 347.
Second, the Court held that the states could not permit recovery of
presumed or punitive damages without a showing of actual malice. Id. at
349-50.
ABC argues that Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767
(1986), made the finding of falsity a constitutional rule requiring us to
independently 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.
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. After examining the case law concerning 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 public 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, in at least some of their
range, less forbidding than when the plaintiff is a public
figure and the speech is of public concern. When the speech is
of exclusively private concern and the plaintiff is a private
figure, as in Dun & Bradstreet, the constitutional requirements
do not necessarily force any change in at least some of the
features of the common-law landscape.
Id. at 775 (emphasis added).
The Court emphasized that "the common-law presumption that
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defamatory speech is false cannot stand when a plaintiff seeks damages
against a media defendant for speech of public concern." Id. at 777.
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 independently evaluate the findings in a suit
brought by a private figure against a media defendant. ABC contends that
we cannot 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 justified.'" Masson v. New Yorker Magazine, Inc.,
501 U.S. 496, 517 (1991) (quoting Heuer v. Kee, 59 P.2d 1063, 1064 (Cal.
Dist. Ct. App. 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." Id. (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. Lundell 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 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. Accord Bose Corp., 466 U.S. at 514 ("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
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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 independently evaluate the record.
When the Court in Philadelphia Newspapers discussed overriding the
common law because of First Amendment protections, it focused on the
allocation of the burden of proof. See 475 U.S. at 777. The Pennsylvania
Supreme Court, reversing the trial court, held that a Pennsylvania statute
placed the burden of proving truth on the publisher, and that this did not
violate the Federal Constitution. Id. at 770-71. 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. Id. at 777. 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 private figure plaintiff must present to recover. Id. at 779 n.4; Accord
Bose Corp., 466 U.S. at 514 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 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 interview could establish the
actual malice required for a defamation suit by a public figure. 501 U.S.
at 499. The Supreme Court's analysis of actual malice required it to
consider the concept of falsity. Id. at 513. The Court examined six
different published passages to
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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. Id. at 522-25. The Court concluded that one of the
passages did not materially alter the meaning of the tape-recorded
statement and therefore, was not actionable. Id. at 524. With respect to
the other five passages, however, the Court decided that a reasonable jury
could find a material difference between the meaning of the published
passages and that of the tape-recorded statements. Id. at 522-25. Because
a jury could find the differences in the statements exposed the interviewee
to contempt, ridicule, or obloquy, the Court held that it could not decide
the issue of falsity as a matter of law. Id. Masson makes abundantly
clear that in reviewing a summary judgment 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. Id. at 520-21.1
Recently, we reviewed the district court's grant of summary judgment
to a defendant television station on a defamation 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. Id. at 389. The district court
ruled that the statement was not actionable because even if the statement
was defamatory, it was true. Id. 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. Id. at 388. We disagreed,
1
"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 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986). We examine 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.
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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." Id.
We directed that this question should be decided by a jury. Id. 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." 847 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 (1990), the Supreme Court rejected the argument
that opinions are absolutely protected by the First Amendment, id. at 18-
19, recognizing that "expressions of `opinion' may often imply an assertion
of objective fact," id. at 18. The Court allowed the defamation action to
go forward, ruling that a reasonable trier of fact could find that the so-
called opinion could be interpreted as a false assertion of fact. Id. at
21. 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 Partington v. Bugliosi, 56 F.3d 1147, 1153 (9th
Cir. 1995) (standard 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 private plaintiff against a media defendant
only that we review the record to determine whether a
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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, Inc. v.
Connaughton, 491 U.S. 657 (1989), where the Supreme Court, in reviewing an
actual malice determination, stated that the clearly erroneous standard
could be applied to the credibility determinations, but the reviewing court
must determine whether the statements are the character which the First
Amendment protects. Id. at 686-88. On review of the record, it agreed
with the Court of Appeals that the evidence supported a finding of actual
malice. Id. at 689.
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 protections 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
defamation 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 reasonable jury could understand the statement, when
read in context, 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 appropriate when its statements could not
reasonably be read to be false assertions of fact).
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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. Alternatively, 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 interpretation
of Iowa law de novo, and give no deference to the district court's
interpretation of state law. Salve Regina College v. Russell, 499 U.S. 225
(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, tending 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 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). Iowa recognizes substantial truth as an absolute defense in a
defamation 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." Id. The "gist" or "sting" is determined by "looking
at the highlight of the broadcast, the pertinent angle of it, and not to
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the items of secondary importance which are inoffensive details, immaterial
to the truth of the defamatory statement." Id. (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 financially 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.
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 ambiguities and descriptive
challenges for the writer." Id. at 512 (internal quotation omitted). The
Court did not allow recovery for choice of language which, though perhaps
reflecting a misconception, represented "the sort of inaccuracy that is
commonplace in the forum of robust debate to which the New York Times rule
applies." Id. at 513. Similarly, in Janklow v. Newsweek, Inc., 788 F.2d
1300 (8th Cir.) (en banc), cert. denied, 479 U.S. 883 (1986), we stated
that we "will not make editorial judgments about specific word choice in
order 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." Id. at 1306.
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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 statement
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, substantial 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 economic 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 financially 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 (quoting Bose Corp., 466
U.S. at 513). We, therefore, cannot conclude that the story, as a whole,
was substantially 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 a reasonable jury
could conclude that the sting of the story was that
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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 according ABC
the independent review it requests, we are confident that there has been
no forbidden intrusion on First Amendment 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. Nevertheless, 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 anyone
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 independent sales
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representative for Lundell, contacted Chase and advised her that any story
on the Berrien County facility based on information provided only by local
political opponents 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 testified 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 "I'll fire it up." After ABC broadcast the story,
Lundell contacted ABC seeking 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 substantial 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
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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 that the machine did turn garbage
into fuel pellets and compost 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 operated by Tennessee officials.
These other parts of the story do not change our conclusion.2 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 inconsistent with ABC's argument. Along with the footage showing
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 comparison 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
reasonable juror could discredit the statement, as the story painted
Stallings as someone who had misrepresented the machine to the Berrien
County taxpayers.
2
ABC also argues that the district court correctly granted it
judgment 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 journalists. We have carefully considered these
arguments and conclude there is substantial evidence to support the
jury's findings.
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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 district 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
be upheld because Lundell is a public figure for the purpose 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 public
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 figures 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 purpose" public figure. The court
defined this type as a person 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. 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." Id. at 345. In determining whether an individual
should be considered a limited public figure, we must focus our attention
on the "nature
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and extent of an individual's participation in the particular controversy
giving rise to the defamation." Gertz, 418 U.S. at 352. By so doing, we
then can determine whether the individual has voluntarily and purposefully
injected himself into that controversy in an attempt to influence the
resolution of the controversy. Id. at 345.
Applying these factors, we must first identify the particular public
controversy giving rise to the defamatory speech. Bagley, 797 F.2d at 645.
Here, the particular controversy giving rise to ABC's report was the
garbage disposal problem in Berrien County. This controversy is clearly
a public controversy involving questions of "public concern." See Dun &
Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 761-62 (1985)
(plurality 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 (1980); Johnson v. Nickerson, 542 N.W.2d 506, 511 (Iowa 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 inquiry 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.
The Supreme Court faced a situation very similar to this case in
Hutchinson v. Proxmire, 443 U.S. 111 (1979). Hutchinson did research with
primates and received research grants from three federal agencies. Id. at
115. 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
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considered to be wasteful projects. Id. at 114. After denying protection
under the Speech and Debate Clause, id. at 123-33, the Court reversed lower
court rulings that Hutchinson was a public figure, id. at 133-36. The
Court observed that Hutchinson's activities and public profile were like
many members of his profession, and that his public writings reached a
relatively small category of professionals concerned with research in human
behavior. Id. at 135. "To the extent the subject of his published
writings became a matter of controversy, it was a consequence of the Golden
Fleece Award." Id. The Court emphasized that, "those charged with
defamation cannot, by their own conduct, create their own defense by making
the claimant a public figure." Id. The Court also reasoned that
Hutchinson did not "thrust himself or his views into public controversy to
influence others," and at most, the public controversy consisted of
concerns about general public expenditures. Id. 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. Id. The Court's determination was also influenced 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. Id. at 136.
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 (1979). There, publishers of a book described Wolston as
being a Soviet agent. Id. at 159. 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. Id. at 162-63. 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 status. Id. at 167. Wolston did not discuss the matter
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with the press, and limited his involvement to defending 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 into the controversy concerning Soviet espionage. Id.
at 168. The Court said: "It would be more accurate to say that [Wolston]
was dragged unwillingly into the controversy." Id. at 166. "A private
individual is not automatically transformed into a public figure just by
becoming involved in or associated with a matter that attracts public
attention." Id. at 167. "A libel defendant must show more than mere
newsworthiness to justify application of the demanding burden of New York
Times." Id. at 167-168.
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 (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 determinative of
public figure status. See Hutchinson, 443 U.S. at 135; Wolston, 443 U.S.
at 167. Even though the garbage disposal problem was a matter of public
concern, we focus on Lundell's role in the controversy, 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 (plaintiff not a limited purpose
public figure even though he represented a client on a matter related to
the controversy at issue). Furthermore, ABC cannot, by its own conduct,
create its own defense by making Lundell a public figure. Like the
circumstances in Hutchinson, there is no evidence that
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Lundell had access to the media to refute the ABC report. 443 U.S. at 136.
Indeed, ABC denied Lundell's request for a retraction of the story. For
these reasons, we reject ABC's alternative argument.
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
profits, 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 corporation cannot recover for
both lost profits and injury to reputation.
The law of libel has long reflected the distinction
between corporate and human plaintiffs by limiting corporate
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 Broadcasting 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
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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 (Iowa 1968); G &
H Soybean Oil, Inc. v. Diamond Crystal Specialty Foods, Inc., 796 F. Supp.
1214, 1217 (S.D. Iowa 1992) (applying Iowa law). We therefore reject ABC's
argument.
We also reject ABC's argument that there is insufficient proof of
actual damages. Vernon Lundell testified that Lundell began operating in
1945 and had always had an excellent reputation in the industry and in
Iowa. Another witness testified 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 following 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.
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.3 See id.
B.
ABC contends that even if we reverse the district court's entry of
judgment, we must affirm the court's alternative ruling 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
3
For these reasons, we also reject ABC's contention that the
award is excessive.
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evidence. See White, 961 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 evidence with the standard for
reviewing a ruling on a motion for judgment as a matter of law. Id. 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.
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, 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.
Id.
The Iowa Supreme Court has rejected the argument that a plaintiff
must identify specific lost sales to recover lost profits damages. Page
County Appliance Ctr., Inc. v. Honeywell, Inc., 347 N.W.2d 171, 178 (Iowa
1984). Decreased income after the defendant's damaging conduct is
sufficient to support an award for lost profits so long as the record
discloses a reasonable basis from which the amount can be inferred or
approximated. Id. "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.
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1965)).
The district court set aside the lost profits award for two reasons.
First, it concluded that there were "tremendous problems" 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 evidence 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, testified that he thought the company could have
only sold four systems.
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 substantial 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 damages. 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,
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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 support 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.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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