United States Court of Appeals,
Fifth Circuit.
No. 96-50253.
PETER SCALAMANDRE & SONS, INC., et al., Plaintiffs,
Merco Joint Venture, Plaintiff-Counter Defendant-Appellee,
v.
Hugh B. KAUFMAN, et al., Defendants,
Hugh B. Kaufman; TriStar Television, Inc., Defendants-Counter
Plaintiffs-Appellants.
June 3, 1997.
Appeals from the United States District Court for the Western
District of Texas.
Before DUHÉ, BENAVIDES and STEWART, Circuit Judges.
DUHÉ, Circuit Judge:
Appellants Hugh B. Kaufman and TriStar Television appeal a
defamation judgment awarding Appellee Merco Joint Venture nominal
damages of $1 against each appellant, and punitive damages of
$500,000 against Kaufman and $4.5 million against TriStar. Because
Merco failed to prove actual malice, we reverse and render judgment
for Appellants.
Background
In 1989, New York City entered into a consent decree to cease
disposing of its "sewer sludge" by dumping it into the ocean.
Sewer sludge is what remains, in solid form, after wastewater from
city sewers is processed and treated. New York City was in dire
need of a new way to dispose of its sewer sludge, and Merco Joint
Venture was formed to provide a solution to this dilemma. In 1992,
1
the city contracted with Merco to dispose of up to thirty percent
of the city's sewer sludge.1
Merco originally planned to ship the sludge to Oklahoma, and
dispose of it by spreading it on grassland. However, Merco could
not comply with Oklahoma environmental regulations in time to
accommodate its contract. Merco promptly chose Sierra Blanca, a
town in West Texas, as the new destination for the sludge. Merco
obtained state permits to spread sludge in Texas in less than a
month. Merco purchased a ranch in Sierra Blanca as a disposal site
for the sludge shipments, which began arriving in July 1992. When
sludge arrived from New York, Merco applied it to the ground at the
ranch as a fertilizer would be applied.
In the spring of 1994, a television show produced by TriStar
entitled "TV Nation" began developing a program segment focusing on
New York's sludge shipments to Texas. The show's creator, Michael
Moore, intended the program to be a reality-based television show
that used humor and satire to explore public issues and current
events.
The "germ" of the idea for the sludge segment came from a
memorandum written by a TV Nation staffer. The memorandum proposed
the segment follow a load of sludge from the sewage plant in New
York, as it was hauled down to Texas on a train, and finally to the
Merco ranch at Sierra Blanca.2 The memo styled the proposed
1
For its six year sludge disposal contract with the city,
Merco will receive approximately $168 million.
2
The original concept was later altered when the railroad
would not allow TV Nation to ride the sludge train.
2
segment as "a piece about the socioeconomics of waste, about who
gets—literally—shat upon."
Development of the segment was assigned to Fran Alswang, a TV
Nation producer. Alswang studied publications on sludge, and
eventually visited Sierra Blanca on a scouting trip. On that trip,
she went to the Merco ranch, spoke with Merco's media director,
Kelly Sarber, and talked with both supporters and opponents of the
operation in Sierra Blanca. Alswang finished the scouting trip
with the impression the people of Sierra Blanca were divided over
whether or not the Merco ranch was beneficial to the town.
After Alswang completed her research, the sludge segment was
videotaped in June 1994. Roy Sekoff was the on-air correspondent
for the piece. TV Nation spent its first day of filming at a
sewage plant in New York, then flew to Texas and taped at the Merco
ranch and around Sierra Blanca. Sekoff interviewed several
persons, both those associated with the ranch and those opposed to
the Merco operation.
When Alswang had prepared a preliminary "rough cut" of the
segment, she submitted it to her superiors for legal and creative
review. The reviewers suggested she find someone to respond to
Kelly Sarber's positive testimonial on the merits of sludge.
To counter Sarber, Alswang contacted Hugh Kaufman, a
twenty-five year EPA employee whose name she had come across in her
research. Kaufman told Alswang he was authorized to speak on
sludge as an EPA representative, and that his superiors at the EPA
gave him permission to proceed. Alswang interviewed Kaufman and
3
added portions of that interview, which questioned the safety of
Merco's practices, to her segment.
Alswang submitted a second rough cut of the sludge segment,
edited to include Kaufman's comments, for legal review. As support
for Kaufman's comments, she sent the legal department several
documents disputing the safety of sludge land application. Final
revisions were made, Alswang received approval for broadcast, and
the segment entitled "Sludge Train" was broadcast on August 2,
1994.
Merco was irate at the content of the broadcast, which it
contends was an unbalanced report on sewer sludge and Merco's
practices at Sierra Blanca. After "Sludge Train" aired, Merco sued
alleging that nine portions of the Sludge Train segment were
defamatory, disparaging and false. Merco sued TriStar, Hugh
Kaufman, Roy Sekoff, Billy Addington (a resident of Sierra Blanca
who opposed the Merco operation), and Tri-State Broadcasting Co.
Merco dismissed all defendants except TriStar, Kaufman and Sekoff
on the eve of trial. At the close of Merco's case, the trial judge
granted Sekoff's motion for judgment as a matter of law.
The jury awarded Merco nominal damages of $2, and punitive
damages of $500,000 against Kaufman and $4.5 million against
TriStar. TriStar and Kaufman unsuccessfully moved for judgment as
a matter of law, and the trial judge entered judgment against
TriStar and Kaufman for the amount of the jury award. Kaufman and
TriStar appeal.
I.
4
TriStar and Kaufman appeal on two grounds. They first contend
Merco failed to prove TriStar and Kaufman acted with actual malice.
They next argue that, as the jury awarded only $2 total in actual
damages, the district court erred under both Texas and
constitutional law when it entered judgment for Merco on $4.5
million and $500,000 in punitive damages.
II.
We first address whether Merco met its burden of proving
TriStar and Kaufman acted with actual malice when they allegedly
defamed Merco.
State libel law's reach is curtailed by the constitutional
guarantees of freedom of speech and freedom of the press.
Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 30, 91 S.Ct. 1811,
1813, 29 L.Ed.2d 296 (1971). If a plaintiff alleging defamation is
considered a "public figure,"3 or a person or entity whose views
and actions on public issues and events are of concern to other
citizens, Curtis Publ'g Co. v. Butts, 388 U.S. 130, 162, 87 S.Ct.
1975, 1995, 18 L.Ed.2d 1094 (1967) (Warren, C.J., concurring), that
plaintiff must prove the alleged defamation was "made with "actual
malice'—that is, with knowledge that it was false or with reckless
disregard of whether it was false or not." New York Times Co. v.
Sullivan, 376 U.S. 254, 279-280, 84 S.Ct. 710, 726, 11 L.Ed.2d 686
(1964).
Because of the requirement in "public figure" defamation
3
For the purposes of this litigation, Merco stipulated to its
public figure status.
5
cases that a defendant have acted with actual malice, our standard
of review is different from the deferential "clearly erroneous"
standard mandated by Rule 52(a). Rather, in such cases, we have an
obligation to make an independent examination of the entire record
to ensure the judgment is supported by clear and convincing
evidence of actual malice. Bose Corp. v. Consumers Union of U.S.,
Inc., 466 U.S. 485, 511, 104 S.Ct. 1949, 1965, 80 L.Ed.2d 502
(1984). However, this obligation extends only to the ultimate
factual finding of actual malice; we do not conduct de novo review
of the jury's determination of preliminary factual issues or
questions of credibility. Brown v. Petrolite Corp., 965 F.2d 38,
46 (5th Cir.1992).
Proving actual malice is a heavy burden. Proof that a
defendant broadcast false statements will not alone show actual
malice—the Supreme Court has made clear there is a significant
difference between proof of actual malice and proof of falsity.
Bose Corp., 466 U.S. at 511, 104 S.Ct. at 1965. Proof that a
defendant spoke out of dislike, or with ill will towards another,
also does not automatically meet the test of actual malice, even if
his statements are shown to be false. Garrison v. Louisiana, 379
U.S. 64, 73, 85 S.Ct. 209, 215, 13 L.Ed.2d 125 (1964). If a
publication is undertaken in good faith, failure to investigate the
subject of that publication will not in itself establish actual
malice. St. Amant v. Thompson, 390 U.S. 727, 733, 88 S.Ct. 1323,
1326-27, 20 L.Ed.2d 262 (1968). That a defendant publishes
statements anticipating financial gain likewise fails to prove
6
actual malice: a profit motive does not strip communications of
constitutional protections. Harte-Hanks Communications, Inc. v.
Connaughton, 491 U.S. 657, 667, 109 S.Ct. 2678, 2685-86, 105
L.Ed.2d 562 (1989). As long as a defendant does not act knowing
his statement is false or with reckless disregard of its truth,
actual malice will not be present.
There are no set criteria to measure when a defendant's
actions constitute "reckless disregard" of the truth. The Court
has noted that " "[r]eckless disregard' ... cannot be fully
encompassed in one infallible definition." St. Amant, 390 U.S. at
730, 88 S.Ct. at 1325. "A "reckless disregard' for the truth,
however, requires more than a departure from reasonably prudent
conduct." Harte-Hanks, 491 U.S. at 688, 109 S.Ct. at 2696. The
standard for reckless disregard "is a subjective one—there must be
sufficient evidence to permit the conclusion that the defendant
actually had a "high degree of awareness of ... probable falsity'."
Harte-Hanks, 491 U.S. at 688, 109 S.Ct. at 2696 (quoting Garrison,
379 U.S. at 74, 85 S.Ct. at 215-16). The purpose of such a
flexible standard is to ensure defendants have some degree of
culpability before they are found liable for defamation. Herbert
v. Lando, 441 U.S. 153, 171-72, 99 S.Ct. 1635, 1646-47, 60 L.Ed.2d
115 (1979).
In short, "the actual malice standard is not satisfied merely
through a showing of ill will or "malice' in the ordinary sense of
the term." Harte-Hanks, 491 U.S. at 666, 109 S.Ct. at 2685.
Culpability on the part of the defendant is essential. "There must
7
be sufficient evidence to permit the conclusion that the defendant
in fact entertained serious doubts as to the truth of his
publication." St. Amant, 390 U.S. at 731, 88 S.Ct. at 1325. That
evidence is lacking here.
III.
Merco has continually asserted sludge application at its
Sierra Blanca ranch increases vegetation on arid grassland, adds
nutrients to the soil, and conditions the soil to make better use
of a limited water supply. Merco claims that "Sludge Train" was an
unwarranted attack on the land application of sludge and the Sierra
Blanca operation.
Merco argues that TriStar intended from the start to present
a negative, one-sided view of the sludge project. It cites the
original concept memorandum discussing "the socioeconomics of
waste" as evidence of TriStar's prejudice. It claims Fran Alswang
and TriStar deceitfully obtained the cooperation of Merco and Merco
supporters by indicating the piece would be complimentary.
Merco also contends TriStar erred in interviewing Kaufman, as
he is a "renegade" notorious for his "whistleblower" activities and
has no authority at the EPA. Merco argues Alswang had read a Wall
Street Journal article that should have informed her Kaufman was
not an authorized EPA spokesperson. Merco claims it provided
Alswang with the names of "experts" who were better informed than
Kaufman, but that Alswang sought out Kaufman solely because of his
anti-sludge bias.
Appellants TriStar and Kaufman argue that, contrary to Merco's
8
claims, sludge has not been proven safe for land application and
they fairly aired all points of view. Officials, scientists, and
average citizens have debated the wisdom of spreading sludge on
farmland.4 Appellants also claim that, beyond the general dispute
over the safety of sludge, Merco's operation in Sierra Blanca has
itself been a topic of dissension. When it came to light how
quickly Merco received state regulatory approval for its project,
Merco was subjected to media scrutiny and criticism. Appellants
note the Texas Water Commission later admitted its decision to
grant Merco regulatory approval was made too quickly: subsequent
to Merco's registration, the Commission imposed additional
restrictions on the Sierra Blanca operation, and promulgated new
rules related to the registration of beneficial use sites. TriStar
stands by its decision to interview Kaufman, and argues other
sources support Kaufman's views.
Merco's allegations of defamation are based on statements and
alleged implications in the TV Nation segment, including statements
that Merco was "an illegal haul and dump operation," that "[t]he
people of Texas are being poisoned," that sludge contained "high
levels of lead, mercury and PCBs," and an implication that Merco
committed arson. Merco also claims other aspects of the segment
amounted to defamation, such as the statement, "New York sludge
cake isn't just made of toilet refuse. In fact, anything that goes
down the drain or sewer ends up [in treatment plants]," interviews
4
In fact, Merco stipulated for the purposes of this lawsuit
that the Merco project is considered by some to be controversial.
9
with persons who were not residents of Sierra Blanca about the
sludge odor, edited interview tapes with Judge Billy Love and Julie
Porter that allegedly misrepresented their statements, and a
metaphor about "the smell of money" Merco claims implied it bribed
Judge Love.
Merco claims TriStar and Kaufman knew such statements were
false, and therefore acted with actual malice when they made and
broadcast those statements. We disagree. Merco has not met its
burden of proving actual malice as to either TriStar or Kaufman.
Merco presented no proof that TriStar and Kaufman knew, or should
have known, that any part of the "Sludge Train" broadcast was
false. Indeed, Merco failed to show any part of the broadcast
actually was false.
Merco's objections to the "Sludge Train" broadcast result from
its tendency to stretch every "implication" it finds in the
broadcast to its farthest limit, then draw dubious conclusions from
these unrealistic interpretations. It assumes viewers will
automatically reach these same illogical conclusions, and bases its
defamation claims on these assumptions.
The conclusion the evidence at trial suggests is that experts
have yet to reach a consensus on the safety of land application of
sludge. Merco itself conceded land application of sludge was
controversial. At best, Merco's evidence proved certain experts
believe sludge is safe. It did not, however, prove TriStar and
Kaufman knew or should have known their position, evidenced by the
TV Nation broadcast, was false, or that it was in fact false.
10
Kaufman's statements that Merco was "an illegal haul and dump
operation," and that "[t]he people of Texas are being poisoned,"
were shown at trial to be Kaufman's honest beliefs, and were not so
without basis as to constitute reckless disregard of the truth.
Kaufman testified to several aspects of the Merco operation he
found questionable, and noted instances when Merco had failed to
comply with various regulations.
Kaufman professed his sincere belief that the land
application of sludge is dangerous, and will eventually be proved
harmful. His figurative reference to "poison" is hyperbolic, but
exaggeration does not equal defamation. Merco repeatedly claims
experts and agencies have stated sludge is safe, and argues those
opinions prove Kaufman should have known his statements were false.
However, these expert opinions are merely that—opinions. Moreover,
because an "expert" endorses a certain practice does not mean all
reasonable debate on the merits or safety of that practice is
foreclosed.
Sekoff's voice-over comment that sludge contained "high
levels of lead, mercury and PCBs" likewise failed to meet the
standard of actual malice. The vagueness of the term "high levels"
makes Merco's burden of proving defamation even more difficult. As
well, the statement made no particular reference to Merco sludge,
referring instead to sludge in general. Kaufman, who originally
made the statement, based this assertion on numerous articles and
reports questioning the safety of sludge and its contents. There
was adequate support for the statement.
11
Merco's conclusion TriStar implied it committed arson stems
from a portion of the segment showing a visit by Sekoff and Billy
Addington to the remains of Addington's lumberyard. The lumberyard
had burned; a police report attributed the cause of the fire to
arson. In the segment, Sekoff stated in a voice-over that
Addington was a sludge opponent, and that Addington believed his
opposition "has made him some powerful enemies." Addington stated:
"And many of the people of ... in town know why the arson happened,
it was because of our speaking out against the sludge."
In the segment, Addington merely stated his beliefs—that his
lumberyard was burned because he opposed bringing sludge to Sierra
Blanca. Given that a police report found the fire was arson,
Addington's belief that his involvement in a contentious dispute in
his hometown provided the motive for this crime is not reckless and
has not been proven false. Merco's name was not mentioned as a
suspect.5 While viewers could conclude Merco was somehow
implicated in the arson, they were equally likely to believe some
other supporter of sludge in Sierra Blanca was responsible for the
fire.
The statements, "New York sludge cake isn't just made of
toilet refuse. In fact, anything that goes down the drain or sewer
ends up [in treatment plants]," did not defame Merco. Merco argues
plastics and other sewer refuse, shown in the tape accompanying the
statements, are screened out early in the wastewater process. The
5
In fact, TriStar edited out a reference to the company by
Addington, who had actually stated his opposition to "the sludge
and Merco" prompted the arson.
12
footage shown in the segment in no way impugned the character of
Merco's sludge by implying that plastics and debris end up in the
final sludge product.
Likewise, Merco's claim it was libeled because Sekoff stated
the dump was "pungently real" to the residents of Sierra Blanca,
then showed two brief interviews with persons who did not live in
the town, is groundless. TriStar did not claim the women lived in
Sierra Blanca. The women's statements supported the "pungently
real" portion of Sekoff's voice-over by describing an odor present
in Sierra Blanca. Their place of residence has no effect on their
sense of smell.
Merco's claim TriStar committed libel by editing interview
tapes with Judge Billy Love and Julie Porter, allegedly
misrepresenting their statements, also fails. Everyone interviewed
for the segment signed a personal release form allowing TV Nation
to depict or portray them as the program in its discretion
determined. The release also gave TV Nation the right to edit any
statements or comments made on camera, and informed anyone who was
interviewed their statements could be altered. It is common
knowledge television programs such as TV Nation shoot more footage
than necessary and edit the tape they collect down to a brief
piece. TV Nation was entitled to edit the tape it shot to fit into
the short time frame allotted to the sludge segment.
Finally, Merco's assertion that TriStar implied it bribed
Judge Love by using a metaphor about "the smell of money" is
without merit. Throughout the segment, Sekoff referred to the
13
"smell of money" in connection with the Merco operation, playing on
the strong odor reportedly associated with the sludge ranch. When
he spoke with Judge Love, Sekoff introduced the interview by
stating, "Merco, however, does have its supporters in town. I
followed the smell of money to the county courthouse where I met
Judge Billy Love, whose land company profited from Merco's
arrival."
At most, TriStar can be accused of implying Judge Love was a
Merco supporter because he profited from the company's operation in
Sierra Blanca. Such an implication is not libel. Judge Love, like
many other citizens of Sierra Blanca, actually did benefit from
Merco locating in town. These benefits to Sierra Blanca were the
focus of the entire sludge segment: Sierra Blanca allowed the
establishment of a waste disposal operation, despite the fears and
concerns of certain residents, because the financial benefits
outweighed other considerations. The profit Merco brings to Sierra
Blanca is the "smell of money" Sekoff refers to in his voice-over.
In sum, while it is true the "Sludge Train" segment hardly
endorsed the land application of sludge, it does not follow that
TriStar libeled Merco because it chose to present an unenthusiastic
account of Merco and the sludge ranch. The segment was not so
onesided, or without basis in fact, as to constitute defamation.
Merco is a public figure engaged in a controversial business, and
should not be shocked that some disagree with its practices.
Merco's description of an "objective" segment appears
suspiciously like a segment that supported Merco's position on the
14
sludge debate. However, TriStar and Kaufman are not liable for
defamation because they refused to corroborate the Merco party
line. Defamation law should not be used as a threat to force
individuals to muzzle their truthful, reasonable opinions and
beliefs. To endorse Merco's version of defamation law would be to
disregard the constitutional protections that allow individuals to
hold and express unpopular or unconventional opinions.
Because Merco failed to meet its difficult burden of proving
actual malice by clear and convincing evidence, we find the
district court erred in entering judgment for Merco on its
defamation claims against TriStar and Kaufman.
IV.
As we find Merco did not present clear and convincing proof
of actual malice on the part of TriStar or Hugh Kaufman, and
reverse and render on that ground, we find it unnecessary to
discuss Appellants' other point on appeal. However, we note that
our resolution of this case on the ground of insufficient evidence
in no way signals a retreat from the reasoning embraced in Brown v.
Petrolite Corp., 965 F.2d 38 (5th Cir.1992), where this Court
reversed an award of $300,000 in punitive damages when the
plaintiff was awarded only $1 in compensatory damages. Under Texas
law at the time of trial,6 this Court found when a plaintiff
6
Amendments allowing punitive damages, even if only nominal
damages are awarded, upon a showing of malice have since gone into
effect. TEX.CIV.PRAC. & REM.CODE ANN. § 41.004(b) (Vernon Supp.1996).
However, those amendments apply only to causes of action accruing
on or after September 1, 1995. TEX.CIV.PRAC. & REM.CODE ANN. § 41.001
historical & statutory notes (Vernon Supp.1996).
15
"suffered only nominal damages, the jury was not entitled to award
exemplary damages." Id. at 49; see Snead v. Redland Aggregates
Ltd., 998 F.2d 1325, 1334-35 (5th Cir.1993). Texas law clearly
establishes that "recovery of actual damages is prerequisite to
receipt of exemplary damages." Doubleday & Co., Inc. v. Rogers,
674 S.W.2d 751, 754 (Tex.1984); see Twin City Fire Ins. Co. v.
Davis, 904 S.W.2d 663, 665 (Tex.1995); Newman v. Tropical Visions,
Inc., 891 S.W.2d 713, 721 (Tex.App.—San Antonio 1994); St. Paul
Lloyd's Ins. Co. v. Fong Chun Huang, 808 S.W.2d 524, 528
(Tex.App.—Houston (14th Dist.) 1991). Such a disproportionate
award of punitive damages may also be unconstitutional. BMW of
North America, Inc. v. Gore, --- U.S. ----, 116 S.Ct. 1589, 134
L.Ed.2d 809 (1996).
V.
As we find Merco failed to meet its burden of proving actual
malice by clear and convincing evidence, we REVERSE the judgment of
the district court and RENDER judgment for Appellants TriStar and
Kaufman, that Merco take nothing.
REVERSED and RENDERED.
16
Peter Scalamandre & Sons, Inc. v. Kaufman
Court: Court of Appeals for the Fifth Circuit
Date filed: 1997-06-03
Citations: 113 F.3d 556
Copy CitationsCombined Opinion