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PRAGER v. ABC

July 25, 1983

MARTIN S. PRAGER, Plaintiff,
v.
AMERICAN BROADCASTING COS., INC., ROBERT BLANCHARD, a/k/a BOB BLANCHARD and ERNEST ANASTOS, Defendants



The opinion of the court was delivered by: BIUNNO

 This suit is grounded on two TV news broadcasts, one on Friday, March 26, 1982, and the other on Monday, March 29, 1982.

 The major subject dealt with was a marketing program of International Diamond Corporation to sell diamonds for investment as an inflation hedge.

 The discovery indicates that the marketing was done through independent contractor brokers making sales on a commission basis with the payments being sent by the brokers to the company which sent the diamonds by mail directly to the buyers.

 From a structural standpoint there seem to have been some number of subsidiaries, one being a New Jersey corporation, on a territorial basis.

 It also appears that individual independent contract sales representatives either channeled their sales through or were recruited by other independent contractors known as district managers who would receive an override commission on sales made by others as well as on their own.

 The discovery documents show that plaintiff Martin Prager entered into a number of independent contracts with IDC both as a sales representative or account executive and as a district manager.

 The first broadcast summarized the IDC offering of the sale of the diamonds for investment and suggested that before investing money with them, "You should hear what a Federal Grand Jury thinks of the plan."

 The announcer said that there were allegations of fraud and misrepresentation, with top officers indicted and facing charges on the way they ran the company. Pictures of the Board Chairman, two Vice-Presidents and the National Sales Director were shown on the video portion. The name of the Board Chairman was spoken, the names of the others were not. Nor were they shown in the picture.

 And along with the pictures there was spoken text mentioning a 12-count indictment in Missouri on charges ranging from fraud to misrepresenting the value of the diamonds. Mention is also made of similar charges filed in Minnesota.

 There is also a clip of a tape showing a Federal Trade Commission spokesman whose name appears on the documents filed in the Northern District of California as a member of its legal staff. He speaks and says that the consumers were told that the diamonds were risk free and if you wanted to sell them they would buy them back. But in fact if you tried to sell them back they resisted. And if you went somewhere else, say to a jeweler, you would be told there was no market for them.

 So much of the story as has been described thus far is not defamatory of Mr. Prager as there is no reference to him in these segments. The suit is evidently filed because the Friday broadcast also showed clips of an attempted interview with Mr. Prager in a parking lot said to be near his office. There is no immediate spoken introduction to the clip.

 The name of Martin Prager and of International Diamond Corporation are superimposed on the camera image, and Bob Blanchard asks him, "Do you know anything about the Grand Jury indictments, the charges of fraud, misrepresentation? Selling the diamonds at above retail level when the catalogue says they're being sold below retail level?"

 Mr. Prager says: "Do I know anything?"

 Bob Blanchard says: "About that?"

 Prager then says: "No, I think that before you can make assumptions you, you have to have" -- and Blanchard says: "Well, I have, I got the Grand Jury indictments right here."

 Prager says: "No, before you make -- no, no."

 Blanchard says: "I do, they're right here, the indictments. Do you want to see them?"

 And Prager says: "If you want to do an interview, then you have to do it fairly. You can't make assumptions without having the facts."

 And Bob Blanchard says, "Well, here, do you want to see the indictments?"

 And Mr. Prager says: "Can you excuse me for five minutes, I'd like to get a cup of coffee."

 Then Prager is shown on again offering an interview on Monday at nine, to which Bob Blanchard agrees.

 On Monday's broadcast there is a lead in from Friday's broadcast, followed by a brief clip taken on Friday, but not shown then, in which Mr. Prager says: "We are only one outlet of 700."

 Bob Blanchard asks: "Are you, are you still?"

 Prager replies: "We are closing down, we are fading fast."

 Blanchard then reviews some of the Friday material about IDC, and there is a clip of another FTC spokesman who says substantially what the first one did. Then there is another clip from the Friday broadcast in which Mr. Prager is offering the interview on Monday at 9 A.M.

 Finally Mr. Blanchard says: "Since last Friday Mr. Prager's lawyer told him not to talk to us. The attorney did tell us that Mr. Prager is very upset with our story; that he's not an officer of the company; that he runs a clean operation; and that no one has ever lost any money. Other than that, no further comment."

 This full text as well as a videotape copy of the two broadcasts are stipulated and are in the records and the Court has examined them both with care.

 Under modern defamation law which is fundamentally State Law with restrictions and modifications as imposed nationwide by paramount law, by virtue of the guaranty of free press and free speech in the First Amendment applied to the States through the Fourteenth Amendment. The history of these changes begins with N.Y. Times v. Sullivan, 376 U.S. 254, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964), and have continued on through Gertz v. Welch, 418 U.S. 323, 41 L. Ed. 2d 789, 94 S. Ct. 2997 (1974).

 Without repeating what the Supreme Court and the Court of Appeals in this Circuit has said about the history of these cases, they require certain modifications to State law where the charges are leveled against the media, whether print or broadcast or TV.

 A public official may not press a claim unless he can show with convincing clarity or by clear and convincing proof that there was a publication with actual knowledge of falsity, or a high degree of awareness of probable falsity, that is reckless disregard for the truth, rather than negligence such as a failure to investigate without more.

 In the Butts1 and Walker2 cases the same rule was applied to claims by persons who were generally public figures, although not public officials.

 For a period, as the result of the decision in Rosenbloom v. Metromedia, 403 U.S. 29, 29 L. Ed. 2d 296, 91 S. Ct. 1811 (1971), a decision from this Circuit, it appeared that if the publication involved a public issue or a matter of general concern, the standard of New York Times would apply without regard to whether the plaintiff was a public or private individual.

 However, the Supreme Court was highly fragmented on this issue. Only three members joined in the opinion. Two others concurred in the judgment only to form a majority but did not concur in the opinion.

 It appears, too, that Pennsylvania seems to have adopted the Rosenbloom rule as State law. *fn3" But it is not evident that New Jersey has done so. Since then the Supreme Court has drawn back from the public issue formulation. This was in Gertz v. Welch, 418 U.S. 323, 41 L. Ed. 2d 789, 94 S. Ct. 2997 (1974). But at the same time the Court more specifically defined a limited public figure who was also required to meet the New York Times test.

 In that case it also ruled that liability without fault will not be permitted under State law in any case, and that no damages, other than actual damages, will be allowed in any case unless the New York Times standard is met.

 These changes, which apply in cases where the plaintiff is neither a public official or even a limited public figure, are grounded on a further balancing of the First Amendment guarantees of free speech and free press against other competing interests.

 Thus, the analysis must begin by considering whether Mr. Prager is a public official, a public figure, a limited purpose public figure, or a private individual. If he is any of the first three, he can advance no claim without overcoming the considerable hurdles of the New York Times test. The determination whether he is in any one of these three categories is a determination to be made by the Court. If he is merely private then he may recover under applicable State law meeting the Gertz minimum, but may recover only actual damage proved unless he is able to meet the New York Times standard.

 Guided by the analysis of the Court of Appeals for the Third Circuit, in the case of Systems Operations v. Scientific Games, 555 F.2d 1131 (3rd Cir. 1977), and the Restatement on Conflicts of Law, Second, Sections 149 and 150, as well as the single publication rule adopted by New Jersey in Barres v. Holt, 131 N.J. Super 371, 330 A.2d 38 (Law 1974), affirmed 141 N.J. Super 563, 359 A.2d 501 (App. 1976), affirmed 74 N.J. 461, 378 A.2d 1148 (1977), the Court is satisfied that the motions before it today are governed by New Jersey law. The publication involved is a type that is called an aggregate publication. The Court takes judicial notice that all of the local TV stations in this New York Metropolitan area have their broadcast antennas in New York City and all reception from the line of sight limitation characteristic of TV broadcasts means that anything received in New Jersey comes ...


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