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SCHIAVONE CONSTR. CO. v. TIME

October 1, 1985

SCHIAVONE CONSTRUCTION CO. and RONALD A. SCHIAVONE, Plaintiffs,
v.
TIME, INCORPORATED, Defendant



The opinion of the court was delivered by: SAROKIN

 INTRODUCTION

 Although summary judgment motions by the media in defamation actions are not entitled to any special enhancement, the underlying reasons for allowing such motions are particularly applicable in this type of matter. Summary judgments are designed to avoid the expense and time of trial and permit an early disposition where there are no genuine issues of material fact to be resolved. In every case such savings are a creditable goal, but in a defamation action they go far beyond the direct economies effected. Totally apart from the ultimate verdicts for libel against the media, the mere pendency and continuation of such actions must of necessity have a chilling effect upon the freedom of the press. If the threat of a libel action is causing any segment of the media to hesitate to publish knowingly false or misleading information about persons or companies, then it is serving a worthwhile function. But if it is causing hesitation by the media in those borderline situations in which the public has a right to know, then one of our most important liberties is in peril.

 Possibly the giants of the industry have both the finances and the stamina to run the risk in such situations. But the independent will of smaller magazines, newspapers, television and radio stations undoubtedly bends with the spectre of a libel action looming. Even if convinced of their ultimate success on the merits, the costs of vindication may be too great for such media defendants to print or publish that which may entail any risk of a court action. If that is the result, it is a sorry state of affairs for the media, and, more important, for this country. Therefore, probably more than any other type of case, summary judgments in libel actions should be readily available and granted where appropriate. We must accept the fact that while many defamation actions are instituted in good faith with the expectation that they will be tried to conclusion, unless a satisfactory settlement is reached in the interim, many are started for strategic reasons with no real expectation of pursuing a trial on the merits. There is no more dramatic means of denying charges than the institution of a libel action, only to be abandoned later when its purpose has been served. In the meantime, the media in all of its forms is involved in spending its energy, time and money defending such actions. The sheer number and defense costs must take its ultimate toll on a free press. While recognizing the power of the media to destroy a reputation in an instant of television coverage or with a banner headline, we must also recognize the power of libel actions, even their mere threat or pendency, to destroy the press itself and with it the very foundation of our democracy.

 Here, even if plaintiffs are successful in establishing liability, as they may well be, it is unlikely that they will be able to prove damages attributable to the particular falsehood alleged in view of the vast publicity given to all facets of the Donovan controversy. Indeed, those parts of the article not alleged to be defamatory are, perhaps, more damaging than that which is the subject of this suit. However, notwithstanding the court's fears regarding the effect of the mere pendency of actions such as these, binding precedent does not permit a summary disposition of the matters here presented in favor of the defendant.

 This is a libel action brought by Schiavone Construction Company and Ronald A. Schiavone against Time, Inc., regarding a magazine article published in the "Nation" section of the August 23, 1982 issue of TIME magazine. The article, entitled "Jury Still Out: Donovan probe is reopened," stated that Special Prosecutor Leon Silverman had reopened his investigation of then Secretary of Labor Raymond Donovan and would be presenting fresh allegations about Donovan's conduct to grand juries in New York and elsewhere. After noting that Phase II of the inquiry would focus on charges that Donovan had met with two known mobsters near Miami in January, 1979, the article discussed the failure of the Special Prosecutor in his first probe to pursue all leads concerning the January, 1979 meeting. The article concluded:

 
The FBI faces some tough questioning of its own. The Senate Labor Committee is investigating the bureau's handling of Donovan's confirmation probe 18 months ago. The personal files of FBI Director William Webster, forwarded to the committee last month, reveal that the name of Schiavone appeared several times in the bureau's reports on the 1975 disappearance of former Teamster Boss Jimmy Hoffa. That detail would surely have intrigued both the Senate committee that approved Donovan's nomination in February 1981, and the special prosecutor this year. But neither learned about it until last month.

 It is only this last paragraph of the article to which plaintiffs object and which has become the subject of this suit. It is uncontroverted that such paragraph refers to a memorandum in the files of FBI Director William Webster, which memorandum states, in pertinent part, that Mr. Webster advised Presidential Counsellor Edwin Meese "that a company, Chivone (PH), in which he [Donovan] apparently had a very substantial interest, had appeared a number of times in reports in our HOFEX case, but that none of these suggested any criminality or organized crime accusations." Aff. of John F. Neary (6/11/85), Exh. A.

 FACTS

 In February, 1981, TIME's Chief of Correspondents, Richard Duncan, told Senior Correspondent Alexander McNeil Smith to "cover the Donovan case." T220:2-016. *fn1" An experienced reporter with over forty-five years of experience in the newspaper business, Smith had been with TIME since 1969. T52:2-22. From 1981 until his deposition on October 29, 1984, Smith accumulated between twenty and thirty files on Donovan. T163:5-8. Approximately twenty stories resulted from these files. T163:9-25.

 In June, 1982, T107:6-15, Smith learned from three separate confidential informants of the contents of a confidential memorandum authored by FBI Director William H. Webster to then Executive Assistant Director of the FBI, Francis P. Mullen, dated December 15, 1980. Although Smith never saw the memorandum, it was read to him, T105:22-25; T106:12-25; T107:2-6; T18:5-9, and he wrote down its contents word-for-word in his notes. T91:2-4. The Webster memorandum reported December 12, 1980 conversations between Mr. Webster and Pen James and Edwin Meese, both members of the staff of then President-elect Ronald Reagan. The memorandum read as follows:

 
Mr. Edwin Meese called during my absence at 10:15 a.m. 12/12/80, and said he would return the call upon my return. He was tied up with President-elect Reagan and asked Mr. Pen James to return the call. Mr. James asked whether we had reached any conclusion as a result of our inquiry into Pat Donovan. I checked with Mr. Revell and based on information which he supplied, as well as my recollection of conversation with Mr. Mullen while I was in New York on December 10th, that we had reviewed all our indices and had checked with all field offices and nothing negative had been disclosed. I advised that a company, Chivone (PH), in which he apparently had a very substantial interest, had appeared a number of times in reports in our HOFEX case, but that none of these suggested any criminality or organized crime associations. I further advised that it did not appear necessary, in our view, to conduct a full field investigation based on the results of the name check. Mr. James said that he might need our assistance in the course of the confirmation proceedings and I, of course, stated that we would do whatever we could to help.
 
I advised that the report had been sent to Miss Jane Donower (PH), Mr. Fielding's secretary. Mr. Fielding was present with Mr. James at the time of our conversation, and was not aware that the report had been delivered.
 
William H. Webster
 
Director
 
Mr. Meese called at 4:40 p.m., 12/12/80, and wanted to be certain that there were no ongoing investigations involving Donovan. I confirmed to him, based on what I had been previously advised, that this was the case. We will certainly be asked for a full field following the nomination, but I told him that I knew of nothing to hold up the nomination at this time.

 After hearing the contents of this memorandum, Smith understood that the FBI had concluded that the Schiavone references in the HOFEX files "did not suggest any criminality." T360:10-14. However, Smith felt that "everything Webster said in the memorandum was totally contradicted by the information that [Smith] had received from confidential sources." T9:2-4. Thus, while Mr. Webster stated that the FBI had reviewed all indices and checked all field offices and that nothing negative had been found, Smith's sources told him that the field offices had not been checked. T23:22-24. And while Mr. Webster had written that the FBI concluded "that none of these [HOFEX references] suggested any criminality or organized crime associations," Smith found such conclusion to be contradicted by other information which he had been told was in the FBI files. First, Smith was told by his confidential sources that a six-month wiretap in 1979 of William P. Masselli, undertaken as part of the FBI Tuminaro Conspiracy ("TUMCON") investigation, regarding organized crime activity and the alleged use of political influence to obtain construction contracts, see Aff. of Peter G. Banta (5/14/85), Exh. B, at 6, made reference to Schiavone Construction Co. and Donovan. According to these sources, Masselli described himself on the wire as a member of the Genovese crime family. The wiretap disclosed that Masselli had obtained a Schiavone contract from a "gangster" and that a Mafia "sit-down" had sanctioned Masselli's takeover of such contract. Further, Smith was told that the wiretap showed that Masselli used his influence with corrupt union officials for the benefit of the Schiavone Company and that Masselli received money any time he wanted it from the Schiavone company. T19:9-21:12. Smith stated, "Any association with Masselli would be a suggestion of organized crime associations." T20:16-17.

 Second, Smith's confidential sources told him of the reports of Michael Orlando, an FBI informant. Orlando had reported to the Bureau that Masselli described Secretary Donovan as his "ace in the hole," and that a Genovese gangster named Albert Facchiano had demanded no-show jobs on a Schiavone construction project. Orlando stated that a conference was held in Miami regarding the no-show jobs and that Donovan participated in such conference as well as in follow-up meetings with Masselli and Schiavone in order to implement the decisions reached at the Miami conference. T21:13-22:9. Smith concluded, "All of that to me suggested criminality and organized crime references." T22:9-10.

 In addition to the TUMCON wiretaps and the Orlando reports, Smith had been told that the FBI files contained information concerning three grand jury investigations "in which the Schiavone Company was the subject," which he referred to as the Kantor case, the Gross case and an investigation of Masselli's minority-owned business. T23:6-13. Finally, in June 1982, Smith had obtained a confidential FBI memorandum dated January 12, 1981 from C.P. Monroe to Francis Mullen concerning the Donovan inquiry, and advising that Donovan had possible affiliations with LaCosa Nostra ("LCN"). In part, such memorandum states:

 
Two independent sources of the New York Division have advised that the Schiavone Construction Company, in which Mr. Donovan is an Executive Vice President, is "mobbed up." One source indicates the upper management of the Schiavone Construction Company is closely aligned with the Vito Genovese Family of the LCN through Schiavone Vice President Albert Magrini and its contacts with Jopel Construction headed by William Masselli who is an alleged self-admitted "soldier" in the Genovese family. This New York source alleges Mr. Donovan is acquainted with LCN members through Magrini and Masselli on a business and social basis and has in fact traveled from New York to Miami for the 1979 Super Bowl with Masselli and other LCN figures in the construction business.
 
* * * *
 
None of the New York sources was able to provide any information that shows any specific criminal misconduct on the part of Mr. Donovan.
 
A search of the central files of the FBI, the indices of the New York Office, and the Organized Crime Information System disclosed one pertinent reference to Mr. Donovan which is a Title III overhear between William Masselli and his son Nat Masselli, which makes reference to the fact that Mr. Masselli was going to pick up Ronnie Schiavone and Raymond J. Donovan and take them to a social function.

 Neary Aff., Exh. B.

 Thus, when Mr. Webster's memorandum was read to Smith in June 1982, the only material in the memorandum that, in Smith's view, was not contradicted by other information he knew to be in the Bureau's possession was Mr. Webster's statement that the Schiavone Company had appeared a number of times in reports in the HOFEX case. T361:25-362:4. Smith attempted to verify the accuracy of the Webster memorandum, T58:10-13, but was told by three confidential sources that the Schiavone references in the HOFEX file were "missing," T798:22-25; T80:2-3; T119:14-20; T122:18-21, that "they could not be found," T358:21-23, and that "nobody could find it." T122:19-23. He then attempted independently to verify the accuracy of the memorandum by investigating the affairs of Salvatore Briguglio, T59:16-24; T120:16-17, and by looking into the "Canny wiretapping." T120:15-22; T59:16-24. Neither investigation produced support for or verification of the Webster memorandum. T63:10-15; T358:14-28.

 On July 21, 1982, Smith met with Special Prosecutor Leon Silverman, who had been appointed in December 1981 to investigate additional allegations of criminal wrongdoing by Donovan. *fn2" Also present was Assistant Special Prosecutor Gregory N. Joseph. Smith told Silverman that "the FBI has acknowledged that . . . the name of the Schiavone company came up in the Hoffex case." Neary Aff., Exh. C, at 21. Silverman responded, essentially, that "nothing that came to our attention linked any of the principals of Schiavone with the Hoffa case." Ibid. Smith states that when he left the meeting, he was told that Silverman would make some attempt to find, and determine the nature of the HOFEX references. T83:7-11; T91:11-20; T93:6-13. Smith spoke with Silverman by telephone on July 29, August 2, August 4 and August 5, 1982 concerning whether Silverman had located the HOFEX references. T87:19-88:24; T95:2-4. On August 4, 1982 Silverman told Smith that he had located the December 15, 1980 Webster memorandum. T88:11-89:20.

 On August 12, 1982, based upon a discussion between Chief of Correspondents Duncan and Smith, one hundred lines were scheduled for "Donovan developments" in the "Nation" section of TIME, to be published on August 16, 1982, with an issue date of August 23, 1982. Banta Aff., Exh. P, at 27 (deposition of James P. Kelly). According to Smith, the objective of such coverage was "to make the public aware of shortcomings by the FBI and/or the Department of Justice in connection with the Donovan investigation," T55:4-6, and to expose "the cover-ups that took place in the bureau and in the Department of Justice that had the effect of sheltering the Secretary of Labor." T65:5-7. See also T94:3-8. On August 13, 1982, Smith submitted his file *fn3" to the New York bureau of TIME. As it related to the last paragraph of the August 23rd article, such file read as follows:

 
Yet the performance of the FBI has been controversial, at least, in the investigations of Donovan's affairs before he became Secretary of Labor. Indeed, the Senate Labor Committee has opened an investigation of the Bureau's actions. In closed-door sessions on Capitol Hill this week, Executive Assistant FBI Director Francis Mullen (who is also acting boss of the Drug Enforcement Agency) was interrogated about information withheld by the FBI last year while the Labor Committee was considering Donovan's nomination. This year, after Silverman opened his inquiry, he failed to receive some information gathered by the FBI in past investigations of the Genovese tribe with which, according to one FBI source whose report did come to light, "the upper management of the Schiavone Construction Company is closely aligned. The apparent gaps in the information provided by the Bureau are regarded by Silverman as inexplicable but not manipulative.
 
* * * *
 
At least one gap in the information the Special Prosecutor received from the FBI remains a mystery. Missing from the reports provided by the Bureau to Silverman were the references to the Schiavone Company in the FBI's investigation of the disappearance and presumed murder of the former Teamsters Union boss, Jimmy Hoffa.
 
The existence of the references to Donovan's company in the FBI files on the Hoffa case was revealed by the FBI last month in records yielded to congressional committees. The documents, the personal records of FBI Director William Webster, disclosed that he informed the Reagan transition team before Donovan was nominated that the name of the Schiavone Company appeared several times in the Hoffa case. On December 12, 1980, the information was telephoned by Webster to an aide of Ed Meese, now a top presidential aide and then chief of the Reagan transition force.
 
But neither the Senate Committee nor the Special Prosecutor was told of the mention of the Schiavone Company in the Hoffa files until Webster's records were surrendered to Congress recently. Silverman regards the matter as an imbroglio that can be explained only by the FBI. Up to now, Webster has not done that.

 Banta Aff., Exh. Q at 4-5, 9-10.

 Smith deliberately excluded from his file the deleted phrase, "but that none of these suggested any criminality or organized crime associations." T18:25-19:7. Although he would have included any "legitimately exculpatory" material, T76:23-77:15, Smith stated that he deleted this particular phrase as it was not central to the thrust of his story, T139:4-11, because it was contradicted by other information that Smith had, T77:20-25; T127:9-16; T141, and because it was ambiguous. T78:11-82:25. He chose to use the first part of the sentence, ". . . a company, Chivone (PH) . . . had appeared a number of times in reports in our HOFEX case" even though he had not been able to substantiate the existence of the HOFEX references because "that was the only thing that was not challenged in Webster's memorandum that someone had told him about these HOFEX references." T353:6-11.

 The August 23, 1982 article was written in New York by James Kelly, a staff writer for TIME, who relied completely on the file provided him by Smith. Banta Aff., Exh. P, at 17:16-20. Kelly was thus not aware of the exculpatory language omitted from such file. The article was checked for accuracy by TIME researcher Michael Harris, who appears to have accomplished this solely by confirming various facts and versions of the story with Smith. Banta Aff., Exh. S (dep. of Michael P. ...


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