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Sisler v. Gannett Co.

Decided: October 21, 1986.

MAYO S. SISLER, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT, AND APT-TO-ACRES, INC., A NEW JERSEY CORPORATION, PLAINTIFF-CROSS-APPELLANT,
v.
GANNETT CO., INC., A DELAWARE CORPORATION, DEFENDANT-APPELLANT AND CROSS-RESPONDENT



On certification to the Superior Court, Appellate Division, whose opinion is reported at 199 N.J. Super. 307 (1985).

For reversal and remandment -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. For affirmance -- None. The opinion of the Court was delivered by Handler, J. Garibaldi, J., concurring. Garibaldi, J., concurring in the result.

Handler

This libel suit calls upon us to consider what standard of liability should be established under New Jersey law with respect to tortious defamation committed by media defendants against a plaintiff who is not a "public figure" under the First Amendment. Both courts below held that ordinary negligence was the proper standard for determining whether such defamation was actionable. They were of the view that the plaintiff was essentially a "private person" who should not be required to bear the substantial, "actual malice" burden in order to prove defamation, as might otherwise be required under constitutional free-speech principles in situations where the defamed person can be considered a "public official" or "public figure." Defendants now renew their contention as to the appropriate standard for imposing liability, stressing that plaintiff involved himself in a matter of public concern and is not entitled to the diminished burden of proving defamation accorded truly private persons; in addition they claim error in two other trial court rulings. Plaintiff likewise brings before the Court several alleged trial errors regarding the amount of his damages.

I.

The facts in this case, as in most libel-defamation actions, are critical. In the early 1960's, plaintiff, Mayo Sisler, and several other Franklin businessmen co-founded the Franklin State Bank (FSB or bank). From the time of FSB's inception until 1980, plaintiff served as President or Chairman of the Board of the

bank. During this period plaintiff also became involved in several substantial real estate and racehorse breeding projects. In 1980 Sisler retired from all official bank positions in order to pursue his other business interests, including the operation of a wholly-owned corporation, Apt-to-Acres, engaged in breeding standardbred and thoroughbred horses.

In August of 1981, The Courier-News, a newspaper with a circulation of 58,800 in central New Jersey, published a three article series concerning alleged improper loans made by the Franklin State Bank. The initial article, not at issue in this case, appeared on August 15, 1981, and reported that State and Federal authorities were investigating FSB for questionable loans issued on falsified credit reports. In the second article, which ran on August 19, 1981, defendant, Sam Meddis, a Courier-News staff writer, reported that a company with which plaintiff was associated had sold and leased land to the landlord of an auto company under investigation for falsifying credit reports in loan applications to FSB. While the facts related by this article were true, plaintiff objected to implications that arose from the newspaper's use of the word "ties" in the headline "Bank officials have ties with firm in loan probe," and to the newspaper's characterization of plaintiff's dealings with the auto company and its landlord as "private." The third article in the series, published on August 20, 1981, and again written by Meddis, accused plaintiff of receiving undercollateralized loans from Franklin State Bank to finance his horse farm, Apt-to-Acres. In fact, plaintiff had adequately secured his loans; Meddis had misinterpreted several public deeds and records. The Courier-News published retractions to the August 19th and August 20th articles on August 28, 1981 and September 18, 1981.

Fatefully, at the time the Courier-News published these articles plaintiff was negotiating with Louis Guida, a leading horse syndicator, to have three standardbred horses stand stud at Apt-to-Acres for the 1982 or 1983 breeding seasons. Two of the three horses, Seahawk Hanover and Computer, were described

by a trial expert as among the top three stallions of the 1982 breeding season, while the third, Niatross, had lowered the world record for the pacing mile and was described by a trial expert as the "Horse of the Century." In the midst of these negotiations someone anonymously mailed the three Courier-News articles to Guida. Guida thereafter informed plaintiff in a letter that although he did not personally credit the articles, he could not take a chance on their veracity and was thus terminating negotiations for standing the three horses at Apt-to-Acres.

Plaintiff, together with Apt-to-Acres, filed suit for defamation in Superior Court, against Sam Meddis, The Courier-News Co., and Gannett Company, Inc., the parent of the Courier-News, as defendants. Plaintiff requested general damages for loss of reputation and mental anguish, special damages arising out of the lost stud fees from the horses, and punitive damages. At trial, the court dismissed Apt-to-Acres as corporate plaintiff and Gannett Company as a defendant. The trial judge also determined that plaintiff was not a "public figure" in terms of applying the strict "actual malice" burden of proof first described in New York Times v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964); accordingly it instructed the jury to return a verdict for the plaintiff if it found the defendant had been negligent in publishing a defamatory article. Additionally, the trial court denied plaintiff's request to submit the issues of punitive damages and damages for mental anguish to the jury. The jury returned a verdict for the plaintiff of $1,050,000, $200,000 in general damages and $850,000 in special damages.

Defendants appealed the ruling that Sisler was a "private figure," the trial court's use of a negligence standard, the adequacy of the evidence of negligence and of injury to reputation, as well as plaintiff's "standing" to recover special damages sustained by Apt-to-Acres, his wholly owned corporation. Plaintiff cross-appealed several rulings of the trial court concerning the quantum of damages. The Appellate Division

affirmed the trial court in all respects. 199 N.J. Super. 307 (1985). In affirming the use of the negligence standard, the Appellate Division reasoned that Lawrence v. Bauer, 89 N.J. 451, cert. denied, 459 U.S. 999, 103 S. Ct. 358, 74 L. Ed. 2d 395 (1982), in which the Court found plaintiff to be a "public figure" under the First Amendment and thus subject to the "actual malice" burden, implied a lesser standard for non-public figures. The Appellate Division did not address most of plaintiff's cross-appeal on the merits, deeming the cross-appeal to be waived by plaintiff's request that the appellate court consider its cross-appeal only if a subsequent trial on the damages issue would not prejudice the initial jury award. 199 N.J. Super. at 329.

We granted defendants' petition for certification and plaintiff's cross-petition. 101 N.J. 289 (1985).

II.

This case presents another episode in the unhappy cohabitation of the tort of defamation, which is protective of an individual's reputation, with constitutional guarantees that serve to protect free speech and press. The tort of defamation and the constitutional and common-law ideals of free speech have long competed for control over the standards of liability for false defamatory speech.

For most of American history, state common law refereed this contest free of federal intervention. Generally, the states favored allowing defamation actions to go forward at the expense of the values embodied in constitutional free speech. The defamed citizen had only to prove a false publication that would subject him to hatred, contempt, or ridicule, and general damage to reputation would be presumed. With the exception of a few isolated absolute and qualified privileges for speech considered particularly worth protecting, most false publications resulted in defamation verdicts for plaintiffs. Any potential First Amendment or similar constitutional complications

were discarded under the rationale that defamatory speech had no "value to society" and thus did not merit constitutional protection. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 369, 94 S. Ct. 2997, 3022, 41 L. Ed. 2d 789, 822 (1974) (White, J., dissenting); Eaton, "The American Law of Defamation Through Gertz v. Robert Welch, Inc. and Beyond: An Analytical Primer," 61 Va.L.Rev. 1349, 1350-64 (1975).

In New York Times v. Sullivan, supra, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686, the Supreme Court realigned the balance between the First Amendment and tortious defamation. Against the background of a "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open," id. at 270, 84 S. Ct. at 721, 11 L. Ed. 2d at 701, the Court declared that the First Amendment "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' -- that is, with knowledge that it was false or with reckless disregard of whether it was false or not." Id. at 279, 280, 84 S. Ct. at 726, 11 L. Ed. 2d at 706. The holding stemmed from the Court's belief that the press, acting under the spectre of libel law, often engaged in self-censorship, editing out many true, constitutionally-protected statements because of the difficulties of proving the truth of statements in court and the expense of doing so. Id. at 271-72, 84 S. Ct. at 721, 11 L. Ed. 2d at 701.

Subsequent cases in the 1960's extended New York Times to speech concerning "public figures," Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S. Ct. 1975, 18 L. Ed. 2d 1094 (1967), and to invasion of privacy suits involving "false reports of matters of public interest." Time, Inc. v. Hill, 385 U.S. 374, 87 S. Ct. 534, 17 L. Ed. 2d 456 (1967). These cases emphasized the importance of the dissemination of information on matters of public interest. See Time, Inc. v. Hill, supra, 385 U.S. at 388, 87 S. Ct. at 542, 17 L. Ed. 2d at 467 (quoting Thornhill v. Alabama, 310 U.S. 88, 102, 60 S. Ct. 736, 744, 84 L. Ed. 1093, 1102 (1940)) ("Freedom of discussion, if it would fulfill its historic function

in this nation, must embrace all issues about which information is needed or appropriate to enable the members of society to cope with the exigencies of their period.") Their holdings stemmed in part from the idea that speech relating to public officials and figures often coincides with matters that would be of legitimate public interest. See Garrison v. Louisiana, 379 U.S. 64, 77, 85 S. Ct. 209, 217, 13 L. Ed. 2d 125, 134 (1964) (public-official rule protects the paramount public interest in a free flow of information to the people concerning public officials); Curtis Publishing Co. v. Butts, supra, 388 U.S. at 154, 87 S. Ct. at 1991, 18 L. Ed. 2d at 1094 (public interest in circulation of materials on public figures involved in that case "not less than that involved in New York Times"). The singular importance ascribed to speech involving a public concern reached fruition in 1971 when a three-member plurality declared that the "actual malice" requirement applied to "all discussion and communication involving matters of public or general concern, without regard to whether the persons involved are famous or anonymous." Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 44, 91 S. Ct. 1811, 1820, 29 L. Ed. 2d 296, 312 (1971).

However, three years later in Gertz v. Robert Welch, Inc., supra, 418 U.S. 323, 94 S. Ct. 2997, 41 L. Ed. 2d 789, the Court retreated from the Rosenbloom position, and limited the application of the New York Times standard to "public figures" and "public officials." According to the Court, these persons, who have "thrust themselves to the forefront of particular public controversies" and "usually enjoy significantly greater access to the channels of effective communication," could more justly be burdened with the actual malice standard. Id. at 344-45, 94 S. Ct. at 3009, 41 L. Ed. 2d at 808. With the Gertz decision, the classification of an individual as a public or private figure became the critical determination in defamation actions.

Recent decisions of the Supreme Court have reasserted the relevance of the nature of the speech, stressing that "not all speech is of equal First Amendment importance. It is speech

on 'matters of public concern' that is 'at the heart of the First Amendment's protection.'" Dun and Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 758-59, 105 S. Ct. 2939, 2945, 86 L. Ed. 2d 593, 602 (1985) (citations omitted). "[I]n contrast, speech on matters of purely private concern is of less First Amendment concern." Id. at 759, 105 S. Ct. at 2946, 86 L. Ed. 2d at 603; see also Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. , 106 S. Ct. 1558, 89 L. Ed. 2d 783 (1986) (holding that the First Amendment requires a private figure libel plaintiff to bear the burden of proving that a matter of public concern has been the subject of a false statement).

From these decisions, which attempt to pacify the warring interests of free speech and individual reputation, two themes can be discerned. The first is directed toward evaluating the strength of an individual's reputational interest. This involves an appreciation of the status or role of the aggrieved individual in relation to the subject matter of the speech. Underlying this focus is the idea that individuals who have knowingly and voluntarily exposed themselves to public commentary can more fairly be required to shoulder a heavier burden of proof in order to establish actionable defamation. The fairness of imposing a heavier burden is most evident as to a person who is a "public official," because his "position must be one which would invite public scrutiny and discussion of the person holding it. . . ." Rosenblatt v. Baer, 383 U.S. 75, 86-87 n. 13, 86 S. Ct. 669, 676 n. 13, 15 L. Ed. 2d 597, 606 n. 13 (1966). The same notions of fairness justify similar treatment of one who is a "public figure." As explained in Gertz, "a compelling normative consideration underlying the distinction between public and private defamation plaintiffs" is that public figures, like public officials, have either "assumed roles of especial prominence in the affairs of society" or "thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues," and thus "invite[d] attention and comment." Gertz v. Robert Welch, Inc., supra, 418 U.S. at 344-45, 94 S. Ct. at 3009, 41 L. Ed. 2d at 808. For those reasons, "[t]he communications

media are entitled to act on the assumption that public officials and public figures have voluntarily exposed themselves to increased risk of injury from defamatory falsehood concerning them." Id. at 345, 94 S. Ct. at 3010, 41 L. Ed. 2d at 808. In contrast, private individuals, having "not accepted public office or assumed an 'influential role in ordering society,'" cannot be presumed to have relinquished part of their interest in the protection of their own good name and are deemed "more deserving of recovery." Ibid. (citation omitted). They may accordingly be allowed to establish actionable defamation under a less onerous burden of proof. Thus, in defamation actions, considerations of fairness to the individual permit the imposition of a strict burden of proof on public persons and, conversely, counsel a lighter burden to be placed on those who have remained out of the public domain.

The second decisional theme focuses on the subject matter of the speech itself. If the speech relates to a matter of public concern, it implicates the "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open," New York Times v. Sullivan, supra, 376 U.S. at 270, 84 S. Ct. at 721, 11 L. Ed. 2d at 701 (emphasis added), and "occupies the 'highest rung of the hierarchy of First Amendment values.'" Dun and Bradstreet, Inc. v. Greenmoss Builders, Inc., supra, 472 U.S. at 759, 105 S. Ct. at 2946, 86 L. Ed. 2d at 603 (quoting Connick v. Myers, 461 U.S. 138, 145, 103 S. Ct. 1684, 1689, 75 L. Ed. 2d 708 (1983)). Such speech requires maximum protection. Speech that does not pertain to matters of public concern rests more lightly on the free speech/reputation interest scale.

The interaction of these two themes under the First Amendment yields four possible combinations, which are by no means static or immutable. Three of these combinations were identified in Philadelphia Newspapers v. Hepps, supra, 475 U.S. , 106 S. Ct. 1558, 89 L. Ed. 2d 783. There, the Supreme Court, in holding that the First Amendment requires a private figure to prove that defamatory speech is false when he seeks

damages against a media defendant for speech of public concern, summarized the federal accommodation of First Amendment and individual reputational interests.

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 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 , 106 S. Ct. at 1563, 89 L. Ed. 2d at 792.]

In a fourth case, the speech concerns the private affairs of a "public person" and the constitutional requirements are relaxed, as with all speech on matters of private concern. See Dun v. Bradstreet, Inc. v. Greenmoss Builders, Inc., supra, 472 U.S. at 759, 105 S. Ct. at 2946, 86 L. Ed. 2d at 603 (speech on private matters is of less First Amendment concern); Restatement 2nd on Torts § 580A (actual malice standards protects communication "concerning a public official or public figure in regard to his conduct, fitness or role in that capacity. . ." (emphasis added)).

These four combinations and their many permutations reflect changing relationships between the policies of encouraging free speech and fairness to the individual. These concerns for fairness to the individual and the importance of the subject-matter of speech necessarily underlie and inform our resolution of this case, both under the Federal Constitution and New Jersey law.

III.

Reflecting these concerns, the constraints and limitations imposed by the First Amendment focus primarily on whether the defamatory speech relates to a topic of legitimate public concern and whether plaintiff is a public figure. We turn first

to whether the articles published in the Courier-News relate to a topic of legitimate public interest. These articles concerned plaintiff's financial dealings with a company being investigated for questionable loans, and related that plaintiff had obtained under-collateralized loans from FSB. Although the trial court determined that "no public controversy" existed before the publication of the articles, it is not clear whether the court concluded that the subject-matter of these articles was not one of legitimate interest to the public.

Concededly "not everything that is newsworthy is a matter of legitimate public concern, and sorting such matters from those of a more private nature may be difficult." Dairy Stores, Inc. v. Sentinel Publishing Co., 104 N.J. 125, 144 (1986). Nevertheless, in view of the historic public and governmental concern with the role and operation of banks, particularly their financial stability, we are satisfied that the propriety of substantial loans issued by and area bank to its former-president and founder is a topic of legitimate public interest. "The business of banking . . . intimately affects the commercial welfare and business interests of the people. . . ." First Nat'l Bank of Whippany v. Trust Co. of Morris County, 76 N.J. Super. 1, 9 (App.Div.1962). Manifesting their importance, banks are subject to both the extensive Federal and State regulation. See 12 C.F.R. § 1-3805; N.J.S.A. 17:9A-1 to -369. Statutes also provide for regular independent examination and supervision of banks. See N.J.S.A. 17:9A-252 to -265. Moreover, special prescriptions have been enacted for loans by a bank to its director or executive officer. See N.J.S.A. 17:9A-72. The policies that actuated the particularized guidelines for incestuous loans between a bank and its high-ranking officers ensure the financial integrity of, and public confidence in, the banking system.

These policies influence our assessment of the transactions between FSB and plaintiff. Clearly the public dangers that are inherent in insider-dealing with a bank are not totally reduced

or substantially lessened when a bank deals with a former insider. Accompanying and motivating this governmental concern is the public's interest in the conduct of the banking industry. This interest encompasses, but may go beyond, the regulatory concerns of government itself. Private actors at all levels, including shareholders, financial analysts, depositors, and potential customers, have a legitimate interest in a bank's dealings. The press thus has an important function not only in reporting government activity respecting banking but also in informing the public about bank conduct. These considerations lead us to conclude that the articles published by the Courier-News, treating the adequacy of security for substantial loans made by FSB to plaintiff, its former director, relate to a matter of legitimate public interest.

The subject of the defamatory articles, being a topic of legitimate public interest, militates strongly in favor of imposing a high or strict burden of proof upon plaintiff. Nevertheless, we must determine whether it is fair to impose that burden in view of plaintiff's role or status. Under the First Amendment, this fairness determination is embodied in the public/private person classification.

The trial court, finding that plaintiff had not assumed an active role with respect to any public controversy or attempted to influence public opinion on the matter, ruled that plaintiff was not a public figure. The record supports this determination. Plaintiff has not attained "especial prominence in the affairs of society," the trademark of all-purpose public figures; nor, as is characteristic of limited-purpose public figures, has plaintiff "thrust [himself] to the forefront of particular public controversies in order to influence the resolution of the issues involved." See Gertz v. Robert Welch, Inc., supra, 418 U.S. at 345, 94 S. Ct. at 3009, 41 L. Ed. 2d at 808; see also Lawrence v. Bauer ...


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