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SCHIAVONE CONSTR. CO. v. TIME

November 6, 1986

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



The opinion of the court was delivered by: SAROKIN

 This case requires the court to determine under what circumstances, if any, a public figure is entitled to recover punitive damages against a media defendant in a libel action. Because of the importance of a free press, some have urged the total abolition of punitive damages in such actions. But certainly in those cases in which a publisher has knowingly reported false information for the specific purpose of injuring someone's reputation, such action should be punished. An intentional or wanton and reckless abuse of the power of the press should not be immune from a punitive damage award. However, the danger from permitting any libel award is apparent. As this court previously stated in this matter:

 
This action may result in a verdict favorable to the plaintiffs; but it may also, along with other defamation cases, result in a timorous and tentative press content to report on births, weddings, deaths and craft fairs. While it is essential to protect individuals from a powerful media which can destroy reputations forever through an abuse of that power, the greater danger lies in the destruction of the independence of the media itself.

 Schiavone Constr. Co. v. Time, Inc., 619 F. Supp. 684, 710 (D.N.J. 1985).

 Punitive damage awards have within their power not only the ability to punish, but to destroy as well. And although the threat of punitive damages may well deter the false statement, it may deter the truth as well. The mere threat or possibility of a libel action with its vast costs of defense and potential adverse verdict must dampen the enthusiasm for vigorous reporting. If added to that is the spectre of punitive damages, awarded with unbridled discretion by juries, then the chilling effect may turn the reporter's zeal to ice.

 To opt for an outright ban of all punitive damage awards in such actions would require the court to ignore substantial binding precedent which permits them. However, the balance may be struck by not permitting such awards in the absence of proof of compensatory damages, since it places no undue burden upon the party defamed to demonstrate that he has actually been injured before he can demand that the defamer be punished. For the reasons hereinafter set forth, plaintiffs are not entitled to recover punitive damages because they cannot recover compensatory damages. As a result, defendant is entitled to summary judgment.

 BACKGROUND *fn1"

 This is a libel action brought by Schiavone Construction Company and Ronald A. Schiavone *fn2" against Time, Inc. regarding a magazine article published in 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. The article, after noting that Phase II of the inquiry would focus on charges that Donovan met with two known mobsters near Miami in January 1979, discussed Silverman's failure in the first phase to pursue all leads concerning the Miami meeting. The article's final paragraph stated:

 
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.

 Schiavone challenges only this paragraph. The background to the publication of this article is as follows.

 In February 1981, Time assigned Senior Correspondent Alexander McNeil (Sandy) Smith to cover "the Donovan case." In June 1982, Smith learned of the contents of a confidential memorandum, dated December 15, 1980, from FBI Director Webster to the FBI's Executive Assistant Director. The memorandum reported December 12 conversations between Mr. Webster and Edwin Meese and Pen James, both staff members of then President-elect Reagan. The memorandum states, in relevant part, that Mr. Webster advised Mr. Meese "that a company, Chivone (PH), in which [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." The "HOFEX case" refers to the investigation of the disappearance of Jimmy Hoffa.

 Smith weighed the Webster memorandum against the substantial fund of information he had garnered concerning Donovan and Schiavone. According to Smith, the only information in the Webster memorandum that was not contradicted by this information was Mr. Webster's statement that the Schiavone Co. had appeared a number of times in reports of the HOFEX case. The exculpatory phrase -- that none of the references suggested criminality -- was contradicted by other information that, according to Smith's confidential sources, was in the FBI's possession.

 Smith attempted unsuccessfully to verify the memorandum. Three confidential sources told Smith that the Schiavone references in the HOFEX file were missing or could not be found.

 On July 21, 1982, Smith met with Special Prosecutor Silverman. Smith told Silverman that the FBI had acknowledged that Schiavone's name appeared in connection with the Hoffa case. Silverman responded that he knew of nothing linking any Schiavone principals to that case. Silverman told Smith that he would search for the HOFEX references. Smith and Silverman met again on August 12, 1982. Silverman told Smith that the Schiavone name did not appear in the HOFEX files, and that Mr. Webster had erred in his memorandum.

 In August 1982, Time decided to run a story on the shortcomings of the FBI's and/or the Department of Justice's Donovan investigation. Smith submitted his reporter's file to the New York bureau as the basis for the article. The file said that the Webster memo stated that the Hoffa file contained Schiavone references; Smith deliberately excluded from the file that the Webster memo further stated that "none of these suggested any criminality or organized crime associations." Smith, in deposition testimony, stated that he deleted the phrase because it was not central to the thrust of his story, because it was contradicted by other information that Smith had, and because it was ambiguous. Smith included the section on the Schiavone references, despite his inability to verify the existence of the references, because their existence was the only thing in Webster's memorandum not contradicted by his confidential sources.

 A staff writer authored the August 23, 1982 article based on Smith's file.

 This case was filed on March 17, 1983. On August 13, 1983, the Honorable Herbert J. Stern granted Time's motion to dismiss on the ground that the New Jersey fair report privilege barred Schiavone's claim in that the article was "an accurate account of an official record or proceeding." Schiavone Constr. Co. v. Time, Inc., 569 F. Supp. 614, 621 (D.N.J. 1983). On May 25, 1984, the Third Circuit reversed, holding that there existed "a question of fact as to the fairness of Time's summarization of the Webster memorandum so as to preclude a determination by the District Court that publication of the article was privileged as a matter of law." Schiavone Constr. Co. v. Time, Inc., 735 F.2d 94, 98 (3d Cir. 1984).

 On December 5, 1984, Judge Stern recused himself and the case was assigned to this court. On November 22, 1985, the court made the following rulings: 1) the challenged statement is defamatory per se ; 2) a genuine issue of fact exists as to whether the challenged statements are "of and concerning" Ronald A. Schiavone; 3) Time's fair reportage, neutral reportage, and truth defenses are stricken; 4) the plaintiffs are public figures; 5) a genuine issue of fact exists as to whether Time acted with "actual malice."

 Time now moves for summary judgment, arguing that plaintiff has suffered no actionable injury as a matter of law. After briefing and oral argument on the original motion, at which plaintiffs conceded their inability to prove compensatory damages, the court requested additional briefing upon the availability of punitive damages to the plaintiffs.

 For the alternative reasons set forth below, the court grants Time's motion for summary judgment.

 DISCUSSION

 The common law of defamation permits a libel plaintiff to seek compensatory, punitive, and nominal damages. See, e.g., W. Keeton, D. Dobbs, P. Keeton, D. Owen, Prosser and Keeton of the Law of Torts, @116A at 842 (5th ed. 1984) [hereinafter Prosser on Torts]. New Jersey recognizes these three basic types of legal damages. See Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 48, 477 A.2d 1224 (1984). The court ...


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