Schiavone is precluded, as a matter of law, from recovering compensatory damages.
I. Compensatory damages
Plaintiff Schiavone Construction Co. admits in interrogatory answers that it "limits its claim for pecuniary damages to a nominal award." Affidavit of Peter G. Banta (4/4/86), Exh. A. Schiavone's counsel at oral argument on a motion for reconsideration stated that "there may be problems with respect to compensatory damages" and that plaintiffs "might well be content to take a nominal award plus a punitive award." Transcript of March 7, 1986. Schiavone, in their briefs on the current motion, insist that they "have not waived their right" to offer compensatory damage proofs, Plaintiffs' Brief in Opposition to Defendant's Motion for Summary Judgment (April 29, 1986), at 6, and that they will offer such proofs "if necessary to sustain a cause of action." Plaintiffs' Brief in Opposition to Defendant's Motion for Summary Judgment (July 2, 1986), at 3-4. Given this ambiguity, the court proceeds as if plaintiffs' intend to seek compensatory damages at trial.
The court finds that plaintiffs cannot recover compensatory damages as a matter of law. The court bases its ruling on the "libel-proof plaintiff" doctrine.
This doctrine recognizes that certain statements, as a matter of law, cannot damage the reputations of certain plaintiffs -- the plaintiffs, in essence, are "libel-proof." See generally Note, The Libel-Proof Plaintiff Doctrine, 98 Harv. L. Rev. 1909 (1985).
Courts have found plaintiffs libel-proof in two senses. First, certain plaintiffs have such poor reputations on a particular issue that no further statements on that issue could cause injury. See, e.g., Cardillo v. Doubleday & Co., Inc., 518 F.2d 638, 639 (2d Cir. 1975); Wynberg v. National Enquirer, Inc., 564 F. Supp. 924, 928-29 (C.D. Cal. 1982); cf. Marcone v. Penthouse Int'l Magazine for Men, 754 F.2d 1072, 1078-79 (3d Cir. 1985) (applying Cardillo and Wynberg but finding plaintiff not to be libel-proof), cert. denied, 474 U.S. 864, 106 S. Ct. 182, 88 L. Ed. 2d 151 (1985). This "issue-specific" libel-proof doctrine involves comparison of the issue raised by the allegedly defamatory statements with the issue on which plaintiff's reputation is previously tarnished. Second, the unchallenged portion of a communication may so damage a plaintiff's reputation that the challenged portion may be found to cause no further meaningful injury. See Guccione v. Hustler Magazine, Inc., 800 F.2d 298, 303 (2d Cir. 1986); Simmons Ford, Inc. v. Consumers Union, 516 F. Supp. 742 (S.D.N.Y. 1981). This "incremental harm" aspect of the doctrine calls for comparison of the challenged and unchallenged sections of the communication at issue. This case implicates both branches of the doctrine.
The challenged statements in the Time article reported that "the name of Schiavone appeared several times in the [FBI's] reports" on the disappearance of Jimmy Hoffa and that these references "would surely have intrigued" those investigating Donovan's nomination. Time argues that these statements concern Schiavone's connection with organized crime. In light of the hundreds of published reports tying Schiavone to organized crime, including unchallenged statements in the Time article itself reporting on Schiavone's underworld connections, Time argues that the challenged statement cannot further injure plaintiffs' reputation.
The court agrees. In a previous opinion in this case, the court stated:
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.
Schiavone Constr. Co. v. Time, Inc., 619 F. Supp. 684, 686 (D.N.J. 1985).
Plaintiffs counter by claiming that the challenged statement goes beyond simply connecting Schiavone to organized crime. The passage, plaintiffs contend, accuses them of murdering Jimmy Hoffa, an accusation different in kind from any previously published statements. Plaintiffs, however, mischaracterize the challenged paragraph. A statement that Schiavone's name appeared in the FBI's Hoffa files is not an accusation of murder. The connection of Hoffa to organized crime is notorious. Schiavone's alleged involvement with underworld figures, as stated above, has been widely catalogued. The statement that Schiavone's name was in the Hoffa files -- without specifying the nature of the references -- does nothing more than reassert the claims of Schiavone's ties with organized crime.
The facts of this case resemble those in the Second Circuit's recent reaffirmation of the libel-proof plaintiff doctrine, Guccione v. Hustler Magazine, Inc., 800 F.2d 298 (2d Cir. 1986). In that case, the court found that Bob Guccione, publisher of Penthouse magazine, was libel proof on the issue of his adultery. The court rejected the argument that Guccione could not be libel-proof because he had never been convicted of adultery. Id. at 303. The court found Guccione's reputation to be tarnished due to magazine and newspaper articles reporting his adulterous relations. Id. at 304; cf. Wynberg v. National Enquirer, Inc., 564 F. Supp. 924, 928-29 (C.D. Cal. 1982) (finding a plaintiff libel-proof based on both past convictions and adverse media coverage).
This doctrine does not and should not prevent the imposition of liability merely because the person allegedly defamed already has a bad reputation. In order to be shielded from liability, the statement upon which the claim is based must deal with the same matters upon which the person's bad reputation is founded. The fact that a person has a reputation as a liar would not make him libel proof against charges that he is a thief.
Further, it is not the mere repetition of the same or similar defamatory statements which invokes the doctrine. Rather it arises after the publicity of the claims is so widespread that further repetition can do no further harm to the person allegedly defamed. Such is the situation in this case. The widespread national coverage of Schiavone's alleged ties to organized crime, then, constitutes sufficient evidence to support the court's finding that plaintiff suffered no injury as a matter of law.
The court concludes, as a matter of law, that Schiavone has suffered no injury to reputation as a result of the challenged Time passage. Thus, Schiavone cannot recover compensatory damages.
II. Punitive and nominal damages
The court has ruled that Schiavone has not suffered injury to reputation and therefore cannot recover compensatory damages as a matter of law. Schiavone claims, however, that it nonetheless can seek punitive damages. Furthermore, because the challenged statements are defamatory per se, see Schiavone Constr. Co. v. Time, Inc., 619 F. Supp. 684, 694-95 (D.N.J. 1985), Schiavone is entitled to nominal damages given that the statements are defamatory per se. See, e.g., Restatement (Second) of Torts § 620 comment a (stating that nominal damages are awarded when the plaintiff's "bad character" leads jury to believe that plaintiff has suffered no serious injury to reputation). Given this background, the court faces two questions: 1) Can Schiavone, in the absence of injury to reputation, maintain this libel action for punitive and nominal damages? 2) If so, can Schiavone, as a matter of law, recover punitive damages? The court examines these two questions under both New Jersey tort law and federal constitutional principles.
A. New Jersey law
The court concludes that New Jersey tort law would permit Schiavone to pursue punitive and nominal damages in this case.
1. Can the cause of action be maintained ?
New Jersey law provides that punitive damages may be awarded in intentional tort cases whether or not compensatory damages are recoverable, as long as the plaintiff has suffered "some injury, loss, or detriment." See Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 51, 477 A.2d 1224 (1984). In other words, a plaintiff who can recover nominal damages may seek a punitive award.
The New Jersey Supreme Court in Nappe, a fraud case, recognized that punitive awards serve deterrent and retributive purposes not furthered by compensatory damages. See id. at 48-49. Furthermore, the court stated:
Because of the fortuitous circumstance that an injured plaintiff failed to prove compensatory damages, the defendant should not be freed of responsibility for aggravated misconduct. People should not be able with impunity to trench wilfully upon a right. Moreover, it is especially fitting to allow punitive damages for actions such as legal fraud, since intent rather than mere negligence is the requisite state of mind.