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Senna v. Florimont

September 22, 2008

RANDY SENNA, T/A FLIPPERS FASCINATION, PLAINTIFF-APPELLANT,
v.
WALTER FLORIMONT AND 2400 AMUSEMENTS, INC., T/A OLYMPIC ENTERPRISES, DEFENDANTS-RESPONDENTS, AND ROBERT MEHLBAUM AND JOHN DOE A & JOHN DOE B, DEFENDANTS.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the issue is whether defendant Walter Florimont, an operator of a boardwalk game of chance, whose employees broadcast over a loudspeaker that a nearby competitor, plaintiff Randy Senna, was a cheat, is entitled to the heightened protection of the actual-malice standard that applies to speech involving public figures and the public interest.

Because summary judgment was granted in defendants' favor, the facts are viewed in the light most favorable to plaintiff. In 2003, Senna owned Flipper's Fascination, a boardwalk arcade game in Wildwood. Fascination is a competitive game of chance regulated by the State's Legalized Games of Chance Control Commission. The first player to roll balls into five holes that form a row wins the game and receives tickets that can be redeemed for prizes. Senna had operated a Fascination parlor in Seaside Heights until 1995, when he relocated his parlor to Wildwood. Senna's rival, Florimont, owned a parlor that operated nearby on the boardwalk. He told Senna "this is my town" and "I'm going to run you out of business."

To keep his client base, Senna ran an ad in a local newspaper, promising that prize tickets won at his Seaside Heights parlor would be honored at his Wildwood parlor. Soon after, employees at Florimont's parlor told customers that Senna would not honor the prize tickets he had issued. Within a few months, Senna closed his Wildwood parlor, only to open it again in 2000 under the name of Flipper's Fascination. In 2003, Florimont's employees broadcast over a public address system to boardwalk customers that Flipper's Fascination was flimflamming the public; that Senna was "dishonest" and "a crook" who "ran away and screwed all of his customers in Seaside" by not honoring their prize tickets; and that he would cheat his Wildwood customers.

Senna filed a complaint against Florimont and others, alleging they defamed him and tortiously interfered with his business. The trial court granted summary judgment in favor of defendants. With respect to the defamation claims, the court determined that plaintiff had not presented sufficient evidence to show that defendants acted with actual malice, which requires proof that they made the allegedly defamatory statements either knowing that they were false or in reckless disregard of the truth. The court applied that heightened standard because the allegedly defamatory speech concerned a highly regulated industry and a matter of legitimate public concern -- games of chance.

The Appellate Division affirmed, concluding that games of chance are part of a highly regulated industry, and thus the actual-malice standard applied. The Supreme Court granted certification. 192 N.J. 477 (2007).

HELD: Based on the content, form, and context of the challenged speech, including the identity of the speaker and the intended audience, the speech involved here did not touch on matters of public concern. The false and defamatory statements of defendants' employees, impugning the honesty of a business competitor, fall into the category of commercial speech that is not entitled to heightened protection. The negligence standard is the appropriate standard of care.

1. In this case, the Court must balance two competing interests: the right of individuals to enjoy their reputations unimpaired by false and defamatory attacks, and the right of individuals to speak freely on issues of public concern. At common law, reputation was so highly valued that a speaker was held strictly liable for a false and defamatory statement. The right to enjoy one's reputation free from unjustified smears was so socially significant that it was understood to be guaranteed by the New Jersey Constitution. Although the 1844 Constitution protected free speech as a fundamental right, it allowed for persons to be held accountable "for the abuse of that right." The common law of strict liability in defamation cases, however, was buffered by a limited number of privileges designed to protect speech serving important public interests. (pp. 8-13)

2. In New York Times Co. v. Sullivan, 376 U.S. 254 (1964), the United States Supreme Court held that the First Amendment prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves the statement was made with actual malice. As background,the Court considered the profound national commitment to the principle that debate on public issues should be uninhibited. Application of the state defamation law at issue was unconstitutional because libel suits threatened to bankrupt newspapers and therefore limit public debate. In later cases, the Court extended the actual-malice standard to speech concerning public figures who, unlike private individuals, enjoy greater access to channels of communication and have a better opportunity to counteract false statements. However, for First Amendment purposes, the actual-malice standard does not apply to speech concerning private individuals because they have not voluntarily relinquished any interest in the protection of their own good names. The Court left to the states substantial latitude to develop their own remedy for defamatory falsehood injurious to the reputation of a private individual. (pp. 14-18)

3. In three cases, the New Jersey Supreme Court adopted the actual-malice standard in private-figure defamation cases in which the challenged speech touched on matters of public concern. In Dairy Stores, Inc. v. Sentinel Publishing Co., 104 N.J. 125 (1986), defendant's newspapers reported that plaintiff sold contaminated spring water. The Court foundthat the need for the free flow of information on matters of public concern required heightened protection for the speaker, regardless of whether the target of the speech was a public figure. The Court also applied the actual-malice standard to the independent laboratory that analyzed the water because outside experts that submit reports to the media are so closely related to news gathering that they should be treated like media defendants. (pp. 19-21)

4. In Sisler v. Gannett Co., 104 N.J. 256 (1986), the Court extended the actual-malice standard to a former bank president's defamation action against a newspaper, which had reported that authorities were investigating the bank for questionable loans and that he had received an under-collateralized loan. Although he was not a public figure for First Amendment purposes, the propriety of an area bank's loan to its former president is a topic of legitimate public interest, and the press has an important function in reporting about government activity regarding banking and about bank conduct. (pp. 21-22)

5. In Turf Lawnmower Repair, Inc. v. Bergen Record Corp., 139 N.J. 392 (1995), the Court found that the public has a compelling interest in any business charged with criminal fraud, a substantial regulatory violation, or consumer fraud raising a matter of public concern. When the media reports onsuchissues, the actual-malice standard applies regardless whether the business is heavily regulated. The Court observed the vital role that investigative reporting plays in conveying consumer affairs information, and that a heightened standard of liability would protect both the public interest and the press. (pp. 22-24)

6. In Dairy Stores, Sisler, and Turf Lawnmower, the Court identified matters of public concern or interest only in the context of published investigative reports by media and media-related defendants. Here, the Court must distinguish between the kinds of speech that do and do not involve matters of public interest or concern in a non-media case. (pp. 24-25)

7. In defining speech involving a matter of public concern, the Court has relied on the common law, informed by the freedom of speech and press guarantees of Article I, Paragraph 6 of the New Jersey Constitution. But the right of a person to be secure in his reputation, grounded in Article I, Paragraph 1 of our Constitution, has an equal claim in the development of defamation law. Although strict liability is gone, reputation is still valued as essential to human dignity and worth. (pp. 25-26)

8. The degree of protection given to speech depends on the public interest in the free flow of information, the speaker's ability to exercise due care, and the individual's need for legal recourse if his good name is subject to false and defamatory verbal attacks. Speech not involving matters of public concern requires that greater weight be placed on an individual's interest in an unimpaired reputation. Negligence is the appropriate standard of care in those circumstances. Speech involving matters of public concern needs adequate breathing room in a democratic society to promote unrestrained debate. In those circumstances, actual malice is the proper standard. (pp. 27-28)

9. A useful formula is found in Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749 (1985): whether speech addresses a matter of public concern requires a review of the content, form, and context of the speech, including the identity of the speaker and the targeted audience. That formula allows for clear distinctions between speech worthy of heightened protection, such as speech critical of the government, which is at the core of First Amendment values, and speech of a subordinate kind, such as commercial speech, which is likely to advance the speaker's specific business interests. (pp. 28-30)

10. Significant federal and state authority indicates that when considering the degree of protection to be given to speech, one factor must be the speaker's identity. Logic also suggests that the source of the speech should be considered. (pp. 30-33)

11. The content, form, and context of the speech, including the disinterested nature of the speaker, indicate that news stories about health and safety, highly regulated industries, and consumer fraud involve the public interest and deserve heightened protection. Conversely, there is no significant public benefit in giving business rivals greater protection for the false and defamatory speech they use as an economic club to harm each other. (pp. 33-34)

12. In summary, the actual-malice standard applies when the alleged defamatory statement concerns a public figure or public official or involves a matter of public concern. When published by a media or media-related defendant, a news story about public health and safety, a highly regulated industry, or allegations of criminal or consumer fraud or a substantial regulatory violation will, by definition, involve a matter of public concern. In all other media and non-media cases, to determine whether the speech involves a matter of public concern that will trigger the actual-malice standard, a court should consider the content, form, and context of the speech, including the nature and importance of the speech and the identity of the speaker, his ability to exercise due care, and the identity of the targeted audience. (pp. 35-36)

13. In this case, the actual-malice standard does not apply. For First Amendment purposes, plaintiff is not a public official or public figure, and under New Jersey's common law, the speech did not involve matters of public concern. The content of the public address system broadcasts can fairly be characterized as commercial speech. The form and context of the broadcasts leave little doubt that the consumer fraud accusations were intended to drive business away from plaintiff's Fascination parlor. The speaker's identity is also important. This was not a case of disinterested investigative news reporting. Defendants' employees were basically scaring plaintiff's customers away. Their speech was not more highly valued because they charged a rival with consumer fraud rather than a peccadillo. In the competitive marketplace, it cannot be that the bigger the lie the more free speech protection for the publisher of the lie. (pp. 36-39)

14. Defendants also unmoor the term "highly regulated industry" from its conceptual context in Sisler and Turf Lawnmower. Invocation of that term is not talismanic, giving all speakers immunity for their negligent, false, and harmful speech. In New Jersey, many businesses are highly regulated.The critical inquiry is the content, form, and context of the speech. (pp. 39-40)

15. In balancing the respective interests at stake here, including plaintiff's right to enjoy his reputation free of unfair and false aspersions, the negligence standard adequately protects defendants' free speech rights. None of our state law precedents presaged extending the actual-malice standard to the type of commercial speech involved here --boardwalk barkers persuading patrons of Fascination games to stay away from a competitor's parlor. Based on the content, form, and context of the challenged speech, including the identity of the speaker and intended audience, the speech involved here did not touch on matters of public concern, and thus the trial court should have applied the negligence standard. (pp. 40-41) The judgment of the Appellate Division is REVERSED and the matter is REMANDED for further proceedings consistent with the Court's opinion.

CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, WALLACE, RIVERA-SOTO, and HOENS join in JUSTICE ALBIN's opinion.

The opinion of the court was delivered by: Justice Albin

Argued February 20, 2008

In this case, we once again address the degree to which speech, even speech that may disseminate falsehoods damaging the reputation of a person, should be protected from a defamation lawsuit. Balancing the right to speak freely and the right to be secure in one's good name -- determining how much protection should be given to speech at the expense of reputation -- is at the heart of this case.

In a general defamation case, a plaintiff claiming to be damaged by a false statement will succeed if he shows that the speaker acted negligently in failing to ascertain the truth of the statement. However, we give greater protection to speech involving public officials, public figures, and the public interest because of the important role that uninhibited and robust debate plays in our democratic society. In those cases, the plaintiff must prove actual malice, showing that the speaker made a false and defamatory statement either knowing it was false or in reckless disregard of the truth. The actual-malice standard tolerates more falsehood and harm to reputation than the negligence standard in order to shield highly valued speech from ruinous lawsuits.

The issue on appeal is whether defendant Walter Florimont, an operator of a boardwalk game of chance, whose employees broadcast over a loudspeaker that a nearby boardwalk competitor, plaintiff Randy Senna, was a cheat, is entitled to the heightened protection of the actual-malice standard. The trial court dismissed plaintiff's defamation lawsuit on summary judgment, finding first that the actual-malice standard applied because games of chance, as a highly regulated industry, are a matter of public concern, and second that plaintiff could not prove actual malice. The Appellate Division affirmed. We now reverse and hold that the false and defamatory verbal broadsides of defendant's employees, impugning the honesty of a business competitor, fall into the category of commercial speech that is not entitled to heightened protection under the actual-malice standard.

I.

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