On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1429-07.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff, Fisher and C.L. Miniman.
In this appeal, we reverse the dismissal of the complaint because defendants were not privileged to republish alleged defamatory statements within a bankruptcy court complaint and, absent the shield of the fair report privilege, they failed to demonstrate the statements were true or nondefamatory. We also hold that, although a private person, plaintiff was embroiled in a public matter and must be held to the actual malice standard, but we also hold that he should be permitted to amend his complaint.
The complaint filed in this matter by plaintiff Thomas John Salzano (Salzano) was triggered by articles published in two newspapers, The Record and The Glen Ridge Voice, and placed on two websites, NorthJersey.com and LeasingNews.org. These articles reported on a complaint, which was filed by the trustee for the bankruptcy estate of NorVergence, Inc., against Salzano on March 1, 2006, in the United States Bankruptcy Court for the District of New Jersey. The complaint in this adversary proceeding in the NorVergence bankruptcy matter (the bankruptcy complaint) alleged that Salzano, the son of Thomas N. Salzano, who was NorVergence's former chief managing officer, "unlawfully diverted, converted and misappropriated" NorVergence's funds "for his own personal benefit."
Specifically, the trustee claimed that, in July 2003, Salzano negotiated two NorVergence checks in the approximate amount of $200,000 for the purchase of a residence in Glen Ridge. The trustee also alleged that Salzano charged $268,795.84 in "personal expenses, such as outings to bars and clubs, clothing and other personal expenses, between November 25, 2002 and March 24, 2004" against NorVergence's American Express Business Gold/Platinum account, and that other unspecified credit cards were similarly misused.
The bankruptcy complaint consisted of five counts. The first two counts urged the application of federal and state law in seeking avoidance of what the trustee claimed were fraudulent conveyances made by NorVergence to Salzano. The third count alleged conversion, the fourth count claimed that Salzano was unjustly enriched, and the fifth count sought the imposition of a constructive trust on Salzano's Glen Ridge property.
On March 2, 2006, The Record published an article with the headline "Man accused of stealing $500,000 for high living." A smaller headline declared that "NorVergence funds were taken," and the beginning of the article, authored by defendant Martha McKay, stated:
The son of the mastermind behind NorVergence, a bankrupt Newark telecommunications firm, allegedly stole close to $500,000 from the company, using the money to pay for drinks, trips to area clubs and for a five-bedroom Glen Ridge house, according to court papers filed Wednesday in U.S. Bankruptcy Court in Newark.
Thomas John Salzano, son of Thomas N. Salzano, the chief management officer of bankrupt NorVergence, was accused of using two company checks -- one in the amount of $61,200 dated July 1, 2003, and another for $140,000 dated July 29, 2003 -- to help pay for "the purchase of his personal residence located [in] Glen Ridge," the papers said.
In addition, the article recounted other aspects of the bankruptcy complaint, and synopsized some of the events that led NorVergence into bankruptcy, with a brief description of the losses allegedly sustained by NorVergence employees, investors and customers as a result. The article also indicated that Salzano and his father "started a Kenilworth business last year called Charity Snack, which also went belly-up."
This same article was posted on March 2, 2006 by defendant at NorthJersey.com. On March 9, 2006, the article was included in The Glen Ridge Voice under the headline: "Argyle residence allegedly bought with stolen funds," and was also posted at LeasingNews.org, under the headline "NorVergence BK charges Salzano son stealing $1/2 MM."
As a result of these articles, Salzano filed suit in the Law Division against defendants North Jersey Media Group, Inc. (North Jersey), the publisher of The Record; NorthJersey.com; Malcolm Borg, the chief executive officer of North Jersey; Jonathan Markey, the president of North Jersey; Stephen A. Borg, the editor/publisher of The Record and NorthJersey.com; Martha McKay, a staff reporter for The Record; Glen Ridge Voice, Inc., which was alleged to be the publisher of The Glen Ridge Voice; and Frank A. Orechio, the alleged president of The Glen Ridge Voice. In his complaint, Salzano asserts that he became "unwittingly embroiled" in the bankruptcy proceedings through the trustee's assertion of "baseless and unsupported" claims against him, which these defendants republished "intentionally, maliciously, and with reckless and/or negligent disregard of the truth." He also claims that defendants added far more sinister innuendo to the trustee's claims by referring to the bankruptcy complaint as alleging that Salzano "stole" from NorVergence, thereby, in Salzano's words, "egregiously infer[ring] criminal implications and immorality, which is completely and factually inaccurate, false and libelous." Based on these and other allegations, Salzano pled seven counts in his complaint, which he labeled: defamation-libel, gross negligence, invasion of privacy (public disclosure of private facts), invasion of privacy (false light invasion), malice, negligent infliction of emotional distress, and intentional infliction of emotional distress.
All defendants except Glen Ridge Voice Inc. and Frank A. Orechio*fn1 moved for a dismissal of the complaint for failing to state a claim upon which relief may be granted. R. 4:6-2(e). Even though less than all the named defendants moved for dismissal, the judge entered a final order that dismissed the complaint as to all defendants. The judge's entire oral opinion states:
Look, I'm going to grant the motion as -- with regard to the named defendants in the motion for several reasons. One is I do not feel that the defendant -- that the plaintiff's position with regard to the statements is a reasonable interpretation of that and that, in any case, the -- this matter is subject to the heightened standard of malice and that there is in fact no reasonable showing of any malice. I can understand why plaintiff is upset with regard to the reporting as not being totally, 100 percent accurate. But that's not the standard that we apply. And based on the arguments presented I find that this matter -- that the complaint does fail to state a cause of action in defamation with regard to these particular defendants. And I so rule.
Although the judge's opinion fails to provide an adequate explanation for his disposition of the many issues presented, we discern from the judge's statement -- that the moving defendants (hereafter "defendants") were not required to be "totally, 100 percent accurate" -- that the judge applied the fair report privilege in dismissing the complaint. The judge's opinion also suggests that he found as an alternative basis for dismissal what he viewed as Salzano's imperfect allegation of actual malice. We find that the judge mistakenly dismissed the complaint and reverse.
Although many arguments have been presented, we need not consider all of them because we conclude that reversal is mandated because (a) absent application of the fair report privilege, defendants were required -- and failed -- to demonstrate that the statements they republished about Salzano were made by the trustee and are substantively true; (b) because the fair report privilege does not apply to defendants' reports about the bankruptcy complaint; and (c) because, even though Salzano was required to plead and ...