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Ronald Durando and Gustave Dotoli v. the Nutley Sun and North Jersey Media Group

February 28, 2012

RONALD DURANDO AND GUSTAVE DOTOLI, PLAINTIFFS-APPELLANTS,
v.
THE NUTLEY SUN AND NORTH JERSEY MEDIA GROUP, INC., DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

The opinion of the court was delivered by: Justice Albin

SYLLABUS

(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.)

Ronald Durando and Gustave Dotoli v. The Nutley Sun and North Jersey Media Group, Inc.

(A-105-09); (065978) Argued January 5, 2011 -- Reargued November 29, 2011 -- Decided February 28, 2012

ALBIN, J., writing for a majority of the Court.

In this defamation case, the Court considers whether the record before it supports a finding by clear and convincing evidence that the editor of a regional weekly newspaper knowingly or in reckless disregard of the truth published a false front-page teaser.

On November 15, 2005, the Securities and Exchange Commission (SEC) filed a complaint in the United States District Court for the District of Connecticut against Ronald Durando and Gustave Dotoli (residents of Nutley), charging them with various violations of federal securities laws. The complaint alleged that Durando and Dotoli engaged in a "fraudulent 'pump and dump' market manipulation scheme" and through it "gained more than $9 million in proceeds from illegal sales of essentially worthless" stock. The SEC specifically charged Durando and Dotoli with "illegal insider trading," filing "reports containing false and misleading statements," and other violations of federal securities laws.

On November 17, 2005, The Record -- a newspaper owned by North Jersey Media Group -- published an article written by staff writer Kathleen Lynn about the SEC complaint. The headline of the article read: "3 N.J. men accused in $9M stock scam." Neither the SEC complaint nor the article suggested that Durando and Dotoli were arrested. The North Jersey Media Group also owns The Nutley Sun, a local weekly newspaper. The executive editor of The Nutley Sun, Paul Milo, received permission to reprint Lynn's article in The Record about Durando and Dotoli. On December 5, 2008, Milo prepared the article for publication in The Nutley Sun's December 8 edition -- a promotional issue circulated to 2500 non-subscribers in addition to the weekly's regular subscribers. Milo wrote a new headline for the article: "Local men charged in stock scheme."

The following day, December 6, 2005, Milo composed three "teasers" for the front page of the December 8 edition of The Nutley Sun, referencing different articles within the newspaper. The teaser for the reprinted article read: "Local men arrested in 'pump and dump' scheme, page 11." The teaser did not mention the names of either Durando or Dotoli. Nevertheless, the statement in the teaser that local men were "arrested" was erroneous. That error was not repeated in the text of the article on page eleven of the paper.

The day after publication, plaintiffs' attorney sent an email to The Nutley Sun pointing out that his clients had not been "arrested." Plaintiffs' counsel demanded a retraction and threatened to file suit. After a back-and-forth email exchange, on December 19, Jennifer Borg, general counsel to the North Jersey Media Group, gave approval for the filing of a retraction, and indeed one was published in boldface and large print on the front page of The Nutley Sun's December 22 edition. This edition, however, was not circulated to the 2500 non-subscribers who received the December 8 edition with the erroneous teaser. On December 16, plaintiffs' counsel already had filed the lawsuit, which is the subject of this appeal.

Plaintiffs' complaint alleged that defendants, The Nutley Sun and North Jersey Media Group, Inc., had committed the tort of libel. An amended complaint listed the additional tort claims of casting one in a false light and intentional and negligent infliction of emotional distress. Plaintiffs sought compensatory, emotional-distress, and punitive damages. The trial court ultimately granted summary judgment in favor of defendants on all claims and dismissed the complaint. The court determined that there was not "sufficient evidence from which a jury could clearly and convincingly conclude that any . . . of the defendants acted with actual malice."

In an unpublished opinion, the Appellate Division affirmed, finding that "there simply is not 'clear and convincing' evidence of actual malice here to warrant a jury trial" on defamation or false light. The panel reasoned that the "careless and unfortunate" use of the inaccurate word "arrested" was not sufficient to "satisfy the legal and constitutional requirements for liability."

The Supreme Court granted plaintiffs' petition for certification.

HELD: Although this case unquestionably involves sloppy journalism, the careless acts of a harried editor, the summary-judgment record before the Court cannot support a finding by clear and convincing evidence that the editor knowingly or in reckless disregard of the truth published the false front-page teaser.

1. New Jersey's common law, which is informed by the free-speech and --press guarantees of Article I, Paragraph 6 of the New Jersey Constitution, provides enhanced protection to speech touching on matters of public concern and interest. The Court gives such speech the protection of the actual-malice standard because of the "significant societal benefit in robust and unrestrained debate on matters of public interest" and because "[e]ven the fear of having to defend against a defamation suit may make some too timid to venture into discussions where speech may be prone to error." Senna v. Florimont, 196 N.J. 469, 491-92 (2008). (pp. 15-16)

2. To succeed in a defamation action against a media defendant that publishes an article touching on a matter of public interest or concern, a plaintiff must prove three elements: (1) that the defendant made a false and defamatory statement concerning the plaintiff; (2) that the statement was communicated to another person (and was not privileged); and (3) that the defendant published the defamatory statement with actual malice. To prove the tort of false light, a plaintiff must satisfy two elements: (1) that "the false light in which [he] was placed would be highly offensive to a reasonable person" and (2) that the defendant "had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the [plaintiff] would be placed." Romaine v. Kallinger, 109 N.J. 282, 294 (1988) (quoting Restatement (Second) of Torts § 652E (1977)). (pp. 16-17)

3. This Court "expanded free speech protections under our common law -- beyond the mandate of federal law --" to cases involving media and media-related defendants "and applied the actual-malice standard to investigative news stories that addressed matters of public concern." Senna, supra, 196 N.J. at 483. Today, in New Jersey the actual-malice standard protects both media and non-media defendants who make statements involving matters of public concern. Actual malice is defined similarly under federal and state law. Although the reckless-disregard-for-the-truth prong has been defined in a variety of different ways, the core principle has remained constant: establishing reckless disregard requires a showing that the defendant made the statement with a "high degree of awareness of [its] probable falsity." The test is subjective, not objective, and involves analyzing the thought processes of the particular defendant. (pp. 18-25)

4. On the summary-judgment record before the Court, Milo was undoubtedly careless in composing the erroneous front-page teaser. The Court determines that a reasonable jury could not conclude that Milo's conduct was so reckless that it "approache[d] the level of publishing a knowing, calculated falsehood." One does not have to condone Milo's shoddy editing to understand how he might have made the mistake in preparing the teaser. The language of the SEC complaint, as reflected in the article, bespeaks criminality. Milo was a harried editor and mistakenly reconfigured the headline of the article. Importantly, plaintiffs are not named in the teaser. Given the heightened protections for free speech and a free press under the actual-malice standard, and the failure of plaintiffs to establish by clear and convincing evidence a jury issue, the Court comes to the same conclusion as the trial court and the Appellate Division -- summary judgment must be granted. (pp. 25-29)

The judgment of the Appellate Division is AFFIRMED.

JUSTICE HOENS filed a separate, DISSENTING opinion, in which JUSTICE LaVECCHIA joins, stating that the majority has misperceived the relevance of including a falsehood in a front page teaser, has failed to weigh the factual assertions in accordance with the applicable summary judgment standards, and has effectively created a new standard for protection of journalistic practices that the majority itself denounces. CHIEF JUSTICE RABNER and JUSTICES LONG, PATTERSON, and JUDGE WEFING (temporarily assigned) join in JUSTICE ALBIN's opinion. JUSTICE HOENS filed a separate, dissenting opinion, in which JUSTICE LaVECCHIA joins.

Argued January 5, 2011 -- Reargued November 29, 2011

JUSTICE ALBIN delivered the opinion of the Court.

New Jersey's common law provides special protection to speech touching on matters of public concern, even when that speech contains some careless falsehoods. A free and robust press, one that does not engage in self-censorship from fear of ruinous lawsuits, is essential to an enlightened democracy. Our jurisprudence recognizes that the free and unimpaired flow of information on matters of public concern necessarily leads to some erroneous reporting due to human error. In those circumstances, freedom of speech and the press are values that outweigh the right to security in one's personal reputation. Provided that a reporter or editor does not publish a false and defamatory statement with actual malice -- that is, knowing that the statement is false or recklessly disregarding the truth --the erroneous statement contained in an article touching on a matter of public interest is not actionable.

In this case, a regional weekly newspaper inaccurately printed a front-page "teaser," reporting that "two local men," plaintiffs -- whose names were not mentioned in the teaser --had been arrested for stock fraud. The two men were charged with illicit stock manipulation in a complaint filed by the Securities and Exchange Commission, but they had not been arrested. Readers who turned to the article on page eleven learned that plaintiffs were the subject of a civil complaint alleging that they had bilked unsuspecting investors of nine million dollars. No word or phrase in the article itself suggested that plaintiffs had been arrested.

Plaintiffs filed a civil action against defendants, the newspaper and its parent company, alleging, among other things, defamation and false light. The trial court granted summary judgment to defendants, finding that plaintiffs could not establish that the teaser was published with actual malice. The Appellate Division upheld that decision.

We affirm. Although this case unquestionably involves sloppy journalism, the careless acts of a harried editor, the summary-judgment record before us cannot support a finding by clear and convincing evidence that the editor knowingly or in reckless disregard of the truth published the false teaser.

I.

On November 15, 2005, the Securities and Exchange Commission (SEC) filed a complaint in the United States District Court for the District of Connecticut against Ronald Durando and Gustave Dotoli (residents of Nutley), charging them with various violations of federal securities laws.*fn1 The complaint alleged that Durando and Dotoli acquired "control of a failed and indebted company," changed the company's name, inflated "the trading price of the company's stock through false publicity," and then sold the stock "to the public at artificially-inflated prices for large profits." As a result of this "fraudulent 'pump and dump' market manipulation scheme," the complaint alleged that Durando and Dotoli (and other defendants) "gained more than $9 million in proceeds from illegal sales of essentially worthless" stock. The SEC specifically charged Durando and Dotoli with "illegal insider trading," filing "reports containing false and misleading statements," and other violations of federal securities laws. The SEC sought to have Durando and Dotoli disgorge all proceeds "received from the illegal conduct" and to enjoin them permanently from becoming officers or directors in any publicly traded company.*fn2

On November 17, 2005, The Record -- a newspaper owned by North Jersey Media Group -- published an article written by staff writer Kathleen Lynn about the SEC complaint. The headline of the article read: "3 N.J. men accused in $9M stock scam." The article in its entirety is set forth below:

Three New Jersey men pumped up the price of a worthless stock, then dumped it on unsuspecting investors in a $9 million scheme, the Securities and Exchange Commission said Wednesday.

According to the SEC, which filed a civil complaint Tuesday in Connecticut, the scheme involved a telecommunications company called PacketPort.com of Norwalk, Conn. According to the SEC, Ronald Durando, 48, of Nutley, bought a controlling stake in an insolvent company called Linkon. Working with Gustave Dotoli, 70, of Nutley, and attorney Robert H. Jaffe, 69, of Mountainside, Durando changed the company's name to PacketPort.com, the SEC said. Durando became CEO and Dotoli the chief financial officer.

Durando then allegedly paid IP Equity Inc., a California company that ran an Internet stock newsletter, to tout PacketPort.com to investors as a promising company in the business of Internet phone service.

As a result of this publicity, the stock price rose to about $19.50, the SEC said. Then, the SEC said, Durando, Dotoli, Jaffe, and IP Equity and its principals dumped the shares - which the SEC called "essentially worthless" - for a total of more than $9 million.

They sold most of the shares through New York stockbroker William Coons III, the SEC said.

The SEC also says that Durando, Dotoli and Jaffe falsified PacketPort.com's financial reports.

The SEC complaint names Durando, Dotoli, Jaffe, Coons, and the two IP Equity principals, M. Christopher Agarwal and Theodore Kunzog, as defendants. The complaint, which seeks disgorgement of the profits, alleges fraud and violations of various securities laws.

Lawyers for Durando, Dotoli and Jaffe did not return calls seeking comment.

The civil case was filed in U.S. District Court in New Haven.

No one disputes that the article accurately described the contents of the SEC complaint. Neither the SEC complaint nor the article suggested that Durando and Dotoli were arrested.

The North Jersey Media Group also owns The Nutley Sun, a local weekly newspaper with approximately 5000 subscribers in Nutley Township and neighboring communities. The executive editor of The Nutley Sun, Paul Milo, received permission to reprint Lynn's article in The Record about Durando and Dotoli. On December 5, 2008, Milo prepared the article for publication in The Nutley Sun's December 8 edition -- a promotional issue circulated to 2500 non-subscribers in addition to the weekly's regular subscribers. Milo removed the last three paragraphs of the original article so that it would fit within his weekly newspaper's space constraints. He also wrote a new headline for the article: "Local men charged in stock scheme."

The following day, December 6, 2005, Milo composed three "teasers" for the front page of the December 8 edition of The Nutley Sun, referencing different articles within the newspaper.*fn3

The teaser for the reprinted article read: "Local men arrested in 'pump and dump' scheme, page 11." That teaser -- the third listed on the upper portion of the front page -- was not only smaller in font than the lead teaser, which was in bold print, but also was in much smaller font than the bold-print lead headline, entitled "Peace on earth." The "pump and dump" teaser did not mention the names of either Durando or Dotoli. Nevertheless, the statement in the teaser that local men were "arrested" was erroneous. That error was not repeated in the text of the article on page eleven of the paper.

The day after publication, December 9, plaintiffs' attorney sent an email to The Nutley Sun pointing out that his clients had not been "arrested." Plaintiffs' counsel demanded a retraction and threatened to file suit. That same day, after conferring with his publisher, Milo forwarded the email to in-house counsel for the North Jersey Media Group, Dina Sforza. Sforza did not contact Milo until December 14 -- one day after the deadline for placing a retraction in The Nutley Sun's next edition. On December 15, Sforza called plaintiffs' counsel and requested that he delay filing a lawsuit until after she had time to discuss the matter with general counsel to the North Jersey Media Group, Jennifer Borg. Plaintiffs' counsel told Sforza that he would not file a lawsuit until after December 19. Borg, whose approval was necessary before publication of a retraction, was unavailable the week of December 15 because she was tending to a dying relative at Hackensack Medical Center.

On December 19, Borg gave approval for the filing of a retraction, and indeed one was published in boldface and large print on the front page of The Nutley Sun's December 22 edition.*fn4

This edition, however, was not circulated to the 2500 non-subscribers who received the December 8 edition with the erroneous teaser. On December 16, plaintiffs' counsel already had filed the lawsuit, which is the subject of this appeal.

II.

A.

The December 16 complaint filed by plaintiffs Durando and Dotoli alleged that defendants, The Nutley Sun and North Jersey Media Group, Inc., had committed the tort of libel. An amended complaint filed ten months later listed the additional tort claims of casting one in a false light and intentional and negligent infliction of emotional distress. Plaintiffs sought compensatory, emotional-distress, and punitive damages.

For our purposes, an extensive discussion of the procedural history is not necessary. Suffice it to say, the trial court ultimately granted summary judgment in favor of defendants on all claims and dismissed the complaint. With respect to the false-light claim, the trial court found that the article touched on a matter of public concern but initially denied summary judgment because, in its view, Milo had "obvious reasons to doubt the veracity" of the teaser in light of Lynn's article. However, the court later reconsidered its ...


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