127 F.3d 122 (1st Cir. 1997), 97-1329, Levinsky's, Inc. v. Wal-Mart Stores, Inc.

Docket Nº:97-1329.
Citation:127 F.3d 122
Party Name:LEVINSKY'S, INC., Plaintiff, Appellee, v. WAL-MART STORES, INC., Defendant, Appellant.
Case Date:September 26, 1997
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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127 F.3d 122 (1st Cir. 1997)

LEVINSKY'S, INC., Plaintiff, Appellee,

v.

WAL-MART STORES, INC., Defendant, Appellant.

No. 97-1329.

United States Court of Appeals, First Circuit

September 26, 1997

Heard July 29, 1997.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Jonathan S. Piper, with whom Charles J. Glasser, Jr., Preti, Flaherty, Beliveau & Pachios, Peter J. DeTroy, Russell B. Pierce, Jr., and Norman, Hanson & DeTroy, Portland, ME, were on brief, for appellant.

Karen Frink Wolf, with whom Harold J. Friedman and Friedman & Babcock, Portland, ME, were on brief, for appellee.

Before SELYA and LYNCH, Circuit Judges, and POLLAK, [*] Senior District Judge.

SELYA, Circuit Judge.

Our enduring national devotion to freedom of expression, embodied in the First Amendment and renewed in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), inevitably means that much offensive and inaccurate speech will remain free from legal constraints. Still, there are boundaries past which speakers cannot trespass. This case illustrates how difficult it is to trace those boundaries with the precision that the law demands.

I. STORE WARS

The events that gave rise to this litigation are controversial but, for the most part, not controverted. We present a balanced synopsis here.

The plaintiff, Levinsky's, Inc. (Levinsky's), is a family-owned business that operates three retail clothing stores in Maine. It has deep roots in the community. The defendant, Wal-Mart Stores, Inc. (Wal-Mart), is the nation's largest retailer. It is a relative newcomer to the Maine marketplace. The two compete head to head in the Portland area.

In the fall of 1994, Levinsky's decided to run a tongue-in-cheek radio advertisement that forged a comparison between it and Wal-Mart. A snippet from the ad reflects its tone: "Levinsky's has a great selection and the lowest prices in Maine on Levi's jeans, Dockers and denim shirts. Wal-Mart doesn't carry Levi's, but we did get a good buy on a toaster." The spot aired in the Portland area for about six weeks during the pre-Christmas shopping season.

Intrigued by the unorthodox advertising campaign, Michael Boardman, a free-lance writer for the Portland business magazine Biz, decided to write a "David versus Goliath" story about Levinsky's aggressive reaction to Wal-Mart's entry into the marketplace. The article appeared in Biz 's January/February 1995 issue under the headline "Levinsky's: Leaner and meaner with retail competition." In the text, Boardman compared Levinsky's to a "feisty kid who fights the school bully for his lunch money."

While researching the story, Boardman telephoned Gilbert Olson, the manager of Wal-Mart's store in Scarborough, Maine (a

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Portland suburb). Olson testified that he thought Boardman was a college student researching a paper, but Boardman maintained that he clearly identified himself as a journalist and stated the purpose of his call. At any rate, Olson made two statements during his conversation with Boardman that lie at the epicenter of this appeal. First, he described a Levinsky's store as "trashy." Second, he stated that when a person called Levinsky's, "you are sometimes put on hold for 20 minutes--or the phone is never picked up at all." Biz printed these (and other) remarks, attributing them to Wal-Mart.

Shortly thereafter, Levinsky's and several family members sued Wal-Mart for defamation, injurious falsehood, false light, deceptive trade practices, interference with advantageous economic relations, and infliction of emotional distress. Their complaint, filed in the federal district court under diversity jurisdiction, 28 U.S.C. § 1332(a) (1994), sought $40,000,000 in compensatory and presumed damages, plus punitive damages equal to 2% of Wal-Mart's net worth. Most of these claims were weeded out before or during trial. 1 The defamation claims survived. The jury found that the individual family members had not been defamed, but awarded Levinsky's $600,000 for presumed damages to reputation (notwithstanding the lack of any specific evidence of actual pecuniary loss). The jury also determined that Olson had not acted with ill will and declined to award Levinsky's exemplary damages.

The district judge upheld the verdict and made several rulings that bear on this appeal. First, the judge found that the verdict did not offend the First Amendment because both the word "trashy" and the "20 minutes on hold" comments stated opinions that implied provably false facts. Second, because Olson's statements related to Levinsky's business, the judge concluded that presumed damages were available. Third, emphasizing Olson's subjective belief that he was not speaking to a reporter but to a university student, the judge determined that Olson's comments did not relate to a matter of public concern, and that, therefore, Levinsky's did not need to show actual malice as a precondition to the award of presumed damages. Fourth, the judge ruled that, under Maine's defamation per se doctrine, a finding of defamation that related to the plaintiff's business established legally sufficient fault and thus obviated any need for a jury instruction on negligence.

II. A SHOPPING LIST

This appeal offers a large inventory of interleaved legal issues. We pick our way through that inventory by traversing the intersection of the First Amendment and state defamation law as it has developed over time, noting, inter alia, a restriction on the scope of defamation imposed by Maine law. We next discuss one of the two allegedly defamatory statements--the "trashy" reference--and conclude, as a matter of federal constitutional law, that it cannot support a recovery. We then address the second statement--"20 minutes on hold"--and conclude that it is actionable. We move at that point to the matter of public concern (but do not resolve it). Finally, because a new trial is required, we offer some guidance to the district court in connection with the role of negligence in Maine defamation cases.

III. STAPLES: THE FIRST AMENDMENT AND STATE DEFAMATION LAW

For many years, states enacted statutes and applied common law tort principles in the area of defamation with no more than a passing nod to the First Amendment's free speech guaranty. This era of constitutional non-interference ended when the Justices proclaimed "a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials." New York Times, 376 U.S. at 270, 84 S.Ct. at 721. Faithful to this ideal, the Court announced that the First Amendment precludes

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recovery by a public official under state defamation law unless the official shows that the speaker acted with actual malice, that is, with knowledge of or reckless disregard for the falsity of the statement. See id. at 279-80, 84 S.Ct. at 725-26.

The seeds sown in New York Times have blossomed over the years, giving rise to a crop of checks on the sweep of state defamation law. We harvest four points.

  1. Independent Appellate Review.

    First, the deference traditionally shown by courts toward factfinders' determinations is muted when defamation issues implicate free speech concerns. In such circumstances, appellate judges must conduct a whole-record review and "examine for [them]selves the statements in issue and the circumstances under which they were made to see ... whether they are of a character which the principles of the First Amendment" protect. Id. at 285, 84 S.Ct. at 728-29 (citation and internal quotation marks omitted). This requirement of independent appellate review is not a procedural directive, but, rather, "a rule of federal constitutional law" that "reflects a deeply held conviction that judges ... must exercise such review in order to preserve the precious liberties established and ordained by the Constitution." Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 510-11, 104 S.Ct. 1949, 1965, 80 L.Ed.2d 502 (1984). Indeed, when the imperative of independent review conflicts with a standard procedural dictate (such as Fed.R.Civ.P. 52(a)), the constitutional mandate controls. See id. at 514, 104 S.Ct. at 1967.

    As a practical matter, this requirement means that federal courts engage in de novo review when mulling defamation issues that are tinged with constitutional implications. See, e.g., id. at 511, 514, 104 S.Ct. at 1965, 1967; Connick v. Myers, 461 U.S. 138, 147-48 & n. 7, 103 S.Ct. 1684, 1690-91 & n. 7, 75 L.Ed.2d 708 (1983); Phantom Touring, Inc. v. Affiliated Publications, 953 F.2d 724, 727 (1st Cir.1992); Kassel v. Gannett Co., 875 F.2d 935, 937 (1st Cir.1989). Maine courts follow the same course. See Rippett v. Bemis, 672 A.2d 82, 86 (Me.1996); Caron v. Bangor Publishing Co., 470 A.2d 782, 784 (Me.1984).

  2. Opinions May Be Actionable.

    The First Amendment does not inoculate all opinions against the ravages of defamation suits. A statement couched as an opinion that presents or implies the existence of facts which are capable of being proven true or false can be actionable. See Milkovich v. Lorain Journal Co., 497 U.S. 1, 18-19, 110 S.Ct. 2695, 2705-06, 111 L.Ed.2d 1 (1990); see also Restatement (Second) of Torts § 566 (1977) ("A defamatory communication may consist of a statement in the form of an opinion, but a statement of this nature is actionable only if it implies the allegation of undisclosed defamatory facts as the basis for the opinion."). 2 Thus, a statement normally is not actionable unless it contains an objectively verifiable assertion. 3 Chief Judge Posner has captured the distinction between statements that are actionable and those that are not:

    A statement of fact is not shielded from an action for defamation by being prefaced with...

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