Carr v. Forbes

• Decision Date: 07 June 2001
• Docket Number: No. 00-2555,00-2555
• Citation: 259 F.3d 273
• Parties: (4th Cir. 2001) RICHARD LLOYD CARR, Plaintiff-Appellant, v. FORBES, INCORPORATED; MATTHEW SCHIFRIN; JOHN DOES, Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 273

259 F.3d 273 (4th Cir. 2001)

RICHARD LLOYD CARR, Plaintiff-Appellant, v. FORBES, INCORPORATED; MATTHEW SCHIFRIN; JOHN DOES, Defendants-Appellees.

No. 00-2555

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: June 7, 2001

Decided: August 1, 2001

Appeal from the United States District Court for the District of South Carolina, at Greenville. G. Ross Anderson, Jr., District Judge.

(CA-99-1967-6-13)

[Copyrighted Material Omitted] COUNSEL ARGUED: William Marvin Grant, Jr., GRANT & LEATHERWOOD, P.A., Greenville, South Carolina, for Appellant. Wallace K. Lightsey, WYCHE, BURGESS, FREEMAN & PARHAM, P.A., Greenville, South Carolina, for Appellees. ON BRIEF: Langdon Cheves, III, GRANT & LEATHERWOOD, P.A., Greenville, South Carolina, for Appellant. Carl F. Muller, WYCHE, BURGESS, FREEMAN & PARHAM, P.A., Greenville, South Carolina; Tennyson Schad, NORWICK & SCHAD, New York, New York, for Appellees.

Before LUTTIG, MOTZ, and GREGORY, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Luttig and Judge Gregory joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

Richard Lloyd Carr, an engineer who develops privately financed public infrastructure projects, brought this action asserting that Forbes, Incorporated defamed him by publishing an article casting doubt on the integrity of his conduct and his representations concerning those projects. Because Carr is a limited-purpose public figure who has forecast no evidence that Forbes acted with actual malice in publishing the article, we affirm the district court's grant of summary judgment to Forbes.

I.

Carr has spent his career managing the development of public infrastructure projects; he assembles construction proposals, finds teams of engineers to build such projects, and identifies sources of funding for them. In 1992, an engineering company that Carr owned ran into financial trouble leading to its demise and Carr's personal bankruptcy. Carr then contacted a former employer, the Dana Larson Roubal Group (DLR), a large national engineering and architectural firm, and convinced DLR to provide seed money to form a new company, Interwest Management, Inc., through which Carr, as President and CEO, could continue managing the development of public infrastructure projects with public-private financing methods.

In the early 1990s, Carr contracted to develop a sewer for the town of Quartzsite, Arizona. Carr served as his firm's public representative for the project and maintained a prominent profile in the project's development. The sewer project tapped into local political passions and, in 1993 when the town elected a new mayor who had campaigned against the sewer system, the town canceled construction of the sewer and refused to pay Interwest for the work that the firm had completed. Interwest and the town proceeded to arbitration, resulting in an award in Interwest's favor. After the town refused to honor the award, Interwest sued to recover its fees.

As Interwest was developing the Quartzsite project, officials in Apache Junction, Arizona, who were familiar with Carr's work in Quartzsite, contacted Carr seeking to develop a sewer system for their town. In August of 1991, these officials and Carr's firm signed a contract to build a similar sewer in Apache Junction. Regulators had imposed a building moratorium on Apache Junction, the largest town in the United States without a sewer, because of its inadequate sewage disposal system; yet, local voters had twice voted against the tax increases necessary to finance such a system. Carr proposed that the town form a private sewer district that could operate the sewer by collecting fees and thereby avoid new taxes. After Carr arranged to create a sewer district, that district hired Interwest to build and manage the project and financed it through the issuance of bonds, all of which the Allstate Insurance Company, Inc. purchased. However, Interwest had apparently relied on unreasonably optimistic projections and an erroneous database of potential customers. Due to a lack of customers, the sewer district was unable to pay off its bonds and ultimately filed for bankruptcy. Allstate then sued all members of the Interwest team for fraud.

In July 1995, as the Apache Junction sewer project neared completion, South Carolina officials solicited bids to build the Southern Connector, a highway intended to connect I-85 with I-385 in Greenville County, South Carolina. Carr and Interwest arranged that a new corporation, Interwest Carolina, LLP, be formed to bid for the contract to build this highway. Carr had no ownership stake in Interwest Carolina, which, like Interwest, was controlled by DLR. The record does not reveal whether Carr was an officer in Interwest Carolina, but indisputably he continued to serve as President and CEO of Interwest itself. Bob Farris, a former Federal Highway Administration Commissioner, was the "public face" of Interwest Carolina. Carr served as the project's manager and behind-the-scenes facilitator and shared with Farris joint authority for the project.

After a competitive bidding process in March of 1996, South Carolina selected Interwest Carolina to complete the Southern Connector project. Among the many firms Carr drew together to form the Interwest Carolina team was Wilbur Smith Associates.

Controversy immediately ensued over the highway project. Indeed, its opponents brought suit, contending that the project required a local referendum, a position the South Carolina Supreme Court ultimately rejected. When word of the Allstate lawsuit against Interwest reached South Carolina, state officials developed concerns as to the competency and honesty of Interwest Carolina. The Allstate suit became the topic of local news coverage and local officials investigated the allegations in that suit to determine whether Interwest Carolina should continue on the project. South Carolina officials decided to take no action and Interwest Carolina continued its work on the Southern Connector.

In its July 7, 1997 edition, Forbes magazine printed an article entitled "Moonshine Bonds" that was centered on Carr. The article suggested that Carr was a shady businessman with a troubled history. The article criticized Carr throughout. For example, it alleged that Carr "smelled money" in public-private financing, that he "exploited" the tax law, and that he sought to target a larger federal funding program as "bigger game" which was "right on [his] turf." In the table of contents, the magazine referred to Carr as the "Moonshine Man." Forbes noted Carr's personal bankruptcy, the failure of his prior business, and that he had once hired a convicted felon who had served time in connection with an insurance fraud scheme. The article alluded to the Quartzsite project -stating that it "ended in a legal mess" -and focused on Carr's involvement with the Apache Junction and Southern Connector projects.

Based on the allegations in the Allstate suit, "Moonshine Bonds" charged Carr with personally defrauding Allstate and the town of Apache Junction.¹ The article explained that the Apache Junction sewer district had "busted" because "the feasibility study done by Carr's company had grossly overstated the number of residents who would sign up for sewage connections." Although the magazine noted that "Carr has an explanation for all his failures," specifically the "failure" of Apache Junction, it suggested that any explanation was false by highlighting the fact that Carr's "company drew $1.5 million in project management fees" from the project.

"Moonshine Bonds" further stated that, while Apache Junction residents were "nursing their wounds," Carr had"moved on" and was now "pushing yet another" project, the Southern Connector. The article claimed that Carr's firm was awarded the Southern Connector contract because it had secured a study by Wilbur Smith Associates, which "project[ed] traffic and toll revenues 50% higher" than a previous study conducted by that same firm. Forbes implied that, like the Arizona project, the South Carolina project would fail because it was based on a fraudulent feasibility study. The article noted that Carr had now "set his sights on even bigger game" because he intended to participate in a new federal financing program. It concluded with the statement: "Count on one thing: Those bond sellers [for the Southern Connector] won't be calling on Allstate to unload the Carolina bonds" and recommended that readers "take a pass" on the Southern Connector bonds.

The author of "Moonshine Bonds," Matthew Schifrin, began work on the article after a bond "watchdog," Richard Lehman, alerted him to the potential story. Lehman put Schifrin in touch with George Price, a South Carolina activist working to defeat the Southern Connector. Price provided Schifrin with a notebook of material that he had collected about the project. Schifrin subsequently conducted independent research. In addition to speaking with Price and Lehman, he talked with several other sources, including an Allstate attorney involved in the lawsuit, a financier, a local Arizona town official, and Carr, himself. Schifrin also examined relevant documents including the complaint in the Allstate action and project proposals relevant to the Southern Connector. A Forbes employee fact-checked Schifrin's article and verified all of its material facts.

Soon after the Forbes company published "Moonshine Bonds," DLR, believing Carr to be a public relations problem and no longer "marketable," terminated his employment with Interwest. Carr subsequently brought this defamation suit in June 1999 against Forbes, Schifrin, and several John Does (hereafter, collectively "Forbes"). The district court granted Forbes summary judgment, reasoning that Carr was a limited-purpose public figure who could not prove by clear and convincing evidence that Forbes had acted with actual malice. Carr now appeals.

II.

We first...