Trans World Accounts, Inc. v. Associated Press

• Decision Date: 31 January 1977
• Docket Number: No. C-75-1166 WWS.,C-75-1166 WWS.
• Citation: 425 F. Supp. 814
• Parties: TRANS WORLD ACCOUNTS, INC., a California Corporation, Plaintiff, v. The ASSOCIATED PRESS et al., Defendants.
• Court: U.S. District Court — Northern District of California

425 F. Supp. 814

TRANS WORLD ACCOUNTS, INC., a California Corporation, Plaintiff, v. The ASSOCIATED PRESS et al., Defendants.

No. C-75-1166 WWS.

United States District Court, N. D. California, Civil Division.

January 31, 1977.

COPYRIGHT MATERIAL OMITTED

L. Lawrence Bernheim, Spridgen, Barrett, Achor, Luckhardt, Anderson & James, Santa Rosa, Cal., for plaintiff.

David E. Monahan, Gray, Cary, Ames & Frye, San Diego, Cal., for defendant Copley Press, Inc.

Rogers & Wells by Richard N. Winfield and Donald F. Luke, New York City, for Associated Press.

Baker, Hostetler & Patterson, by Bruce W. Sanford and Lawrence V. Lindberg, Cleveland, Ohio for United Press International.

Arthur B. Dunne, Robert M. Dunne, Dunne, Phelps & Mills, San Francisco, Cal., for defendants Associated Press and United Press International, Inc.

ORDER GRANTING AND DENYING MOTIONS FOR SUMMARY JUDGMENT

SCHWARZER, District Judge.

This is an action for defamation arising out of erroneous reports published by defendants of a complaint against plaintiff proposed to be issued by the Federal Trade Commission (FTC). Plaintiff Trans World Accounts, Inc. is a corporation conducting debt collecting and other operations in California and elsewhere. On January 3, 1975, the FTC distributed a press release announcing that it intended to issue complaints against Trans World and seven other debt collecting companies charging certain unfair and deceptive practices, namely (1) the use of collection forms appearing to be urgent telegraphic messages, (2) the use of forms falsely stating that legal action was about to be instituted, (3) the use of letters threatening debtors with damage to their credit ratings unless bills were promptly paid, and (4) falsely holding themselves out as bona fide collection agencies when in fact the companies were only mailing services engaged in sending out form messages to debtors.

The FTC release indicated that the third and fourth of the above charges were not being made against plaintiff Trans World, but only against certain of the other proposed respondents. The relevant portion of the press release stated:

"With the exception of Continental Collection Service and Trans World Accounts, Inc., all of the complaints allege that, contrary to fact, respondents represented that the debtor's general credit record would be adversely affected if the alleged debt is not paid.

Other typical allegations in the proposed complaints, with the exception of Power's Service, Inc., and Trans World Accounts, Inc., are that, contrary to representation:

. . . proposed respondents' businesses are not collection agencies, and

. . . alleged delinquent debts are not referred by creditors for collection by proposed respondents."

Nevertheless, one of three different dispatches prepared by the Washington Bureau of Associated Press (AP) reporting the FTC press release failed to indicate that not all of the eight companies named in the proposed complaints were charged with all of the unfair conduct described in the dispatch. Similarly the dispatch prepared by United Press International (UPI) reporting the press release failed to distinguish between the charges against Trans World and those against the other companies.

The San Diego Union and the San Diego Evening Tribune, both owned by Copley Press Inc., published news stories based on the AP and UPI dispatches in which Trans World was lumped with the other companies as the object of all of the charges in the proposed complaint.

Plaintiff demanded that AP and UPI publish corrections. Both wire services did so, but AP's correction was untimely under the California correction statute, Cal.Civil Code § 48a. Trans World also demanded a correction from the newspapers. The San Diego Union published a correction within the statutory time limit; The Evening Tribune's correction was untimely.

On May 6, 1975, Trans World filed an action for libel in the San Francisco Superior Court against AP, UPI and Copley Press, seeking general, special and punitive damages. It was subsequently removed to this Court which has jurisdiction based on diversity of citizenship. The defendants have now moved for summary judgment.

I.

California law defines libel as a false and unprivileged publication which exposes a person to contempt, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation. Cal.Civil Code § 45. The protection afforded by California libel law extends to corporations as well as to individuals. A corporation may recover for defamatory statements having "a tendency to directly affect its property . . . or occasion it pecuniary injury." Western Broadcast Co. v. The Times-Mirror Co., 14 Cal.App.2d 120, 57 P.2d 977 (1936); Daniels v. Sanitarium Assoc., Inc., 59 Cal.2d 602, 30 Cal.Rptr. 828, 833, 381 P.2d 652 (1963); Di Giorgio Fruit Corp. v. American Federation of Labor, 215 Cal.App.2d 560, 30 Cal.Rptr. 350 (1963). The Restatement of Torts states the applicable rule as follows:

"One who falsely, and without a privilege to do so, publishes of a corporation for profit matter which tends to prejudice it in the conduct of its trade or business or to deter third persons from dealing with it, is liable to the corporation . ." Sec. 561.

California law provides that statements made in the proper discharge of an official duty, in the course of official proceedings or in fair and true reports in a public journal of such proceedings or of public meetings are absolutely privileged. Communications between persons having an interest in the subject made without malice are also privileged. But other libelous communications subject the persons making the publication to liability without regard to fault. A plaintiff, whether a natural person or a corporation, may recover general, special and exemplary damages, except that in cases against newspapers only special damages may be recovered if a correction is demanded and published within the time provided. Cal.Civil Code, §§ 47, 48a. In view of the disposition of this case, it is not necessary to decide whether the correction provisions apply to AP and UPI.

Inasmuch as the publication here was one which may be found to be defamatory and which does not fall within any of the privileges recognized by California law, Trans World has stated a claim for libel upon which defendants could be held liable at least for special damages and, in the case of The Evening Tribune and AP, for general and exemplary damages.

II.

Until the decision in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), libelous publications were considered to be "a class of speech wholly unprotected by the First Amendment . . ." Gertz v. Robert Welch, Inc., 418 U.S. 323, 370, 94 S.Ct. 2997, 3022, 41 L.Ed.2d 789 (1974). In New York Times, the Court began the process of reconciling the interest in reputation with the interest in free speech by holding that "the Constitution delimits a State's power to award damages for libel in actions brought by public officials against critics of their official conduct." 376 U.S. at 283, 84 S.Ct. at 727. In such cases, the Court held, the First Amendment bars recovery except where the statement is found to have been made with actual malice — with knowledge or reckless disregard of its falsity. Id. at 279-280, 84 S.Ct. 710.

In Curtis Publishing Co. v. Butts and Associated Press v. Walker, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967), the Court extended the protection afforded by New York Times to cases involving public figures, i. e. persons who, although not government officials, are "intimately involved in the resolution of important public questions or, by reason of their fame, shape events in areas of concern to society at large." 388 U.S. at 164, 87 S.Ct. at 1996 (Warren, C. J., concurring in result).

In Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971), a plurality opinion of the Court sought to extend the New York Times rule to any utterance concerning "a matter . . . of public or general interest," whether involving a private or a public individual. Id. at 43, 91 S.Ct. at 1819. But three years later, in Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), the Court reverted to the test laid down by its prior decision, based on the status of the plaintiff as a public official or public figure and articulated as follows:

"That designation may rest on either of two alternative bases. In some instances an individual may achieve such pervasive fame or notoriety that he becomes a public figure for all purposes and in all contexts. More commonly, an individual voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues. In either case such persons assume special prominence in the resolution of public questions." 418 U.S. at 351, 94 S.Ct. at 3012.

The instant motion requires the Court to determine the First Amendment standard applicable where the plaintiff is a corporation rather than a natural person. Only one reported decision appears to have considered the issue. Martin Marietta Corp. v. Evening Star Newspaper, 417 F.Supp. 947 (D.D.C.1976). In that case, the court held that the rule in Rosenbloom v. Metromedia, Inc., above, should apply to corporations because "the values considered important enough to merit accommodation with interests protected by the first amendment are associated solely with natural persons, and that corporations, while legal persons for some purposes, possess none of the attributes the Court sought to protect." Id. at p. 955.¹

This Court disagrees with that reasoning for two reasons. First, the Supreme Court in Gertz rejected Rosenbloom without qualification. It did so because the Rosenbloom formulation would unduly abridge the state interest in protecting the reputation of private individuals and because it would create...