Information Control Corp. v. Genesis One Computer Corp.

• Decision Date: 15 January 1980
• Docket Number: No. 77-3659,77-3659
• Citation: 611 F.2d 781
• Parties: INFORMATION CONTROL CORPORATION, Plaintiff-Appellant, v. GENESIS ONE COMPUTER CORPORATION, etc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 781

611 F.2d 781

INFORMATION CONTROL CORPORATION, Plaintiff-Appellant, v. GENESIS ONE COMPUTER CORPORATION, etc., et al., Defendants-Appellees.

No. 77-3659.

United States Court of Appeals,

Ninth Circuit.

Jan. 15, 1980.

Joan Patsy Ostroy, Bersch & Kaplowitz, Beverly Hills, Cal., argued for plaintiff-appellant; Blanche E. Bersch, Bersch & Kaplowitz, Beverly Hills, Cal., on the brief.

Robert H. Tau, Rosenfeld, Meyer & Susman, Beverly Hills, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before BROWNING and TANG, Circuit Judges, and MUECKE, District Judge ^*.

MUECKE, District Judge:

For two years Genesis One Computer Corporation (Genesis) marketed certain electronics products manufactured by Information Control Corporation (ICC). A dispute arose. ICC sued Genesis for breach of contract and misrepresentation, and Genesis countersued to collect allegedly unpaid commissions. An industry news journal requested a statement from Genesis' counsel regarding the suits. Counsel replied:

In the opinion of Genesis' management, the action by ICC is intended as a device by ICC to avoid payment of its obligations (I. e., the commissions allegedly owing) to Genesis as a result of the sale of over two million dollars worth of ICC equipment, and in the opinion of general counsel to Genesis, Genesis has substantial defenses to the ICC action.

Two weeks later, Genesis' public relations firm issued a press release containing the same statement with minor modifications. The release again characterized ICC's breach of contract action as a "device" to avoid payment of commissions due Genesis.

ICC then brought this suit for defamation, based on the statement by Genesis' counsel and the press release. The district court ruled the statements non-defamatory and privileged as a matter of law, and granted Genesis' motion for summary judgment.

Under California law, recovery for defamation may be had only for false statements of fact. Statements of opinion are not actionable. Gregory v. McDonnell Douglas Corp., 17 Cal.3d 596, 600, 131 Cal.Rptr. 641, 643, 552 P.2d 425, 427 (1976). The determination of whether an allegedly defamatory statement is a statement of fact or statement of opinion is a question of law. Gregory, supra, 17 Cal.3d at 601, 131 Cal.Rptr. at 644, 552 P.2d at 428. Accord, Greenbelt Cooperative Publishing Assn. v. Bresler, 398 U.S. 6, 13-15, 90 S.Ct. 1537, 1541-42, 26 L.Ed.2d 6 (1970). It is normally defamatory on its face to say that a business refuses to pay its just debts. W. Prosser, Law of Torts 756 (3d ed. 1964). See Reed v. Melnick, 81 N.M. 608, 471 P.2d 178, 179, 182 (1970); Cosgrove Studio & Camera Shop, Inc. v. Pane, 408 Pa. 314, 317, 182 A.2d 751, 753 (1962); Restatement (Second) of Torts § 569, Comment e (1977).

It is often quite difficult to determine whether a publication constitutes a statement of fact or statement of opinion. In the process of making this determination, it is important to keep three factors in mind. First, it is established that words are not defamatory unless they are understood in a defamatory sense. W. Prosser, Supra, at 763. "Publications by which it is sought to convey pertinent information to the public in matters of public interests are permitted wide latitude. . . . Mere expressions of opinion or severe criticism are not libelous if they clearly go only to the merits or demerits of a condition, cause or controversy which is under public scrutiny . . . ." Howard v. Southern California Associated Newspapers, 95 Cal.App.2d 580, 213 P.2d 399, 402 (1950). Thus, the words alone are not determinative; the facts surrounding the publication must also be considered.

A second factor to consider in determining the nature of a publication is that even apparent statements of fact may assume the character of statements of opinion, and thus be privileged, when made in public debate, heated labor dispute, or other circumstances in which an "audience may anticipate efforts by the parties to persuade others to their positions by use of epithets, fiery rhetoric or hyperbole . . . ." ¹ Gregory, supra, 17 Cal.3d at 601, 131 Cal.Rptr. at 644, 552 P.2d at 428. Accord, Scott v. McDonnell Douglas Corp., 37 Cal.App.3d 277, 112 Cal.Rptr. 609 (1974); Taylor v. Lewis, 132 Cal.App. 381, 22 P.2d 569 (1933).

The final consideration in the fact/opinion analysis is the language of the allegedly defamatory statement. Where the language of the statement is "cautiously...