755 F.2d 1300 (8th Cir. 1985), 83-1894, In re IBP Confidential Business Documents Litigation

Docket Nº:83-1894.
Citation:755 F.2d 1300
Case Date:February 13, 1985
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 1300

755 F.2d 1300 (8th Cir. 1985)


Hughes A. BAGLEY, Appellee,



No. 83-1894.

United States Court of Appeals, Eighth Circuit

February 13, 1985

Submitted Feb. 14, 1984.

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[Copyrighted Material Omitted]

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Don H. Reuben, Chicago, Ill., argued, Edward M. Blando, Cedar Rapids, Iowa and Thomas E. Deacy, Jr., Kansas City, Mo., for appellant.

Robert D. Sack, New York City, for amicus curiae.

William J. Rawlings and Michael P. Jacobs, Sioux City, Iowa, for appellee.

Before BRIGHT, ARNOLD and FAGG, Circuit Judges.

BRIGHT, Circuit Judge.

Hughes A. Bagley brought this action 1 against Iowa Beef Processors, Inc. (IBP), claiming damages for libel, invasion of privacy, and tortious interference with employment, 2 all resulting from a letter written by IBP to a congressional subcommittee in which IBP in essence called Bagley a liar and a thief. Federal jurisdiction rests on diversity of citizenship. After twelve days of trial, the jury found IBP liable on all three claims and awarded Bagley compensatory and punitive damages of $8.75 million. 3 The district court entered final judgment, as modified after post-trial motions, 4

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] for $9.33 million. IBP appeals. We affirm the award for tortious interference with existing employment and reverse the awards for libel and tortious interference with future employment.

In submitting Bagley's claim of libel to the jury, the district court instructed the jurors that to recover damages Bagley must prove by a preponderance of the evidence:

  1. That [IBP] published a letter concerning [Bagley] which was a libel as that term is defined in these instructions.

  2. That [IBP] published the letter with knowledge that it was false.

  3. That the libel was read by members of the general public.

  4. That as a proximate result of [IBP's] actions, [Bagley] sustained damages.

The district court further instructed the jury that the allegedly defamatory statements in IBP's letter to the congressional subcommittee were libelous per se, creating "a legal presumption of their falsity thus shifting to [IBP] the burden of proving the truth of the statements" and "a presumption of injury and damage even if actual pecuniary damages cannot be proved." As to damages, the district court explained that establishing the elements of his libel claim entitled Bagley to compensatory damages and that, if the jury found that IBP had acted with "actual malice" (with knowledge that the statements were false or with reckless disregard of whether they were false or not), they could award Bagley punitive damages as well.

In its post-trial motion for judgment notwithstanding the verdict or alternatively for a new trial, IBP argued that the district court erred in so instructing the jury, and entered judgment on the libel claims in derogation of IBP's first amendment rights. IBP contended, among other things, 5 that the allegedly libelous letter and the subsequent republications thereof were privileged, urging the applicability of the following: 1) the absolute privilege at common law afforded statements made in the course of a legislative proceeding, 2) the Noerr-Pennington doctrine (Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965)), which protects bona fide attempts to petition the government, 3) the right, at common law, to reply in an appropriate manner to public accusations, and 4) the "actual malice" standard of liability, rather than presumptive liability, based on Bagley's alleged status as a limited public figure. IBP also contended that the district court unconstitutionally imposed liability without fault by instructing the jury to presume falsity. In addition, IBP argued that the damage awards, having no relationship to injury actually suffered, were constitutionally impermissible.

The district court rejected these arguments 6 and therefore denied IBP's motion

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for judgment notwithstanding the verdict or a new trial. IBP raises each of these arguments again on appeal. In addition, IBP contends that the district court denied it a fair trial by allowing the introduction of prejudicial and irrelevant evidence and by permitting improper closing argument. IBP also argues that the tortious interference verdicts must fall because they are hopelessly tainted by the libel portion of the trial.

We agree with IBP's contention that the libel instructions cannot pass constitutional muster. For the reasons discussed at length below, we believe that IBP is immune from liability unless Bagley can prove by clear and convincing evidence that the defamatory statements were false and that they were made with "actual malice."


IBP, a large meatpacker, employed Bagley from mid-1971 to mid-1975, first as a consultant and then as vice president of retail sales development. In July of 1975, Bagley left IBP's employ, 7 taking with him files that he generated while he worked there (the Bagley Documents). 8 IBP and Bagley, both with the benefit of counsel, subsequently negotiated and executed a settlement agreement, releasing each other from potential liability arising out of their employment relationship and the termination thereof. In that agreement, Bagley agreed not to assist any third party in bringing a lawsuit against IBP. 9

In late 1976 and early 1977, Bagley met with several lawyers who were interested in the potential antitrust ramifications of IBP's activities. Those lawyers were Albert Krieger, a criminal defense attorney, who, with one unrelated exception, had never handled an antitrust case but hoped to do so, based on information he learned from Bagley; Minnesota attorney John Cochrane and Iowa attorney Lex Hawkins, then representing the Meat Price Investigators Association (MPIA) in antitrust litigation against four meatpacking companies, including IBP; and attorneys who had on occasion represented the Greater New York Association of Meat and Poultry Dealers. In the course of these meetings, Bagley disclosed information about IBP's

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activities and permitted the attorneys to examine, and in some cases to copy, some of the Bagley Documents. Bagley also met in late 1976 with Irving Stern and Jess Proston, officials of the Meat Cutters Union, who, anticipating upcoming contract negotiations with IBP, discussed with Bagley the advisability of a strike.

IBP learned of Bagley's activities in the spring of 1977 and, on June 7, 1977, filed suit in federal district court against Bagley and others, seeking injunctive relief and damages. In its complaint, IBP alleged that Bagley breached his fiduciary duty to IBP and violated the express terms of his termination agreement. 10 IBP dismissed its claim against Bagley for damages in June of 1982, but continued to seek injunctive relief compelling Bagley to return the Bagley Documents and to honor his contractual and fiduciary obligations. 11

A. The Subcommittee's Proceedings.

In late 1977, the Subcommittee on Small Business Administration and Small Business Investment Company Authority and General Small Business Problems of the United States House of Representatives Committee on Small Business (the Subcommittee) began investigating the meatpacking industry. The Subcommittee held a number of hearings between October of 1977 and July of 1979 to examine particular problems faced by small packers and to determine whether existing legislation ensured continued competition in the industry. At least five witnesses who testified before the Subcommittee discussed or provided information about IBP, in some cases specifically charging IBP with anticompetitive conduct. The Subcommittee's investigator also gathered additional information about IBP by examining the Bagley Documents, which were subpoenaed in late 1978, and by questioning Bagley under subpoena in January and June of 1979 in preparation for hearings before the Subcommittee.

B. The Subcommittee's Invitation to IBP.

On June 29, 1979, Congressman Neal Smith from Iowa, chairman of the Subcommittee, invited IBP to send a spokesperson to testify before the Subcommittee during hearings scheduled for late July. In a letter to IBP's president, Robert Peterson, Congressman Smith wrote,

I wish to take this opportunity to offer you or any other officer who has personal knowledge of the firm's activities and who can speak on behalf of Iowa Beef Processors the opportunity to voluntarily appear and testify before the Subcommittee. Such a hearing would be conducted pursuant to the Rules of the Committee on Small Business, a copy of which is included with this letter. Essentially, the witness or witnesses appearing on behalf of Iowa Beef Processors would have the opportunity to appear under oath and present a written statement of reasonable length which would be made a part of the Subcommittee's hearing record. Following the submission of this written statement and an oral presentation of reasonable length, the witness or witnesses appearing on behalf of Iowa Beef Processors would be questioned by members of the Subcommittee.

Congressman Smith went on to advise Peterson that "the questions can be expected to cover a broad range of topics and issues pertinent to the Subcommittee's inquiry[,] * * * undoubtedly includ[ing] matters raised by the so-called 'Bagley documents'

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* * *." In closing, Congressman Smith wrote:

As you know, a great deal of testimony received by this Subcommittee has been in regard to Iowa Beef Processors. If new legislation or rules are enacted to limit dominance by any companies in the meat...

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