Sunward Corp. v. Dun & Bradstreet, Inc.

Decision Date04 February 1987
Docket NumberNos. 83-2644,83-2645,s. 83-2644
PartiesSUNWARD CORPORATION, Wedg-Cor, Inc., and Marvel Brute Steel Buildings, Inc., Plaintiffs/Appellees/Cross-Appellants, v. DUN & BRADSTREET, INC., Defendant/Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Fred H. Bartlit, Jr. of Kirkland & Ellis, Denver, Colo. (A. Buffum Lovell of Dun & Bradstreet, Inc., Murray Hill, N.J., with him on briefs), for defendant/appellant/cross-appellee.

William E. Murane of Holland & Hart, Denver, Colo. (A. Bruce Jones of Holland & Hart, Denver, Colo., with him on briefs), for plaintiffs/appellees/cross-appellants.

Before BARRETT and ANDERSON, Circuit Judges, and COOK, District judge *.

STEPHEN H. ANDERSON, Circuit Judge.

Dun & Bradstreet, Inc. appeals from a judgment entered on a $3,847,000 general jury verdict against it in a business defamation action. It also appeals from the denial of post-trial motions for judgment n.o.v. and for a new trial.

The affiliated plaintiff corporations, Sunward Corporation, Wedg-Cor, Inc., and Marvel Brute Steel Buildings, Inc. (collectively "Sunward") sued Dun & Bradstreet over the issuance of at least 340 inaccurate reports sent, on request, to various subscribers over a period of approximately two years, beginning in the fall of 1979 and ending in October, 1981, when Dun & Bradstreet was advised of the error and notified subscribers. The reports stated nothing explicitly defamatory about Sunward on their face, but they grossly understated the size of Sunward's business. Sunward charged that if recipients of the reports had prior information as to Sunward's true size, they would have interpreted the credit reports to mean that Sunward's business was in a steep decline, thus imputing to Sunward financial distress and incompetence in the conduct of its business. Sunward further charged that a report of small size in and of itself is defamatory in the competitive business in which it is engaged. No recipients of the reports were produced to testify that they interpreted the reports to have the defamatory meanings charged by Sunward. Federal jurisdiction is based on diversity of citizenship. Colorado law governs.

On appeal Dun & Bradstreet contends: that there was no proof of defamation sufficient to allow the case to go to the jury; that the jury instruction defining "reckless disregard" (which Sunward had to prove to overcome Dun & Bradstreet's qualified privilege) was erroneous, and evidence on the subject was insufficient; that the district court erred in permitting Sunward to recover presumed damages; and that the evidence on damage was improper. We agree with certain of those arguments, as discussed in this opinion. Therefore, we affirm in part, reverse in part, and remand for a new trial.

Sunward has filed a cross-appeal from the district court's denial of pre-judgment interest on the jury award. Our decision to reverse and remand this case for a new trial renders that appeal moot.

BACKGROUND

The business of Dun & Bradstreet is well known and has been discussed extensively in decided cases, including the published opinion of the district court in this case. Sunward Corp. v. Dun & Bradstreet, Inc., 568 F.Supp. 602 (D.Colo.1983). In general, Dun & Bradstreet is a credit reporting agency which "provides subscribers with financial and related information about businesses. All the information is confidential; under the terms of the subscription agreement the subscribers may not reveal it to anyone else." Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 105 S.Ct. 2939, 2941, 86 L.Ed.2d 593 (1985).

Sunward is in the business of manufacturing and selling steel buildings. R. Vol. IV at 73-74. Although it sells nationwide, Sunward's buildings are sold primarily to agricultural and commercial concerns in the north-central states as barns, warehouses and storage bins. R. Vol. IV at 37, 73, 78.

In 1975 and 1976 Dun & Bradstreet issued basically accurate reports on segments of the Sunward corporate structure, stating, on December 22, 1975, that Wedg-Cor Inc., (a subsidiary of Marvel Steel, Inc.) had annual "sales in the $7 million range." Ex. 26, R. Vol. IV at 101. Because of Dun & Bradstreet's records destruction policy it is not known what, if any, reports relating to Sunward were issued between 1976 and 1979. R. Vol. V at 196-97.

Over a two-year period, beginning with two reports dated August 15, 1979 (the first recorded issuance of which was on November 12, 1979), and ending in mid-October, 1981, Dun & Bradstreet, in response to requests from subscribers, issued approximately 340 reports on corporations in the Sunward group. Those reports grossly understated the size of Sunward's business. The 1979 report on Sunward Corporation estimated annual sales at $200,000 with three to five employees, and stated that Sunward had $25,000-$50,000 in fixtures and equipment. Sunward was described as a real estate investment company. Ex. 29, R. Vol. VI at 262-64. The 1979 report on "Marvel Brute Steel Buildings/Marvel Steel Wedg-Cor/Sunward Purchasing Div." stated that the company had three to five employees, with estimated annual sales of $500,000-$750,000.

In fact, in the 1979 fiscal year which ended February 28, 1980, the Sunward group of corporations had combined gross sales amounting to $29.5 million. Also in 1979, those corporations employed just over 300 salaried personnel, of whom 169 were employed by Marvel Brute Steel and 100 by Sunward. They also had approximately 250 commissioned sales personnel and 100 dealers. Approximately 80% of the total 1979 business was done by the commissioned sales personnel. R. Vol. IV at 80-81. 1 In March, 1979, the beginning of fiscal year inventory amounted to $4.6 million, and plant and equipment, after depreciation, was valued at $5.8 million. The backlog of orders stood at $6.7 million. Ex. 64, R. Vol. IV at 83-86.

Although some differences appeared, the Dun & Bradstreet reports on the Sunward group of corporations continued in the same vein as the 1979 reports until October, 1981 when Danton Wirth, owner and a principal in these corporations, saw one of the reports. Exs. 23, 24, R. Vol. IV at 93-95. Each of the credit reports stated on its face that Sunward had declined to be interviewed and declined all information; therefore, sales figures were the reporter's estimates. Mr. Wirth testified that from and after 1975 he consistently refused to provide financial information about his companies to Dun & Bradstreet, and instructed his employees not to cooperate. R. Vol. IV at 91-92; R. Vol. V at 176. Requests by the Dun & Bradstreet representative for information in 1979 were rebuffed. R. Vol. VI at 265. The parties are in disagreement as to whether or not Sunward was aware of the erroneous credit reports between 1979 and October of 1981, but Mr. Wirth denied any knowledge. R. Vol. V at 174-76.

In the period generally corresponding with that in which the erroneous credit reports were being issued, Sunward's gross sales declined 56.5% (Pl.Ex. 66, par. 4); its sales force declined to just six active commissioned salespeople; 2 and its backlog of orders decreased during the 1979 fiscal year from $6.7 million to $2.3 million. Ex. 64, R. Vol. IV at 83-84, 86-87.

The causal relationship of these and associated business difficulties of Sunward to the Dun & Bradstreet reports is a highly disputed and central issue in this case. Not one of the recipients of the erroneous credit reports was called to testify, nor was any witness called who had heard any reference to the reports. Rather, through three witnesses, Sunward established only Steven L. Kalicki, a former employee, testified that while employed by Sunward in 1979 he heard rumors within the company, from company employees, that the business was not doing well. R. Vol. IV at 59-60, 63. And, in late 1980 and in 1981, after he had left the company, various contractors in Colorado commented to him that Sunward was doing poorly and about to go out of business. R. Vol. IV at 60-61. He failed to name any of the individuals who made such comments or any other parties to the conversation. Nor did he identify the time or place of the conversations.

that there were rumors in the industry that the company was in financial difficulty.

Jerry Bishop, who worked for a competitor, testified that he had heard similar rumors on two occasions: in November, 1980, during the cocktail hour at the 25th anniversary meeting of the Metal Building Manufacturers' Association (he could not remember who made the remark); and in a telephone conversation with a district manager for a competitor, Chief Industries, sometime between December 15, 1982 and January, 1983 (more than a year after Dun & Bradstreet ceased distribution of the erroneous reports). R. Vol. VI at 291-94.

Mr. Wirth testified to the existence of rumors and consequent difficulties with his sales force and dealers. He also admitted that he could not identify any customer or specific business loss directly traceable to the Dun & Bradstreet reports. R. Vol. IV at 103; R. Vol. V at 181. And, he acknowledged the onset of a bad economic climate in the early 1980s, resulting in a general decline in the steel building business. R. Vol. IV at 135, 140-41.

A Sunward employee, Jerry Johnston, testified in general that warranties and engineering certifications are important to the sale of buildings. R. Vol. IV at 45-46. But Sunward made no serious attempt to establish the resulting inference that small companies are not patronized because they are unable to provide or stand behind their warranties or certifications. That very general and sketchy testimony, along with figures showing its decline in business, constituted Sunward's evidence that the credit reports were considered to be defamatory.

The credit reports in question were prepared by Dun & Bradstreet employee Larry Thompson. Mr. Thompson admitted that after Sunward refused...

To continue reading

Request your trial
57 cases
  • Balla v. Hall
    • United States
    • California Court of Appeals Court of Appeals
    • January 6, 2021
    ... ... Balla owns Strategic Assets Group, Inc. and works in real estate finance and development. He also managed ... ( Vegod Corp. v. Am. Broad. Cos. (1979) 25 Cal.3d 763, 769-770, 160 Cal.Rptr. 97, 603 ... Gabor (1995) 40 Cal.App.4th 1455, 1474, 48 Cal.Rptr.2d 235, and Sunward Corp. v. Dun & Bradstreet, Inc. (10th Cir. 1987) 811 F.2d 511, 535. But ... ...
  • U.S. v. Ruedlinger
    • United States
    • U.S. District Court — District of Kansas
    • July 15, 1997
    ... ... Jones, 49 F.3d 628, 633 (10th Cir.1995) (quoting Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 521 (10th Cir.1987) ... ...
  • U.S. Industries, Inc. v. Touche Ross & Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • August 22, 1988
    ... ... 701, 105 S.Ct. 2308, 85 L.Ed.2d 708 (1985). See Schaafsma v. Morin Vermont Corp., 802 F.2d 629, 636 (2d Cir.1986); Penturelli v. Spector, Cohen, Gadon & Rosen, 779 F.2d 160, 164 ... See, Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 531 (10th Cir.1987); but see Anderson v. Deere & ... ...
  • Colo. Cross-Disability Coal., Non-Profit Corp. v. Abercrombie & Fitch Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • August 29, 2014
    ... ... ABERCROMBIE & FITCH CO.; Abercrombie & Fitch Stores, Inc.; J.M. Hollister LLC, d/b/a Hollister Co., Defendants–Appellants. United States of America; Legal ... Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 521–22 (10th Cir.1987). Therefore, “a plaintiff ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT