847 F.2d 1069 (3rd Cir. 1988), 86-5839, Schiavone Const. Co. v. Time, Inc.

Docket Nº:Individually, Appellants in 86-5839,
Citation:847 F.2d 1069
Party Name:SCHIAVONE CONSTRUCTION CO. and Ronald A. Schiavone,
Case Date:May 16, 1988
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 1069

847 F.2d 1069 (3rd Cir. 1988)

SCHIAVONE CONSTRUCTION CO. and Ronald A. Schiavone,

Individually, Appellants in 86-5839,

v.

TIME, INC., Appellants in 86-5920.

Nos. 86-5839, 86-5920.

United States Court of Appeals, Third Circuit

May 16, 1988

Argued Sept. 15, 1987.

Rehearing and Rehearing In Banc Denied June 10, 1988.

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[Copyrighted Material Omitted]

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Theodore W. Geiser (argued), John F. Neary, Thomas S. Cosma, Connell, Foley & Geiser, Roseland, N.J., for Schiavone Const. Co., etc.

Peter G. Banta, Winne, Banta, Rizzi, Hetherington & Basralian, Hackensack, N.J., Stuart Robinowitz (argued), Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Time, Inc.

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Before BECKER and SCIRICA, Circuit Judges, and FARNAN, District judge [*].

OPINION

BECKER, Circuit Judge.

This is an appeal from the grant of summary judgment for defendant Time, Inc. in a highly publicized defamation case arising out of media coverage of an investigation of former United States Secretary of Labor Raymond Donovan. Plaintiffs, Ronald Schiavone (Schiavone) and Schiavone Construction Company (SCC), in which Schiavone owned a controlling interest and Donovan formerly owned a minority interest, brought a libel suit against Time on account of an article in Time magazine. The challenged portion of the article was based on a confidential memorandum of former FBI chief William Webster. Relying on the memorandum, the article asserted that "the name of Schiavone appeared several times in the bureau's reports on the 1975 disappearance of former Teamster Boss Jimmy Hoffa." In reporting on this confidential memo, the article did not, however, include the important statement that appeared in the memo that "none of these [appearances in the Hoffa execution files] suggested any criminality, or organized crime associations." Immediately following its report of the Webster memorandum, the article stated: "That detail would surely have intrigued both the Senate committee that approved Donovan's nomination in February 1981, and the special prosecutor this year."

Time asserts that the article focused on the Donovan investigation and that any incidental references to the plaintiffs merely recounted the plaintiffs' Mafia associations, which had been publicized countless times before. Plaintiffs, however, contend that the article does much more--that it purports to tie them to the notorious disappearance and suspected murder of Jimmy Hoffa. We consider in this opinion six interesting legal issues, at least two of which depend in some measure on whether the "sting" of the article concerns Mafia associations or innuendos of involvement with Jimmy Hoffa's disappearance. Several of these issues emerge from the murky ground where state (New Jersey) tort law ends and first amendment protection of the press begins. The "unhappy cohabitation" of the two competing values requires us to balance society's desire to protect an individual's good name and its interest in promoting the rights of a vigorous press. Sisler v. Gannett Co., 104 N.J. 256, 516 A.2d 1083, 1086 (1986).

First, we consider the district court's holding that Schiavone and SCC are public figures. We conclude that even if plaintiffs did not intend to achieve limited purpose public figure status by their activities, they nevertheless did so by thrusting themselves into the forefront of the debate about Secretary of Labor Donovan. As a consequence of their status as public figures, they must, according to New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), prove with convincing clarity that Time acted with " 'actual malice'--that is, with knowledge that it was false or with reckless disregard of whether it was false or not." Id. at 280, 84 S.Ct. at 726.

Second, we consider the district court's summary judgment that plaintiffs are libel proof as a matter of law which resulted in the dismissal of the entire case against Time. Although we intimate no general view as to the viability of the libel proof plaintiff doctrine, we hold that under the facts of this case, depending on how a jury determines the sting of Time's article, the plaintiffs may indeed be able to secure compensatory damages and hence could not be libel proof as a matter of law. We expressly decline to consider the related question of plaintiffs' ability to secure punitive damages in the absence of compensatory damages, given the uncertainty that the jury will even have to reach this issue.

Third, we discuss the question whether the Time article is defamatory as a matter of law. We will reverse the district court's

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partial summary judgment in favor of Schiavone on this issue. We believe that the assertion that the name of Schiavone appeared in the HOFFEX file is capable of non-defamatory as well as defamatory meaning and hence must go to the jury.

Fourth, after noting that plaintiff, as a matter of constitutional law, must prove the article's falsity, we address the question whether Schiavone deserves summary judgment on the question of the falsity of the article. We note that the determination of falsity depends in large part on the "sting" of the article, which, as we mentioned above, is a question for the jury. We nevertheless address the district court's determination that the name of Schiavone simply does not appear in the FBI files concerning Jimmy Hoffa's disappearance, and its grant of partial summary judgment for Schiavone on this issue. Although plaintiffs have presented affidavits from FBI agents who searched the files and found no reference to Schiavone, we nonetheless believe that the question is unripe for summary judgment at this juncture. We find persuasive Time's arguments concerning logistical problems in demonstrating that plaintiffs' names appear in the files to which Time has no access. We instruct the district court to allow Time the discovery it requested and then consider any motions for summary judgment on this specific issue.

Fifth, after explaining our grave doubts that New Jersey would apply its fair report privilege to an unauthorized leak of an internal FBI memorandum, and our observation that under New Jersey tort law the fair report privilege may be entirely subsumed by the malice inquiry, we ultimately conclude that, under the facts of this case, Time's report of the Webster memorandum was so inherently unfair that it has forfeited the privilege as a matter of law. We therefore affirm the grant of partial summary judgment for Schiavone on this issue.

Finally, we consider whether, under the facts, including the intentional deletion of exculpatory material from the Webster memorandum, the question of malice should go to the jury. Applying Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), we affirm the district court's denial of Time's motion for summary judgment on the question of malice. We hold that a reasonable jury could find by clear and convincing evidence that Time acted with New York Times actual malice.

We therefore affirm in part, reverse in part, and remand for proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

The following facts, except where noted, are undisputed. 1 On August 23, 1982, Time Magazine published an article about the reopening of Special Prosecutor Leon Silverman's investigation of Secretary of Labor Donovan. Donovan had been vice-president and a 38% shareholder of SCC. Donovan's association with Ronald Schiavone and with SCC formed the basis of many allegations of Donovan's connections with organized crime.

pThe article read in full:

JURY STILL OUT

Donovan probe is reopened

Only seven weeks ago, when Special Prosecutor Leon Silverman released a 1,025-page report stating that there was "insufficient credible evidence" to prosecute the Labor Secretary, Raymond Donovan quickly declared that his troubles were over. Not quite. Silverman has reopened his investigation, and Time has learned that he will present fresh allegations about Donovan's conduct to grand juries in New York and elsewhere.

Phase II of the inquiry centers on the charge that Donovan, then part owner of New Jersey's Schiavone Construction Co., met near Miami in January 1979 with two known mobsters: William Masselli, a member of the Genovese Mafia

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family and head of an excavation firm that did business with Schiavone; and Albert ("Chink") Facchiano, a convicted loan shark and former capo (captain) in the Genovese clan. The purpose of the Miami get-together was reportedly to set up no-show jobs for Genovese Mob members on Schiavone construction sites. Although Donovan refused to comment on the new inquiry, he has repeatedly denied meeting with any mobsters. He contends he had run into Masselli only about three times, always at job sites, and says he does not know Facchiano at all.

In the first probe, Silverman received so many reports about Donovan's alleged conferences with mobsters in Miami that Facchiano, one of several gangsters mentioned in the allegations, escaped any questioning. Almost all the others had denied knowing the Labor Secretary, and Silverman says that summoning Facchiano then seemed pointless. But Facchiano, who is serving time in an Alabama prison for loan sharking, will now be called to testify. Silverman will also attempt to interrogate two men closely connected with Masselli who were not questioned during the first probe: Joseph Verlezza, an associate of Genovese gangsters, and Alfred Ditraglia, who watches over Masselli's interests in the Miami area, including an oceanfront condominium. During the initial inquiry, Verlezza claimed he was too ill to testify; Ditraglia could not be found by Silverman's staff.

The FBI faces some...

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