98 F.3d 351 (8th Cir. 1996), 95-3473, Lundell Mfg. Co., Inc. v. American Broadcasting Companies, Inc.

Docket Nº:95-3473.
Citation:98 F.3d 351
Case Date:October 15, 1996
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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98 F.3d 351 (8th Cir. 1996)




No. 95-3473.

United States Court of Appeals, Eighth Circuit

October 15, 1996

Submitted April 10, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied Nov.

26, 1996.[*]

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Paul Dean Lundberg, argued, Sioux City, IA, for plaintiff-appellant.

Kasey W. Kincaid, argued, Des Moines, IA, for defendant-appellee.

Before WOLLMAN, JOHN R. GIBSON, and HANSEN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Lundell Manufacturing Company appeals from the district court's order granting American Broadcasting Companies judgment as a matter of law, and setting aside a jury verdict of just over one million dollars for Lundell on its libel action. ABC broadcast a story on "World News Tonight with Peter Jennings," reporting that a garbage recycling machine manufactured by Lundell "does not work." Lundell sued for libel, a jury returned a verdict in its favor, and the district court set aside the jury verdict. On appeal, Lundell argues that the district court erred in setting aside the jury verdict because there was substantial evidence that the "sting" of the defamatory statement was false. Lundell also contends that the court erred in setting aside the lost profits award because there was evidence of lost profits damages. We reverse.

On July 2, 1992, ABC broadcast a story on "World News Tonight with Peter Jennings" as part of the program's continuing "Anger in America" reports. Jennings introduced the story:

Our final report tonight is about garbage, which in the case of a small rural county in Georgia, is making an awful lot of people angry. What we have here is another example of why people are frustrated or angered by government.

ABC reporter, Rebecca Chase, began the story by explaining the predicament of Berrien County taxpayers. An on-screen graphic labeled "Garbage Tax" appeared at the beginning of the story, and Chase began her report:

In this south Georgia county of tobacco farms and pecan groves, taxpayers are angry that they are stuck with a three million dollar debt for this garbage recycling machine that they never approved and does not work.

(Emphasis added).

The story continued with Chase interviewing an upset taxpayer, and then describing the background of the controversy:

In 1988, Berrien County had no place to put its garbage because the landfill was full. So the county commission decided to buy this garbage machine with revenue bonds which do not require voter approval.

As Chase made this statement, television viewers saw a corresponding video showing the Lundell machine in Berrien County.

Further in the story, viewers were shown another recycling machine sorting solid waste as Chase stated:

The machine was supposed to work like this one in Tennessee, sorting and recycling up to ninety percent of the county's garbage and paying for itself by selling the recycled materials and charging user fees. That is how then-commissioner Joe Stallings promised it would work here. It did not.

Chase then interviewed the former Commissioner, Joe Stallings, who stated: "There's nothing physically wrong with the machine. It's the people."

Chase continued:

Stallings blames people for not giving the machine a chance. But most people here blame him for misleading them about how much it cost to operate the plant. It was five times more expensive than he said it would be. The machine turned the garbage into fuel pellets and compost, but no one found a buyer. So the unsold material piled up outside--nothing more than exposed trash. The state has now ordered

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the plant shut down as an environmental hazard.

The story then detailed citizen responses, including a class action lawsuit to void the taxpayers' obligation to pay for the recycling project. The story concluded by telling that Berrien County taxpayers now must have their garbage hauled to another county for disposal.

Lundell sued ABC, alleging that the statement that the recycling machine "does not work" falsely implied that the recycling machine was not mechanically operable. 1 ABC concedes that the recycling machine was mechanically sound, and that the reason Berrien County no longer used the machine was because the county could not sell the by-products at a price sufficient to cover the machine's operating expenses. ABC defends the statement, arguing that the phrase "does not work" accurately implied that the Lundell machine and Berrien County's recycling plan did not work as intended or promised because the system did not work in a financially viable manner.

ABC filed a motion for summary judgment, arguing that Lundell could not demonstrate that the statement that the machine "did not work" was false, and that the challenged statement was not actionable because it was substantially true. The district court ruled that Lundell must bear the burden of proving that the challenged statement was false. See In re IBP Confidential Business Documents Litigation, 797 F.2d 632, 647 (8th Cir.1986) (en banc), cert. denied, 479 U.S. 1088, 107 S.Ct. 1293, 1294, 94 L.Ed.2d 150 (1987). The court recognized, however, that even if the statement was false, Lundell could not recover for defamation if the "gist" or "sting" of the report was substantially true. See Behr v. Meredith Corp., 414 N.W.2d 339, 342 (Iowa 1987). Nevertheless, the court denied ABC's motion, holding that a disputed question of fact existed as to the "sting" of the report and, therefore, the jury must decide the question. At the close of Lundell's evidence, the court directed a verdict for ABC on Lundell's claim of actual malice. The court concluded that Lundell was a "private figure plaintiff" and, therefore, must show by a preponderance of the evidence that ABC breached the standard of care of reasonably prudent professional broadcast news employees in broadcasting the report. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 347, 94 S.Ct. 2997, 3010-11, 41 L.Ed.2d 789 (1974); Jones v. Palmer Communications, Inc., 440 N.W.2d 884, 898 (Iowa 1989).

Following an eight-day trial, the jury returned a verdict for Lundell assessing $900,000 in damages for injury to reputation and $158,000 in damages for lost profits. Later, the court granted ABC's renewed motion for judgment as a matter of law, ruling that the news report was substantially true as a matter of law. The court also ruled that if it had not entered judgment as a matter of law, it would have set aside the $158,000 lost profits award because of insufficient evidence. Lundell appeals.


A critical dispute in this case is over our standard of review. Lundell argues that there is substantial evidence that ABC's statement that the machine did not work is false, and, therefore, the court could not decide that the report was substantially true as a matter of law, and neither the district court nor this court can disturb the jury's finding.

Lundell argues that we are guided by our usual standard for reviewing a district court's decision to enter judgment as a matter of law. Under that standard, we ask whether there is sufficient evidence to support a jury verdict. White v. Pence, 961 F.2d 776, 779 (8th Cir.1992) (standard for granting a motion for judgment as a matter of law). We analyze the evidence in the light most favorable to Lundell, and we do not weigh or evaluate the evidence or consider questions of credibility. Id. To sustain a motion for judgment as a matter of law, all the evidence must point one way and be susceptible of no

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reasonable inference sustaining Lundell's position. Id.

ABC, on the other hand, contends that we are not restrained in this First Amendment case by the deference ordinarily accorded jury findings. Citing New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), ABC argues that we must "make an independent examination of the whole record," unrestrained by the deference ordinarily afforded to the jury, in order to ensure that no "forbidden intrusion on the field of free expression" has occurred. Id. at 285, 84 S.Ct. at 729 (internal quotation and citation omitted).

To remove the chilling effect of defamation laws and to encourage "uninhibited, robust, and wide-open" debate, the Supreme Court created a constitutional rule protecting the good faith criticism of government officials in New York Times, 376 U.S. at 270-71, 84 S.Ct. at 720-21. Because freedoms of expression require "breathing space," id. at 272, 84 S.Ct. at 721-22, the Court held that the Constitution "prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves that the statement was made with 'actual malice.' " Id. at 279-80, 84 S.Ct. at 725. Actual malice is a statement made "with knowledge that it was false or with reckless disregard of whether it was false." Id. at 280, 84 S.Ct. at 726. To ensure no forbidden intrusion on these First Amendment liberties, an appellate court's review of a trial court's finding of actual malice is not controlled by the "clearly erroneous" standard of Federal Rule of Civil Procedure 52(a). Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 498-511, 104 S.Ct. 1949, 1958-65, 80 L.Ed.2d 502 (1984). "Judges, as expositors of the Constitution, must independently decide whether the evidence in the record is sufficient to cross the constitutional threshold that bars the entry of any judgment that is not supported by clear and convincing proof of 'actual malice.' " Id. at 511, 104 S.Ct. at 1965.


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