Altoona Clay Products, Inc. v. Dun & Bradstreet, Inc.

• Decision Date: 08 September 1966
• Docket Number: 15710.,No. 15709,15709
• Citation: 367 F.2d 625
• Parties: ALTOONA CLAY PRODUCTS, INC., Appellant, v. DUN & BRADSTREET, INC. v. C. R. GROVE, Joined as Plaintiff by Court Order. ALTOONA CLAY PRODUCTS, INC. v. DUN & BRADSTREET, INC. v. C. R. GROVE, Joined as Plaintiff by Court Order, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

367 F.2d 625 (1966)

ALTOONA CLAY PRODUCTS, INC., Appellant, v. DUN & BRADSTREET, INC. v. C. R. GROVE, Joined as Plaintiff by Court Order.

ALTOONA CLAY PRODUCTS, INC. v. DUN & BRADSTREET, INC. v. C. R. GROVE, Joined as Plaintiff by Court Order, Appellant.

Nos. 15709, 15710.

United States Court of Appeals Third Circuit.

Argued May 17, 1966.

Decided September 8, 1966.

Rehearing Denied October 4, 1966.

John E. Evans, Jr., Pittsburgh, Pa. (Evans, Ivory & Evans, Pittsburgh, Pa., on the brief), for appellant Altoona Clay Products, Inc.

Joseph A. Williams, Pittsburgh, Pa., for appellant C. R. Grove.

Clyde A. Armstrong, Pittsburgh, Pa. (Edmund S. Ruffin, III, Thorp, Reed & Armstrong, Pittsburgh, Pa., on the brief), for appellee.

Before STALEY, Chief Judge, and McLAUGHLIN and SMITH, Circuit Judges.

OPINION OF THE COURT

STALEY, Chief Judge.

The appeal in this diversity case requires us to decide several issues involving the Pennsylvania law of defamation. The legal questions, however, are far more simple than they would appear on their surface or the parties would have them.

The facts may be abbreviated for the purposes of this appeal. The plaintiff, Altoona Clay Products, Inc., is a Pennsylvania corporation and was engaged in business as a brick and tile broker. Being a sizable concern, its credit standing became the subject of analysis by the defendant, Dun & Bradstreet, Inc. From time to time the defendant issued credit reports concerning the plaintiff to its brick and tile suppliers and other creditors. Sometime in early January, 1963, Dun & Bradstreet requested one of its employees to up-date its credit report on the plaintiff. In his search of the records in the Blair County Courthouse, the employee discovered in the judgment index an unsatisfied judgment against Altoona Clay Products Company for $60,000.¹ On January 9, 1963, Dun & Bradstreet issued a credit report covering plaintiff. The report, which is reproduced below,² among other things listed in two columns items which would normally fall into the categories of assets or liabilities. The estimated total of assets was $101,200, while plaintiff's total liabilities were estimated at $86,500. Below these columns, however, appeared the following:

"A check of the Blair County Records on Jan 7 1963 revealed a judgment filed by the Altoona Central Bank #280 term 10-61 dated Nov 10 1961, for $60,000 A.S.B. Penal * * *."

There was, in fact, no judgment against the plaintiff corporation.

Plaintiff brought suit against the defendant, alleging that the circulation of this report to its suppliers caused them to restrict plaintiff's credit to such an extent that plaintiff suffered great financial loss. The complaint incorporated substantially the same quote as appears above; however, the entire report was made part of the answer. After the parties had completed extensive discovery, the defendant moved for summary judgment inter alia on the grounds that the alleged libel was a libel per quod and required the pleading of special damages and that plaintiff had failed to so plead. The district court found that the alleged libel was a libel per quod but held that plaintiff's pleading was sufficient.³

On the eve of trial, plaintiff's counsel for the first time expressly indicated that his case turned, at least in part, on the theory that defendant's report had imputed insolvency to the plaintiff. Despite this new assertion, the district court adhered to its position that the alleged defamation was a libel per quod. Plaintiff's counsel was prohibited from mentioning "imputed insolvency" in his opening to the jury and from eliciting testimony along those lines.

Prior to discussing the issues raised on this appeal, certain salient features of the law of defamation in general, and the law of Pennsylvania in particular, should be clarified. Perhaps an over-generalization of the case law in Pennsylvania is that it follows the Restatement of Torts, §§ 558 et seq. The Pennsylvania courts have unequivocally committed themselves to the Restatement's definition of defamatory communication:

"A communication is defamatory if it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." Restatement, Torts § 559.

Cosgrove Studio & Camera Shop, Inc. v. Pane, 408 Pa. 314, 182 A.2d 751 (1962); Birl v. Philadelphia Electric Co., 402 Pa. 297, 167 A.2d 472 (1960). It is equally clear that Pennsylvania follows §§ 570 and 573 of the Restatement whereby publication of slanderous statements concerning one's business, trade or profession are made actionable per se, that is, they are actionable without proof of special harm. Fegley v. Morthimer, 204 Pa.Super. 54, 202 A.2d 125 (1964); Cosgrove Studio & Camera Shop, Inc. v. Pane, supra. "For obvious reasons, the presumption that words are defamatory arises much more readily in cases of libel than in cases of slander." Collins v. Dispatch Pub. Co., 152 Pa. 187, 25 A. 546, 547 (1893). This being so, this case does not require us to determine whether all libels are actionable per se in Pennsylvania.⁴

At this point, we must note a distinction which is most important. The determination of whether particular words are actionable without proof of special damages ("actionable per se") is without question a matter of state substantive law. Sweeney v. Philadelphia Record Co., 126 F.2d 53 (C.A.3, 1942); Sweeney v. Schenectady Union Pub. Co., 122 F.2d 288 (C.A.2, 1941). Not to be confused with this determination is whether a particular publication is defamatory on its face ("defamatory per se," "libelous per se," or "slanderous per se"). This latter determination is strictly procedural and means only that an "innuendo" must be or need not be pleaded. The authorities tell us that these pleading requirements are ofttimes ridiculous and frequently result in injustice. McCormick, Damages § 113 at 417-419; Prosser, Torts § 92 at 79 et seq. (2d ed.). Since the Federal Rules greatly reduced the importance of technical pleading, we need only state that these technical rules must give way when they come in conflict with our simplified rules of pleading. Continental Collieries v. Shober, 130 F.2d 631 (C.A.3, 1942); see also Watson v. Cannon Shoe Co., 165 F.2d 311, 313 (C.A.5, 1948).

The pivotal issue on this appeal is whether the credit report issued by the defendant is actionable without proof of special damages. We have already noted that Pennsylvania treats slanderous words injurious to one's business or profession as actionable per se. Hartman Co. v. Hyman, 87 Pa.Super. 358, aff'd, 287 Pa. 78, 134 A. 486, 48 A.L.R. 567 (1926); Phillips v. Hoefer, 1 Pa. 62 (1845).

The criteria for determining when a publication is injurious to one's business is spelled out in Sarkees v. Warner-West Corp., 349 Pa. 365, 37 A.2d 544 (1944):

"* * * If this publication imputes insolvency, financial embarrassment, unworthiness of credit, or failure in business of the plaintiff, it would be libelous. Phillips v. Hoefer, 1 Pa. 62 * * *; Hayes v. Press Company, Limited, 127 Pa. 642, 18 A. 331, 5 L.R.A. 643 * * *; Will (National News Co.) v. Press Publishing Co., 309 Pa. 539, 164 A. 621." 349 Pa. at 367, 37 A.2d at 546.

Especially relevant to the facts presently before us is the case of Hartman Co. v. Hyman, supra. In that case, plaintiff's name was confused with that of another purchaser from produce dealers who were members of a mutual credit bureau. It had been reported by the defendants to the bureau that "J. Hartman" was indebted to them. The agency printed a notice which was circulated to all of its members informing them that plaintiff had not paid its account. As a result of this and the credit agency's rule that members should not sell on credit to a person so listed, plaintiff was unable to purchase produce on credit and was required to cease operations until his name was removed from the "black list."⁵ Though the appellant had apparently raised no issue with regard to special damages, the court stated:

"* * * It is well settled in this State that when words are spoken of another which tend to injure him in his business or calling, they are slanderous per se and neither express malice nor special damage need be proved. Citing cases. Legal malice exists where a wrongful act is done intentionally. Citing cases. That the slanderous words complained of by plaintiff tended to injure his business credit must be admitted." 87 Pa.Super. at 361-362 (Emphasis supplied.)

In light of the foregoing, the plaintiff's allegation that defendant had "erroneously" reported to plaintiff's creditors that a large judgment had been entered against it was actionable per se. The complaint clearly states that plaintiff's credit was injured as a result of the publication. In arriving at this conclusion we are not unmindful of the cases relied upon by the district court in holding that this libel was not actionable per se. We believe its reliance on McDonald v. Lee, 246 Pa. 253, 92 A. 135, L.R.A. 1916B, 915 (1914), and Shaines v. R. G. Dun & Co., 8 Pa.Dist. & Co.R. 597 (Phila. C.P., 1927), is misplaced.

The McDonald case is a clear illustration of Dean Prosser's criticism of "per se" labels in defamation cases. In that case, plaintiff brought suit against a physician who was responsible for placing his name on a list of patients who were slow in paying for medical services. The court first examined whether plaintiff had been injured by reason of the publication and concluded that he had not. The court then stated that the publication was not "libelous per se"; however, a subsequent sentence states that plaintiff's case could become "actionable" only upon allegation and proof of special damages. In summary, the court merely held that plaintiff had not been denied credit and, therefore, he was required to allege and prove special damages.

There is even less substance in the Shaines case. There, ...