College Sav. Bank v. Fla. Prepd. Educ. Expense Bd.

• Decision Date: 22 March 1996
• Docket Number: Civ. No. 95-4516 (GEB).
• Citation: 919 F. Supp. 756
• Parties: COLLEGE SAVINGS BANK, Plaintiff, v. FLORIDA PREPAID POSTSECONDARY EDUCATION EXPENSE BOARD, Defendant.
• Court: U.S. District Court — District of New Jersey

919 F. Supp. 756

COLLEGE SAVINGS BANK, Plaintiff, v. FLORIDA PREPAID POSTSECONDARY EDUCATION EXPENSE BOARD, Defendant.

Civ. No. 95-4516 (GEB).

United States District Court, D. New Jersey.

March 22, 1996.

Arnold B. Calmann, Saiber Schlesinger, Satz & Goldstein, Newark, NJ and David C. Todd, Garrett G. Rasmussen, and Deborah M. Lodge, Patton Boggs, L.L.P., Washington, D.C., for Plaintiff College Savings Bank.

William B. Mallin, Lewis F. Gould, and Anne E. Hendricks, Eckert Seamans Cherin & Mellott, Marlton, NJ; Philadelphia, PA, for Defendant Florida Prepaid Postsecondary Education Expense Board.

MEMORANDUM OPINION

GARRETT E. BROWN, Jr., District Judge.

This matter comes before the Court on the motion of plaintiff College Savings Bank to dismiss, pursuant to FED.R.CIV.P. 12(b)(6), the counterclaims filed by defendant Florida Prepaid Postsecondary Education Expense Board, for defamation, product disparagement and trade libel. For the reasons set forth herein, the Court will grant the motion, and will dismiss these counterclaims.

I. BACKGROUND

The Complaint in this matter alleges that since September, 1987, plaintiff College Savings Bank ("CSB") has been in the business of selling the CollegeSure® CD, a deposit contract administered according to a patented method¹ and intended to provide a return adequate to satisfy college education expenses, even though those expenses are presently unknown. Defendant Florida Prepaid Postsecondary Education Expense Board ("Florida Prepaid") has administered a tuition prepayment program since September, 1988. Florida Prepaid is an agency of the State of Florida, pursuant to FLA.STAT.ANN. § 240.551. Complaint ¶ 8; Answer ¶ 6; Counterclaim ¶ 1.

Plaintiff alleges that Florida Prepaid extensively promotes its program through brochures and other printed materials. Plaintiff also asserts that it and Florida Prepaid compete for sales of these college savings programs, and that its efforts to sell contracts have been hurt by "false and misleading claims that Florida Prepaid has made in its promotional materials." Complaint ¶ 11. CSB alleges that defendants falsely represented the Florida Prepaid program in the following respects: (1) that the State of Florida guarantees all contract beneficiaries to have the full amount necessary to fund a college education at a participating college or university, id. ¶ 14; (2) that any tax liability on a Florida Prepaid contract is deferred until the student reaps the benefits of the contract, i.e., is enrolled at college, id. ¶ 22; (3) that Florida Prepaid's investments are backed by the "full faith and credit" of the United States, id. ¶¶ 30-32; and (4) that defendant failed to disclose, in its 1995 Annual Report, the existence of CSB's patent infringement action against it. Id. ¶¶ 37-39. The foregoing allegations form the basis of CSB's claim that defendant has violated Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and that it has committed the common law tort of unfair competition. Id. ¶ 42.

Florida Prepaid filed its Answer, Affirmative Defenses and Counterclaims on November 8, 1995. Its counterclaims accuse plaintiff of defamation, product disparagement and trade libel. These counterclaims are centered on a statement made by Peter Roberts, the President and Chief Financial Officer of CSB, as quoted by and printed in the September 13, 1995 edition of the Miami Daily Business Review, shortly after CSB filed the instant action. Commenting on the representations Florida Prepaid makes in the promotion of its deposit contract program, Mr. Roberts stated: "At best those claims are half-truths, and at worst they're outright lies." See Stan Yarbro, Prepaid College Plan Faces New Suit from Rival, MIAMI DAILY BUS.REV., September 13, 1995, at A1, A7, attached as Exh. C to Florida Prepaid's Answer, Affirmative Defenses and Counterclaims.

CSB now seeks to dismiss those counterclaims pursuant to FED.R.CIV.P. 12(b)(6). CSB first contends that Florida Prepaid, as a state agency, can not maintain an action for libel or defamation based on statements critical of government operations, as that speech is protected by the Free Speech Clause of the First Amendment to the United States Constitution.² CSB also insists that Roberts's statement is privileged speech because it comments on a judicial proceeding or a matter that is of public interest — i.e., Florida Prepaid's prepayment program and the representations made in its promotion. CSB reasons that Roberts's statement essentially encapsulates the gist of their Lanham Act claims, which is that Florida Prepaid has made several misrepresentations about its program. Florida Prepaid responds that the action is not entitled to absolute protection by the First Amendment because it is false and malicious, and does not seek to share information regarding a matter of public concern.

II. DISCUSSION

A. STANDARD FOR A MOTION TO DISMISS

A motion to dismiss pursuant to FED. R.CIV.P. 12(b)(6) may be granted only if, accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief. Bartholomew v. Fischl, 782 F.2d 1148, 1152 (3d Cir.1986); Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir.), cert. denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985). The Court may not dismiss a complaint unless plaintiff can prove no set of facts which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Angelastro, 764 F.2d at 944. "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). In setting forth a valid claim, a party is required only to plead "a short plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV.P. 8(a).

B. FLORIDA PREPAID'S COUNTERCLAIMS

The initial issue in this motion is whether Florida Prepaid, as a government agency, can maintain an action for libel or defamation. CSB claims that it cannot, in view the courts' treatment of libel actions brought by government entities. CSB first relies on the Illinois Supreme Court's decision in City of Chicago v. Tribune Co., 307 Ill. 595, 139 N.E. 86 (1923), a matter in which the City of Chicago sued a newspaper for libel, accusing the newspaper of reporting that the city teetered on the verge of bankruptcy, that its credit was poor, and that it faced receivership. Id. The city alleged that the statements were false, and that the newspaper made them maliciously because it supported a rival candidate for the ongoing gubernatorial Republican primary. Id. The city also contended that the Free Speech Clause of the First and Fourteenth Amendments did not bar the suit, because the statement was libelous and the city could, as any other corporation, be libeled with respect to its "private" enterprises. The newspaper publisher admitted that the statements were largely false and malicious. Id., 139 N.E. at 91. Nevertheless, the court concluded as follows:

If this action can be maintained against a newspaper it can be maintained against every private citizen who ventures to criticize the ministers who are temporarily conducting the affairs of his government. Where any person by speech or writing seeks to persuade others to violate existing law .... he may be punished ... but all other utterances or publications against the government must be considered absolutely privileged.

Id., 139 N.E. at 90.

The courts have consistently reaffirmed this view. A prominent example is language from the United States Supreme Court's decision in New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Relying in part on Tribune Co., the Sullivan Court observed that "for good reason, `no court of last resort in this country has ever held, or even suggested, that prosecution for libel on government have any place in the American system of jurisprudence.'" Sullivan, 376 U.S. at 291, 84 S.Ct. at 732 (quoting Tribune Co., 139 N.E. at 88). The Court reiterated this view in Rosenblatt v. Baer, 383 U.S. 75, 81, 86 S.Ct. 669, 673, 15 L.Ed.2d 597 (1966), when it noted that the Constitution does not tolerate, in any form, prosecutions for libel on government. See also City of Philadelphia v. Washington Post Co., 482 F.Supp. 897, 898 (E.D.Pa.1979) (In dismissing a city's action against a newspaper for allegedly false statements in an article about police brutality in Philadelphia, the court held that "the City cannot maintain an action for libel in its own behalf. A governmental entity is incapable of being libeled."); Johnson City v. Cowles Communications, Inc., 477 S.W.2d 750, 753 (Tenn. Sup.Ct.1972) ("We hold that the article in question is absolutely privileged for the reason that any citizen, private or corporate, of these United States has an absolute privilege to make any statements, excepting only treasonable utterances, concerning a government, city or otherwise. Government has no capacity to apply either criminal or civil sanctions to the speaker or writer, without regard to the falsity of malice of the comment, for such sanctions are forbidden under the First and Fourteenth Amendments...."); State of Louisiana v. Time Inc., 249 So.2d 328, 331 (La.Ct.App.) ("We note that no American court which has dealt with the question of whether a government, be it state or local, has a cause of action for defamation, has reached a result contrary to that of City of Chicago v. Tribune Co."), writ. denied, 252 So.2d 456 (1971); Weymouth Township Board of Educ. v. Wolf, 178 N.J.Super. 481, 483, 429 A.2d 431 (Law Div.1981) (dismissing township board of education's defamation action against taxpayers' association after finding that board of education, as a governmental agency, could not maintain action for defamation in...