Dalitz v. Penthouse International, Ltd.

• Decision Date: 21 May 1985
• Citation: 168 Cal.App.3d 468,214 Cal.Rptr. 254
• Court: California Court of Appeals Court of Appeals
• Parties: , 11 Media L. Rep. 2153 Morris B. DALITZ and Allard Roen, Appellants and Cross-Respondents, v. PENTHOUSE INTERNATIONAL, LTD., a corporation, Jeff Gerth and Lowell Bergman, Respondents and Cross-Appellants. Civ. 69025.

Page 254

214 Cal.Rptr. 254

168 Cal.App.3d 468, 11 Media L. Rep. 2153

Morris B. DALITZ and Allard Roen, Appellants and Cross-Respondents, v. PENTHOUSE INTERNATIONAL, LTD., a corporation, Jeff Gerth and Lowell Bergman, Respondents and Cross-Appellants.

Civ. 69025.

Court of Appeal, Second District, Division 2, California.

May 21, 1985.

Certified for Partial Publication.

Review Denied Sept. 19, 1985.

Phillips, Nizer, Benjamin, Krim & Ballon, New York City, and Buchalter, Nemer, Fields, Chrystie & Younger, Los Angeles, for appellants and cross-respondents.

Paul, Hastings, Janofsky & Walker, Los Angeles, and Grutman, Miller, Greenspoon & Hendler, New York City, for respondents and cross-appellants.

BEACH, Associate Justice.

PART ONE ^*

PART TWO

DEFENDANTS/PUBLISHERS' CROSS APPEAL

(1) Statement of the Case

The original plaintiffs in this case were five corporations and four individuals. The original complaint arose out of an article published by Penthouse International Limited which on its face was libelous of appellants Dalitz and Roen. Dalitz and Roen were accused of being mobsters, gangsters and members of organized crime. The resort, La Costa, with which they were connected was accused of being an organized crime headquarters. The article also implicated Dalitz and Roen in the Watergate scandal, nationwide bank failures, securities frauds totaling some $50 billion, criminal misuse of Teamster Pension Funds and other swindles of many kinds.

The trial court by summary judgment held that plaintiffs (appellants here), Dalitz and Roen, were public figures, unable to prove malice, and their complaint was dismissed. They appealed.

By unpublished opinion we have ruled on the appeal by plaintiffs in their action for libel against defendants/publishers and reporters.

The defendants/publishers (cross-appellants) filed a cross-complaint also for libel and slander, against plaintiffs. The trial court dismissed that cross action. The defendants/publishers by their cross-appeal contest that judgment. In this part of the opinion we consider defendants' cross-appeal from the trial court's dismissal of the publishers' cross-complaint for slander and libel brought against the original plaintiffs. The dismissal was a sanction for failure of cross-appellants to disclose their sources. We affirm this judgment.

The libelous and slanderous statements on which cross-appellants filed their cross-complaint were alleged to have been made at a press conference convened by plaintiffs La Costa, et al., including appellants Dalitz and Roen, to respond to the article which had appeared in Penthouse magazine. The press conference was held on the same day the main complaint for libel against Penthouse, et al, was filed.

The cross-complaint was eventually dismissed by the trial judge, Judge Dell, as a sanction for the failure of reporters Gerth and Bergman to disclose their confidential sources. The sanction was applied to cross-complainants Penthouse, Inc. and publisher Guccione even though Gerth and Bergman were not parties to the cross-complaint. At a hearing held prior to the actual dismissal of the cross-complaint, Judge Dell well perceived and analyzed the unique situation stating: "I find this type of issue particularly difficult, whereas in this case even though it is not the reporters who have filed the cross-complaint, where the alleged libeling party has contended that it has been libeled and has filed a cross-complaint for defamation. I suppose it would be an even clearer case if Mr. Bergman and Mr. Gerth were the cross-complainants, but I must say I don't see an immense amount of difference. Penthouse was certainly--perhaps I shouldn't use the word 'capitalized' or 'benefited,' I don't know whether it is an ultimate benefit or not, certainly has displayed the works of Mr. Bergman and Mr. Gerth and their work has been the basis for the libel suit and the comments about their work are the basis for the cross-complaint."

After the filing of the dismissal, cross-appellants petitioned this court for a writ arguing that the trial court had no jurisdiction to dismiss the cross-complaint. (Penthouse v. International Limited (Superior Court), 2 Civ. No. 60769.) This court summarily denied the petition. The California Supreme Court denied cross-appellants' petition for hearing.

Prior to the dismissal, appellants (cross-respondents herein) made several discovery motions requesting the identities of the confidential news sources. Another judge LeSage, rejected cross-appellants' claim of privilege. Judge Le Sage's holding was upheld by the Court of Appeal and the California Supreme Court refused to grant a hearing.

Also prior to the dismissal still another judge, Phillips, ruled that it was "both idle and erroneous to say that the First Amendment affords a newsman no protection whatever as to his confidential sources. (cf. Caldero v. Tribune Publishing Co. 562 P.2d 791, 797, 98 Idaho 288 (1977); Dow Jones & Co., Inc. v. Superior Court 303 N.E.2d 847, 849 , (1973.) It is the view of this court that Branzburg v. Hayes 408 U.S. 665 [92 S.Ct. 2646, 33 L.Ed.2d 626] cannot legitimately be read without regard to the concurring opinion of Mr. Justice Powell (408 U.S. at 709 ), as his vote was necessary to that decision. So read it becomes clear that an '... asserted claim to [a First Amendment] privilege should be judged on its facts by the striking of a proper balance between freedom of the press and the obligation of all citizens to give relevant testimony....' [408 U.S. at 710, 92 S.Ct. at 2671; concurring opinion.]" Judge Phillips then ruled that the record presented to him was inadequate to form the basis for the balancing required. He then set forth the considerations to be addressed through additional discovery and pending that discovery he denied the motion without prejudice to its renewal at a later date.

Appellants (cross respondents) conducted additional discovery along the lines suggested by Judge Phillips and thereafter renewed their motion to compel disclosure before Judge Dell. In ruling upon the motion and dismissing the cross-complaint of cross-appellants in October 1980, Judge Dell stated "Plaintiff's motion is granted, upon the determination by the court that there is no constitutional or statutory privilege available in this action to withhold sources for the alleged libel. Most persuasive in the court's view is Herbert v. Lando (1979) --- U.S. ----, [now 441 U.S. 153], 99 S.Ct. 1635, , which rejects the principle of an analogous 'editorial process' privilege. The court's feeling is that the Supreme Court's language [99 S.Ct.] at pages 1641-1649 rules out a 'source' privilege just as it does an 'editorial process' privilege. Accordingly, Herbert v. Lando has rendered Judge Phillips' 1978 ruling moot." Cross-appellants then timely filed a notice of appeal from the order of dismissal.

(2) The Trial Court Properly Exercised its Jurisdiction in Dismissing the Cross-Complaint

Cross-appellants claim that the trial court exceeded its jurisdiction in dismissing the cross-complaint in that the trial court's order was directed against Gerth and Bergman, the reporters who wrote the La Costa article, and only against Gerth and Bergman. Since only Penthouse Limited and Guccione prosecuted the cross-complaint, cross-appellants claim that the trial court had no jurisdiction to dismiss against parties who had not violated the order. Cross-appellants maintain that they had no control over Gerth and Bergman at the time the order issued; that they could not have compelled Gerth and Bergman to comply with the order in any event. The applicable code section, Code of Civil Procedure section 2034, subdivision (b), which grants the trial court jurisdiction in this matter, provides in relevant part: "(1) The court may punish ... the refusal of any person to obey any order made by the court under subdivision (a). p (2) If any party or person for whose immediate benefit the action or proceeding is prosecuted or defended, or an officer, director, superintendent, member, agent, employee, or managing agent of that party or person refuses to obey an order made under subdivision (a), or if any party or an officer or managing agent of a party refuses to obey an order made under Section 2019, 2031, or 2032, the court may make any orders in regard to the refusal which are just, including, but not limited to, any of the following: ... (C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party."

Cross-appellants state that the trial court lacked jurisdiction to apply the sanction of dismissal against them since Judge Dell's order did not specifically name them and on the assertion that only the reporters, Gerth and Bergman, knew the identities of the confidential sources.

We can find no California case directly on point in which a publisher has been held responsible for acquiring the knowledge of the confidential sources of its reporter or agent who actually wrote a story.

In the Idaho case of Sierra Life Ins. v. Magic Valley Newspapers (4 Med. Law Reporter 1689, 1690), reversed on other grounds in Sierra Life Ins. v. Magic Valley Newspapers 101 Idaho 795, 623 P.2d 103), the court held that "defendants have suggested that sanctions if any should be imposed only upon defendants High and Lazarus as they were the ones actually being deposed. I cannot accept this view. The corporation, by and through its chief executive officer, its managing editor and its reporter have acted in concert in refusing to comply with the lawful court order; ... [t]o impose sanctions only on High and Lazarus would merely make them martyrs to the unbelievers." The Idaho Supreme Court approved this language: "One of Magic Valley's arguments on appeal was that it should not be held liable for...