Denny v. Mertz

• Decision Date: 30 March 1982
• Docket Number: No. 80-436,80-436
• Citation: 106 Wis.2d 636,318 N.W.2d 141
• Parties: , 8 Media L. Rep. 1369 William A. DENNY, Plaintiff-Appellant, v. Orville R. MERTZ and McGraw-Hill, Inc., Defendants-Respondents-Petitioners.
• Court: Wisconsin Supreme Court

Page 141

318 N.W.2d 141

106 Wis.2d 636, 8 Media L. Rep. 1369

William A. DENNY, Plaintiff-Appellant, v. Orville R. MERTZ and McGraw-Hill, Inc.,

Defendants-Respondents-Petitioners.

No. 80-436.

Supreme Court of Wisconsin.

Argued Nov. 3, 1981.

Decided March 30, 1982.

Don S. Peterson, Milwaukee, argued, for McGraw-Hill, Inc.; Mark S. Schmitt and Minahan & Peterson, S. C., Milwaukee, on brief.

L. C. Hammond, Jr., Milwaukee, argued, for Orville R. Mertz; James H. Baxter, III and Quarles & Brady, Milwaukee, on brief.

William A. Denny, Milwaukee, argued, pro se; Denny & Yanisch, Milwaukee, on brief, and Wayne B. Giampietro and DeJong, Poltrock & Giampietro, Chicago, Ill., of counsel.

James P. Brody, John R. Dawson, Foley & Lardner, Milwaukee, Wis., for Newspapers, Inc.

DAY, Justice.

This is a review of a decision of the court of appeals published at 100 Wis.2d 332, 302 N.W.2d 503 (Ct.App.1981), reversing a decision of the circuit court for Waukesha county, Hon. John P. Buckley, Judge. The principal issue in this case is whether plaintiff-appellant, William A. Denny, a dissident stockholder of a publicly held corporation actively seeking ouster of the management of the corporation is a "public figure" for the purpose of maintaining an action for libel. We conclude under the facts of this case that he is not.

The second issue is: What are the constitutional protections afforded McGraw-Hill, Inc., the publisher of Business Week magazine, that published the libel. We conclude that, under the holding of Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), Mr. Denny must prove that McGraw-Hill was negligent in publishing the libel in order to recover actual damages. "Presumed" or punitive damages may only be awarded upon proof that McGraw-Hill acted with "actual malice."

The third question is: Does the defendant, Orville R. Mertz, as the alleged source of the defamation published by McGraw Hill, enjoy the same constitutional protections as the media publisher. We conclude he does not.

Other issues raised will be discussed in the balance of this opinion.

This is the second time this dispute has been before this court. In the earlier decision, ¹ this court held that Denny's complaint, which alleged that Mertz and McGraw-Hill defamed him in causing to be published a statement that Denny had been "fired" from an earlier job, was sufficient to maintain a cause of action for libel.

The matter is again before us on review.

Summary judgment was granted defendants by the trial court on remand following this court's prior decision. A summary judgment is appropriate if there is no disputed issue of material fact, so that the action may be disposed of as a matter of law. ² The facts in the case are as follows:

Mr. Denny was employed by Koehring Company (Koehring), a large Milwaukee corporation, as an attorney from 1954 to June, 1969, when he resigned to go into the private practice of law. During all times pertinent to this action Denny and his family owned about 4,400 shares of Koehring stock. Between 1969 and 1974, the price of Koehring stock dropped from forty-five dollars to five dollars per share, and the Denny family's annual dividend on this stock dropped from $8,000 to nothing. Denny claimed that this drop was due to poor management and, in 1974 and 1975, he became involved in a campaign by dissident stockholders to change the Koehring management.

Their efforts focused on ousting Mr. Mertz, chairman of the board and chief executive officer. He had been employed by Koehring in various executive capacities since 1953. In 1974, he became chairman of the board and chief executive officer. He resigned from these positions on December 5, 1975. In furtherance of these efforts, Denny commenced two lawsuits to get access to Koehring records. He requested both the United States Securities and Exchange Commission and the Wisconsin Commissioner of Securities to investigate what he alleged to be improper transactions of stock engaged in by Koehring and misstatements and omissions in materials mailed to Koehring shareholders.

The Koehring shareholder dispute was reported in the financial pages of the Milwaukee newspapers and in The Wall Street Journal. Denny was mentioned in some of the Milwaukee articles. He also wrote a letter to The Wall Street Journal suggesting that it might be interested in reporting on the Koehring dispute. The letter was never published, nor was Denny mentioned in any Wall Street Journal article concerning Koehring.

Business Week became interested in the Koehring controversy on December 5, 1975, when a reporter of that magazine, David Santry, read a news release announcing Mertz's resignation in which Mertz stated that relieving Koehring from shareholder controversies was an important reason for his resignation. Mr. Santry thought that the Koehring dispute would interest the general "business community" because, "it's not often that dissident shareholders can (depose) an incumbent manager."

In researching the story, Santry contacted Denny, who provided the reporter with documents from his files and put Santry in touch with other persons involved in the dispute. Santry also contacted Mertz who informed him that Denny was a biased source and that Denny's employment with Koehring had been "terminated." ³

Santry's article, entitled "Top Management Ferment At Koehring," appeared in the January 19, 1976, issue of Business Week, (a McGraw-Hill publication). In the course of chronicling the attempts by dissident stockholders to remove Mertz, the article stated:

"Also about that time, William Denny, general counsel of Koehring until Mertz fired him in 1969, began to question many of Koehring's management decisions."

Following publication of the article, both Denny and Mertz contacted Business Week, informing the magazine that Denny had resigned rather than been fired. Business Week published a correction in its March 1, 1976, issue, which read:

"A Correction

"In 'Top Management ferment at Koehring' (Management, Jan. 19), BUSINESS WEEK reported that in 1969 Orville R. Mertz, then president of Koehring Co., fired William Denny, who was serving as head of the company's legal department. BUSINESS WEEK'S source for that statement has now reconsidered the circumstances surrounding Denny's departure from Koehring, and has concluded that he erred. Denny resigned. He was not fired."

Denny sued Mertz and McGraw-Hill for defamation. McGraw-Hill and Mertz moved to dismiss the action for failure to state a claim. The motion was denied by the trial court. On appeal this court affirmed the trial court. ⁴ After remand to the trial court and following discovery, Mertz and McGraw-Hill moved for summary judgment. The trial court granted the motion on the ground that Denny was a "public figure" who had to prove actual malice in order to prevail, and that affidavits, depositions and interrogatories submitted by Mertz and McGraw-Hill established a prima facie defense to the action which the affidavits submitted by Denny failed to contradict.

The court of appeals reversed the trial court in a decision dated January 15, 1981, which held that Denny was not a public figure, and remanded the case to the trial court for a trial on the merits under Wisconsin libel law. This court granted Mertz's and McGraw-Hill's petition for review.

Generally, a defamatory statement is one that "tends so to harm the reputation of another so as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." ⁵ Such statement is actionable without specific proof of actual pecuniary damages. ⁶ However, truth is an absolute defense. ⁷ Certain defamatory statements may be privileged, either because of the relationship between the defamer and the defamed or because of the context in which the statement was made. ⁸

I.

The first question is: Was Denny a "public figure."

In New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), the United States Supreme Court added a constitutional element to the law of defamation. New York Times held that a "public official" could only recover damages for a "defamatory statement concerning his official conduct" if he could prove that the statement was made with "actual malice," that is "knowledge that it was false or with reckless disregard of whether it was false or not." ⁹

The "constitutional privilege" articulated in the New York Times was expanded to cover a wider range of potential defamation plaintiffs and defendants. ¹⁰ In Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967), the United States Supreme Court brought "public figures" as well as "public officials" within the ambit of the New York Times privilege. This process reached its peak in Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971). Five separate opinions were delivered by the eight justices who took part in Rosenbloom. The plurality opinion by Justice Brennan, which was joined by only two other justices, has been treated by this court as the decision of the case. ¹¹ Rosenbloom held that the "knowing falsity or reckless disregard of the truth" standard applied to all "communication involving matters of public or general concern, without regard to whether the persons involved are famous or anonymous." ¹²

The "matter of public concern" test for application of the constitutional privilege has never been subscribed to by a majority of the United States Supreme Court and the concept was criticized in Gertz v. Robert Welch, Inc., 418 U.S. 323, 346, 94 S.Ct. 2997, 3010, 41 L.Ed.2d 789 (1974). ¹³

In Gertz, the court held that an attorney representing relatives of a youth murdered by a Chicago policeman in civil proceedings against the policeman was not a public figure and therefore need not surmount the New York Times privilege in a libel action against a magazine which...