Ellis v. Northern Star Co.

• Decision Date: 07 February 1990
• Docket Number: No. 192PA89,192PA89
• Citation: 326 N.C. 219,388 S.E.2d 127
• Parties: Earl ELLIS and Ellis Brokerage Company, Inc. v. NORTHERN STAR COMPANY and Thomas W. Kenney.
• Court: North Carolina Supreme Court

Page 127

388 S.E.2d 127

326 N.C. 219

Earl ELLIS and Ellis Brokerage Company, Inc. v. NORTHERN STAR COMPANY and Thomas W. Kenney.

No. 192PA89.

Supreme Court of North Carolina.

Feb. 7, 1990.

On appeal from the judgment of Brewer, J., entered in Superior Court, Wake County, on 4 November 1988. Pursuant to N.C.G.S. § 7A-31(a) and Rule 15(e)(2) of the North Carolina Rules of Appellate Procedure, discretionary review prior to a determination by the Court of Appeals was allowed by the Supreme Court ex mero motu on 16 May 1989. Heard in the Supreme Court on 13 September 1989.

Graham & James by Mark Anderson Finkelstein, Raleigh, for plaintiffs.

Morris, Bell & Morris by William C. Morris, Jr., Asheville, for defendants.

MITCHELL, Justice.

The questions presented on appeal include (1) whether a letter sent by the defendants to some of the plaintiffs' business contacts is libelous per se, and (2) whether libel per se of a plaintiff relating to the conduct of its business constitutes an unfair or deceptive act affecting commerce in violation of N.C.G.S. § 75-1.1. We conclude that the letter in question was properly found to be libelous per se. We further conclude that libel per se of a plaintiff as to the conduct of its business does violate N.C.G.S. § 75-1.1 and, when the libel proximately causes injury to the business, gives rise to a cause of action under N.C.G.S. § 75-16.

At trial, evidence tended to show that the plaintiff Ellis Brokerage Company, Inc. is a food broker. The company's function as a food broker is to convince large-quantity food buyers, such as hospitals and school systems, to place orders with the company's clients who are in the business of selling foods. The company's sole full-time employee is the individual plaintiff Earl Ellis. The defendant Northern Star Company is a Minnesota-based potato processor, and the defendant Thomas Kenney is Northern Star's senior vice-president for sales. Ellis Brokerage Company became a broker for Northern Star in 1981, and over the years built Northern Star's sales in eastern North Carolina from no sales at all to approximately $640,000 annually.

On 20 June 1986, Ellis received Northern Star potato pricing information from Kenney over the telephone. On 23 June 1986, Ellis sent price lists based on this information to several potential buyers.

On 29 August 1986, Northern Star terminated its brokerage contract with Ellis Brokerage Company. On 5 September 1986, Kenney wrote the following letter for Northern Star to several of the buyers who had received the 23 June price list from Ellis:

Dear Sir;

We have recently received copies of a price list sent to you from Ellis Brokerage Company regarding pricing on Northern Star potato products. These prices were noted for bids only, delivered by Northern Star.

We at Northern Star Company did not authorize such a price list and therefore cannot honor the prices as quoted on June 23, 1986.

....

Sincerely,

Thomas W. Kenney

Senior Vice-President Sales

The plaintiffs then brought this action contending the letter is libelous per se and an unfair or deceptive act affecting commerce under N.C.G.S. § 75-1.1. The plaintiffs' amended complaint also alleged breach of a covenant of good faith, breach of contract through unreasonable termination, tortious interference with business relations, and unjust enrichment or restitution. The defendants counterclaimed for breach of fiduciary duty and breach of contract. The breach of contract claim and counterclaim were settled prior to trial. At the close of the plaintiffs' evidence, the trial court granted the defendants' motions for directed verdicts on all but the libel claims. The jury found that the defendants had maliciously libeled the plaintiff Ellis Brokerage Company, and awarded compensatory and punitive damages. The jury also found, however, that the defendants had not libeled the individual plaintiff Earl Ellis.

We note at the outset that, since the jury expressly found that the defendants acted with actual malice, this case does not present the issue of whether damages may be presumed in libel per se actions absent a finding of malice, as this Court has held in previous cases. See, e.g., Flake v. News Co., 212 N.C. 780, 785, 195 S.E. 55, 59 (1938), quoted in Renwick v. News and Observer & Renwick v. Greensboro News, 310 N.C. 312, 316, 312 S.E.2d 405, 408, cert. denied, 469 U.S. 858, 105 S.Ct. 187, 83 L.Ed.2d 121 (1984). Certain cases decided by the Supreme Court of the United States give rise to a question as to whether North Carolina can continue the common law presumption of damages in libel per se actions absent express findings of malice. See, e.g., Dun & Bradstreet v. Greenmoss Builders, 472 U.S. 749, 105 S.Ct. 2939, 86 L.Ed.2d 593 (1985); Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974); Walters v. The Sanford Herald, Inc., 31 N.C.App. 233, 228 S.E.2d 766 (1976); Halpern, Of Libel, Language, and Law: New York Times v. Sullivan at Twenty-Five, 68 N.C.L.Rev. 273 (1990); Christie, Underlying Contradictions in the Supreme Court's Classification of Defamation, 1981 Duke L.J. 811.

I.

We first address the defendants' contentions that the trial court erred in denying their motions for directed verdict and judgment notwithstanding the verdict as to the plaintiffs' libel and punitive damages claims. Since the jury found the defendants had not libeled Earl Ellis, we consider these contentions only as they relate to the libel claim by Ellis Brokerage Company.

North Carolina has long recognized three categories of libel (1) Publications which are obviously defamatory and which are termed libels per se; (2) publications which are susceptible of two reasonable interpretations, one of which is defamatory and the other is not; and (3) publications which are not obviously defamatory, but which become so when considered in connection with innuendo, colloquium and explanatory circumstances. This type of libel is termed libel per quod.

Flake v. News Co., 212 N.C. 780, 785, 195 S.E. 55, 59 (1938); see Renwick v. News and Observer & Renwick v. Greensboro News, 310 N.C. at 316, 312 S.E.2d at 408 (quoting Arnold v. Sharpe, 296 N.C. 533, 537, 251 S.E.2d 452, 455 (1979)).

Further,

a publication is libelous per se, or actionable per se, if, when considered alone without innuendo: (1) It charges that a person has committed an infamous crime; (2) it charges a person with having an infectious disease; (3) it tends to subject one to ridicule, contempt, or disgrace, or (4) it tends to impeach one in his trade or profession.

Flake v. News Co., 212 N.C. at 787, 195 S.E. at 60-61 (citing cases), cited in Renwick v. News and Observer & Renwick v. Greensboro News, 310 N.C. at 317, 312 S.E.2d at 408-09.

The plaintiffs contend that the defendants' letter of 5 September 1986 is libelous per se. The defendants, on the other hand, argue that the letter is not defamatory at all or, alternatively, it is susceptible of both defamatory and nondefamatory interpretations. We conclude that the letter is libelous per se. The language "[w]e at Northern Star did not authorize such a price list," taken in the context of the entire letter, can only be read to mean that Ellis Brokerage Company, acting in its capacity as broker for Northern Star, did an unauthorized act. Whether that act was publishing certain unauthorized prices within a price list or publishing the entire price list itself without authorization is of no import; either reading is defamatory and impeaches Ellis Brokerage in its trade as a food broker.

Whether a publication is one of the type that properly may be deemed libelous per se is a question of law to be decided initially by the trial court. See Flake v. News Co., 212 N.C. at 786, 195 S.E. at 409, quoted in Renwick v. News and Observer & Renwick v. Greensboro News, 310 N.C. at 317-18, 312 S.E.2d at 409; Sasser v. Rouse, 35 N.C. 142, 143 (1851). Here, the trial court properly treated the defendants' letter as a publication of that type and allowed the libel per se claim of Ellis Brokerage Company to be decided by the jury.

At trial, Earl Ellis testified to a discussion he had with Bill Flemming of Henderson Fruit & Produce, one of Ellis Brokerage Company's customers. Ellis testified that Flemming stated he had received one of Northern Star's letters. Flemming told Ellis, after receiving the letter, that "he was going to look for other sources to get his potatoes because he didn't know whether he could trust me or Northern Star either one." Although the defendants objected to Ellis' testimony concerning Flemming's statement, the trial court properly admitted the testimony as showing Flemming's state of mind, since it was directly pertinent to the question of Flemming's reliance upon the defendants' misrepresentations. See Pearce v. American Defender Life Ins. Co., 316 N.C. 461, 472, 343 S.E.2d 174, 181 (1986); N.C.R.Evid. 801(c), 803(3); 1 Brandis on North Carolina Evidence 3d §§ 141, 161 (1988 & Supp.1989). While Flemming's statement as described by Ellis could be taken as an indication that Flemming did not think he could trust Earl Ellis personally, Earl Ellis and Ellis Brokerage Company were, to the extent pertinent to this issue, one and the same; Earl Ellis was the sole employee of Ellis Brokerage Company. The testimony of Earl Ellis concerning Flemming's statement was sufficient to support the jury's finding that the defendants' letter proximately caused injury to Ellis Brokerage Company's business.

Based on the evidence and upon proper instructions, the jury found that the defendants had libeled Ellis Brokerage Company and that the company was entitled to compensatory and punitive damages. The defendants' assignments of error relating to the verdict and judgment against them for their having libeled Ellis Brokerage Company are without merit and are overruled.

II.

The second issue before the Court is whether libel per se in a business...