First United Fund Ltd. v. American Banker, Inc.

• Decision Date: 06 February 1985
• Citation: 127 Misc.2d 247,485 N.Y.S.2d 489
• Parties: , 11 Media L. Rep. 1699 FIRST UNITED FUND LTD. and Mario Renda, Plaintiffs, v. AMERICAN BANKER, INC., d/b/a American Banker, and Richard Ringer, Defendants.
• Court: New York Supreme Court

Page 489

485 N.Y.S.2d 489

127 Misc.2d 247, 11 Media L. Rep. 1699

FIRST UNITED FUND LTD. and Mario Renda, Plaintiffs, v. AMERICAN BANKER, INC., d/b/a American Banker, and Richard Ringer, Defendants.

Supreme Court, Special Term Nassau County, Part I.

Feb. 6, 1985.

Cadwalader, Wickersham & Taft, New York City, for plaintiffs.

Rosenman Colin Freund Lewis & Cohen, New York City, for defendants.

MEMORANDUM

ELI WAGER, Justice.

In this libel action, the defendants move for a protective order striking certain of plaintiffs' interrogatories and the plaintiffs cross-move for an order compelling answers. The media defendants urge the court to enunciate a "reporter's privilege" under the state and federal constitutions, while the plaintiffs, asserting that the burden of proof imposed upon them by New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 and its progeny entitles them to broad disclosure, resist limitations including those which may be imposed by the constitution, the Shield Law or even the CPLR.

The Pleadings

Plaintiffs are alleged to be a broker-dealer engaged in the business of brokering money instruments and other securities and the corporate founder, president and chief executive officer. The defendants are a corporation which publishes the American Banker, a daily newspaper, and one of its reporters. It is alleged that the reporter wrote and the paper published an article on August 1, 1983 and a second on August 8, 1983 which linked the plaintiff First United Fund Ltd. to the "Fort Lincoln affair," described as a criminal and fraudulent scheme to defraud certain banks. Plaintiffs allege that the defendants published the articles "in a grossly irresponsible manner without due consideration for the standards of information gathering and dissemination ordinarily followed by responsible parties" or "with knowledge of their falsity or in reckless disregard of their truth or falsity" and they seek $45,000,000.00 in damages plus punitive damages.

In their answer, the defendants plead that the articles are "qualifiedly privileged" under the First Amendment to the United States Constitution and the law of New York. They allege that the plaintiffs are "public figures," that the articles concerning plaintiffs were of public concern and warranted public exposition, that the statements are fair and truthful, that they constitute opinion and/or fair comment, that they constitute a neutral report of newsworthy events and that the statements were made in the discharge of the defendants' social, moral, public and/or private duty to communicate relevant news to their readers.

The Interrogatories

The plaintiffs' interrogatories contain six pages of detailed definitions and twenty-five questions divided into numerous paragraphs and subparagraphs. Defendants apparently intend to respond to all but ten questions as to which they have lodged objections.

The interrogatories objected to are number 2 which inquires as to whether defendants have ever discussed, spoken or written about standards for determining truth or falsity of statements made to reporters, or reckless disregard of the truth, or gross irresponsibility, or the accepted standards of information gathering and dissemination or negligence by a reporter, editor or newspaper; number 13 which demands that they state the circulation of American Banker by state and foreign country; number 15 which demands identification of all documents supplied to their insurance carrier relating to this lawsuit; number 16(b) which demands all drafts of the two articles; number 17 which demands identification of all sources of the disputed statements in the articles, all documents relating to each such statement, including communications between the defendants and the sources, and what steps were taken to establish the truth of each statement; number 18 which inquires whether there were conversations or other communication concerning the subject matter of the articles between anyone associated with the American Banker and anyone else prior to publication and identification of all documents relating to such correspondence, conversation or other communication; number 19 which demands identification of all expense vouchers, reimbursement requests, travel logs, diaries or telephone bills related to the investigation; number 22 which requests identification of every article ever published by the defendants which mentions the plaintiffs; number 24 which demands identification of all persons who know or have been told about the subject matter of any information claimed by the defendants to be privileged and the identity of any persons who were present or overheard such communication, and identification of all documents or communications relating to the subject matter or confidentiality of such documents or communications; and number 25 which demands that they state each fact which is the basis for each of the defenses pleaded in the answer.

Defendants contend that some of the interrogatories exceed the scope of discovery permitted by the CPLR and others invade the "Constitutional privileges accorded to a journalist's sources and investigatory and editorial work product." They state that they will rely on New York's Shield Law (Civil Rights Law § 79-h) only in the event the court rejects their claim to constitutional protection.

The plaintiffs urge that because one defense is predicated on the notion that they are "public figures," they will have to show "actual malice" (New York Times v. Sullivan, supra). They also urge that the defense that the articles "were within the sphere of legitimate public concern and were reasonably related to matters warranting public exposition" is an invocation of the qualified privilege discussed in Chapadeau v. Utica Observer-Dispatch, Inc., 38 N.Y.2d 196, 379 N.Y.S.2d 61, 341 N.E.2d 569 applicable when a private person is involved in a matter of public concern and which requires a showing of "gross irresponsibility." Finally, plaintiffs contend that they must show actual malice in order to recover punitive damages, citing Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 [1974].

The term "malice" as used in its First Amendment constitutional sense is not to be equated with a base or unworthy motive, but is instead defined as knowledge of falsity or reckless disregard of whether it was false or not (Rinaldi v. Viking Penguin, Inc., 52 N.Y.2d 422, 438 N.Y.S.2d 496, 420 N.E.2d 377 Trails West, Inc. v. Wolff, 32 N.Y.2d 207, 344 N.Y.S.2d 863, 298 N.E.2d 52 ). The plaintiff must, in order to show reckless disregard of the truth, prove through direct or circumstantial evidence that there were facts available to the defendant that did or should have aroused serious doubts as to the accuracy of the published material (James v. Gannett Co., Inc., 40 N.Y.2d 415, 386 N.Y.S.2d 871, 353 N.E.2d 834 ). Such a showing may require inquiry into editorial processes and the subjective state of mind of the journalist (see Karaduman v. Newsday, Inc., 51 N.Y.2d 531, 435 N.Y.S.2d 556, 416 N.E.2d 557 citing St. Amant v. Thompson, 390 U.S. 727, 88 S.Ct. 1323, 20 L.Ed.2d 262 Herbert v. Lando, 441 U.S. 153, 99 S.Ct. 1635, 60 L.Ed.2d 115 ), whereas objective proof is generally sufficient to show gross irresponsibility (Karaduman v. Newsday, Inc., supra; Ortiz v. Valdescastilla, 102 A.D.2d 513, 478 N.Y.S.2d 895 ).

Whether plaintiffs are public figures or private persons defamed in articles within the sphere of a legitimate public concern cannot be determined on the present record and may, in any event, be a matter for the trier of fact (seeOrtiz v. Valdescastilla, supra; Maule v. NYM Corp., 54 N.Y.2d 880, 444 N.Y.S.2d 909, 429 N.E.2d 416 ). Thus, the plaintiffs must be prepared to show both actual malice (which requires clear and convincing evidence ) and gross irresponsibility (which may be shown by a fair preponderance of the evidence ). Nevertheless, even though the proof required differs in degree, under both standards plaintiffs must show that the defendants had or should have had substantial reasons to question the accuracy of information received or the bona fides of the source (Ortiz v. Valdescastilla, supra). Thus, proof sufficient to show actual malice should be sufficient to show gross irresponsibility and the disclosure at issue here will be analyzed with reference to the higher standard.

Discussion

The broad discovery sought by plaintiffs is apparently based on the notion that proving actual malice requires a Sisyphean effort unknown in jurisprudential history prior to Sullivan, supra. However, long before Sullivan, recovery of punitive damages by libel plaintiffs required proof of actual malice, i.e., that the publication was wanton and reckless and that the publisher had no reason to believe the truth of the article and took no steps to discover whether it was true or not (Butler v. Gazette Co., 119 App.Div. 767, 104 N.Y.S. 637 ). Butler was cited in Herbert v. Lando, (supra) (the case relied upon by plaintiffs in support of their interrogatories) to illustrate the fact that inquiry into the editorial process is not a new concept, even though a showing of fault is now required of all libel plaintiffs. The court explicitly noted that the discovery sought there would be governed by the rules of civil procedure and judges were counselled to exercise appropriate control over the discovery process. It thus appears that even though libel plaintiffs are entitled to extensive disclosure, they must abide by established rules.

Because the Court of Appeals in this state counsels that disclosure disputes, even in actual malice cases, should be disposed of on nonconstitutional grounds if possible before reaching a constitutional question (Matter of Beach v. Shanley, 62 N.Y.2d 241, 476 N.Y.S.2d 765, 465 N.E.2d 304 ), the threshold issue here is whether the disputed interrogatories are permissible under the CPLR and New York's...