Golden Bear Distributing Systems of Texas, Inc. v. Chase Revel, Inc., 81-2492
| Decision Date | 05 July 1983 |
| Docket Number | No. 81-2492,81-2492 |
| Citation | 708 F.2d 944 |
| Parties | 13 Fed. R. Evid. Serv. 1028, 9 Media L. Rep. 1857 GOLDEN BEAR DISTRIBUTING SYSTEMS OF TEXAS, INC., Plaintiff-Appellee, v. CHASE REVEL, INC., d/b/a Entrepreneur Magazine, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Robert A. Schlanger, Houston, Tex., for defendant-appellant.
Bertrand L. Pourteau, II, Houston, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before THORNBERRY, GEE and REAVLEY, Circuit Judges.
I. Introduction:
In this diversity action, the plaintiff, Golden Bear Distributing Systems of Texas, Inc. (Golden Bear of Texas), a Texas corporation, sued Chase Revel, Inc., d/b/a Entrepreneur Magazine (Entrepreneur), for libel. 1 The jury found that the defendant defamed Golden Bear of Texas, and awarded compensatory and punitive damages. Entrepreneur appeals this judgment, challenging the sufficiency of the evidence, and claiming errors by the trial judge in not admitting evidence, as well as other errors of law. We affirm.
II. Facts and Disposition Below:
Entrepreneur Magazine, a monthly publication owned by the defendant, publishes articles of interest to businessmen and others who wish to start their own businesses. Its circulation is nationwide, and includes 2,500 subscribers in Texas. In its monthly "Fraud" column, Entrepreneur exposes instances of consumer and investor fraud. In its March 1979 issue, Entrepreneur published as its "Fraud" feature an article entitled "Golden Bear Turns to Brass." The article was based on the activities of separate companies operating in several states under the name Golden Bear Distributing Systems, Inc., and relied heavily for its conclusions upon the results of an investigation by law enforcement officers into the companies' activities. 2
The record shows that the various Golden Bear companies operated as franchises of the parent company, Golden Bear of California. Both companies sold vending machines and pop to investors, promising them high returns on their investment through high volume sales in premium locations. However, apart from their common advertising and sales techniques, Golden Bear of Texas and Golden Bear of California had no apparent connection with one another. Their stock was separately issued and subscribed, and each company had its own management. Under the franchise agreement, however, Golden Bear of Texas was obligated to purchase the vending machines and pop from Golden Bear of California. It appears that at the time this suit was filed, Golden Bear of Texas had purchased and paid for machines from Golden Bear of California that were never delivered.
Entrepreneur's March 1979 "Fraud" feature described in detail an investment fraud lawsuit that the California Attorney General had brought against Golden Bear of California, as well as certain legal difficulties experienced by Golden Bear of Utah. In its description of the company's operations, the magazine also reported that "Golden Bear['s] promises were consistent throughout the country," and gave as an example the sales pitch used by a Golden Bear of Texas marketing director. Entrepreneur did not expressly state that Golden Bear of Texas defrauded investors, or that it was under investigation. After the article came out, Golden Bear of Texas rapidly lost its business, and was eventually forced to file for bankruptcy. Following trial and submission of separate interrogatories, the jury found that: (1) the article was libelous; (2) the overall impression conveyed by the article was to falsely impute the fraudulent conduct of Golden Bear of California to the Texas company; (3) this libel was the proximate cause of the plaintiff's injuries; (4) Entrepreneur knew that the article gave a false impression; (5) Entrepreneur published the article with either malice or reckless disregard of the truth; (6) Entrepreneur should reasonably have known that a false impression would result; and (7) the article was communicated only to persons with a common interest in the subject matter. The jury then awarded to Golden Bear of Texas $30,000 in actual damages, and $20,000 in punitive damages.
III. Analysis:
A. First Amendment Standards
In libel cases, the state's interest in preserving the reputation of its citizens and providing for compensation for injury caused by the publication of false statements must be balanced against the potential harm to the publisher's first amendment rights. Accordingly, the Supreme Court, in Gertz v. Welch, 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), held that the states may define the appropriate standard of liability for a defamatory falsehood of a private individual as they see fit, "so long as they do not impose liability without fault." 418 U.S. 347, 94 S.Ct. at 3010. The first and fourteenth amendments thus require at a minimum a showing of negligence before a private figure may recover an award of actual damages for libel. The Gertz Court also held that the states must require a showing of "actual malice," defined as ill will or reckless disregard of the falsity of the statement made, before a court may award punitive damages to private defamation plaintiffs, or to establish the defamation of "public figures." Id. at 350, 94 S.Ct. at 3012.
B. Texas Libel Law
Texas libel law meets these constitutional requirements by requiring a showing of fault on the part of the publisher, and will not permit recovery of actual damages unless the publisher of the defamatory statement "knew or should have known that the ... statement was false." Foster v. Laredo Newspapers, Inc., 541 S.W.2d 809, 819 (Tex.1976). If the subject of the libel is a public figure or the publisher has a qualified privilege with respect to the subject or matter in contention, then the injured party must show actual malice, defined as in the constitutional standard as knowledge of falsity or reckless disregard. Dun & Bradstreet, Inc. v. O'Neil, 456 S.W.2d 896, 900 (Tex.1970); British Overseas Airways Corp. v. Tours & Travel of Houston, Inc., 568 S.W.2d 888, 893 (Tex.Civ.App.--Houston 1978, writ ref'd n.r.e.).
"Reckless disregard" requires proof that a false defamatory statement was made with a "high degree of awareness of [its] probable falsity." Garrison v. Louisiana, 379 U.S. 64, 74, 85 S.Ct. 209, 215, 13 L.Ed.2d 125 (1964). There must be sufficient evidence to conclude that the defendant in fact entertained "serious doubts" as to the truth of the publication. St. Amant v. Thompson, 390 U.S. 727, 731, 88 S.Ct. 1323, 1325, 20 L.Ed.2d 262 (1968).
Foster v. Upchurch, 624 S.W.2d 564, 566 (Tex.1981).
C. Is the Article Actionable?
Our first inquiry is whether the article is libelous. We are guided in our analysis by the rule announced by the Texas Supreme Court in Cotulla v. Kerr, 74 Tex. 89, 11 S.W. 1058 (Tex.1889):
In the absence of doubt or ambiguity growing out of the language used in the publication, we understand it to be the duty of the court to determine and instruct the jury whether or not it is libelous; but, where there is uncertainty or doubt, it is the duty of the court to give the jury a definition of what is a libel, and leave it for the jury to say whether the offense has been proved.
Id. at 1059. See Denton Publishing Co. v. Boyd, 460 S.W.2d 881, 884 (Tex.1971); Fitzjarrald v. Panhandle Publishing Co., 149 Tex. 87, 228 S.W.2d 499, 505 (Tex.1950).
In determining whether a publication contains actionable defamatory meaning, Texas law looks to the effect the article has on the mind of the "ordinary reader." See Rose v. Enterprise Co., 617 S.W.2d 737, 740 (Tex.Civ.App.--Beaumont 1981, writ ref'd n.r.e.). See generally, Restatement (Second) of Torts Sec. 614 & comment b (1977). The allegedly defamatory publication must be construed as a whole. If a defamatory meaning may exist, then the statement or article is considered ambiguous, and the court must allow the jury to determine whether an ordinary reader would perceive the statement as defamatory. See Raymer v. Doubleday & Co., 615 F.2d 241, 246 (5th Cir.), cert. denied, 449 U.S. 838, 101 S.Ct. 115, 66 L.Ed.2d 45 (1980) (applying Texas law).
The evidence presented at trial suggests that all the individual statements in the magazine article concerning Golden Bear of California's fraudulent activities and Golden Bear of Texas' representations to potential investors were true. The basis of the libel lies in the juxtaposition of truthful statements about one company with truthful statements about the illegal operations of an independent company of the same name located in a different state.
We conclude that the district court correctly followed Texas law in submitting the article to the jury. Although a literal reader might have realized that the article did not state that Golden Bear of Texas had not been investigated by law enforcement authorities and was not in any way implicated in the fraud perpetrated by Golden Bear of California, we think that an ordinary reader could infer from the article that Golden Bear of Texas engaged in illegal actions much like Golden Bear of California. Since the overall import of the article was capable of two interpretations, one of which was potentially defamatory, it was proper for the trial judge to submit the article to the jury. The jury found the overall effect of the article to be defamatory because the article imputed wrongdoing to Golden Bear of Texas. Since ample evidence exists in the record to support this jury finding, we decline to disturb it. The article stated that Golden Bear's promises were consistent throughout the country. The article then went on to characterize the promises made by Golden Bear of California as false. It was reasonable for the jury to find that an ordinary reader could conclude that the Texas company's promises were false as well.
D. Truth
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