Maheu v. Hughes Tool Company

• Decision Date: 18 October 1974
• Docket Number: Civ. No. 72-305-HP.
• Citation: 384 F. Supp. 166
• Court: U.S. District Court — Central District of California
• Parties: Robert A. MAHEU, Plaintiff, v. HUGHES TOOL COMPANY, a corporation, et al., Defendants.

384 F. Supp. 166

Robert A. MAHEU, Plaintiff, v. HUGHES TOOL COMPANY, a corporation, et al., Defendants.

Civ. No. 72-305-HP.

United States District Court, C. D. California.

October 18, 1974.

COPYRIGHT MATERIAL OMITTED

Morton R. Galane, Galane, Tingey & Shearing, Las Vegas, Nev., Hurley & Grassini, North Hollywood, Cal., for plaintiff.

Norbert A. Schlei, Hughes, Hubbard & Reed, Los Angeles, Cal., and Howard M. Jaffee, Davis & Cox, New York City, for defendants.

MEMORANDUM AND ORDER GRANTING SUMMA'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE PUNITIVE DAMAGES

PREGERSON, District Judge.

This is a defamation action brought by plaintiff, Robert A. Maheu, against defendant, Hughes Tool Company, now known as Summa Corporation, to recover compensatory and punitive damages.

On July 1, 1974, after a four month bifurcated trial, requested by Summa, the jury returned a verdict in favor of Maheu on the issue of liability.¹ The second phase of this action to determine Maheu's damages and to dispose of Summa's counterclaims is now scheduled for trial before the same jury for October 29, 1974.

The matter now before the court is Summa's motion for partial summary judgment, filed August 22, 1974, pursuant to F.R.Civ.P. 56(a), which challenges the constitutionality of punitive damages in a defamation action involving a public figure plaintiff when liability is founded upon actual malice.

The defamatory statements which sparked this lawsuit were uttered on January 7, 1972, by Howard R. Hughes during a telephonic press conference with seven newsmen at the Sheraton Universal Hotel. Hughes' defamatory utterance is contained in the following colloquy:

"Q. Was Maheu fired on your orders and because of

A. (Answer not audible)

MR. NEAL: Would you ask him to repeat that, please.

Q. Would you repeat that, please.

A. Specifically.

Q. Why?

A. Because he's a no-good, dishonest son-of-a-bitch, and he stole me blind.

Q. Thank you. Mr. Hughes, this is your first news conference in how long?

A. I don't suppose I ought to be saying that at a news conference, but I just don't know any other way to answer it. If you, if you would even — you wouldn't think it could be possible with modern methods of bookkeeping and accounting and so forth for a thing like the Maheu theft to have occurred, but believe me it did, because the money is gone and he's got it."

Prior to the liability trial, Summa admitted that the utterance of those words by Hughes satisfied all elements necessary to fix its liability for damages for defamation, except for the overriding issue of truth. In other words, Summa conceded legal responsibility for the utterance, admitted publication, and agreed that the utterance was defamatory if found by the trier of fact to be untrue. Moreover, Summa assumed the burden of proof on the truth issue and conceded that if it did not prevail on that issue at trial, Summa would be deemed to have acted with actual malice, i. e., that it had knowledge of falsity or acted in reckless disregard of the truth.² See New York Times v. Sullivan, 376 U. S. 254, 279-280, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Furthermore, in the Pre-trial Conference Order Re Trial of Truth Issue, filed February 19, 1974, the parties stipulated that both plaintiff and defendant were public figures and that the subject matter of Maheu's termination was a matter of public or general concern.

Defendant's present motion for partial summary judgment on punitive damages raises an issue of first impression. This court must decide whether the First Amendment to the United States Constitution precludes the recovery of punitive damages when the plaintiff is a public figure and liability is founded upon actual malice. Having studied the briefs of both parties and having heard oral argument on September 9, 1974, this court concludes that punitive damages in this context have a chilling effect on freedom of speech, and that these arbitrary awards do not narrowly and necessarily promote an important and substantial state interest. Therefore, plaintiff Maheu may not recover punitive damages in this action.

In recent opinions, the United States Supreme Court has questioned the constitutional propriety of punitive damages for defamation. See Gertz v. Welch, 418 U.S. 323, 94 S.Ct. 2997, 3011, 41 L.Ed.2d 789 (1974); Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 59, 91 S. Ct. 1811, 29 L.Ed.2d 296 (White, J. concurring), 65-78 (Harlan, J. dissenting), 82-86 (Marshall and Stewart, J.J. dissenting) (1971); see also Restatement (Second) of Torts, Explanatory Notes § 621, comments b and f, at 286 and 288 (Tent. Draft No. 20, 1974). The most recent decision, Gertz v. Welch, supra, involved a private figure plaintiff who had not shown actual malice as defined by New York Times v. Sullivan, supra. In Gertz, after holding that "the States may not permit recovery of presumed or punitive damages, at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth," 94 S.Ct. at 3011, the court discussed the practical effect of punitive damages as follows:

In most jurisdictions jury discretion over the amounts awarded is limited only by the gentle rule that they not be excessive. Consequently, juries assess punitive damages in wholly unpredictable amounts bearing no necessary relation to the actual harm caused. And they remain free to use their discretion selectively to punish expressions of unpopular views.

94 S.Ct. at 3012.

A similar discussion of punitive damages may be found in Justice Marshall's dissenting opinion in Rosenbloom v. Metromedia, Inc., supra, 403 U.S. at 83-86, 91 S.Ct. 1811. In this opinion, Justice Marshall states:

The manner in which unlimited discretion may be exercised is plainly unpredictable. And fear of the extensive awards that may be given under the doctrine must necessarily produce the impingement on freedom of the press recognized in New York Times.

* * * * * *

The unlimited discretion exercised by juries in awarding punitive . . . damages compounds the problem of self-censorship that necessarily results from the awarding of huge judgments. This discretion allows juries to penalize heavily the unorthodox and the unpopular and exact little from others. Such free wheeling discretion presents obvious and basic threats to society's interest in freedom of the press. And the utility of the discretion in fostering society's interest in protecting individuals from defamation is at best vague and uncertain. These awards are not to compensate victims; they are only windfalls.

403 U.S. at 83 and 84, 91 S.Ct. at 1839.

The foregoing analysis demonstrates the chilling effect that punitive damages have on the exercise of First Amendment rights. Individuals "steer far wider of the unlawful zone," Speiser v. Randall, 357 U.S. 513, 526, 78 S.Ct. 1332, 1342, 2 L.Ed.2d 1460 (1958), and forego the exercise of constitutionally protected speech when threatened by the award of unlimited discretionary punitive damages. This threat becomes even more ominous when viewed in the context of costly litigation and the attendant potential recovery of substantial compensatory damages. Moreover, the chilling effect exists whether or not the plaintiff is required to show actual malice in accordance with New York Times v. Sullivan, supra. Although the New York Times rule provides the publisher with greater protection at the threshold of liability, it does not cure the self-censorship effect of punitive damages. Before speaking, the publisher must still consider the risk of unlimited recovery in the event the plaintiff satisfies the requirement of actual malice. This risk is increased when the publisher expresses unpopular views. Under this circumstance, the jury could find the existence of actual malice more because it objects to the views expressed by the publisher than because he in fact acted with knowledge of falsity or reckless disregard of the truth. Aside from the specter of unlimited recovery, these gratuitous awards invite lawsuits. Regardless of the merits or extent of actual injury, some plaintiffs may be willing to trigger expensive litigation when the jackpot of open-ended recovery looms in the background. For these reasons, the court believes that the availability of exemplary damages promotes self-censorship despite the higher threshold of liability imposed by New York Times. Therefore, this court cannot sustain punitive damage awards in public figure defamation actions unless they narrowly and necessarily further important and substantial state interests. See Keyishian v. Board of Regents, 385 U.S. 589, 602-604, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967); United States v. O'Brien, 391 U.S. 367, 376-377, 381, 88 S.Ct. 1673, 20 L.Ed.2d 672 (1968); Baird v. State Bar of Arizona, 401 U.S. 1, 6-7, 91 S.Ct. 702, 27 L.Ed.2d 639 (1971); Shelton v. Tucker, 364 U.S. 479, 488-490, 81 S.Ct. 247, 5 L.Ed.2d 231 (1960); cf. Dunn v. Blumstein, 405 U.S. 330, 343-344, 92 S. Ct. 995, 31 L.Ed.2d 274 (1972).

There are several state interests which punitive damages in defamation actions might vindicate. First, these awards might serve the state's interest in the protection of reputation against harm. However, the prospect of protracted and expensive litigation and the award of compensatory damages adequately serve this same interest. Thus, the addition of punitive damages to promote this deterrent purpose is unnecessary under ordinary circumstances. In this regard, it should be added that the Gertz decision does not diminish the deterrent effect of compensatory damages. This opinion catalogs a very broad range of compensable items capable of yielding substantial awards for successful plaintiffs:

We need not define "actual injury," as trial courts have wide experience in framing appropriate jury instructions in tort action. Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory

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