Maheu v. Hughes Tool Co.

• Decision Date: 27 December 1977
• Docket Number: Nos. 75-1306,75-2353,s. 75-1306
• Citation: 569 F.2d 459
• Parties: 3 Media L. Rep. 1847 Robert A. MAHEU, Plaintiff-Appellant and Appellee, v. HUGHES TOOL COMPANY, a corporation, now known as Summa Corporation, Defendant-Counterclaimant-Appellant and Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 459

569 F.2d 459

3 Media L. Rep. 1847

Robert A. MAHEU, Plaintiff-Appellant and Appellee, v. HUGHES TOOL COMPANY, a corporation, now known as Summa Corporation, Defendant-Counterclaimant-Appellant and Appellee.

Nos. 75-1306, 75-2353.

United States Court of Appeals Ninth Circuit.

Dec. 27, 1977.

As Modified Jan. 12, 1978.

Morton R. Galane (argued), of Galane, Tingey & Shearing, Las Vegas, Nev., Laurence H. Eldredge (on the brief), San Francisco, Cal., for plaintiff-appellant and appellee.

Norbert A. Schlei and Malcolm E. Wheeler (argued), Hughes Hubbard & Reed, Los Angeles, Cal., Howard M. Jaffe, Davis & Cox, New York, N. Y., Charles Alan Wright, Austin, Texas (of counsel), on the brief, for defendant-counterclaimant-appellant and appellee.

Appeal from the United States District Court for the Central District of California.

Before DUNIWAY, CHOY and WALLACE, Circuit Judges.

DUNIWAY, Circuit Judge:

This is a diversity action for defamation brought by Robert A. Maheu against Hughes Tool Company, now named Summa Corporation ("Summa"). The defamatory statement was made by Howard Hughes, sole owner of Summa.

I. Preliminary Observations.

As it comes to us, the case is unusual in several respects. First, the record is immense. The Clerk's record of court papers (other than exhibits) consists of thirty-two volumes containing 8,545 pages and two supplemental volumes containing 505 pages. There are 92 volumes of reporter's trial transcript, containing 15,472 pages. There are also 22 volumes of reporters' transcripts of various pre-trial hearings. The pages of these are not consecutively numbered, but there are several hundred. There are thousands of exhibits, and many depositions, some very long, were taken. Rule 1 of the Federal Rules of Civil Procedure, as adopted nearly 50 years ago, states the high hopes of the draftsmen: the rules "shall be construed to secure the just, speedy, and inexpensive determination of every action." Something in the Federal civil procedure has gone very much awry. Where now is speedy and inexpensive determination?

Second, Summa admitted that the defamatory statement was made by Hughes, and Summa assumed legal responsibility for it. Summa also conceded that if the jury were to find the statement false, Summa could be deemed to have acted with actual malice as defined by the Court in New York Times v. Sullivan, 1964, 376 U.S. 254, 279-80, 84 S.Ct. 710, 11 L.Ed.2d 686. The parties also stipulated that both Maheu and Hughes were public figures and that the subject matter was of public or general concern. Summa relied solely upon the defense of truth, and it assumed the burden of proving truth. Lipman v. Brisbane Elementary School Dist., 1961, 55 Cal.2d 224, 11 Cal.Rptr. 97, 359 P.2d 465.

Third, the defamatory statement was, in essence, that Maheu had "stolen" money from Hughes. Summa counterclaimed for numerous amounts of money including unpaid loans and moneys that it claimed that Maheu had wrongfully obtained. The jury returned a large verdict for Maheu, and so must have found that the defamatory statement was false, but it also awarded Summa part of the moneys that it claimed. Moreover, the court awarded Summa a judgment against Maheu for a very much larger amount. From that judgment Maheu does not appeal. Both the verdict and the court's judgment included some of the moneys wrongfully obtained.

Fourth, Hughes had become an eccentric, who had totally withdrawn from direct contact with the outside world. He would not appear in any court; he would not give depositions. Thus there is no testimony by him in the case. Maheu knew that Hughes would not testify, and he took full advantage of this, to him, happy situation. Much of the crucial testimony in the case is Maheu's recital of telephone conversations with Hughes to which no one else was a party, and of which no contemporaneous record was made.

II. Statement of the Case.

A. The trial and judgments.

A bifurcated trial was held. The jury returned a verdict in the liability phase in favor of Maheu and at the second phase of the trial awarded Maheu compensatory damages of over $2.8 million. Summa was awarded approximately $48,000 on its counterclaims. The trial court entered judgment for the $2.8 million plus for Maheu and for approximately $470,000 plus accrued interest for Summa. The judgment for Summa included the jury's award of $48,000 plus claims which the trial court resolved in Summa's favor without submission to the jury. Both parties appeal. We reverse in part and remand for a new trial.

B. The basic facts.

On December 5, 1970, Howard Hughes discharged Robert A. Maheu, thus ending a 14-year relationship involving Maheu, Hughes and Summa. Thereupon Maheu filed suit in Nevada state court to retain his position, claiming, inter alia, that Hughes had been coerced into firing him or that someone other than Hughes had ordered the firing. These goings on were widely publicized. Late in 1971, a major publisher announced plans to publish an "autobiography" of Hughes purportedly based upon personal interviews with Hughes by one Clifford Irving. Questions raised by Maheu and the proposed Irving book aroused the concern of Nevada officials as to the ownership and management of Hughes very extensive Nevada interests.

To establish that Irving's book was not authentic, Hughes arranged a telephonic news conference on January 7, 1972, with Hughes speaking from Paradise Island in the Bahamas to newsmen assembled in the Sheraton Universal Hotel in Los Angeles. During that telephonic news conference, the following colloquy occurred:

Q. (by Mr. Neal of NBC) 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's gone and he's got it.

Those statements form the basis for this suit. Because Summa argues, inter alia, that the evidence either clearly established the truth of those statements or at a minimum was inadequate to support the verdict, we will present further facts as they become relevant to our resolution of those issues.

III. Denial of Motions for Directed Verdict and Judgment N. O. V.

A. The standard of review.

Summa challenges the trial court's denial of its motions for a directed verdict or a judgment n. o. v. As part of that argument, Summa maintains that this court should conduct a de novo review of the evidence to determine whether it establishes the defense of truth. Normally the standard for appellate review of motions for directed verdict and for judgment n. o. v., is whether, viewing the evidence in the light most favorable to the party opposing the motion, the evidence permits only one reasonable conclusion as to the proper result. 5A Moore's Federal Practice, P 50.02(1) and P 50.07(2) (1975). Kay v. Cessna Aircraft Co., 9 Cir., 1977, 548 F.2d 1370, 1372. Summa contends, however, that de novo review is required here to assure adequate protection of First Amendment rights.

Summa explains its views as to the appropriate application of its proposed standard as follows:

First, the Court must examine all the evidence. Second, the Court must draw all reasonable inferences and resolve all credibility questions in Maheu's favor. Finally, the Court must make its own determination as to whether Summa proved by a preponderance of the evidence that the gist of the defamatory utterance was true. (Reply Brief at 23)

While we have no difficulty with the first two steps, we disagree with the third.

The effect of applying Summa's de novo review standard would be to give Summa a second chance to convince an independent fact finder. In effect, we are being told to ignore the jury's factual determination and to reach our own verdict. That we refuse to do.

Guam Federation of Teachers, Local 1581, A.F.T. v. Ysrael, 9 Cir., 1974, 492 F.2d 438, cert. denied, 419 U.S. 872, 95 S.Ct. 132, 42 L.Ed.2d 111, supports our conclusion. We held there that the traditional standard for appellate review of motions for a directed verdict and judgment n. o. v. should be applied in this type of case. Ysrael was a libel action in which the issue was the propriety of the granting of a directed verdict for the defendant. We held that a de novo review of all the evidence by the trial judge or this court with an independent decision on credibility and what inferences should be drawn, was not proper. Instead, we stated:

We think that in a libel case, as in other cases, the party against whom a motion for summary judgment, a motion for a directed verdict, or a motion for a judgment notwithstanding the verdict is made is entitled to have the evidence viewed in the light most favorable to him and to all inferences that can properly be drawn in his favor by the trier of fact. We think, too, that in such cases it is not only not the duty of the judge, or of this court of appeal, to weigh the credibility of the evidence, or to draw inferences in favor of the moving party (except, of course, when no contrary inference can legitimately be drawn), but that neither the judge nor this court on appeal has the authority to weigh credibility or to choose among legitimate inferences in such cases.

The standard against which the evidence must be examined is that of New York Times and its progeny. But the manner in which the evidence is to be examined in the light of that standard is the same as in all other cases in which it is claimed that a case should not go to...