Peagler v. Phoenix Newspapers, Inc.

• Decision Date: 04 February 1977
• Docket Number: No. 12691--PR,12691--PR
• Citation: 560 P.2d 1216,114 Ariz. 309
• Parties: , 2 Media L. Rep. 1687 Julian PEAGLER and Dodge City Motors, Inc., an Arizona Corporation, Appellants, v. PHOENIX NEWSPAPERS, INC., an Arizona Corporation, Eugene C. Pulliam, and Albert J. Sitter, Appellees.
• Court: Arizona Supreme Court

Page 1216

560 P.2d 1216

114 Ariz. 309, 2 Media L. Rep. 1687

Julian PEAGLER and Dodge City Motors, Inc., an Arizona Corporation, Appellants, v. PHOENIX NEWSPAPERS, INC., an Arizona Corporation, Eugene C. Pulliam, and Albert J. Sitter, Appellees.

No. 12691--PR.

Supreme Court of Arizona, In Banc.

Feb. 4, 1977.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears by Harry J. Cavanagh, Richard McC. Shannon, Phoenix, for appellants.

Snell & Wilmer by Arthur P. Greenfield, Phoenix, for appellees.

STRUCKMEYER, Vice Chief Justice.

Appellants, Dodge City Motors, Inc. and Julian Peagler, brought this suit against Phoenix Newspapers, Inc., Eugene C. Pulliam, Albert Sitter and J. Edward Murray for damages resulting from an allegedly libelous article in a Phoenix newspaper, The Arizona Republic. The Superior Court first summarily entered a judgment dismissing the suit as to Murray, then ordered the suit by Julian Peagler dismissed, and, finally, on December 20, 1972, at the close of appellant Dodge City Motor's case, directed a verdict against it and in favor of the remaining appellees. The Court of Appeals affirmed, 26 Ariz.App. 274, 547 P.2d 1074 (1976). In light of the decision of the Supreme Court of the United States in Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), we took review to resolve the question in Arizona of the standard of liability for libel of private individuals damaged by falsehoods in publications of public or general interest or concern. Decision of the Court of Appeals vacated.

Dodge City Motors, Inc. was a corporation engaged in the business of selling new and used automobiles in Phoenix, Arizona and Julian Peagler was its president. Phoenix Newspapers, Inc. is the corporate owner of the Arizona Republic. Eugene C. Pulliam, now deceased, was, at the time of the incident out of which this action arises, its president and publisher. Albert Sitter is a reporter for The Arizona Republic and the author of an allegedly libelous article.

This article was published in The Arizona Republic on August 30, 1970:*

'The Phoenix office of the Better Business Bureau has among its own members some business firms which engage in highly questionable sales methods, two former employes charged last week.

The former employes are Vernon Terrell, former membership chairman, and Mrs. Kay Runser, who resigned Wednesday as the bureau's trade practice consultant.

Both said in a joint interview that they were especially disillusioned when the BBB further tarnished its record by supporting the Direct Sellers Association, formed in early July for the purpose of scuttling House Bill 102, a tough consumer protection measure.

Terrell and Mrs. Runser cited three firms with the longest records of unresolved consumer complaints which are allowed to remain BBB members in good standing.

They were identified, in the order of frequency of complaints as Peagler's Dodge City, 1521 E. Camelback; Carpetime, 1240 E. Indian School, and Family Publications Service, 3424 N. Central.

The greatest number of complaints on file against any one company, Mrs. Runser said, were lodged against Peagler's Dodge City.

Despite the firm's frequent apparent transgressions and lack of response to complaints, no move has been made to reprimand the auto dealership, she said.

Advised of Mrs. Runser's criticisms, (James White, manager of the Better Business Bureau) disclosed that the BBB is planning to bear down on Peagler's.

'I've already talked to the head of the screening committee (about Peagler's),' White said, 'who will take the matter before the board of directors in September to cancel the membership. I've already got 21 complaints written out and ready to go to the board.

'It appears,' White said, 'that many of the complaints (against Peagler's) involve misrepresentation in advertising and selling. Although I can't prove it, it appears to be based on bait and switch.

'If Kay (Mrs. Runser) would have come to me with this,' White said, 'she would have known what was being done.'

Mrs. Runser said she repeatedly brought the problem to White's attention with no apparent effect.

When originally contacted by The Arizona Republic, both Julian Peagler, owner of the auto agency, and Bob Young, general manager, maintained that the company had not received any complaints from the BBB.

Later, after checking with White, Peagler said that there had indeed been complaints but that they had not been brought to his or Young's attention.

'Now I've asked that these be sent to me personally,' Peagler said. 'Last month we sold 5,000 used and 1,600 new cars and I've been oblivious to these kinds of problems. I did not know of one sales complaint.

'Most complaints,' Peagler added, 'fall in the area that a used car is not satisfactorily described. But I'm not aware of any complaints that are not properly handled.'

* * *'

Because of the article's asserted libelous character, this action was brought by Julian Peagler and Dodge City Motors, Inc. for damages.

The testimony in the trial court established that a few days prior to August 30, 1970, Albert Sitter visited the offices of the Phoenix Better Business Bureau to investigate a connection between the Bureau and an organization known as the Direct Sellers Association. The Direct Sellers Association was a group of businesses engaging in door-to-door sales. Its purpose was to obtain the repeal of certain consumer legislation aimed at abuses in the door-to-door sales industry. Sitter learned that James C. White, manager of the Bureau, was also connected with the Direct Sellers Association. A former employee of the Bureau, Kay Runser, discussed certain aspects of the Bureau's business with Sitter. After further discussions with still another former employee of the Bureau, the article was written.

I

Under the First and Fourteenth Amendments of the United States Constitution, the publishers of libelous material or statements may be protected from the consequences of their defamatory utterances. In New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), the Supreme Court of the United States ruled that damages cannot be recovered for the defamation of a public official absent clear and convincing proof that the defamatory statement was published with actual malice. Actual malice was there defined as an utterance with knowledge of its falsity or in reckless disregard of whether it was true. Id. at 279--80, 84 S.Ct. at 726, 11 L.Ed.2d at 706. And see Phoenix Newspapers, Inc. v. Church, 103 Ariz. 582, 589, 447 P.2d 840 (1968). The New York Times standard was later extended to include 'public figures' in Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967).

After publication of the article and before trial of the action, the rule of New York Times was again extended by a plurality of the Court to publications relating to private individuals where the publication was of public or general concern, Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971). Rosenbloom marked a shift in focus from the status of the plaintiff as a public figure to the public's interest or general concern in the content of the publication. The plurality thought that publication of matters of public interest or concern should be protected to the same extent as the New York Times rule protected publications about public officers and public figures.

Appellees concede on appeal that the appellants were neither public officers nor public figures. The learned trial judge, however, believing that the rule of New York Times governed either because Peagler was a public figure or the subject matter of the article was a matter of public interest or concern, granted the motion for direct verdict, saying:

'* * * (W)hat this Court would have to do to deny the Motion for Directed Verdict is to find by convincing clarity either that Mr. Sitter lied, or that he had the reckless disregard for the truth.

I don't think the testimony is such that I can find that, and for that reason I'm going to grant the Motion.'

Three years later, while this case was on appeal, Gertz v. Welch, supra, 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 was decided. The United States Supreme Court in that case retreated from the extension of the New York Times standard as applied in Rosenbloom, holding:

'(S)o long as they do not impose liability without fault, the States may define for themselves the appropriate standard of liability for a publisher or broadcaster of defamatory falsehood injurious to a private individual.' Id. at 347, 94 S.Ct. at 3010, 41 L.Ed.2d at 809.

The Court, however, placed certain limitations on state actions: first, that there could be no recovery without fault; second, that recovery could only be had on proof of actual injury; third, that presumed or punitive damages could not be allowed, at least when liability was not based on a showing of knowledge of falsity or reckless disregard for the truth; and, finally, that the rule of Gertz would not apply where the contents of the publication were not such as to warn a reasonably prudent publisher of its defamatory potential.

Before considering the course of the decisions in the several states since Gertz, we concern ourselves with whether the principle of that case should be applied retroactively to the present case.

The nonretroactivity of Supreme Court decisions in civil cases was the subject of a detailed inquiry in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971). There, the Court said:

'In our cases dealing with the nonretroactivity question, we have generally considered three separate factors. First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, see E.g., Hanover Shoe v. United Shoe Machinery Corp., supra, (392 U.S. 481) at 496, (88 S.Ct. 2224, ...