Pearce v. EF Hutton Group, Inc.

• Citation: 664 F. Supp. 1490
• Decision Date: 14 July 1987
• Docket Number: Civ. A. No. 86-0008.
• Parties: John M. PEARCE, Plaintiff, v. The E.F. HUTTON GROUP, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

664 F. Supp. 1490

John M. PEARCE, Plaintiff, v. The E.F. HUTTON GROUP, INC., et al., Defendants.

Civ. A. No. 86-0008.

United States District Court, District of Columbia.

July 14, 1987.

COPYRIGHT MATERIAL OMITTED

Stephen G. Milliken, Greta Van Susteren and John P. Coale, Washington, D.C., for plaintiff.

Earl J. Silbert and Allen V. Farber, Washington, D.C., for defendant Bell.

John Walsh and Harvey Spear, Cadwalader, Wickersham & Taft, New York City, for defendant Hutton.

MEMORANDUM OPINION

FLANNERY, District Judge.

This matter comes before the court upon defendant Griffin B. Bell's motions for partial summary judgment and for summary judgment. After hearing oral argument on these motions on March 9, 1987, and after considering the underlying papers, plaintiff's oppositions, and the entire record in this case, this court will grant the motion for partial summary judgment, and grant in part and deny in part the motion for summary judgment for the reasons stated below.

I. BACKGROUND

On May 2, 1985, E.F. Hutton & Company, Inc. ("Hutton"), a wholly owned subsidiary of defendant, The E.F. Hutton Group, Inc. ("Hutton Group"), pled guilty in the United States District Court for the Middle District of Pennsylvania to 2,000 counts of mail and wire fraud. The Department of Justice decided not to prosecute individual Hutton executives and instead accepted a plea from Hutton to pay a $2 million fine, reimbursement to the government for its costs, and restitution to defrauded banks. Hutton was also enjoined from engaging in certain cash management practices.

The scandal and the Justice Department's handling of it led to a number of government probes and much public debate. As a result, the Hutton Group hired Griffin B. Bell and the law firm of King & Spalding in May, 1985 to conduct an investigation of the cash management program at Hutton which had resulted in the guilty plea. Based on this investigation, a report entitled "The Hutton Report" was issued on September 4, 1985 and was made available to the public by Mr. Bell at a press conference held in Washington, D.C. on the following day.

The Hutton Report named a number of individuals as responsible for the fraudulent practices¹ that resulted in Hutton's guilty plea. The report also recommended certain sanctions for them. Among those deemed responsible for the fraud was John M. Pearce. Mr. Pearce had been branch manager of the Hutton office in St. Louis. After publication of the report, he was removed from that position, transferred to Florida, and eventually left the firm altogether. The State of Virginia took action against Pearce by barring him from being a Hutton manager there for five years. Pearce was also required to report to the securities regulators of the various states where he had been registered that an adverse action had been taken against him by his employer and the State of Virginia.

Pearce filed suit on January 3, 1986 against the Hutton Group and Griffin Bell. He alleges that Bell was hired to produce a report that would place blame for the fraudulent cash management program with low level employees rather than with Hutton's senior officers. Besides being made a scapegoat, Pearce alleges that the report falsely states that he should have known his actions were illegal and in violation of firm policies and guidelines. Thus, plaintiff claims the Hutton Report libels him and places him in a false light. Plaintiff also charges that by mentioning him in the Hutton Report, defendants have misappropriated his name.

On April 16, 1986, this court denied the Hutton Group's motion to stay these proceedings pending arbitration. On April 28, 1986, that decision was appealed. On June 10, 1986, a stay of this action, pending the appeal, was granted solely with regard to defendant Hutton Group. The Circuit Court heard oral argument on the appeal (D.C.Cir. No. 86-5281) on February 17, 1987 but no decision has been issued as yet. The case regarding defendant Bell was scheduled to go to trial on March 2, 1987. On February 9, 1987, however, trial was postponed because several motions had been filed that convinced the court this case was simply not ready to proceed. Among the motions filed, were the two dispositive motions presently before the court.

Defendant Bell has filed a motion for partial summary judgment on the claims for punitive damages and the false light invasion of privacy claim. Bell has also filed a motion for summary judgment with respect to the remainder of plaintiff's claims.

Plaintiff's original oppositions to Bell's motions were stricken from the record by this court in an opinion filed February 12, 1987, because they relied on inadmissible evidence. Plaintiff filed new oppositions on February 18, 1987. Defendant Bell renewed a motion to strike plaintiff's oppositions because they purportedly violated Fed.R.Civ.P. 56 and Local Rule 108(h). Bell claimed the oppositions were replete with false statements and with arguments, assertions, and allegations that are not referenced to the record. On March 9, 1987, the court ruled from the bench and denied Bell's renewed motion to strike. Following that ruling, the court heard oral argument on the motions for summary judgment.

II. BARS TO PLAINTIFF'S CLAIMS

As a preliminary matter, Bell argues that at least some of plaintiff's claims must be dismissed, regardless of how much supporting evidence plaintiff may have. First, plaintiff cannot raise a false light invasion of privacy claim since the applicable law is that of the State of Missouri, and Missouri does not recognize the false light invasion of privacy action. Second, plaintiff's misappropriation of name claim is inapplicable to the circumstances of this case. Finally, several of plaintiff's libel claims are not actionable since they involve statements that are absolutely privileged as expressions of opinion.

A. Choice Of Law

To determine which law applies to plaintiff's false light claim, the forum must apply the choice of law principles of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). This court must therefore apply the District of Columbia's choice of law rules to the problem. This is no simple task. Choice of law issues in defamation actions have historically presented difficult problems for the courts,² and these problems have only been magnified with the emergence of modern approaches to conflict of laws.³ As at least one commentator has noted, American courts now follow no less than ten different approaches, not one of which can claim the allegiance of a majority of states.⁴

1) Approach to conflict of laws in the District of Columbia

Until about thirty years ago, the territorialist or "vested rights" approach adopted by the first Restatement of Conflict of Laws dominated American conflicts law. E. Scoles & P. Hay, Conflict of Laws § 17.2, at 552 (1984). The District of Columbia abandoned that approach in Tramontana v. S.A. Empresa De Viacao Aerea Rio Grandense, 350 F.2d 468 (D.C.Cir. 1965), cert. denied, 383 U.S. 943, 86 S.Ct. 1195, 16 L.Ed.2d 206 (1966).⁵ In its place, a "governmental interest analysis" approach was adopted. See generally Milhollin, The New Law of Choice of Law in the District of Columbia, 24 Cath.U.L.Rev. 448 (1975).

Strictly speaking, interest analysis refers to the method developed by Professor Brainerd Currie. See R. Smolla, Law of Defamation § 12.035 (1986); Pielemeier, Multistate Defamation, supra note 2, at 396-98. Indeed, plaintiff appears to rely in part on arguments based on that form of interest analysis. Currie's approach, however, places heavy reliance on forum law. Pielemeier, Multistate Defamation, supra note 2, at 396-97. See generally B. Currie, Selected Essays on the Conflicts of Laws (1963). Yet recent choice of law decisions by the District of Columbia courts put no such reliance on forum law. Thus, it is clear that the District does not follow Currie's brand of governmental interest analysis.

Nevertheless, Currie's work provided the starting point for many of the current, policy-based approaches to conflict of laws. Among these numerous variations of interest analysis is the "most significant relationship" approach of the Restatement (Second) of Conflict of Laws. The Restatement (Second) developed over a seventeen year period which was marked by an at-first grudging and then a more whole-hearted acceptance of policy analysis. R. Cramton, D. Currie & H. Kay, Conflict of Laws: Cases—Comments— Questions 317 (1981). The end product combines presumptive jurisdiction-selecting rules with policy analysis. Id.

It is the Restatement (Second) that guides choice of law decisions in the District of Columbia.⁶ The most significant relationship approach⁷ has even been used by this jurisdiction in other defamation/invasion of privacy cases.⁸ Therefore, the Restatement (Second) of Conflict of Laws governs the choice of law issue in the case at bar.

2) False conflict analysis

The first step in deciding a choice of law problem is to determine whether there really is a conflict or whether the situation presents a "false conflict."⁹ A false conflict exists when either (1) the potentially applicable laws do not differ, or (2) when, upon examination, one law—by its terms or underlying policies—is not intended to apply to a situation such as the one in issue. E. Scoles & P. Hay, Conflict of Laws at 17. Both concerns are raised in the instant case.

Plaintiff argues that the laws of the District of Columbia and of the State of Missouri do not truly differ as to the existence of a false light invasion of privacy claim under the facts of this case. It is clear that the District of Columbia does recognize the false light action. See, e.g., Dresbach v. Doubleday & Co., 518 F.Supp. 1285, 1291 (D.D.C.1981); Logan v. District of Columbia, 447 F.Supp. 1328, 1332-34 (D.D.C.1978). The only issue is whether Missouri recognizes...