Peter Scalamandre & Sons, Inc. v. Kaufman

• Decision Date: 03 June 1997
• Docket Number: No. 96-50253,96-50253
• Parties: 27 Envtl. L. Rep. 21,153, 25 Media L. Rep. 1782 PETER SCALAMANDRE & SONS, INC., et al., Plaintiffs, Merco Joint Venture, Plaintiff-Counter Defendant-Appellee, v. Hugh B. KAUFMAN, et al., Defendants, Hugh B. Kaufman; TriStar Television, Inc., Defendants-Counter Plaintiffs-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 556

113 F.3d 556

27 Envtl. L. Rep. 21,153, 25 Media L. Rep. 1782

PETER SCALAMANDRE & SONS, INC., et al., Plaintiffs, Merco Joint Venture, Plaintiff-Counter Defendant-Appellee, v. Hugh B. KAUFMAN, et al., Defendants, Hugh B. Kaufman; TriStar Television, Inc.,

Defendants-Counter Plaintiffs-Appellants.

No. 96-50253.

United States Court of Appeals, Fifth Circuit.

June 3, 1997.

Joseph Davies Tydings, David L. Elkind, Dickstein, Shapiro, Morin & Oshinsky, Washington, DC, Robert Eric Birne, Dallas, TX, for Merco Joint Venture, Plaintiff-Counter Defendant-Appellee.

David Michael Gunn, Bellaire, TX, for Hugh B. Kaufman, Defendant-Counter Claimant-Appellant.

Peter Drew Kennedy, James A. Hemphill, George, Donaldson & Ford, Austin, TX, for The National Broadcasting Co., Dow Jones & Co., Inc., Fox Inc. and The Texas Association of Broadcasters, amici curiae.

Robert E. Lapin, Carrigan, Lapin, Landa & Wilde, Houston, TX, for Accuracy In Media, Inc., amicus curiae.

Dan Duncan Davison, Ben Taylor, Fulbright & Jaworski, Dallas, TX, William Joseph Boyce, Fulbright & Jaworski, Houston, TX, for TriStar Television, Inc., Defendant-Counter Claimant-Appellant.

Appeals from the United States District Court for the Western District of Texas.

Before DUHE, BENAVIDES and STEWART, Circuit Judges.

DUHE, Circuit Judge:

Appellants Hugh B. Kaufman and TriStar Television appeal a defamation judgment awarding Appellee Merco Joint Venture nominal damages of $1 against each appellant, and punitive damages of $500,000 against Kaufman and $4.5 million against TriStar. Because Merco failed to prove actual malice, we reverse and render judgment for Appellants.

Background

In 1989, New York City entered into a consent decree to cease disposing of its "sewer sludge" by dumping it into the ocean. Sewer sludge is what remains, in solid form, after wastewater from city sewers is processed and treated. New York City was in dire need of a new way to dispose of its sewer sludge, and Merco Joint Venture was formed to provide a solution to this dilemma. In 1992, the city contracted with Merco to dispose of up to thirty percent of the city's sewer sludge. ¹

Merco originally planned to ship the sludge to Oklahoma, and dispose of it by spreading it on grassland. However, Merco could not comply with Oklahoma environmental regulations in time to accommodate its contract. Merco promptly chose Sierra Blanca, a town in West Texas, as the new destination for the sludge. Merco obtained state permits to spread sludge in Texas in less than a month. Merco purchased a ranch in Sierra Blanca as a disposal site for the sludge shipments, which began arriving in July 1992. When sludge arrived from New York, Merco applied it to the ground at the ranch as a fertilizer would be applied.

In the spring of 1994, a television show produced by TriStar entitled "TV Nation" began developing a program segment focusing on New York's sludge shipments to Texas. The show's creator, Michael Moore, intended the program to be a reality-based television show that used humor and satire to explore public issues and current events.

The "germ" of the idea for the sludge segment came from a memorandum written by a TV Nation staffer. The memorandum proposed the segment follow a load of sludge from the sewage plant in New York, as it was hauled down to Texas on a train, and finally to the Merco ranch at Sierra Blanca. ² The memo styled the proposed segment as "a piece about the socioeconomics of waste, about who gets--literally--shat upon."

Development of the segment was assigned to Fran Alswang, a TV Nation producer. Alswang studied publications on sludge, and eventually visited Sierra Blanca on a scouting trip. On that trip, she went to the Merco ranch, spoke with Merco's media director, Kelly Sarber, and talked with both supporters and opponents of the operation in Sierra Blanca. Alswang finished the scouting trip with the impression the people of Sierra Blanca were divided over whether or not the Merco ranch was beneficial to the town.

After Alswang completed her research, the sludge segment was videotaped in June 1994. Roy Sekoff was the on-air correspondent for the piece. TV Nation spent its first day of filming at a sewage plant in New York, then flew to Texas and taped at the Merco ranch and around Sierra Blanca. Sekoff interviewed several persons, both those associated with the ranch and those opposed to the Merco operation.

When Alswang had prepared a preliminary "rough cut" of the segment, she submitted it to her superiors for legal and creative review. The reviewers suggested she find someone to respond to Kelly Sarber's positive testimonial on the merits of sludge.

To counter Sarber, Alswang contacted Hugh Kaufman, a twenty-five year EPA employee whose name she had come across in her research. Kaufman told Alswang he was authorized to speak on sludge as an EPA representative, and that his superiors at the EPA gave him permission to proceed. Alswang interviewed Kaufman and added portions of that interview, which questioned the safety of Merco's practices, to her segment.

Alswang submitted a second rough cut of the sludge segment, edited to include Kaufman's comments, for legal review. As support for Kaufman's comments, she sent the legal department several documents disputing the safety of sludge land application. Final revisions were made, Alswang received approval for broadcast, and the segment entitled "Sludge Train" was broadcast on August 2, 1994.

Merco was irate at the content of the broadcast, which it contends was an unbalanced report on sewer sludge and Merco's practices at Sierra Blanca. After "Sludge Train" aired, Merco sued alleging that nine portions of the Sludge Train segment were defamatory, disparaging and false. Merco sued TriStar, Hugh Kaufman, Roy Sekoff, Billy Addington (a resident of Sierra Blanca who opposed the Merco operation), and Tri-State Broadcasting Co. Merco dismissed all defendants except TriStar, Kaufman and Sekoff on the eve of trial. At the close of Merco's case, the trial judge granted Sekoff's motion for judgment as a matter of law.

The jury awarded Merco nominal damages of $2, and punitive damages of $500,000 against Kaufman and $4.5 million against TriStar. TriStar and Kaufman unsuccessfully moved for judgment as a matter of law, and the trial judge entered judgment against TriStar and Kaufman for the amount of the jury award. Kaufman and TriStar appeal.

I.

TriStar and Kaufman appeal on two grounds. They first contend Merco failed to prove TriStar and Kaufman acted with actual malice. They next argue that, as the jury awarded only $2 total in actual damages, the district court erred under both Texas and constitutional law when it entered judgment for Merco on $4.5 million and $500,000 in punitive damages.

II.

We first address whether Merco met its burden of proving TriStar and Kaufman acted with actual malice when they allegedly defamed Merco.

State libel law's reach is curtailed by the constitutional guarantees of freedom of speech and freedom of the press. Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 30, 91 S.Ct. 1811, 1813, 29 L.Ed.2d 296 (1971). If a plaintiff alleging defamation is considered a "public figure," ³ or a person or entity whose views and actions on public issues and events are of concern to other citizens, Curtis Publ'g Co. v. Butts, 388 U.S. 130, 162, 87 S.Ct. 1975, 1995, 18 L.Ed.2d 1094 (1967) (Warren, C.J., concurring), that plaintiff must prove the alleged defamation was "made with 'actual malice'--that is, with knowledge that it was false or with reckless disregard of whether it was false or not." New York Times Co. v. Sullivan, 376 U.S. 254, 279-280, 84 S.Ct. 710, 726, 11 L.Ed.2d 686 (1964).

Because of the requirement in "public figure" defamation cases that a defendant have acted with actual malice, our standard of review is different from the deferential "clearly erroneous" standard mandated by Rule 52(a). Rather, in such cases, we have an obligation to make an independent examination of the entire record to ensure the judgment is supported by clear and convincing evidence of actual malice. Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 511, 104 S.Ct. 1949, 1965, 80 L.Ed.2d 502 (1984). However, this obligation extends only to the ultimate factual finding of actual malice; we do not conduct de novo review of the jury's determination of preliminary factual issues or questions of credibility. Brown v. Petrolite Corp., 965 F.2d 38, 46 (5th Cir.1992).

Proving actual malice is a heavy burden. Proof that a defendant broadcast false statements will not alone show actual malice--the Supreme Court has made clear there is a significant difference between proof of actual malice and proof of falsity. Bose Corp., 466 U.S. at 511, 104 S.Ct. at 1965. Proof that a defendant spoke out of dislike, or with ill will towards another, also does not automatically meet the test of actual malice, even if his statements are shown to be false. Garrison v. Louisiana, 379 U.S. 64, 73, 85 S.Ct. 209, 215, 13 L.Ed.2d 125 (1964). If a publication is undertaken in good faith, failure to investigate the subject of that publication will not in itself establish actual malice. St. Amant v. Thompson, 390 U.S. 727, 733, 88 S.Ct. 1323, 1326-27, 20 L.Ed.2d 262 (1968). That a defendant publishes statements anticipating financial gain likewise fails to prove actual malice: a profit motive does not strip communications of constitutional protections. Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 667, 109 S.Ct. 2678, 2685-86, 105 L.Ed.2d 562 (1989). As long as a defendant does not act knowing his statement is false or with reckless disregard of its truth, actual malice will not be present.

There are no set criteria to measure when a defendant's actions constitute "reckless disregard" of the truth. The Court has noted that " '[r]eckless disregard' ... cannot be fully encompassed in one infallible definition."...