Reeves v. American Broadcasting Companies, Inc.

• Decision Date: 11 October 1983
• Docket Number: No. 157,D,157
• Citation: 719 F.2d 602
• Parties: 9 Media L. Rep. 2289 George C. REEVES, Plaintiff-Appellant, v. AMERICAN BROADCASTING COMPANIES, INC., Roone Arledge, and Everett Erlick, Defendants-Appellees, v. Joseph O. GIAIMO, Counterclaim-Defendant. ocket 83-7352.
• Court: U.S. Court of Appeals — Second Circuit

Page 602

719 F.2d 602

9 Media L. Rep. 2289

George C. REEVES, Plaintiff-Appellant, v. AMERICAN BROADCASTING COMPANIES, INC., Roone Arledge, and Everett Erlick, Defendants-Appellees, v. Joseph O. GIAIMO, Counterclaim-Defendant.

No. 157, Docket 83-7352.

United States Court of Appeals Second Circuit.

Argued Sept. 15, 1983.

Decided Oct. 11, 1983.

Giaimo & Vreeburg, Forest Hills, N.Y., of Counsel, for plaintiff-appellant.

Coudert Brothers, Hawkins, Delafield & Wood, New York City (Michael J. Calvey, Peter M. Nelson, New York City, of counsel), for defendants-appellees.

Before KAUFMAN, MESKILL and PIERCE, Circuit Judges.

IRVING R. KAUFMAN, Circuit Judge:

A nation which prizes free expression must support lofty sentiment with meaningful legislation. The noble guarantee against laws abridging the freedom of the press, enshrined in the First Amendment, would be incongruous indeed, were any federal or state statutes to punish a journalist for accurately reporting allegations of wrongdoing in a matter of public interest. We said in Edwards v. National Audubon Society, Inc., 556 F.2d 113, 115 (2d Cir.1977), an unfettered press "must be the most cherished tenet" of a self-governing society. Since New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), federal courts have sought to give practical effect to this ideal. In Edwards, supra, we discussed the import of assuring that accurate reports of newsworthy accusations of malfeasance be immune to action under defamation laws, since "fair and dispassionate" news accounts would be discouraged and public enlightenment on matters of concern would thereby be diminished. Edwards v. National Audubon Society, Inc., supra, 556 F.2d at 122.

We are invited today to reverse a finding of statutory privilege completely consistent with these basic democratic values. George Reeves asks us to rule that granting summary judgment in favor of the American Broadcasting Companies, Inc. ("ABC") on his defamation count was erroneous because a California statutory privilege does not extend to reports of charges made to a grand jury. We are convinced the statute was correctly construed and our conclusion is buttressed by fundamental precepts of free expression. Accordingly, we affirm the judgment. Before turning to the legal questions presented, we believe it would be useful to set forth the facts so that the legal issues are placed in focus.

FACTS

In recent years, the entertainment industry has been buffeted by controversy regarding the intricate financial maneuvers which characterize the world of show business. Some entertainers alleged producers were cheating them of profit participations (as in the case of James Garner and the television program "The Rockford Files"). Movie mogul David Begelman was forced to resign as President of Columbia Pictures when proof of bookkeeping irregularities was brought to light, although Begelman's exile from Hollywood was brief and he once again produces films.

The history of the instant dispute began when an attorney for ABC named Jennifer Martin charged in 1979 that top network executives colluded with producers Aaron Spelling and Leonard Goldberg to defraud Robert Wagner and his wife, the late Natalie Wood, of their 46% profit participation in the popular television show "Charlie's Angels." Martin's contentions, in sum, were that the producers inflated expenses and were permitted to do so by ABC officials whose responsibility was to assure the legality and propriety of financial dealings. Martin directly implicated one of her superiors in the Contracts Department, ABC Vice President Ron Sunderland, who, according to Martin, bluntly told her Spelling and Goldberg were "blanking the Wagners out of their money." Reeves, at that time Senior Vice President for Theatrical Motion Pictures and Television Affairs for ABC, was Sunderland's superior and accordingly allegedly associated with the claimed misdeeds.

ABC was concerned about the charges, since the network and Spelling-Goldberg enjoyed a lucrative association dating to the 1960s. The producers supplied the network with such successful and profitable programs as "The Mod Squad," "Starsky and Hutch," "Fantasy Island," "Hart to Hart" (in an ironic turn, starring Robert Wagner), and "The Love Boat." The Spelling-Goldberg creation which aroused Martin's suspicions, "Charlie's Angels," was a fanciful detective program featuring an unseen man supervising three glamorous female investigators who managed to bring malefactors to justice while remaining pulchritudinous throughout. The network quickly concluded an internal investigation into Martin's charges led by a lawyer who had represented ABC in the past. The report was brought to the attention of the Los Angeles County District Attorney, who commenced a grand jury inquiry into the allegations. The Securities and Exchange Commission, Federal Communications Commission, and Department of Justice also were to examine the accusations in the months ahead. No formal charges were ever filed against any individual or corporate entity.

The investigations were not yet public knowledge when Jennifer Martin was fired, allegedly for incompetence, late in 1979. She repeated her story to the news media in 1980, and extensive coverage in the New York Times, People, Time, and other publications ensued. Reeves gave several interviews, including one with the Times. Later in the year, ABC News, a division of ABC, determined to broadcast a story on the allegations. The story was prepared for the network's nightly news report, normally devoted to international affairs, domestic politics, and other weighty matters. Public interest in, and media attention to the "Charlie's Angels" affair seemed to vindicate the truth of the nostrum, "Everyone has two businesses: his own, and show business."

The story was aired on the network's "World News Tonight" program on August 25, 1980. ABC's anchorman the late Frank Reynolds and correspondent Charles Gibson together spent 4 minutes, 20 seconds on the report. Gibson explained Martin's accusations that the Wagners were being defrauded, and reported charges of favoritism between Spelling-Goldberg and top ABC officials, who were real estate business partners of Goldberg. The story mentioned ongoing grand jury and SEC investigations and noted no indictments or charges had been filed.

Reeves had given a 10-minute interview to ABC in which he commented on the story. The broadcast report contained a ten-second denial from Spelling ("There was never, never any effort to deprive Mr. and Mrs. Wagner of one cent of the profit they would share as a result of their profit participation in Charlie's Angels") and a four-second excerpt from the Reeves interview:

ABC Reporter: It was Sunderland, [Martin] claims, who told her bluntly that with the exclusivity billing, Spelling-Goldberg were "blanking the Wagners out of their money."

Reeves: Now I said to Ron, I said, "Ron, did you say that? That's crazy man. How the hell do you know something like that?" He said, "Well, I ... I was just ... I blew my top." I said ... he said, "I don't even remember if I said that, George."

Reeves sued ABC alleging, inter alia, defamation based on the news report. ¹ ABC and co-defendant Roone Arledge (President of ABC News) moved for summary judgment on the defamation count. The district court judge granted the motion, reasoning that California law applied and that the state's statutory law grants an absolute privilege for a "fair and true report ... of judicial ... or other public official proceeding[s] ... or anything said in the course thereof." Cal.Civ.Code Sec. 47(4) (West 1982). ²

DISCUSSION

Before reaching the core issue of statutory construction, Judge Werker considered the threshold question of which state law pertained. He concluded the law of California, domicile and principal place of business of Reeves, was applicable. We are urged to find this evaluation erroneous by an appellant who believes New York, the forum state and principal place of business of ABC, adheres to legal principles more sympathetic to his cause. Nevertheless, we hold that the trial court correctly concluded California law should apply.

It is axiomatic that a federal court sitting in diversity follows the choice of law principles of the state of its situs. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). New York law mandates application of the law of the state with the most significant relationship to the issues in dispute. Nader v. General Motors Corp., 25 N.Y.2d 560, 255 N.E.2d 765, 307 N.Y.S.2d 647 (1970). Accordingly, it is proper for a federal court in New York to apply the case-by-case balancing test of the Restatement (Second) of the Conflict of Laws (1971). Bio/Basics International v. Ortho Pharmaceutical Corp., 545 F.Supp. 1106, 1113 (S.D.N.Y.1982). Judge Werker correctly applied the significant relationship test. His factual determination that Reeves would suffer the most damage to his reputation in his home state was not clearly erroneous, since the state of the plaintiff's domicile will usually have the most significant relationship to the case. Restatement, supra, at Sec. 150(2). The initial decision to apply California law, therefore, was entirely proper.

We now turn our attention to the cynosure of controversy, the applicability of California's statutory privilege to ABC's report. Cal.Civ.Code Sec. 47 was enacted in 1872, and legislative history is unavailable. The section was amended in minor fashion in the century since its promulgation, but the provision at issue, Sec. 47(4), was last altered in 1945. Moreover, California courts have never ruled on the dispositive question whether the Sec. 47 privilege applies to a news story detailing charges made in a secret grand jury proceeding. In such a case, a federal court sitting in diversity must appraise what the state's highest court would rule to be...