Roemer v. Retail Credit Co.

• Decision Date: 29 January 1975
• Citation: 44 Cal.App.3d 926,119 Cal.Rptr. 82
• Parties: Paul F. ROEMER, Jr., Plaintiff and Respondent, v. RETAIL CREDIT COMPANY, a corporation, Defendant and Appellant. Civ. 30888.
• Court: California Court of Appeals Court of Appeals

Page 82

119 Cal.Rptr. 82

44 Cal.App.3d 926

Paul F. ROEMER, Jr., Plaintiff and Respondent, v. RETAIL CREDIT COMPANY, a corporation, Defendant and Appellant.

Civ. 30888.

Court of Appeal, First District, Division 2, California.

Jan. 29, 1975.

Hearing Denied March 26, 1975.

Cooper, White & Cooper, Charles W. Kenady, Robert R. Callan, Richard A. Seitz, San Francisco, for defendant and appellant.

Clifford Burnhill, Burnhill, Morehouse & Burford, Walnut Creek, for plaintiff and respondent; Cyril Viadro, San Francisco, of counsel.

KANE, Associate Justice.

Defendant Retail Credit Company appeals for the second time from a jury verdict finding it guilty of libel and awarding plaintiff Paul Roemer, Jr., both compensatory and punitive damages. Judgment for plaintiff at the first trial of this action was reversed because of an erroneous instruction pertaining to the subject of malice (Roemer v. Retail Credit Co. (1970) 3 Cal.App.3d 368, 83 Cal.Rptr. 540).

Mr. Roemer is a licensed insurance broker. Defendant is a mercantile agency engaged in the business of providing commercial investigative reports to subscribers--many of whom are insurance underwriters who request such reports in determining whether to license applicant brokers with their companies.

Plaintiff commenced this action in 1965 after discovering that defendant had prepared and submitted investigative reports about him to four insurance companies. Falsity of the reports was admitted by defendant (Roemer, supra, 3 Cal.App.3d p. 370, 83 Cal.Rptr. 540). At both trials of the case, the sole defense was that of the qualified privilege provided by Civil Code, section 47, subdivision 3. ¹

On this appeal defendant contends that: 1) the award of punitive damages must be set aside because (a) the jury was erroneously instructed as to the standard of proof required to establish actual malice and (b) the evidence (regardless of the standard of proof) does not support the jury's finding of malice. As an alternative contention on this subject, defendant claims that the jury's award of $250,000 punitive damages was grossly excessive as a matter of law; 2) the trial court erred in denying defendant's request for leave to amend its answer to plead partial truth in mitigation of damages and in rejecting defendant's proposed instruction on the same subject; and 3) plaintiff's counsel was guilty of prejudicial misconduct. For reasons which shall appear, none of these contentions can be sustained. Accordingly, we affirm the judgment.

Punitive Damages--Malice--Quantum of Proof

Since defendant is a mercantile agency to which the qualified privilege extends (Roemer, supra, 3 Cal.App.3d p. 370, 83 Cal.Rptr. 540: Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 418, 42 Cal.Rptr. 449, 398 P.2d 785), the judgment against it can be sustained only if the jury's finding of malice is supported by the appropriate quantum of evidence.

Before evaluating the evidence, therefore, we must first determine what standard of proof of malice is required in state private defamation actions.

Defendant, predicating its argument on the First Amendment principles enunciated in New York Times v. Sullivan (1964) 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, and more recently articulated in Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789, urges us to hold that the element of malice must be proven by clear and convincing evidence. Since the jury was instructed in the court below in terms of preponderance of evidence, defendant argues that we must reverse. We disagree with defendant's basic premise as to the standard of proof in a case such as this. Accordingly, we conclude that the jury was properly instructed. ²

While Gertz does hold that a private defamation plaintiff may recover punitive damages only if he sustains the standard of proof required by New York Times (418 U.S. 323, 94 S.Ct. p. 3012), the case as a whole makes it unmistakable that this rule obtains only where the protection of First Amendment freedoms is at stake. The court in Gertz emphatically points out that the individual's right to the protection of his own good name is a basic concept of human dignity which is at the root of any system of ordered liberty. As a consequence, the protection of private personality, like the protection of life itself, is a legitimate state interest. ³ The decision in Gertz that, despite this crucial state interest, the press should be held liable for libelous statements only under a more stringent standard of proof than that prescribed by state law (i.e., plaintiff must show actual loss to recover compensatory damages and must prove actual malice by clear and convincing evidence to be awarded punitive damages) is the result of balancing competing values and is predicated on a solicitous protection of the freedom of the press secured by the First Amendment. The Gertz court makes it clear indeed that the result reached therein is a compromise which is based on 'the principle that debate on public issues should be uninhibited, robust, and wide-open' (New York Times Co. v. Sullivan, supra 376 U.S. at pp. 270--271, 84 S.Ct. at p. 721), and on the premise that this standard of proof 'administers an extremely powerful antidote to the inducement to media self-censorship' (Gertz v. Robert Welch, Inc., supra, 418 U.S. 323, 94 S.Ct. at p. 3008).

The decisive issue awaiting determination, therefore, is whether the credit report in dispute, as opposed to news media publications, is protected by the First Amendment calling for the higher standard in proving actual malice. For the reasons which follow, the hold that the libelous communication presented in a credit report falls outside the protective umbrella of the First Amendment; and, as a consequence, malice, a prequisite to sustain punitive damages, may be proved under the conventional standard of preponderance of evidence.

In limine, we wish to point out that the precise question here raised has not, as yet, been definitively decided by the United States Supreme Court. On the contrary, Rosenbloom v. Metromedia (1971) 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 explicitly leaves this issue open. While in Rosenbloom the court reaffirms its commitment to bolster robust debate on public issues embodied in the First Amendment and extends constitutional protection to all discussion and communication involving matters of public or general concern, it intimates 'No view on the extent of constitutional protection, if any, for purely commercial communications made in the course of business' (403 U.S. pp. 43--44, fn. 12, 91 S.Ct. p. 1820; emphasis added).

In resolving the issue, therefore, we take recourse to federal cases dealing with situations comparable with those presented in the case at bar. One of the cases in point is Kansas Electric Supply Co. v. Dun & Bradstreet, Inc. (10 Cir. 1971) 448 F.2d 647, cert. den. 405 U.S. 1026, 92 S.Ct. 1289, 31 L.Ed.2d 486. In Kansas Electric plaintiff, a wholesale electric supply company, brought an action against defendant, a credit reporting agency, for libelous statements contained in a credit report. The jury returned a verdict in favor of plaintiff, awarding it substantial sums of compensatory and punitive damages. In its appeal, defendant argued that under New York Times Co. v. Sullivan, supra, and its companion cases, the trial court should have directed a verdict in its favor because there was a total lack of "actual malice" as defined by New York Times. In affirming both the compensatory and punitive damages, the Court of Appeals held that the doctrine of New York Times did not extend to private credit reports because the business and credit standing of the company was not a matter of public interest, and that the credit report under consideration provided specialized information to a selective, finite audience, and concluded that the case was properly tried and decided under Kansas state law (see to same effect: Grove v. Dun & Bradstreet, Inc. (3 Cir. 1971) 438 F.2d 433, cert. den. 404 U.S. 898, 92 S.Ct. 204, 30 L.Ed.2d 175).

In Hood v. Dun & Bradstreet, Inc. (5 Cir. 1973) 486 F.2d 25, cert. den. 415 U.S. 985, 94 S.Ct. 1580, 39 L.Ed.2d 882, another case in point, plaintiff, a building contractor, instituted an action against defendant credit agency for libelous communications embraced in a credit report. In relying on New York Times and Rosenbloom, supra, defendant contended on appeal that the false credit report was constitutionally protected by the First Amendment guarantee of freedom of the press. In rejecting defendant's argument, the court held that the libelous and defamatory publications engrossed in credit reports are of a commercial nature and are unprotected by the constitutional safeguards of free speech and free press. The court recalled that the concept of purely commercial speech as an area where the First Amendment protection does not apply was originally articulated in Valentine v. Chrestensen (1942) 316 U.S. 52, 62 S.Ct. 920, 86 L.Ed. 1262. In Valentine, a city ordinance banning the distribution of handbills which solicited a submarine tour was challenged as violative of First Amendment rights. The Supreme Court upheld the ordinance, declaring that commercial speech did not fall within the protective care of the First Amendment. The commercial speech doctrine was revitalized recently in Pittsburgh Press Co. v. Human Rel. Comm'n (1973) 413 U.S. 376, 93 S.Ct. 2553, 37 L.Ed.2d 669, where the court upheld an ordinance which prohibited newspapers from referring to sex in employment headings in want ads. The court distinguished New York Times, emphasizing that the court there was concerned with a publication which communicated information or expressed opinion, whose existence and objectives were matters of public interest and concern. The court found that the commercial advertisements did not express such social policies and as a consequence the case...