Ryan v. Brooks

Decision Date17 October 1980
Docket NumberNos. 79-1473,79-1474,s. 79-1473
Citation634 F.2d 726
Parties6 Media L. Rep. 2155 John J. RYAN, Appellee, v. John BROOKS, Defendant, and Harper & Row Publishers, Inc., Appellant. John J. RYAN, Appellee, v. John BROOKS, Appellant, and Harper & Row Publishers, Inc., Defendant.
CourtU.S. Court of Appeals — Fourth Circuit

Whiteford S. Blakeney, Charlotte, N. C., Samuel G. Thompson, Raleigh, N. C., (Edward A. Miller, New York City, Blakeney, Alexander & Machen, Charlotte, N. C., Smith Anderson, Blount, Dorsett, Mitchell & Jernigan, Raleigh, N. C., on brief), for appellants.

Kermit D. McGinnis, Charlotte, N. C., for appellee.

Before WINTER, WIDENER and PHILLIPS, Circuit Judges.

JAMES DICKSON PHILLIPS, Circuit Judge:

This appeal arises from an action for libel brought by John J. Ryan, former Vice-President and General Manager for North Carolina of Southern Bell Telephone Company. Ryan claimed that he had been libelled in a book written by defendant John Brooks and published by defendant Harper & Row in February 1976. Entitled Telephone: The First Hundred Years, the book was commissioned by AT&T as a corporate history to be published during the centennial year of the telephone's existence. Only one sentence of the 345-page volume mentioned Ryan; it purported to summarize Ryan's account, released to the press in January 1975, of Southern Bell's political activities during his tenure. Ryan took issue with Brooks' choice of words in that sentence; and a federal jury agreed that the sentence was false and defamatory of Ryan. They awarded him $5,000 actual and $150,000 punitive damages, against Brooks and Harper & Row jointly. Defendants raise several issues on this appeal, including a thorny question of the correct statute of limitations to be applied under controlling North Carolina law. 1 But we find one issue dispositive, and reach only that: whether there was sufficient evidence that the defendants published the allegedly defamatory matter with "actual malice" under the standard of New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). 2 Upon our own careful review of the evidence, see id. at 285, 84 S.Ct. at 728, we conclude that there was insufficient evidence of malice to sustain a judgment against defendants, while affording them the full protection required by the First Amendment. We therefore reverse the judgment and remand with instructions to enter judgment n. o. v. for defendants.

I

Before reaching the dispositive questions of law, a fuller discussion of the factual background of this case is necessary. John Ryan held the North Carolina Vice-President position for Southern Bell from 1964 to 1973, when higher-ups asked him to retire. In late 1974, rumors of corruption at a high level of the Southern Bell operation began to circulate, sparked by news of the suicide of the Texas Vice-President of Southwestern Bell and his suicide note detailing charges of illegal political contributions and wiretapping by the company. Ryan testified that he was immediately contacted by newspaper reporters in Charlotte, N.C., who were investigating the possible existence of similar political activity in Southern Bell's Charlotte headquarters. At first he refused to talk with them, but soon became concerned when it appeared that Charlotte Observer reporters were getting information from other Southern Bell sources that Ryan had operated a political "slush fund" out of his Charlotte office, funded by proceeds from false expense vouchers. Fearing that he would be made to appear the scapegoat in forthcoming news stories that would not accurately describe Southern Bell's political fund and his role in operating it, Ryan decided to go on record about the fund.

In the interview with Observer reporters Marion Ellis and Howard Covington, published in a copyrighted article on January 15, 1975, and in his testimony at the trial below, Ryan described the operation of Bell's political fund as follows. Each Southern Bell department head, upon his promotion to that position, was informed that he would receive a $2,500 annual raise, but that the money was not his; it was to be paid back to the company's political fund in cash payments of $100 a month. Ryan testified that as it was explained to him when he became a department head, he had the option to decline the raise, but if he took it, he was "committed permanently" to the $100 a month payments. In addition to the inevitable pressure that a rising corporate executive would feel to accept the raise and not appear to be unwilling to do his part for the company, there was a positive incentive. The company increased the raise by the amount of extra income tax that would be owed, and the total increase resulted in a larger salary base and thus a larger pension upon retirement. No department head, to Ryan's knowledge, had ever refused this "raise."

As director of Bell's North Carolina operation, Ryan collected the salary kickbacks from the eight or nine department heads under him, and gave it out in cash to state political candidates of both parties, in hopes that Bell would have the ear of whoever was elected. In 1972, the peak year for this activity, Ryan said that he contributed a total of $28,000 to candidates for governor, senator and congressman in North Carolina. Ryan's story made headlines in the Observer on January 15, 1975, and related articles received extensive coverage over a wide area for some months thereafter.

At about this time, John Brooks, an experienced writer about business matters, was working under contract to AT&T and Harper & Row on the book Telephone. He learned of Ryan's allegations through several secondary sources, and felt they should be included in a section discussing recent scandals within the corporation. Brooks summarized the Ryan story in the following sentence found on page 310 of the published volume:

But in January 1975, John J. Ryan, a former vice-president for Southern Bell Telephone Company in charge of service for North Carolina, who had been forced to retire in June 1973 on grounds of "unsatisfactory performance", said in a series of local newspaper interviews that over a period of years he had made political contributions to candidates who were expected to be favorable to the interests of Southern Bell, deriving the funds from salary kickbacks extorted from leading Southern Bell executives that had been concealed by the use of false vouchers.

The book Telephone was published in February 1976. By May 1977, its one hardcover and two paperback editions had sold approximately 195,000 copies, of which AT&T had purchased 150,000, and the company's stockholders 30,000 through a coupon purchasing plan.

Ryan first learned about the statement when he read a book review of Telephone by Marion Ellis in the Observer. Ellis pointed out that the book contained "one major error," in that Ryan "has never acknowledged the existence of a bogus voucher scheme." After reading the book, Ryan engaged counsel and demanded that Harper & Row retract the statement. He particularly objected to the use of the word "extorted," and to the mention of a false voucher plan for concealment of the kickbacks. Harper & Row and Brooks did eventually agree to change the statement about Ryan, 3 but the new version could not be inserted until the second paperback edition was issued in August 1976. The publishers refused Ryan's demand to delete all mention of him from the book, however, and he filed the complaint that began this suit on May 2, 1977. He named AT&T, Harper & Row, and Brooks as defendants, but AT&T settled before trial and the case proceeded against the publisher and author.

At the trial, John Brooks testified that his contract with AT&T gave him complete control over the content of the corporate history, and that he was given almost complete access to AT&T files. Brooks said that he had never heard of Ryan or of any misconduct in Southern Bell until he read an article in the New York Times on February 9, 1975 about federal investigations of AT&T subsidiaries' "secret political contributions." The article contained an account of Ryan's revelations to the Observer, stating that Ryan "said that he had run a political fund made up of salary kickbacks from an average of six to eight of his immediate subordinates in the North Carolina operation." Though that article introduced him to the problems at Southern Bell, Brooks testified that his most important source for this paragraph of his book was a June 23, 1975 article in Business Week magazine. That story discussed the Southwestern Bell scandals, and then noted that Southern Bell had

tried quietly to oust the head of its telephone operations in North Carolina, John J. Ryan. But Ryan suddenly rebelled and rattled off a detailed story to the Charlotte Observer describing a companywide system of forced political contributions and false vouchering that he and others had engaged in, allegedly with the knowledge and approval of higher-ups.

Brooks' third source of information about the Ryan affair was an issue of the "AT&T Management Report," an internal publication of AT&T, dated January 23, 1975, which Brooks had pulled from the corporate files in February or March of that year. It contained a statement of Mr. L. E. Rast, President of Southern Bell, in response to Ryan's allegations. Rast stated that Ryan had been "forced to retire" in June 1973, that the existence of a bogus voucher plan, whose proceeds had been diverted to political contributions, had been discovered then, and that it had been promptly stopped.

Brooks testified that though none of these sources contained the exact words that he used in his book, he felt that his sentence was a "fair synthesis" of the information he had gathered. He believed that force was inherent in any salary kickback operation, and the Business Week article referred to "forced political contributions." Thus Brooks chose...

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