Wehling v. Columbia Broadcasting System

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Before BROWN, TATE and HIGGINBOTHAM; JOHN R. BROWN
• Citation: Wehling v. Columbia Broadcasting System, 721 F.2d 506 (5th Cir. 1983)
• Decision Date: 19 December 1983
• Docket Number: No. 83-1294,83-1294
• Parties: 10 Media L. Rep. 1125 Carl D. WEHLING and Geraldine D. Wehling, Plaintiffs-Appellants, v. COLUMBIA BROADCASTING SYSTEM, Defendant-Appellee. Summary Calendar.

Page 506

721 F.2d 506

10 Media L. Rep. 1125

Carl D. WEHLING and Geraldine D. Wehling, Plaintiffs-Appellants, v. COLUMBIA BROADCASTING SYSTEM, Defendant-Appellee.

No. 83-1294

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Dec. 19, 1983.

Westbrook, Schroeder & Piker, Joel W. Westbrook, Edward J. Schroeder, II, San Antonio, Tex., for plaintiffs-appellants.

Baker & Botts, William J. Dyer, Houston, Tex., for defendant-appellee.

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

Before BROWN, TATE and HIGGINBOTHAM, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

Carl Wehling and his wife brought a diversity suit against Columbia Broadcasting System (CBS) for defamation of character and invasion of privacy. On motion for summary judgment, the suit was dismissed based on a defense of truth established by collateral estoppel. We affirm.

CBS aired a television broadcast on CBS Evening News, Monday, August 18, 1975. The gist of the report was that Wehling, through a corporate network, defrauded the United States Government and many students through the use of federally funded loans for students attending Wehling's chain of proprietary schools. The broadcast also referred to outdated textbooks and business machines, bogus entrance examinations, and kickbacks to banks making the loans. The broadcast also contained interviews with student to whom fraudulent promises of jobs were made.

CBS asserted the defense of substantial truth to the defamation claim under Texas law. CBS asserted judgments in United States of America v. Carl D. Wehling, CR-3-39 (N.D.Tex. Dallas) (federal criminal case) and State of Texas v. Carl D. Wehling, 74-C1-14335 (166th Judicial District Court, Bexar County, Texas) (state civil case) as conclusively establishing its substantial truth defense by collateral estoppel.

The District Court granted summary judgment for CBS. In a memorandum opinion, the District Court applied the federal test for collateral estoppel, which does not require both parties to have been mutually bound by the decision in the previous case. The District Court pointed out that Wehling's counsel, during the argument on Motion for Summary Judgment, conceded that the federal indictment said essentially the same thing about Wehling that the broadcast had said. The court concluded that the guilty verdict by the jury confirmed the truth of the indictment and, thus, of the broadcast.

"When a federal court sitting in diversity is considering the collateral estoppel affect of a prior federal judgment, this Circuit applies federal common law." Reimer v. Smith, 663 F.2d 1316, 1325 n. 9 (5th Cir.1981) (emphasis in original) (citing cases). See also Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980). Thus, the preclusive effect to be given the judgment of the federal criminal case is determined by federal standards. There are three prerequisites to collateral estoppel under federal law:

(1) that the issue at stake be identical to the one involved in the prior litigation;

(2) that the issue has been actually litigated in the prior litigation; and

(3) that the determination of the issue in the prior litigation has been a critical and necessary part of the judgment in that earlier action.

Hicks v. Quaker Oats Co., 662 F.2d 1158, 1166 (5th Cir.1981). Accord, Stovall v. Price Waterhouse Co., 652 F.2d 537 at 540 (5th Cir.1981); Johnson v. United States, 576 F.2d 606, 615 (5th Cir.1978). Complete identity of parties in the two suits is not required. "The federal principle of collateral estoppel precludes re-litigation of an adversely decided issue by a party who has once had a full and fair opportunity to litigate the issue, regardless of whether his present adversary was a party to the previous lawsuit." Willis v. Fournier, 418 F.Supp. 265, 266 (M.D.Ga.), aff'd, 537 F.2d 1142 (5th Cir.1976). Accord, Allen v. McCurry, 449 U.S. 90, 94-95, 101 S.Ct. 411, 414-415, 66 L.Ed.2d 308 (1980).

A central issue in the substantial truth defense of CBS is whether Wehling, through the chain of vocational schools he operated, defrauded the federal government by means of student loan programs. This was litigated and affirmatively answered by the guilty verdicts in the federal criminal case. The indictments, the jury charge, the statutes under which Wehling was prosecuted (18 U.S.C. Secs. 287, 641 (1976)), and the jury verdict (all of which are part of the record in this case) demonstrate the truth of the broadcast with respect to fraud and irregularity in loan applications, approvals, and disbursements. Moreover, the guilty verdicts returned on counts 2-10 of the indictment in the federal criminal case conclusively establish that Wehling's businesses were not properly refunding to students amounts of unearned tuition paid to Wehling schools with federal loan money. ¹ Thus, to reach a guilty verdict on counts 2-10, the jury had to find that numerous students who had incurred liability on student loans and had paid all of the proceeds to Wehling schools as tuition were not given refunds owed to them when the tuition was unearned. The judgment in the federal criminal case thus conclusively established the truth of the CBS broadcast's references to Wehling's defrauding both the United States and students at his schools.

The collateral estoppel effect of the state civil judgment is determined by Texas law. Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980) (citing 28 U.S.C. Sec. 1738 (1976)); Reimer v. Smith 663 F.2d 1316, 1325-26 (5th Cir.1981). The Texas Supreme Court recently explained:

Texas courts have adopted the position that mutuality is required only as to the party against whom the plea of collateral estoppel is asserted. When the persons against whom collateral estoppel operates have had their day in court, either as parties, privies, or through actual and adequate representation, application of the doctrine meets the requirements of due process.

Bonniwell v. Beech Aircraft Corp., 26 Tex.Sup.Ct.J. 259, 260, (citations omitted), rev'd on other grounds, 663 S.W.2d 816 ("the rule of collateral estoppel operate[s]...