N.J. editor did not act with actual malice in false light case

A front-page teaser that wrongly stated that the subjects of a civil complaint by the Securities and Exchange Commission were "arrested" was not made with "actual malice" — intentional falsity or reckless disregard for the truth — the New Jersey Supreme Court has ruled.

The decision means that the The Nutley Sun and its parent company, the North Jersey Media Group, are not liable to the plaintiffs in the false light case filed against them.

Bruce Rosen, who represented the defendants in the case, said that this is a "good decision on actual malice and really makes clear the difference between actual malice and negligence."

Dissenting from the majority opinion, Justice Helen Hoens wrote that the court edged towards creating a new, overly-friendly standard for journalists, wherein if a defendant "simply denies having any idea that the writing was false, or offers an opinion that the false word had equivalent journalistic weight to the truth, any defamation claim can be defeated."

In November 2005, the SEC filed a civil complaint against Ronald Durando and Gustave Dotoli, shareholders and officers of PacketPort.com, alleging that they had artificially inflated the value of a company's stock by engaging in "false publicity," and then sold the stock to the public for large profits — a so-called "pump and dump market manipulation scheme," according to the opinion. When the SEC files a civil complaint against someone, they are not arrested on criminal charges. The SEC complaint has since been settled.

The Record, a newspaper covering Northern New Jersey, ran an article under the headline "3 N.J. men accused in $9M stock scam," accurately describing the accusations against the plaintiffs as a civil matter seeking "disgorgement of the profits" gained through the scheme, according to the opinion and Glenn Finkel, who represents the plaintiffs in the false light lawsuit but not with regard to the SEC complaint.

The Record also is owned by the North Jersey Media Group. Paul Milo, then executive editor of The Nutley Sun, received permission to reprint the original article.

The lawsuit arises out of the teaser that Milo composed for the front page of The Nutley Sun, which read "Local men arrested in 'pump and dump' scheme, page 11." As the opinion states, neither Durando nor Dotoli were named in the teaser. The article ran on December 8, 2005, and the next day the paper was alerted to the error — Dotoli and Durando were not arrested — and asked to file a retraction. After internal deliberations, The Nutley Sun ran a front page retraction on December 22.

Durando and Dotoli filed a suit against The Nutley Sun and the North Jersey Media Group on December 16, 2005, alleging, among other things, false light.

Milo stated in a deposition that he was aware that the SEC regulated the investment industry, and that he understood the difference between civil and criminal actions, but that he did not know whether the SEC pursued criminal prosecutions, according to the opinion. He also said that he relied solely on the original article from The Record, and did refer to the SEC's press release on the matter. He conceded that he had made a "mistake," but stated that he had not doubted the accuracy of the teaser when he wrote it, according to the opinion.

Milo's earlier statements in the deposition may have cast doubt on whether he was confident in the teaser's accuracy, Finkel said.

It was "not good the way this happened," but was far from actual malice, Rosen said.

The trial court ruled for Milo. The Supreme Court affirmed, writing that "[o]ne does not have to condone Milo's shoddy editing to understand how he might have made the mistake in preparing the teaser, a day after he had read Lynn's article." This mistake was not made with such recklessness that it "approached the level of publishing a knowing, calculated falsehood," the Court wrote.

Finkel believes that the court made a mistake in granting summary judgment to the defendants. Summary judgment can be granted when the important facts of the case are not in dispute. Finkel believes that his clients should have been granted the benefit of the doubt as to whether Milo reserved doubts about the accuracy of his teaser when he wrote it, and that a jury should have been given the opportunity to determine that issue. "These are individual's rights here," Finkel said.

Finkel is considering, with his clients, whether they wish to appeal the case to the U.S. Supreme Court.

Related Reporters Committee resources:

· Dig.J.Leg.Gd.: Defining "actual malice"