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Business argues for punitive damages in breach of contract, fraud case

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  1. Libel and Privacy

    NMU         SIXTH CIRCUIT         Privacy         Dec 21, 1999    

Business argues for punitive damages in breach of contract, fraud case

  • WDIA Corp. argued to a federal appellate court that it should recover $45 million from a magazine that breached a contract, in order to deter deceptive newsgathering techniques.

The U.S. Court of Appeals in Cincinnati (6th Cir.) heard arguments last week from WDIA Corp. and McGraw-Hill Inc., owner of Business Week magazine, regarding a lower court’s decision last year refusing to award $45 million in punitive damages to WDIA. The lower court denied WDIA the punitive damages demanded and limited actual damages to 10 percent of the amount requested in WDIA’s breach of contract and fraud lawsuit against McGraw-Hill.Federal District Judge Herman J. Weber in Cincinnati found in mid-December 1998 that a Business Week reporter breached a contract and committed fraud in the pursuit of a story, but refused to award punitive damages against the magazine after recognizing the ‘vital public interest’ served by his truthful article about credit-reporting agencies. Weber awarded WDIA of Cincinnati, an online reseller of credit reports, $7,500 in damages for fraud and breach of contract after considering the corporation’s claims for more than $75,000 in compensatory damages and $45 million in punitive damages.

WDIA argued before the federal appellate court that punitive damages should be given as a preventive measurer to ensure that McGraw-Hill or others do not misrepresent themselves to obtain information for publication, according to the Associated Press. However, McGraw-Hill countered that the lower court’s decision should be upheld because its newsgathering was protected by the First Amendment, according to AP.

The lawsuit was based on an agreement between WDIA and Business Week reporter Jeffrey Rothfeder, who contracted to obtain credit-reporting services. Rothfeder was researching a story on breaches of regulations in the Fair Credit Reporting Act regarding access to credit histories, and presented false information on an application for WDIA’s services in order to test whether WDIA had adequate safeguards in place to protect individual privacy.

Rothfeder falsely represented his purpose in requesting credit reports throughout his dealings with the corporation, the lower court found, by stating that he was seeking credit histories of prospective McGraw-Hill employees. Rothfeder subsequently obtained from the corporation a credit report on then-Vice President Dan Quayle and cited the credit report in a September 1989 article describing how easily credit reports on any individual could be obtained. Rothfeder independently got permission from Quayle before the story was published.

(WDIA Corp. v. McGraw-Hill, Inc.; Media Counsel: Floyd Abrams, New York)

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