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Court permits disparagement suit against Consumer Reports

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Court permits disparagement suit against Consumer Reports

  • A vigorous dissent by eleven judges on a motion for review by the entire appellate court says the decision chills speech by encouraging baseless product disparagement suits.

May 22, 2003 — A narrow majority of 24 judges on the federal appeals court in San Francisco (9th Cir.) refused Monday to rehear an appeal over the right of Suzuki Motor Corporation to sue the publisher of Consumer Reports for product disparagement. The decision allows the case to proceed to trial, despite warnings from dissenting judges that permitting the suit “sets a dangerous precedent” and chills important speech.

“If [Consumers Union] can be forced to go to trial after this thorough and candid disclosure of its methods, this is the death of consumer ratings,” wrote Judge Alex Kozinski on behalf of himself and ten other dissenters. “It will be impossible to issue a meaningful consumer review that a band of determined lawyers can’t pick apart in front of a jury. The ultimate losers will be American consumers denied access to independent information about the safety and usefulness of products they buy with their hard-earned dollars.”

The case arose out of a 1988 article that found the Suzuki Samurai to be unsafe because it “rolls over too easily.” In the 6500-word review, Consumer Reports described its testing procedures and results and ultimately gave the car a rating of “not acceptable.”

After Suzuki sued, Consumer Reports convinced the trial court to dismiss the lawsuit for lack of sufficient evidence.

In June 2002, a three-judge Court of Appeals panel reinstated the suit, holding that “a reasonable jury could find by clear and convincing evidence that [Consumers Union] sought to produce a predetermined result in the Samurai test.”

Monday’s decision reflected a vote by the full appellate court on whether to rehear the appeal. Thirteen of the court’s 25 judges voted, without issuing an opinion, to let its original decision stand. Eleven judges signed the dissent written by Kozinski. One judge recused

herself from the vote.

The three judges who decided the original appeal filed amended opinions Monday explaining their decision to allow the case to continue. Judge A. Wallace Tashima, writing for the majority, said Suzuki had shown sufficient evidence of “actual malice” to go before a jury.

Under the seminal case New York Times v. Sullivan, a plaintiff who brings suit against a public figure or corporation based on speech must prove the statements in question were made with “actual malice,” defined as knowledge of, or reckless disregard for, the truth of a statement.

Tashima said “actual malice” could be inferred from evidence that Consumers Union had rigged its performance test for the Samurai and had wanted the car to fail.

The dissenters said the product disparagement suit should not be permitted to proceed, because the magazine had disclosed its methodology in the report, and any evidence of “actual malice” was insufficient.

“If Suzuki can get to trial on evidence this flimsy, no consumer group in the country will be safe from assault by hordes of handsomely paid lawyers deploying scorched-earth litigation tactics,” Kozinski wrote.

Moreover, he wrote, “[t]he majority’s decision reaches far beyond consumer organizations to virtually any research group that criticizes corporate interests.”

Jim Guest, the president of the Consumers Union, told The New York Times the publisher planned to ask the U.S. Supreme Court to accept an appeal in the case.

(Suzuki Motor Corp. v. Consumers Union of United States, Inc.; Media counsel: Michael N. Pollet, Yonkers, N.Y.) WT

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