Food Lion award for ABC producers' 'fraud' thrown out on appeal

Food Lion award for ABC producers’ ‘fraud’ thrown out on appeal

• Finding that a grocery chain was not damaged by the falsification of resumes, a federal appellate court reduced what was originally a $5.5 million jury award to $2

The U.S. Court of Appeals in Richmond (4th Circuit) threw out most of the claims brought by the Food Lion grocery chain against ABC’s “PrimeTime Live” for an undercover story that alleged Food Lion made its employees repackage and sell outdated food, leaving Food Lion with a total damages award of $2.

The court affirmed the theory that litigants cannot sue for “non-reputational” torts — like fraud, breach of duty of loyalty, and trespass — and expect to recover damages for harm to their reputation caused by a subsequent story, without showing that the information disclosed was false, and that the party reporting it knew it was false or recklessly disregarded the truth.

In 1992, two producers for “PrimeTime Live” modified their resumes to obtain jobs in Food Lion stores to document allegedly unhealthy food handling practices. A jury later found that the two had committed fraud, trespass, and breach of loyalty to Food Lion, and awarded the grocery chain more than $5 million in damages in January 1997. That amount was later reduced to just over $316,000 by the judge.

The appellate court overturned all but $2 of that award, finding that the ABC employee’s action in falsifying their resumes to obtain jobs at Food Lion did not constitute fraud under the North Carolina statute. Food Lion had not been injured by the misrepresentations, the court found, because the employees did their jobs as assigned, and the company acknowledged that the jobs for which they were hired were high-turnover positions.

However, the appellate court upheld the claims of trespass and breach of a duty of loyalty, finding that even though they worked for ABC, once they were hired by Food Lion they were obligated to promote their new employer’s interests. The videotaping exceeded the scope of their permission to be in nonpublic areas of the store. But because Food Lion could not show they were injured by these actions directly, they could only recover $2 in nominal damages.

Food Lion never sued ABC for libel, and admitted in court that it did not think it could prove that ABC acted with actual malice — knowledge of falsity or reckless disregard for the truth.

(Food Lion Inc. v. Capital Cities/ABC Inc.)

© 1999 The Reporters Committee for Freedom of the Press

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