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Publishers' right to report defamatory documents from judicial proceedings strengthened by federal appellate court ruling From the Winter 2004 issue…

Publishers’ right to report defamatory documents from judicial proceedings strengthened by federal appellate court ruling

From the Winter 2004 issue of The News Media & The Law, page 14.

By Kirsten Murphy

A federal appeals court ruling in a lengthy legal battle between two of the nation’s largest manufacturers of cleaning and household products turned out to be a victory for free press advocates.

Even against arguments that a complaint was filed in court solely for the purpose of making defamatory remarks with impunity, a three-judge panel of the U.S. Court of Appeals in Cincinnati (6th Cir.) held in October that the Michigan fair report privilege statute protected the publication of the complaint. Although the three-year-old fight was between corporate giants Amway Corp. and Procter & Gamble Co., the decision is good news for media organizations.

“Generally speaking, a party’s publication of any actual court filing or statement made in a judicial proceeding is privileged because the public has a legitimate interest in accessing and viewing that type of information,” the appellate court held.

The fair report privilege, codified in Michigan law and in many other states’ statutes, is rooted in common law, which has long recognized an interest in protecting the publication of fair and accurate reports of judicial, legislative and executive proceedings. Most decisions involving the fair report privilege — both on a state and federal level — allow for a generous privilege.

Many states allow for substantial leeway in publishing accounts of official acts and proceedings. A substantially correct account — if not one-sided or editorial in nature — will be protected. Republication of defamatory statements contained in these reports will also be protected because of the public’s interest in the workings of government.

The classic formulation of the public’s interest in a fair report privilege was expressed most eloquently by Justice Oliver Wendell Holmes in the 1884 Massachusetts Supreme Judicial Court case Cowley v. Pulsifer, which involved a report of courtroom proceedings.

“It is desirable that the trial of causes should take place under the public eye, not because the controversies of one citizen with another are of public concern, but because it is of the highest moment that those who administer justice should always act under the sense of public responsibility and that every citizen should be able to satisfy himself with his own eyes as to the mode in which a public duty is performed,” Holmes wrote.

Waging a wild and public war

For 20 years, Procter & Gamble and Amway have battled one another in court over allegations of corrupt business practices and, oddly enough, supporting the Church of Satan.

The case Amway Corp. v. Procter & Gamble first arose after Sidney Schwartz, a self-described “longtime Amway opponent,”published a Web site titled “Amway: The Untold Story.”The site included, among other things, extensive documentation about the company’s business practices.

Procter & Gamble’s law firm, Dinsmore & Shohl, discovered the site and hired Schwartz as a “non-testifying consultant” in a lawsuit against Amway in Utah.

Dinsmore later filed a complaint against Amway on behalf of P&G in Texas federal court, alleging that the company was operating an illegal pyramid scheme — selling its products through distributors and paying out commissions based on the number of new distributors recruited — and violating the Racketeer Influenced and Corrupt Organizations Act. Schwartz obtained a copy of the complaint and published it on his Web site.

In 1998, Amway (headquartered in Ada, Mi ch.) filed suit against P&G, Dinsmore and Schwartz in U.S. District Court in Michigan. Amway alleged that the allegations in the Texas complaint were false and defamatory, and constituted a “tortious interference with business relations.”

The court dismissed the complaint, holding that the Web site’s content was protected speech. Furthermore, Amway was a public figure held to the “actual malice” standard — requiring it to prove knowledge of falsity or reckless disregard for the truth of the statements — and the fair reporting privilege applied.

Amway appealed the dismissal.

Judge Alice M. Batchelder, writing the Sixth Circuit’s 2-1 panel decision, held that the Michigan fair report privilege statute protected the publication of the complaint. The privilege also protects individuals who fairly and accurately report on matters of public record, including court records, she wrote.

Amway had argued that the privilege did not apply to P&G and Dinsmore because they created the allegedly defamatory complaint and participated in the publication of the document. Relying on the Second Restatement of Torts, a compendium of case law developments that often has the force of law — which states that there must be some official action in a judicial proceeding before the privilege will apply — Amway urged the court to use the logic of that rule.

“An important reason for this position has been to prevent implementation of a scheme to file a complaint for the purpose of establishing a privilege to publicize its contents and then dropping the action,” the Restatement says.

The court disagreed, concluding that a straightforward application of the Michigan statute protected the posting of the complaint on the Internet.

The District Court in Texas dismissed P&G’s pyramid scheme claims. However, the U.S. Court of Appeals in New Orleans (5th Cir.) partially reversed that ruling, and the case was heard in January 2003. After several others dismissals and appeals, the trial court finally dismissed the case. P&G is appealing that decision.

Attorney James E. Stewart, who practices media law at Butzel Long in Ann Arbor, Mich., said the court’s rejection of the Restatement interpretation of the privilege is a positive development.

“To the degree that the court says Michigan is different than the Restatement, the decision is good news,” Stewart said.

The decision also clears up some uncertainty in Michigan law, he added.

“There was some concern about whether reporting on a complaint was actually protected in Michigan,” Stewart said. “This decision is very helpful because it reinforces that the statute does protect complaints.”

Eric J. Sinrod, a partner in the law firm of Duane Morris in San Francisco and an expert in Internet and communications law, said the unique nature of the case played a role in its outcome.

“It would be very unusual for parties to file a case just to get libelous statements out there,” Sinrod said. “Court documents are part of the judicial process, and there is a long line of precedent that supports openness in that process.”

There are some limitations to the reach of the privilege, however. For example, the publication of an unofficial, nonpublic report that contains defamatory statements will not generally be privileged.

In Wynn v. Smith, decided in January 2001, the Nevada Supreme Court held that confidential documents are not protected under the state’s fair report privilege.

Las Vegas casino mogul Steve Wynn sued Barricade Books, Inc., the publisher of an unauthorized biography about him. Barricade Books advertised that the book contained “details why a confidential Scotland Yard report called Wynn a front man for the Genovese family,” an organized crime organization in New York.

The court ruled that the Scotland Yard report was not “of an official action or proceeding” subject to the fair report privilege, and cited a 1988 federal appellate case, Schiavone Construction Co. v. Time, Inc.

“Allowing the privilege to cover confidential reports would bring to light information that the government had no intention of releasing, and which could be used as a powerful tool for injury,” the appeals court held.

In general, however, the fair report privilege continues to gain muscle through strong endorsements such as the Sixth Circuit decision.

“The case stands for the proposition that if there is a public reference to information contained in a court document that is not under seal,” Sinrod said, “that is protected.”