Libel award tainted by investment firm's misrepresentations

TEXAS–A federal district judge in Houston said in early April that a jury verdict resulting in the largest libel award in U.S. history should be thrown out because plaintiffs tainted the trial with misrepresentations.

Federal District Judge Ewing Werlein Jr. said in a written memorandum opinion that if the U.S. Court of Appeals in New Orleans (5th Cir.) remands to his court a case brought by an investment firm against The Wall Street Journal, he will retry the matter.

Werlein found that relevant audiotapes of telephone conversations were not produced by the now-dissolved investment firm, MMAR Group, before trial and that the withholding of those audiotapes constituted misrepresentation and misconduct warranting a new trial.

MMAR had sued over a 1993 article stating that the firm mishandled investments and recklessly spent clients’ money. MMAR claimed in its 1994 lawsuit that the article contained false information that destroyed the firm.

Werlein wrote that the evidence clearly supported the conclusion that “MMAR engaged in serious misconduct during the pretrial discovery phase of this case, and that MMAR’s misconduct prevented Defendants from fully and fairly presenting their defense.”

Werlein was not able to grant immediately the motion for a new trial submitted by the Journal’s parent company, Dow Jones & Co., because the verdict also has been appealed to the U.S. Court of Appeals in New Orleans. Werlein had authority to hear arguments on Dow Jones’ motion for a new trial and issue an opinion on the matter, but he cannot order a new trial unless the Court of Appeals sends the case back to the district court in Houston.

The unusual procedural posture of the case results from Dow Jones’ discovery of new evidence after it appealed the final verdict — reduced by Werlein to $22.7 million in 1997 — to the Court of Appeals.

Former MMAR employee William Fincher contacted Dow Jones representatives after the verdict became final and informed them that MMAR possessed tape recordings of telephone conversations that supported the truth of the Journal article and that had been knowingly withheld by MMAR during pretrial discovery.

Dow Jones subsequently requested a retrial based on the newly discovered tape recordings and MMAR’s failure to produce those recordings before trial. The Court of Appeals stayed its review of Dow Jones’ and MMAR’s appeals regarding the final $22.7 million verdict pending Werlein’s consideration of the request for a new trial. (MMAR Group, Inc. v. Dow Jones & Co., Inc.; Media Counsel: David Donaldson, Austin)