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Second Circuit refuses to stop British libel suit against Dow Jones Co.

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Second Circuit refuses to stop British libel suit against Dow Jones Co.

  • The U.S. Court of Appeals upheld a lower court’s refusal to declare that a British company may not sue the Wall Street Journal for libel.

Oct. 21, 2003 — The U.S. Court of Appeals in New York (2nd Cir.) upheld a district court dismissal of a lawsuit by Dow Jones Co. seeking a declaratory judgment against a British department store and its billionaire owner.

The Second Circuit ruled Oct. 10 that the district court did not abuse its discretion when it denied Dow Jones’ request for the court to issue an injunction barring Harrods from suing the Wall Street Journal for libel in the U.K. The district court held that the case was not ready to be decided because there was no “actual controversy” yet, and such a declaration would violate the principle that courts should recognize the jurisdiction of other nations’ courts.

The case began as an April Fool’s Day joke in 2002. Harrods issued mock press releases stating plans to “float” Harrods and made reference to a “first-come, first-served share option offer.” A later press release described the plans of Harrods’ owner, Mohamed Al-Fayed, to “float” Harrods by mooring a boat version of the store on the Thames River in London.

The Wall Street Journal, owned by Dow Jones, read the first press release as a genuine announcement that Harrods planned to “float shares,” or make a public offering of stock shares. On April 1, the newspaper reported it. Upon learning of the joke, the Journal printed a correction and published a story about the farce titled “The Enron of Britain?” The article admitted the paper had been fooled, and questioned the propriety of issuing false information.

According to Dow Jones, the Journal article was meant as a tongue-in-cheek humor story. However, Harrods threatened to sue for libel in Britain. In response, Dow Jones attempted a preemptive strike in May 2002 — it asked a federal district court to declare under the Declaratory Judgments Act that the article was not libelous as a matter of law — to prevent Harrods and Al-Fayed from suing.

The Declaratory Judgments Act provides a federal district court the broad discretion, when an “actual controversy” exists, to declare the legal rights of the party seeking the declaration. A court can make such a declaration even if the party seeking it isn’t looking for further relief, such as an injunction or damages.

Harrod’s brought suit in Britain, based on the availability of the article in the U.K. via the Wall Street Journal Internet site, www.WSJ.com. Dow Jones followed by amending its complaint to seek an anti-suit injunction that would bar Harrods’s suit.

Dow Jones argued before the district court that the case involved an “actual controversy” because Harrod’s libel lawsuit threatened the company with potential liability in Britain, where libel laws are less protective of the press, in violation of the First Amendment.

In its ruling, the appellate court stressed that the Declaratory Judgements Act gives judges wide discretion to determine whether they will exercise jurisdiction over a proposed declaratory action. The lower court considered the appropriate factors, the Second Circuit concluded.

One factor considered by the lower court was whether the use of a declaratory judgment would “increase friction between sovereign legal systems or improperly encroach on the domain of a state or foreign court.” District Court Judge Victor Marrero also questioned whether courts in Britain would even recognize or enforce a U.S. court order.

(Dow Jones & Co. v. Harrods, Ltd.; Media Counsel: Jack M. Weiss, Gibson, Dunn & Crutcher LLP, New York) KM

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