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Supreme Court rules Forbes not liable for business disparagement

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    News Media Update         TEXAS         Libel    

Supreme Court rules Forbes not liable for business disparagement

  • The high court of Texas held that a libel suit against Forbes magazine failed to prove actual malice, overturning an appellate court decision.

Jan. 9, 2004 — A libel suit against Forbes magazine was overturned last month by the Supreme Court of Texas, which held that the plaintiffs in the case failed to prove actual malice, defined as knowledge of or reckless disregard for the falsity of a statement.

Granada Biosciences, Inc. and Granada Foods Corp., subsidiaries of Granada Corp., sued Forbes and writer William P. Barrett for a Nov. 11, 1991, article about the company’s finances and its chairman. The article described the subsidiaries as “so broke they haven’t been able to publish their 1990 annual reports.”

The companies brought a business disparagement claim against Forbes and Barrett in 1992, alleging that the article’s publication led to a dramatic drop in their stock prices and caused creditors to deny them credit. Under Texas law, a business disparagement claim requires the plaintiff to prove that the defendant published false and disparaging information with malice, and that the result caused direct economic damages to the plaintiff.

The trial court granted Forbes‘s motion for dismissal, but the appellate court reversed. It found that there was an issue of fact still to be determined — whether the magazine and its reporter acted with actual malice.

On Dec. 19, the Supreme Court unanimously held that the case should be dismissed because the plaintiffs presented no evidence that Forbes published the article with actual malice.

In an effort to prove actual malice, the plaintiffs presented evidence suggesting Bartlett misled Eller into believing he would be allowed to review the article before it was published. Bartlett did provide Eller a copy of the article, and Eller called the reporter soon thereafter to tell him it contained several false statements.

However, the court found, Forbes had already printed and distributed the magazine four days before Eller received a copy of the article. “The actual malice inquiry focuses on the defendant’s state of mind at the time of publication,” the court wrote. Thus, if the magazine was completed and mailed before Barrett or Forbes learned of any inaccuracies, no actual malice could be found, the court said.

In the course of its analysis, the court rejected use of the state’s “single publication” rule, which says that publication is complete on the last day of the mass distribution of copies of the printed matter. The rule applies to determining whether a plaintiff has brought a case within the requisite amount of time and “has nothing to do” with determining a publisher’s state of mind, the court held.

Relying on the U.S. Supreme Court’s 1984 decision in Bose v. Consumers Union, Texas’ high court said a media defendant’s poor choice of words or content, without evidence of deliberate falsity, does not amount to actual malice.

“While it would have been more accurate for Forbes to identify the precise entities with [Granada Corp.] to which it was referring, Forbes‘s careless use of the generic “Granada” is no evidence that Forbes entertained serious doubts as to the statements’ truth or had a high degree of awareness of their falsity,” the court concluded.

(Forbes v. Granada Biosciences, Inc.; Media Counsel: David H. Donaldson, Jr., George & Donaldson, LLP, Austin) KM


© 2004 The Reporters Committee for Freedom of the Press

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