Buckley v. McGraw-Hill, Inc.

OPINION DIAMOND, District Judge. Christopher Buckley has filed a diversity suit against McGraw Hill, Inc., a New York corporation which owns and publishes Business Week magazine. Buckley alleges that an August, 1986 article published in Business Week contained statements or implications that were false and defamatory. He alleges that the statements were delib *1045 erately designed to convey the impression that he was incapable and incompetent to perform in the position for which he was hired at Allegheny International (“AI”), that his father, the former Chief Executive Officer of AI, had created the position for him to enable him to live in unearned luxury, and that his being employed by AI created a damaging conflict of interest. Buckley also alleges that the statements placed him in a false light in the eyes of the public. Business Week has moved for summary judgment. For the reasons that follow, the motion for summary judgment will be granted. Background Business Week’s cover story in its August 11, 1986 edition was entitled “Big Trouble at Allegheny.” (See Exhibit A, attached to this opinion). The article focused on what it termed the “questionable management practices” at AI. Much of the article concerned the activities of AI’s then Chief Executive Officer, Robert Buckley, Christopher Buckley’s father. The portions of the article at issue in the present lawsuit discussed AI’s employment of Christopher Buckley at a company-owned hotel, the Dover. Buckley challenges a number of statements and alleged implications contained in the August, 1986 article. The article included the following statements: Sons and daughters of senior [AI] executives were placed on the payroll — including one of the chairman’s sons, who was appointed manager of a Manhattan hotel that AI owned. He was then allowed to live in the hotel’s penthouse, which had been renovated with marble bathrooms, elaborate paneling, and other luxuries at a cost of more than $1 million. The company paid nearly $6 million for a Manhattan hotel; Buckley’s son became its manager, although his qualifications were minimal. [This statement was contained in a highlighted box titled “Did Conflicts of Interest Cloud Executive Judgment?”] AI is straining to escape from a series of ill-fated real estate ventures. One of these, the Dover Hotel in midtown Manhattan, has raised apparent conflict of interest questions. AI originally purchased the hotel for $5.7 million in 1982, planning to convert it into a time-sharing residence. That plan proved to be unrealistic when AI belatedly learned what heavy sums it would have to pay rent control tenants to move out. So the company began renovating the building for use as a hotel, starting with the penthouse, where it spent more than $1 million dollars installing marble bathrooms and an elaborate rooftop greenhouse. The first resident of the refurbished penthouse: Buckley’s son Christopher. Even though former executives say that Christopher had no hotel experience, Buckley installed him as manager of the Dover. Christopher declined to comment____ Buckley contends in his complaint that the statements about him in connection with his employment at the Dover, independently and cumulatively, are false and defamatory when given their plain and natural meaning in the context of the article. He asserts that the August, 1986 article constituted an extreme departure from the standards of investigative reporting ordinarily adhered to by responsible reporters, editors, and publishers. Buckley alleges that Business Week published the article in a negligent manner, with reckless disregard for the truth or falsity of its statements, and with malice. Business Week has moved for summary judgment on the ground that Buckley has failed to make a showing sufficient to establish essential elements of his prima facie case, including defamatory content, falsity, and fault. We heard arguments on this motion on May 22, 1991. Discussion Prior to evaluating the merits of Buckley’s claims, we must determine what *1046 law governs this action. The issue is whether to apply the substantive law of New York or of Pennsylvania. Buckley initially argued to the court that Pennsylvania law should control this action. Business Week consistently has urged the application of New York law. The parties now agree that Buckley’s claims should be adjudicated under the substantive laws of the State of New York. We also conclude that the substantive law of New York should be applied to Buckley’s claims, not simply because the parties have stipulated that we should do so, but because factors independent of the parties’ stipulation support the application of New York law to the issues in this case. In a diversity case, a federal court applies the choice of law rules of the state where the court is sitting. Klaxon Company v. Stentor Electric Manufacturing Company, 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Under the choice of law rules of Pennsylvania, courts engage in a two-part inquiry. First, it must be determined whether the laws of the states with an interest in the case conflict. If they do, it must be determined which state has the greater interest in the particular question at issue. Myers v. Commercial Union Assurance Companies, 506 Pa. 492, 496, 485 A.2d 1113, 1116 (1984). The conflict is resolved through an analysis of the policies and interests underlying the particular issue before the court. 506 Pa. at 496, 485 A.2d at 1115, citing Griffith v. United Airlines, 416 Pa. 1, 203 A.2d 796 (1964). The two states with a particular interest in this case are Pennsylvania and New York. These states appear to differ on the appropriate standard of fault which would apply under the facts of this case. As we conclude below, this case involves a private figure who seeks to recover for statements about a matter of public concern. Under New York law, private figures may recover against media defendants for statements about a matter arguably within the sphere of legitimate public concern only on a showing that the publisher acted in a grossly irresponsible manner. Chapadeau v. Utica Observer-Dispatch, 38 N.Y.2d 196, 379 N.Y.S.2d 61, 64, 341 N.E.2d 569, 571 (1975). The Pennsylvania Superior Court has held that a private figure in Pennsylvania may recover damages for defamation upon a showing of mere negligence. See Rutt v. Bethlehems’ Globe Publishing Co., 335 Pa.Super. 163, 484 A.2d 72, 83 (1984). 1 Because New York and Pennsylvania courts differ on the applicable standard of fault, we must apply the law of the state with the greater interest in this case. The question of whether Pennsylvania or New York has a greater interest in this case is a close one. The Pennsylvania courts provide little guidance because they apparently have not applied Pennsylvania choice of law rules to resolve a conflict of law problem in the context of a defamation suit. Pennsylvania’s interest is mainly founded on Buckley’s relationship with the Commonwealth. Buckley grew up in Pennsylvania and is a Pennsylvania domiciliary. *1047 His family was living here when the August, 1986 article was published. Both he and his family now live in the Commonwealth, although we note that Buckley lived in Florida when he filed this lawsuit. New York also has a substantial interest in this case. Buckley lived and worked in New York at the time the August, 1986 article was published. The Dover Hotel, the center of the controversy, is located in New York. Business Week is a New York corporation, with its principal place of business in New York. The August, 1986 article was edited in New York. Finally, although we do not consider this a compelling factor, New York courts have expressed New York’s interest in protecting media defendants. The New York Court of Appeals has in the context of a defamation action articulated New York’s particular interest in providing a hospitable climate for the free exchange of ideas. Immuno AG v. Moor-Jankowski, 77 N.Y.2d 235, 249, 566 N.Y.S.2d 906, 913, 567 N.E.2d 1270, 1277 (1991), cert. denied, — U.S. -, 111 S.Ct. 2261, 114 L.Ed.2d 713 (1991). The court stated that the expansive language of the free speech guarantee of the New York Constitution, the history in New York of a free press, and the consistent tradition in New York of providing the broadest possible protection to the gathering and dissemination of news of public events, all call for particular vigilance by New York courts in safeguarding the free press against undue influence. Id. Courts applying New York law have held that libel is less plaintiff-centered than other torts. Davis v. Costa-Gavras, 580 F.Supp. 1082, 1093 (S.D.N.Y.1984); see also Zerman v. Sullivan & Cromwell, 677 F.Supp. 1316 (S.D.N.Y.1988). The District Court for the Southern District of New York has noted "trong policy reasons for deciding issues whose major impact is on the behavior of potential defendants according to the rules of the jurisdiction where the conduct that gives rise to the liability takes place, especially when that conduct may be protected speech. Davis, 580 F.Supp. at 1093. In addition to the above factors, we also consider the fact that, on May 28,1991, the parties filed a “partial pretrial stipulation” agreeing that New York law should control. Based on the typescript of this pleading, it appears to have been drafted by Buckley. The stipulation provides, in pertinent part, that: the parties are in agreement that no genuine conflict of laws exists in applying the substantive laws of the State of New York to Plaintiff’s claims in the above captioned action under the choice of law rules of the Commonwealth of Pennsylvania and agree that Plaintiff’s claims should be adjudicated under the substantive laws of the State of New York. 2 Both Pennsylvania and New York have a strong interest in this case. Under traditional choice of law analysis, the state where the plaintiff is domiciled generally, but not always, will be deemed to have the greater interest in a defamation case. See Restatement (Second) of Conflicts § 150(2), which provides that “when a natural person claims that he has been defamed by an aggregate communication, the state of most significant relationship usually will be the state where the person was domiciled at the time, if the matter complained of was published in that state.” (emphasis added). However, we find that Pennsylvania’s interest in protecting its domiciliary is decreased somewhat in this case by virtue of the fact that by stipulating to the application of New York law its domiciliary Buckley has elected to give up the protections of Pennsylvania law. The fact that Buckley did not reside in Pennsylvania at the time the August, 1986 article was published or at the time he filed this lawsuit *1048 also tends to diminish Pennsylvania’s interest in this case. In addition, we note that there is some authority for applying the law agreed to by the parties entirely or in substantial part because they have so agreed. The Court of Appeals for the Third Circuit has stated in the context of a defamation action that it had no cause to challenge parties’ consensual choice of Pennsylvania law inasmuch as Pennsylvania “has an interest in the outcome of this litigation.” Steaks Unlimited, Inc. v. Deaner, 623 F.2d 264, 269 (3d Cir.1980) (emphasis added). Pennsylvania’s interest in Steaks Unlimited was that “the allegedly defamatory acts as well as the subject of the disputed broadcast occurred in Pennsylvania.” The plaintiff, which was not a natural person but a corporation, was based in Ohio. The Court of Appeals for the Seventh Circuit has gone further, holding that litigants can, by stipulation, formal or informal, agree on the substantive law to be applied to their case, within broad limits. See City of Clinton, Ill. v. Moffitt, 812 F.2d 341, 342 (7th Cir. 1987). Given New York’s strong interest in this case, and the fact that the parties have agreed and stipulated that New York law is to be applied, we conclude that New York has the greater interest in this case. We will apply New York law. Buckley cannot prevail on his defamation claim unless he can establish three things under New York law. 3 First, he must show that statements or implications contained in the August, 1986 article were reasonably susceptible of a defamatory meaning. Mahoney v. Adirondack Publishing Co., 71 N.Y.2d 31, 523 N.Y.S.2d 480, 482, 517 N.E.2d 1365, 1368 (1987). Second, he must show that the defamatory statements were false. Id. Finally, he must show that Business Week acted in a grossly irresponsible manner without due consideration for the standards of information gathering and dissemination ordinarily followed by responsible parties. Chapadeau v. Utica Observer-Dispatch, Inc., 379 N.Y.S.2d at 64, 341 N.E.2d at 571. In its motion for summary judgment, Business Week attacks all three of these essential elements of Buckley’s claim. Business Week argues that Buckley cannot establish that the statements he complains of are capable of defamatory meaning and contends that Buckley’s interpretation of the article includes forced and unintended innuendo. Business Week also argues that there is no genuine material issue of fact as to whether the challenged statements are substantially true. Finally, Business Week argues that there is no genuine material issue of fact as to whether Business Week was grossly irresponsible in publishing the statements. At the outset we must decide whether the challenged statements are capable of defamatory meaning and whether they are capable of the meaning ascribed to them by Buckley. Antonetty v. Cuomo, 131 Misc.2d 1041, 502 N.Y.S.2d 902, 906 (1986). In making this determination, we may not isolate the challenged statements but must consider them in context. Weiner v. Doubleday & Company, Inc., 74 N.Y.2d 586, 550 N.Y.S.2d 251, 253, 549 N.E.2d 453, 455 (1989), cert. denied, 495 U.S. 930, 110 S.Ct. 2168, 109 L.Ed.2d 498 (1990). Further, the statements must be tested against the understanding of the average reader. Aronson v. Wiersma, 65 N.Y.2d 592, 493 N.Y.S.2d 1006, 1007, 483 N.E.2d 1138, 1139 (1985). Under New York law, a statement is defamatory if it “tends to expose a person to hatred, contempt, or aversion, or to induce an evil or unsavory opinion of him in the minds of a substantial number in the community, even though it may impute no moral turpitude to him.” Tracy v. Newsday, Inc., 5 N.Y.2d 134, 182 N.Y.S.2d 1, 3, 155 N.E.2d 853, 854 (1959). A statement also is defamatory if it tends to disparage a person in his profession or trade. Id. In his complaint, Buckley asserts that seven specific statements or implications in the 1986 article are substantially false and untrue. We now examine each of these *1049 statements to determine whether they are susceptible of a defamatory meaning. We also examine the alleged implications to determine whether each is susceptible of a defamatory meaning and also capable of the meaning ascribed to it by Buckley. Buckley asserts first that the statement or implication that he was installed as the hotel manager of a luxurious Manhattan hotel is substantially false. The August, 1986 article does include this statement. However, we conclude that this statement is incapable of defamatory meaning. The statement that Buckley was the manager of a luxurious hotel would not tend to expose him to hatred, to contempt, or to aversion. Nor would such a statement tend to disparage Buckley’s conduct in his profession. Insofar as the use of the verb “installed” may contribute to an implication that Buckley benefitted from nepotism, its use may, in the context of the article, be capable of defamatory meaning. We address the implication of nepotism below. Buckley next objects to the statement or implication that the Dover was a luxurious Manhattan hotel being operated as such while he worked and resided there. Regardless of whether the article states or implies that the Dover was luxurious, a statement that a person has some attachment to a luxurious hotel in no way exposes that person to hatred, contempt or aversion. Similarly, an implication that the Dover was being operated as a hotel would not prompt anyone to think of Christopher Buckley in evil or unsavory terms. Such statements or implications are incapable of defamatory meaning. Buckley next contends that the article states or implies that the Dover was purchased by Allegheny International or Robert Buckley in order to provide Buckley with a job and luxurious residence. The article includes no such statement. Nor, we find, may such a conclusion fairly be implied from the article. The average reader would not conclude that AI or Robert Buckley acquired a six million dollar piece of property for the purpose of creating a job and a luxurious apartment. An average reader would surely realize that if the goal were to locate a position for Christopher Buckley, this goal could be achieved without going to such lengths as purchasing an expensive building in New York City and undertaking its renovation. Buckley next objects to the statement or implication that he was “allowed to live” in the hotel’s luxurious penthouse. The article does include this statement. However, once again, statements as to one’s residence in a luxurious penthouse are incapable of defamatory meaning. To the extent that the statement may contribute to an implication that Buckley benefit-ted from nepotism, we discuss it below. Buckley next objects to the article’s statement or implication that the penthouse was renovated at a cost of one million dollars. While the article includes such a statement, it is hardly susceptible of a defamatory meaning. Statements as to the amount of money expended in renovating a penthouse do not expose the occupant of the penthouse to hatred, aversion, or contempt. Nor do such statements tend to disparage a person in his profession. Buckley next objects that the article states or implies that plaintiff was unqualified to work as a construction manager at the Dover. The article states that “former executives say that Christopher had no hotel experience____” There is no material question of fact as to the truthfulness of this statement. Christopher .Buckley had no hotel experience. The article also states that “[Buckley’s] qualifications were minimal.” We will presume for purposes of this summary judgment motion that this statement is capable of defamatory meaning. We also presume that this statement is a statement of fact, not opinion. Buckley also objects to the statement or implication that Allegheny International’s employment of Buckley presented a conflict of interest. The article does fairly imply that Buckley’s employment presented a conflict of interest. This implication is capable of defamatory meaning with re *1050 gard to Buckley only insofar as it implies that he was a beneficiary of nepotism. Buckley also contends that a fair reading of the article would lead a reader to believe that Allegheny was struggling financially, partly as a result of Robert Buckley’s purchase of and refusal to sell the Dover for the purpose of employing his son as hotel manager and providing him with a lavish penthouse. As set forth above, we reject the assertion that the article fairly implies that the Dover was purchased in order to provide Buckley with a job. We similarly do not believe that an average reader would interpret the article to mean that AI retained the Dover in order to maintain Christopher Buckley’s position and penthouse. We are left with two statements or implications which we will presume are capable of defamatory meaning: the statement that Buckley was minimally qualified to work as a manager at the Dover and the imp. .cation that Christopher Buckley benefitteC from nepotism. With regard to the implication of nepotism, we will presume that the article implies that Buckley got his position at the Dover and a luxurious place to live because of his father. Business Week asserts that it is entitled to summary judgment on the ground that there is no question of material fact as to whether the challenged statements or implications are substantially true. For purposes of this motion we will presume that there are material questions of fact as to whether the statements or implications as to nepotism and to Buckley’s qualifications are substantially true. Where the content of an article is arguably within the sphere of legitimate public concern, which means reasonably related to matters warranting public exposition, a defamed party may recover damages only on a showing of gross irresponsibility. Determining what editorial content is of legitimate public interest and concern is a function for editors, subject only to review by the courts to protect against clear abuses. Gaeta v. New York News Inc., 62 N.Y.2d 340, 477 N.Y.S.2d 82, 85, 465 N.E.2d 802, 805 (1984). Allegations of nepotism which question the integrity and credibility of high corporate officials raise a matter of legitimate public concern. See Tavoulareas v. Piro, 817 F.2d 762 (D.C.Cir.1987) (en banc), cert. denied, 484 U.S. 870, 108 S.Ct. 200, 98 L.Ed.2d 151 (1987). The real subject of the August, 1986 article was Christopher Buckley’s father, Robert Buckley. As the chief executive officer of a publicly held company with thousands of shareholders, Robert Buckley clearly was a high corporate official. That he may have hired a minimally qualified person to fill a responsible position because that person happened to be his son is a matter of public concern, particularly in light of AI’s financial problems at the time. It also is significant that the Securities and Exchange Commission was then examining executive compensation at AI. Under New York law, Buckley can recover only if those statements or implications in the Business Week article that are both false and capable of defamatory meaning were published in a “grossly irresponsible” fashion, without due consideration for the standards of information gathering and dissemination ordinarily followed by responsible parties. Chapadeau v. Utica Observer-Dispatch, Inc., 379 N.Y.S.2d at 64, 341 N.E.2d at 571. Buckley has come forward with no evidence showing facts which would justify a jury in concluding that Business Week acted in a grossly irresponsible manner. Business Week has submitted evidence which shows that, to the contrary, the magazine did not act in a grossly irresponsible manner. According to the uncontradicted evidence, at least two sources told the principal reporter, William Symonds, that Robert Buckley put Christopher Buckley into the position at the Dover. Symonds testified at deposition that he was told that “Buckley put his kid up there.” According to Business Week’s brief, this source was Dick Phillips, AI’s director of corporate real estate. Symonds also stated that Thomas Maletta, a former vice president at AI, told him that “[Buckley] was put in.” *1051 According to Symonds, Maletta made this statement in the context of explaining that Christopher Buckley had no experience. The obvious implication of Maletta’s statements was that Christopher Buckley got the position at the Dover because of his father. Symonds also stated that he was told by Dick Hellwig, a former AI vice president of finance, that Christopher Buckley was ill-qualified to run this operation, speaking of the Dover Hotel. In addition, Symonds averred that he was told by Thomas Maletta that Buckley had no experience and was very unqualified for the job he was given. Another source, apparently AI Thomas, a former real estate official at AI, told Business Week that Buckley had no qualifications for the job. Under New York law, a publisher acts recklessly if it should have had serious doubt as to the truth of a publication. James v. Gannett Co., Inc., 40 N.Y.2d 415, 386 N.Y.S.2d 871, 877, 353 N.E.2d 834, 840 (1976). In other words, it must be established that there are obvious reasons to doubt the veracity of the report. Id. The facts as provided by Business Week’s sources had inherent plausibility and the reporters had no obvious reason to doubt the veracity of the information. It was inherently plausible that Christopher Buckley was put into the position of manager, or “construction manager,” of the Dover by his father. Christopher Buckley was a young man in his 20’s, a recent college graduate with little to no relevant work experience. It is undisputed that he heard about the position at the Dover from his father. When at least two apparently knowledgeable sources clearly implied that Robert Buckley put his son into the position, the implication had inherent plausibility. The statement that Christopher Buckley had minimal qualifications also was inherently plausible. Again, Christopher Buckley was a young man with little work experience. When several sources attested to his lack of qualifications, their statements were inherently plausible. There were no obvious reasons to doubt the veracity of these statements. We conclude that no triable issue is raised as to Business Week’s gross irresponsibility. See Gaeta v. New York News, Inc., 477 N.Y.S.2d at 86, 465 N.E.2d at 806. In fact, we are not sure what else Business Week could have done to be more responsible. Business Week vigorously sought a response from Christopher Buckley prior to publication of the August, 1986 article. Buckley declined to respond. In addition, the magazine specifically asked Robert Buckley, in writing, about the Dover Hotel. Robert Buckley refused to discuss the matter. With respect to his defamation claim, Christopher Buckley has failed to come forward with evidence sufficient to raise a triable issue of fact as to whether Business Week satisfied its duty of care. Nor can Buckley prevail on his “false light” claim. See Arrington v. New York Times Company, 55 N.Y.2d 433, 449 N.Y.S.2d 941, 434 N.E.2d 1319 (1982), cert. denied, 459 U.S. 1146, 103 S.Ct. 787, 74 L.Ed.2d 994 (1983). Accordingly, Business Week’s motion for summary judgment will be granted. *1052 *1053 *1054 *1055 *1056 *1057 *1058 *1059 Footnotes [1] We note that prior to the Superior Court’s decision in Rutt, the Court of Appeals for the Third Circuit stated that Pennsylvania’s standard of liability for suits brought by private figure plaintiffs was unsettled. Steaks Unlimited, Inc. v. Deaner, 623 F.2d 264, 272 (3d Cir. 1980); see abo Rutt v. Bethlehems’ Globe Pub. Co., 335 Pa.Super. at 189, 484 A.2d at 85 (Beck, J., concurring and dissenting). In Matus v. Triangle Publications, Inc., 445 Pa. 384, 286 A.2d 357 (1971), cert. denied, 408 U.S. 930, 92 S.Ct. 2494, 33 L.Ed.2d 343 (1972), the Pennsylvania Supreme Court adopted as binding a rule announced by a plurality of the United States Supreme Court in Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971). Under this rule, any plaintiff must prove that defendants published false material with knowledge of its falsity or with reckless disregard of the truth. The United States Supreme Court subsequently held that private figure plaintiffs could recover upon a showing of mere negligence. Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). The Pennsylvania Supreme Court has not revisited the question of whether a private figure plaintiff must show more than mere negligence. The standard of fault under Pennsylvania law accordingly is not entirely settled. We will assume that Pennsylvania requires a lesser standard than New York. [2] We are not sure what the parties mean by the statement that "no genuine conflict of laws exists in applying the substantive laws of the State of New York ... under the choice of law rules of the Commonwealth of Pennsylvania.” If they mean that there is no conflict between how Pennsylvania and New York law would apply in the present case, the parties quite likely are wrong. As discussed above, Pennsylvania and New York require differing levels of fault on the part of the publisher. If there were no conflict between Pennsylvania and New York law, it would be irrelevant which state’s law we applied. [3] Buckley also must establish other matters not now at issue, such as publication.