Libel claims after Susuki: Costly road ahead?

Investigative Reporters and Editors, Inc. The IRE Journal, Jan/Feb 2004 by Smallman, David

LEGAL CORNER

As the global audience for news grows, so do the perceived consequences of reporting about business operations and consumer safety issues. With global markets and brands to protect, companies now turn to their law firms to counteract negative stories. Lawyers, hunting the hunters, engage in proactive tactics prior to publication. If that proves unavailing, litigation ensues against the bearers of bad tidings. Resulting lawsuits focus attention upon alleged misconduct or flaws in the investigatory process as much as the substance of the reporting itself. Not surprisingly, judicial decisions arising from these cases often reflect dismay at newsgathering practices and can expose journalists, media companies, and their insurers to new, sometimes significant financial risks. A good example is the ongoing battle between Suzuki Motors Corp. and Consumers Union. Not only has the case already resulted in millions of dollars in legal fees, it also threatens to increase the overall likelihood of future protracted libel actions.

The disputed article first appeared in Consumer Reports in 1988, which rated the Samurai - a sport utility vehicle manufactured by Suzuki - "Not Acceptable" based on its propensity to roll over during accident-avoidance tests. During the next 10 years, Consumers Union republished references to the 1988 Samurai rating on numerous occasions. This apparently provoked Suzuki to sue in 1996, alleging that Consumer Union's ongoing publication of the negative Samurai rating constituted product disparagement.

Consumers Union sought dismissal of Suzuki's claim before trial. It relied upon established Supreme Court precedent that requires dismissal when public figures can't offer clear and convincing evidence of actual malice and permits reviewing judges to evaluate the entire record. Historically this approach has worked well for the press. A recent study shows that between 1980 and 2000, media defendants succeeded in obtaining dismissal prior to trial of libel claims in nearly 80 percent of cases in which such relief was sought.

In November 2003, however, the U.S. Supreme Court refused to review an appellate court holding that media attorneys believe could alter the status quo and allow unworthy claims to proceed to trial, even though the evidence can't ultimately support a jury verdict under established First Amendment law. The legal issue involves whether a reviewing court can, in essence, independently examine and weigh the evidence presented by both sides in a pretrial motion. Courts are required to view the evidence in a light most favorable to the party that opposes the motion. If the undisputed facts show that a plaintiff has presented evidence from which a jury might return a verdict in its favor, a trial is required. In Suzuki, the appeals court held that the car company presented evidence of "rigged testing" from which a reasonable jury could find that Consumers Union had recklessly disregarded the truth and therefore acted with actual malice. One of the panel members disagreed. He argued the court should have considered, through independent examination of the evidence, that Consumers Union had disclosed the basis for its negative rating of the Samurai, and that even if Suzuki could show bias by the magazine, that alone does not supporting a finding of actual malice.

In a stinging dissent from denial of rehearing by the full 9th U.S. Circuit Court of Appeals, Judge Kozinski (writing for 11 other judges) observed: "[t]he practical effect ... is that our review for sufficiency at summary judgment is now governed by one standard, while our review after a jury verdict is governed by another standard. The cost," he continued, "for news organizations to defend themselves in resulting 'mock trials' will be enormous ... [and will] result in self-censorship" by news organizations. He went on to call the panel decision a "dangerous precedent," noting that if Consumers Union "can be forced to go to trial" under the facts alleged by Suzuki, "this is the death of consumer ratings." Perhaps. But there is also a lesson here in risk management. True, the law supposedly protects "slashing and one-sided" commentary. Still, read the decision and the briefs. See how Suzuki's lawyers were able to tell their own story of bias. Then, give some thought to how you approach your own projects. Would you be considered an intractable "bulldog" or a thorough watchdog?

David B. Smallman, The IRE Journal's contributing legal editor, is a partner in the law firm of Steinhart & Falconer LLP. He is First Amendment counsel to IRE and NICAR and a member of IRE's First Amendment taskforce.