New Jersey Severely Curtails Fair Report Privilege
February 3, 2009
A three-judge panel of a New Jersey appellate court recently held that that the fair report privilege does not extend to initial pleadings filed in judicial proceedings, severely narrowing the application of the privilege and threatening broader liability of the media in future libel suits.
In Salzano v. North Jersey Media Group, Inc., the plaintiff brought suit against several media defendants, including the publisher of a daily newspaper, The Record, for statements appearing in a news article reporting on a complaint filed in the U.S. Bankruptcy Court. The bankruptcy complaint was filed by the trustee for the bankruptcy estate of NorVergence, Inc., alleging that Thomas John Salzano, son of the former chief managing officer for NorVergence, “unlawfully diverted, converted and misappropriated” Norvergence’s funds “for his own personal benefit.”
The Record subsequently published an article reporting on the lawsuit and summarizing the contents of the complaint. It was titled: “Man accused of stealing $500,000 for high living.” It thereafter appeared on the newspaper’s Web site, as well as in two other local publications.
Salzano filed a seven count complaint for defamation, public disclosure of private facts and false light. The trial court granted the defense motion for dismissal. Salzano appealed.
On appeal, the newspaper argued that the statements were not false because it accurately reported on the bankruptcy complaint. The appellate court rejected this argument, holding that to rely on a truth defense, the newspaper would have to prove the statements in the complaint itself were in fact true.
The court then addressed the application of the fair report privilege. Under the privilege, the press ordinarily is immunized from libel claims if its report was a fair and accurate summary of an official proceeding, such as a court record.
Salzano challenged the trial court’s application of the privilege on the grounds that the article’s use of the term “stole” in the headline and lead paragraph was not an accurate or fair report of the bankruptcy complaint. The court determined that the claim that Salzano “stole” funds held the same “sting” as the actual content of the allegations raised by the trustee in the bankruptcy complaint, stating: “[I]f we were to apply the fair report privilege, we would conclude that defendant’s articles provided a fair and accurate description of the trustee’s allegations.”
Despite this finding, the appellate court then held that the media defendants were not entitled to assert the privilege. Relying on an earlier New Jersey Supreme Court decision, the appellate court held that the state followed the “initial pleading exception” to the fair report privilege. In other words, the fair report privilege does not apply to “[t]he publication ... of contents of preliminary pleadings such as a complaint or petition, before any judicial action has been taken ... .” The appellate court held that the reason for this exception was to prevent “the filing of lawsuits that would be promptly discontinued once the goal of public defamation or even extortion were achieved.” The bankruptcy complaint, filed the day before the article was first published, “was the initial pleading in the trustee’s claim against Salzano and, thus, constituted an act of ‘one party alone.’”
The newspaper, attempting to get around the appellate court’s ruling, argued that this initial pleading exception should not apply when the pleading is filed by a government official. Citing the McCarthy era as an example, the court explained that government officials were just as capable as private litigants to engage in the type of unscrupulous conduct that necessitated the exception.
The court did agree that Salzano was a limited purpose public figure and therefore required him to plead actual malice. However, it found that the trial court should have permitted the plaintiff an opportunity to amend the complaint so as to plead facts that, if proven, would support a finding of actual malice.
Finally, the appellate court found that Salzano’s claims arising from a sentence in the article asserting that he and his father “started a Kenilworth business last year called Charity Snack, which also went belly-up[,]” is capable of a defamatory meaning and therefore should proceed. In addition, because the statement reflects matters unrelated to the bankruptcy proceedings, it does not follow that he is similarly a limited purpose public figure with regard to this matter, and left it up to the trial court to determine.
The dismissal of the complaint was reversed and remanded, with instruction to permit Salzano the opportunity to amend his complaint.
On January 13, 2009, the Supreme Court of New Jersey issued a one-page order staying the appellate court’s judgment pending disposition of the petition for certification and appeal.
For more information, contact:
Judith F. Bonilla
202.419.2546
judith.bonilla@hklaw.com
toll free: 1.888.688.8500
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