DUN & BRADSTREET, INC. v. GREENMOSS BUILDERS
Dun and Bradstreet, a credit reporting agency, mistakenly reported to some of its subscribers that the construction contractor Greenmoss Builders had voluntarily filed for bankruptcy. The president of Greenmoss quickly learned about the erroneous report, requested Bradstreet to correct its error, and asked for the list of subscribers who received the report. Bradstreet refused to release the names on the list, but issued a correction to its five subscribers who received the original report. The correction stated that actually a former employee of Greenmoss had filed for bankruptcy and that Greenmoss Builders "continued in business as usual." Greenmoss was dissatisfied with the correction and again asked for the list. When Bradstreet refused a second time, Greenmoss filed suit against it for defamation in a Vermont state court. The court discovered that a 17-year-old high student interning for Bradstreet had caused the error and the jury awarded $350,000 to Greenmoss in compensatory and punitive damages. Bradstreet claimed that contrary to the Supreme Court's ruling in Gertz v. Robert Welch, the trial judge told the jury that it could award punitive damages even if Bradford did not make mistakes intentionally or out of recklessness. The court granted Bradstreet's motion for retrial, but the Vermont Supreme Court ruled that Gertz only applied to cases involving defamation by the media.
If a trial judge does not instruct the jury to only award punitive damages caused by intentional slander or reckless conduct, can a jury still award punitive damages to a plaintiff defamed by private speech?
Legal provision: Amendment 1: Speech, Press, and Assembly
Yes. Justice Lewis Powell authored the opinion for a 5-4 court. Although the trial court correctly perceived that the trial judge's instructions did not satisfy the requirements of Gertz, the Court held that Gertzdid not apply since the present case did not involve public speech. Instead the Court looked to apply the logic of Gertz to situations concerning private speech. The Court reasoned that laws regulating defamation suits aimed to "balance the State's interest in compensating private individuals for injury to their reputation against the First Amendment interest in protecting this type [Bradstreet's] of expression." Because the First Amendment offers less protection to private speech than to public speech, and especially less to speech "being solely motived by a desire for profit," damages caused by it can result in heavier penalties and broader conditions for convictions. Therefore states can allow the recovery of punitive damages in defamation cases involving private speech even when the perpetrator does not demonstrate "actual malice."
ORAL ARGUMENT OF GORDON LEE GARRETT, ESQ., ON BEHALF OF PETITIONER
Chief Justice Warren E. Burger: We will hear arguments next in Dun & Bradstreet against Greenmoss Builders, Incorporated.
Mr. Garrett, I think you may proceed when you're ready.
Gordon Lee Garrett: Mr. Chief Justice and may it please the Court:
The issue before you today is whether the First Amendment's limitations on presumed and punitive damages apply to non-media defendants in actions for defamation.
Petitioner Dun & Bradstreet has urged the Court to confirm that the First Amendment protects all speech against the award of presumed and punitive damages, absent actual malice.
Unidentified Justice: Mr. Garrett, would suggest that we would be ratifying what someone else has already said is correct.
Who is that someone else?
Gordon Lee Garrett: Fully recognizing, Your Honor, the footnotes in several opinions dealing with private defamation, we believe that this Court's opinion in Gertz versus Robert Welch leads to the inescapable conclusion that on the one hand the states have no substantial interest in awarding presumed and punitive damages against any speech when balanced against the First Amendment protections.
We believe that's why the word "confirm" is appropriate.
Unidentified Justice: I'm not sure I track what you mean when you say private defamation.
Gordon Lee Garrett: Your Honor, I agree with you.
I think in this Court's opinions "private defamation" has been used to signify the status of the plaintiff, from a public figure, to a public official, to a private figure.
But defamation by definition includes a publication to a third party.
I think Your Honor is correct that there really is no such thing as private defamation.
When I speak of private defamation in this case, I am really referring to a private party, not a public figure or a public official.
We believe a ruling which would--
Unidentified Justice: I thought perhaps you had it the other way around, that there is some concept that a private party does not share all the protections that all other persons share under the First Amendment.
Gordon Lee Garrett: --Absolutely not, Your Honor.
We believe that the decisions of this Court recognize that the First Amendment is a freedom which is enjoyed by all, and that this Court doesn't make distinctions based on the speaker or his message in connection with defamation cases.
We believe that a ruling recognizing that neither presumed nor punitive damages could be allowed, absent actual malice, would do two very important things.
First, it would recognize the very legitimate and important state interest in protecting the reputational interests of citizens by allowing private defamation plaintiffs to recover damages for actual injury.
Unidentified Justice: Well, that isn't the result of any limitation.
That's the result of the basic state general damage award.
Gordon Lee Garrett: I'm sorry, Justice Rehnquist?
Unidentified Justice: I thought you were saying the reasons why we should have this limitation on the states' authority are two, and one is the state ought to do what it isn't limited to do by this limitation.
Gordon Lee Garrett: No, Your Honor.
My point was that if you recognize the rule which we suggest in our case you would do two different things: One, you would recognize that the states have an interest in protecting the reputations of their citizens, and that interest is satisfied by awarding damages for actual injury.
The second point is that it would also recognize that, absent actual malice, the states have no interest in awarding either presumed or punitive damages, and that when balanced against the First Amendment freedoms it precludes such an award.
Let me emphasize that Dun & Bradstreet seeks only the same result that would be required in actions brought against newspapers, television, syndicated columnists.
Whatever the term "media" means, we believe that all citizens are entitled to that freedom under the First Amendment.
As I mentioned earlier, we believe that that ruling would flow naturally from the Court's holding in Gertz versus Robert Welch, which significantly recognized that the states have no interest in securing for defamation plaintiffs gratuitous awards of money damages far in excess of any actual injury.
We believe the highlights of the case before the Court recognize the very concerns which troubled this Court in Gertz: jury awards of presumed and punitive damages in wholly unpredictable amounts, bearing no relationship to the actual harm caused.
Unidentified Justice: Well, why are these damage awards so much different than awards in personal injury cases?
They're all going up nowadays.
Why shouldn't they go up against libel defendants, too?
Gordon Lee Garrett: Some of my colleagues at the libel bar would agree with you, Your Honor, that they are going up.
There is one fundamental difference.
In the case before the Court, where there was libel per se charged, the jury was instructed that damages are presumed.
Other torts do not allow a court to give presumed damages.
I should not say "allow".
States do not give damages for presumed injury.
Unidentified Justice: You have to prove the element of damage?
Gordon Lee Garrett: That's correct.
And in an ordinary negligence case, for example, one of the key elements is injury, and that is why.
Plus... and I tend to forget this, too... we are balancing defamation laws against a corresponding First Amendment right, and in ordinary negligence cases there is not even that corresponding First Amendment right except as due process would require.
Unidentified Justice: Your client isn't exactly in the position of the New York Times in New York Times against Sullivan, where the Court talks about the dangers of self-censorship and that sort of thing.
Really, no great social harm would be done if Dun & Bradstreet did a little self-censorship when it comes to defaming people's business reputations, would it?
Gordon Lee Garrett: I think, Your Honor, that it's important to focus on what chilling effect it would have on Dun & Bradstreet.
I do not mean to suggest to the Court that Dun & Bradstreet is going to go out of business.
In fact, it's been in business for a number of years.
But I think we must look, Your Honor, at two interests, one in the interest of the free flow of information generally, and secondly the interest in the recipients of Dun & Bradstreet reports to get prompt, accurate information.
And let me be specific.
If Dun & Bradstreet or any other non-media speaker, whatever that means, is subject to unlimited awards for presumed and punitive damages, I think two things will happen.
One, rather than publish something that cannot be triple checked and guaranteed, that information simply will not be published.
For example, Dun & Bradstreet will oftentimes include in its reports information about how a creditor thinks a particular corporation or proprietorship pays its bills.
Now, when that person that is the subject of the report calls Dun & Bradstreet and says, I don't agree with you, I was not slow 90 days, and then Dun & Bradstreet calls the creditor to check that information and they say, well, we believe that's correct, but it's in our files, we can't be sure, if Dun & Bradstreet is subject to unlimited awards, they simply won't publish that.
And it's important in the free flow of commercial information that the recipients of those reports know that.
Unidentified Justice: Know what?
Gordon Lee Garrett: Know the fact that someone is slow pay, know the fact--
Unidentified Justice: Even though the creditor wouldn't corroborate?
Gordon Lee Garrett: --What I'm saying is, Your Honor, he may have sent magnetic tapes to Dun & Bradstreet which are no longer in existence.
It may take three or four weeks to corroborate.
And it's important to get that information out.
Unidentified Justice: Well, but is that really more important than making sure someone in the Respondent's position here isn't false accused of having filed bankruptcy?
Gordon Lee Garrett: I agree, Your Honor, that it is very important that we recognize the reputational interest of our citizens.
And I think the Court struck the appropriate balance when in the Gertz case it says private defamation plaintiffs may be compensated for their actual injury.
In this case, plaintiffs defamed are entitled to compensation for actual injury.
Our problem with this case is that the jury was told that damages were presumed, period.
They need not prove actual damages.
And I agree with Your Honor that it's important--
Unidentified Justice: But the jury was also told that they had to find malice or lack of good faith to find any damages at all.
Gordon Lee Garrett: --That was based, Your Honor, on the Vermont qualified privilege, not on a constitutional standard.
Unidentified Justice: What difference does it make?
They were instructed.
That was the instruction.
Gordon Lee Garrett: Well, the instruction was faulty because it did not define actual malice in the sense of New York Times versus Sullivan.
It was faulty there.
Unidentified Justice: Well, that would be lesser.
That's the issue in the case.
Gordon Lee Garrett: I'm sorry, Justice?
Unidentified Justice: Nothing.
Well, that's part of the issue in the case, is what kind of malice you have to show to justify punitive damages.
Gordon Lee Garrett: And we believe that the decisions of this Court correctly recognize that that is constitutional malice in the sense of reckless disregard for the truth or knowledge of falsity.
Unidentified Justice: Was Dun & Bradstreet requested to make a retraction and did they do anything about it?
Gordon Lee Garrett: Yes, sir.
Your Honor, we believe that--
Unidentified Justice: Did they go the whole way?
Gordon Lee Garrett: --Oh, yes.
We believe the record reflects this: that promptly after the issuance of the special notice which caused... which set forth that Greenmoss Builders had filed a petition in bankruptcy, that when the President of Greenmoss called Dun & Bradstreet, on that very day they issued a correction in the form of a... excuse me, a retraction, in the form of a correction notice.
Unidentified Justice: Did Dun & Bradstreet let them know who were the recipients of the original false information?
Gordon Lee Garrett: At that time, Your Honor, I do not believe that Dun & Bradstreet did.
Unidentified Justice: They declined to give it to them.
Gordon Lee Garrett: That's correct, although they did send that information to the five recipients that did get the original special notice.
That is clear from the record.
Unidentified Justice: Well, do you think it would be improper for a jury to infer malice from their refusal to let Greenmoss know who received the original false report?
Gordon Lee Garrett: I don't believe so under this Court's constitutional standard dealing with focusing on the speaker's mind at the time of the publication.
This would go to something after the publication was done.
As I was indicating--
Unidentified Justice: Mr. Garrett, as long as you're interrupted, may I ask you another question?
Gordon Lee Garrett: --Yes, Your Honor.
Unidentified Justice: There are federal laws in the securities fields, such as Section 10(b)(5), that govern statements that are made in connection with the sale of securities.
Do you think there's a First Amendment right for people who are publishing information about securities that has to be considered every time we have a 10(b)(5) action?
Gordon Lee Garrett: Your Honor, I think that would require a different analysis than we have in the defamation area.
As I understand the question, we would be talking about individuals publishing matters who are subject to the control of the SEC, as being licensed, perhaps.
I think that in restraining those types of publications there is a much different focus.
In those cases, I believe the Court is focusing on the recipient of the report rather than the individual identified in the report in defamation cases.
And I think--
Unidentified Justice: Well, but you're asking us to recognize a First Amendment right here in connection with the Dun & Bradstreet type of publication, and I'm just wondering if that wouldn't lead us to having to recognize First Amendment rights in a 10(b)(5) situation or an ordinary fraud situation, anything?
Gordon Lee Garrett: --I do not believe so, Your Honor, because what we are talking here about is the sole issue of speech in context of defamation, not speech in the context of giving advisor's advice to the SEC.
And as I indicated, I believe a totally different analysis would apply there.
What we are asking the Court to recognize is that the First Amendment protects all speakers against these types of awards, and we do not believe that the state interest varies in securing gratuitous awards of money damages for plaintiffs depending on the speaker or the message.
Unidentified Justice: Mr. Garrett, may I ask you a question right there?
You seem to treat the case as though there are two kinds of speakers, media speakers and non-media speakers.
You're in the non-media category and you get all of that.
But yet, in the instructions to the jury you got a special instruction for the privilege for credit reporting agencies, which kind of suggests maybe you're in a special narrow category.
Up here your opponent argues, yes, you're in a narrow category and you don't get all the benefits of other non-media people.
Would you kind of comment on how much you think you're typical of non-media defendants generally?
You see, they also say this is commercial speech and it's not something distributed at large, that you don't need robust debate on whether somebody went into bankruptcy or not.
It's kind of a different, specialized area.
Gordon Lee Garrett: Your Honor, I must admit that I have a great deal of difficulty in deciding what is "media" and what is non-media.
As we indicate in our reply brief, many of the functions that Dun & Bradstreet does are very analogous to what a newspaper does.
We send reporters out to get information.
The information is edited and sent to clients or prepaid subscribers of Dun & Bradstreet.
The information relates to matters about commerce.
Not much different, we suggest, than what's in the Wall Street Journal every day or the business page of any newspaper.
Moreover, as I was reviewing the transcript of the case last night, I came across something which struck me, which I think directly goes to your question.
One of the recipients of the Dun & Bradstreet report was the manager of a local bank.
He testified that the bankruptcy notice, which was quickly corrected, had nothing to do with the relationship between the bank and Greenmoss.
But he also said: You know, I look at newspapers because I'm concerned about bankruptcies, and I use newspapers to inform me about that just as well as I do Dun & Bradstreet.
And I think that points out that many of the same functions done by Dun & Bradstreet are done by newspapers and vice versa.
And I believe the second aspect of your question dealt with the commercial speech doctrine.
Your Honor, whatever commercial speech is, it is not speech about commerce.
I don't think anyone would seriously contend that the statement Greenmoss is bankrupt, if it appeared on page 17 of the Vermont Daily Free Press, was commercial speech.
We were not advertising anything.
We were not promoting any of our products.
This simply is not commercial speech.
And we suggest blur is nothing more than an attempt to get around what we believe to be the central issue in the case, balancing the First Amendment rights of all speakers on the one hand against the states' limited interest in securing only awards of actual damages for private plaintiffs.
We believe that the facts of this case highlight the very concern the Court recognized in Gertz.
In July 1976 Dun & Bradstreet sent the special notice to five subscribers of Dun & Bradstreet.
None of these subscribers was a customer of Greenmoss, a local building concern.
It did state that Greenmoss had filed a petition in bankruptcy.
As I indicated earlier, a retraction in the form of a correction notice was issued promptly.
The complaint in this case sought damages of $7500 and $15,000 in punitive damages.
Yet, after a two-day trial the jury awarded $50,000 in compensatory damages and $300,000 in punitive damages.
Unidentified Justice: Do you suggest that there was no evidence?
Did you suggest that before you got here, that there was no evidence to support?
Gordon Lee Garrett: Your Honor, we believe that the evidence showed that plaintiff had not called any recipient of the report to prove that there was a causal connection between the issuance of the report, its receipt, and any damage by Greenmoss.
And in fact, there was no evidence introduced at this trial by anyone establishing a causal connection between the publication of the special notice and the company's alleged injury and damage.
What we believe this exorbitant verdict resulted from were jury instructions which gave the jury uncontrolled discretion to assess unlimited amounts of damages without regard to actual injury and without regard to Dun & Bradstreet's state of mind.
The jury was instructed that it was a case of libel per se, damage and loss were conclusively presumed from publication.
The jury, as I indicated previously, was not given the New York Times versus Sullivan actual malice charge and punitive damages in the amount of $300,000 were awarded.
Unidentified Justice: Well, they were told, though, that they had to find malice or absence of good faith, right?
Gordon Lee Garrett: Your Honor, my recollection on the state law privilege was that they were given several alternatives.
I believe we set that forth on pages 18 and 19 of the joint appendix.
It must show malice or lack of good faith on the part of the defendant.
If the defendant acted in bad faith toward the plaintiff in publishing the report, or that the defendant intended to injure the plaintiff in its business, or that it acted in a willful, wanton or reckless disregard to the interests of the plaintiff, the defendant has acted maliciously and the privilege is destroyed.
Unidentified Justice: They never defined "malice" in the New York Times standard or manner?
Gordon Lee Garrett: Let me be clear, Justice White.
They defined "malice" in the state law privilege, and then they also said, but you may award punitive damages if you find actual malice, and the court never defined "actual malice".
Unidentified Justice: In any way?
Gordon Lee Garrett: That is correct, that is correct.
Unidentified Justice: Was there a request for a definition?
Gordon Lee Garrett: I'm sorry?
Unidentified Justice: Was there a special request for a definition instruction?
Gordon Lee Garrett: I do not believe that there was a special request.
Unidentified Justice: Well, a request?
Gordon Lee Garrett: No, sir.
My recollection of what happened at the trial court was that defendant's counsel moved on directed verdict to dismiss all punitive damages because it had not met the actual actual malice standard of New York Times versus Sullivan.
Unidentified Justice: Well, Mr. Garrett, I gather the report was false.
Gordon Lee Garrett: That is correct.
Unidentified Justice: And what you felt you were entitled to was an instruction that your client was not to be liable unless it published the falsehood knowing it was false, right, or with reckless disregard to whether it was true or false?
Gordon Lee Garrett: No, Justice Brennan.
All we asked for was... our position in the case is that it is a private figure case and we should have the same protection as the John Birch Society had in the Gertz case, that you cannot award presumed or punitive damages absent the showing in New York Times.
But the plaintiff consistent--
Unidentified Justice: Well, I still don't understand.
What is the form of New York Times instruction you thought you were entitled to?
Gordon Lee Garrett: --We thought, Your Honor, that if the jury was going to be charged on giving punitive damages that they must be given the actual malice standard.
Unidentified Justice: Only in relation to the punitive damages?
Gordon Lee Garrett: That is correct, and to be awarded presumed damages.
But that the plaintiff, on the fault standard adopted by the courts in Vermont, should be entitled to receive--
Unidentified Justice: Well, on compensatory damages what type of instruction satisfied you?
Gordon Lee Garrett: --Are you talking about damages, Your Honor, or fault?
Unidentified Justice: Damages.
Gordon Lee Garrett: We would be satisfied with traditional state law damage charges proper in a libel case, but which did not allow the jury to award presumed damages.
Unidentified Justice: Well, but you wouldn't... well--
Gordon Lee Garrett: Absent a showing of actual malice.
Unidentified Justice: --Well, I'm still lost.
You said once or twice you thought that there should have been no damage award whatever, except under instructions that the plaintiff had to prove actual damage.
Well, that's Gertz, isn't it?
Gordon Lee Garrett: Yes.
We are arguing, Your Honor, that the Gertz standard for private plaintiffs should have been applied in this case to Dun & Bradstreet, and the jury should not have been allowed to award presumed damages.
Unidentified Justice: And you concede that as the case comes to us, at least you concede liability, you concede falsity and you concede fault?
Gordon Lee Garrett: I concede fault under whatever Vermont standard there is.
Unidentified Justice: Exactly.
And New York Times is not involved in that.
Gordon Lee Garrett: That is correct, Your Honor.
Unidentified Justice: Then it's just the question of damages, that you think you're entitled to the New York Times malice instruction if you're going to presume damages or give punitive damages.
Gordon Lee Garrett: That is absolutely correct.
As I emphasize again--
Unidentified Justice: Which is what Gertz said about media defendants.
At least that's what Gertz said about defendants, and it happens to be that a media was defendant in that case?
Gordon Lee Garrett: --In that case.
I will agree with that, because throughout that opinion we hear the phrase publishers, media.
It may be that the word "speakers" was even used.
Unidentified Justice: Of course, you are a publisher.
Gordon Lee Garrett: We are absolutely a publisher.
Unidentified Justice: And you are a media.
You are a medium.
Gordon Lee Garrett: We are a medium of communication, and like an individual in the street is a medium of communication and like the New York Times is a medium of communication.
Unidentified Justice: Mr. Garrett, in your colloquy with Justice Brennan and Justice White you stated what instructions you thought you were entitled to under your theory, constitutional theory of the case.
Did you request these instructions from the Superior Court in Vermont?
Gordon Lee Garrett: Let me rephrase that, Justice Rehnquist.
Unidentified Justice: Well, I don't want to rephrase my question.
Gordon Lee Garrett: Oh, no, I'm not.
I just want to turn it to I think give the proper answer to you.
I think our position is not what request that we would have requested, but objections to requests permitting presumed damages.
We objected to a presumed damage charge.
Unidentified Justice: Well, doesn't Vermont follow the rule that most other states follow, that if you want a particular instruction on a question you have to submit it to the court?
Gordon Lee Garrett: I don't think this was a case of wanting a presumed damage charge, but not wanting a presumed damage charge.
Our point is we don't think presumed damages should have been charged unless we met the New York Times versus Sullivan actual malice test.
Unidentified Justice: No, but did you submit a request for instruction?
Gordon Lee Garrett: Yes, Your Honor.
Unidentified Justice: And what was it you asked him to instruct?
Gordon Lee Garrett: In the lower... on the subject of New York Times?
Unidentified Justice: At the trial.
Gordon Lee Garrett: At the trial court level, my recollection is that the only charge requested by Dun & Bradstreet going to damages was that, if you're going to charge libel per se, please charge it this way.
There was no charge, Your Honor--
Unidentified Justice: "Please charge it this way"?
What's "this way"?
Gordon Lee Garrett: --The concern was that the trial court--
Unidentified Justice: What was the actual request?
Gordon Lee Garrett: --It is set forth, I believe, in the cert petition.
It is Petitioner's requested charge number three.
And I believe we were in a Hobson's choice.
We knew that the court was going to charge libel per se.
Our concern was, if you're going to charge it, which we did not agree with, that at least charge it this way.
And I believe that was the only charge that was given at the lower court level concerning damages, although prior to that the judge had been handed a copy of the Gertz decision in connection with plaintiff's request that he be allowed to introduce Dun & Bradstreet's financial statements.
Unidentified Justice: Are you challenging the $50,000 of actual damages found by the jury?
Gordon Lee Garrett: Yes, we are, Your Honor.
Unidentified Justice: On what grounds?
Gordon Lee Garrett: Two grounds.
First and foremost, that the jury charge permitted an award of presumed damage, that the plaintiff did not have to prove actual injury.
That we believe alone is sufficient to order a new trial.
In fact, we believe that's what happened in the Gertz case.
Unidentified Justice: Well, you have to go another step: and that they didn't prove damages.
Gordon Lee Garrett: That's correct.
Unidentified Justice: Don't you have to prove that, too?
Gordon Lee Garrett: Well, I don't believe so, because if the jury was allowed to presume damage I think it's very difficult to tell what in fact--
Unidentified Justice: If the evidence showed that the man called up a man and said, I hate this stinker and he just went into bankruptcy, I take it you'd give him damages without a charge?
Gordon Lee Garrett: --Could they give him damages?
Unidentified Justice: Yes.
Gordon Lee Garrett: Yes, I think that is correct, Your Honor.
Unidentified Justice: May I ask--
Gordon Lee Garrett: Yes, Mr. Justice.
Unidentified Justice: --Your brief refers to $50,000 compensatory damages.
That's a curious way to describe presumed damages.
Gordon Lee Garrett: That is because of the way it was described in the jury verdict, Your Honor.
We used that phrase because that's the exact phrase that the jury foreman signed dealing with compensatory and punitive.
Unidentified Justice: The question I'd like to ask you is, all of the New York Times and Gertz formulas all focus on the state of mind of the defendant at the time the defamation occurred, at the time here we know there was a falsehood.
Would you say that there's anything in the New York Times line of cases that would prevent the State of Vermont assessing punitive damages for your conduct after the libel occurred, when you refused to give the names of the five people who received it, which might have enabled him to go out and check it out?
Gordon Lee Garrett: If that action was the result of a totally independent tort and that action would sustain an award of presumed damages having nothing to do with the First Amendment, I would agree with Justice Stevens.
But this case was a case based on the First Amendment, based on defamation, and we don't believe that there is anything in the record which would permit the State of Vermont, consistent with the First Amendment--
Unidentified Justice: Well, their theory, as I understood it, their theory of malice emphasized, their arguments to the jury and the like, emphasized this conduct as a reason for making you pay a heavy damage award.
Gordon Lee Garrett: --That is correct, and we do not believe that the First Amendment would protect that... would allow that.
What we do say--
Unidentified Justice: Well, why wouldn't the First Amendment allow that?
Because I can see how that would be quite important to a businessman, to go around and straighten out his reputation with all these people.
Gordon Lee Garrett: --Because the First Amendment in the defamation area we believe focuses on the defendant's state of mind when the publication was made.
Unidentified Justice: But does that immunize?
If two weeks later he goes out and does a lot of other stuff that's related to it and is very harmful to the plaintiff, is that also immunized by the First Amendment?
Gordon Lee Garrett: Your Honor, my reading of the First Amendment cases simply would not permit that kind of--
Unidentified Justice: You see, I haven't seen a case quite like this before.
Gordon Lee Garrett: --I understand that.
But I don't believe that it is much different than other cases where in fact you don't know who's received it.
I mean, if the New York Times were sued, would it be a good defense at state law to suggest that we don't know the 500,000 people that got the daily copy of the New York Times?
Unidentified Justice: No, but here you did know and it was a handful and it could easily have been given and it would have made a lot of difference, I suppose, to the plaintiff.
Gordon Lee Garrett: And as I understand it, Your Honor, the client has changed his policy in that regard, that in fact it is now given out.
Let me suggest one--
Unidentified Justice: So maybe punitive damages do accomplish something once in a while.
Gordon Lee Garrett: --Your Honor, I would suggest not in this case.
One quick point on what happened in connection with the request.
I believe the record reflects that one request was made for disclosure at the time of the initial contact between plaintiff and defendant's office.
We said we didn't have it at that time and no further request was made.
Unidentified Justice: Do you say that a juror sitting in the box couldn't say to himself and to the other jurors, their attitude after the original defamation, afterward, relates back and shows that the state of mind all the way through was one of malice?
Gordon Lee Garrett: I do not believe, Your Honor, that that would be consistent with this Court's teachings in St. Amant versus Thompson.
You look at the subjective actual malice of the speaker at the time.
Thank you very much.
Chief Justice Warren E. Burger: Mr. Heilmann.
ORAL ARGUMENT OF THOMAS F. HEILMANN, ESQ. ON BEHALF RESPONDENT
Thomas F. Heilmann: Mr. Chief Justice and may it please the Court:
It was not until 2:30 this afternoon that we heard for the first time that Dun & Bradstreet claims that it is a media defendant.
They never suggested that in this case before.
So, in response to your question, this case came to the Court as a non-media defendant case, and they never asserted a media defendant position below.
The questions that you asked about the facts I think raise some serious questions about just what went on here and I think show why the Gertz formula should not be used in this type of litigation.
You asked the question, did they retract the whole way?
Well, that was a major part of the trial in this case.
Contrary to what's been said to you, in this case what happened was, after our client found out about the false report of bankruptcy they asked to find out who the report was submitted to so that they could engage in what Gertz says is the first remedy of a defamed plaintiff, self-help.
And they couldn't get the answers to those very simple questions until the lawsuit was filed and until discovery was submitted.
So Greenmoss found itself in the position of knowing that this information was being disseminated, but not knowing to whom and not knowing the breadth of the dissemination.
And as the trial indicated, as the president of the company testified at length, he had a bizarre problem.
Every customer that he visited with, he would not know whether that customer had heard about the bankruptcy.
So he was forced into the awkward position of saying: Do you know that we're not bankrupt?
That's a very extraordinary position for a businessman to find himself in.
So I think it is a whole course of conduct.
That's the way this case was tried.
And with respect to whether Gertz was raised at the trial court level, we submitted some extensive information to the court in our brief about the fact that Gertz was not properly raised.
In this case, the common law privilege was an open question in Vermont and that appeared to be all that Dun & Bradstreet wanted.
They only suggested Gertz as, in their words, "a second rationale" behind the protection that common law extended.
Unidentified Justice: Didn't the Vermont Supreme Court address this issue?
Thomas F. Heilmann: They addressed it.
We pointed out to the court--
Unidentified Justice: Whether or not it was raised in the trial court?
Thomas F. Heilmann: --That's right.
But it poses one of the difficulties of getting a clean record to really answer the questions here.
Unidentified Justice: Well, I know, but the Vermont court decided it.
Thomas F. Heilmann: I understand that, Your Honor.
Unidentified Justice: They decided the issue and that's what the argument is here, is whether the Vermont court was right or not--
Thomas F. Heilmann: I understand that.
Unidentified Justice: --as to whether Gertz applies.
Thomas F. Heilmann: In this case, we don't think that the issue is properly framed.
What we really think this case is about is credit reports, and we think that these credit reports, which involve only statements of fact, which are made exclusively in the business and financial arena, come within the definition and description of what this Court has called commercial speech.
This case does not present the difficult questions that other commercial speech cases have presented, because we don't have speech, commercial or otherwise, on public issues, and we don't have speech that involves the total suppression in advance of speech.
I think common sense is the first test that you can utilize in looking at credit reports as commercial speech, and common sense has led virtually all of the lower federal courts... in fact, in one opinion written by Mr. Justice Clark... to say that commercial credit reports, in fact the same reports that are in this case and the exact same defendant, are commercial speech.
Unidentified Justice: You're suggesting that this kind of speech can certainly libel, but you think the First Amendment is just irrelevant, that this kind of speech just doesn't deserve First Amendment protection?
Thomas F. Heilmann: I'm saying it's commercial speech and you use--
Unidentified Justice: Yes, but you're saying that the First Amendment doesn't protect it.
Thomas F. Heilmann: --Because under the commercial speech doctrine the first test is truth or falsity or misleading, and then in this case it clearly is false and misleading.
There is no such tort as the tort of outrageous commercial speech.
Commecial speech gets to the Court in various contexts.
In one case it was the suspension of a lawyer to practice law, the Arala case and the Primus case, that raised the commercial speech question.
In the last case that the Court handled, the Bolger case, it was the circulation of family planning information that raised commercial speech.
As I've indicated, Mr. Justice Clark, writing for the Eighth Circuit in the Millstone-O'Hanlan case, a commercial credit reporting case, said this is commercial speech.
In fact, even in the case that Dun & Bradstreet relies upon, Mr. Justice Douglas' dissent from Grove versus Dun & Bradstreet's denial of certiorari, Mr. Justice Douglas says this is commercial speech.
The key here... I think the two qualities that make this commercial speech is that--
Unidentified Justice: Yes, but did he draw a distinction between commercial speech and other speech when he wrote that dissent?
Thomas F. Heilmann: --He wanted to see what level of constitutional protection, if any, commercial speech should receive.
Unidentified Justice: Well, wasn't the gist of his dissent, however, that there should be no distinction?
Thomas F. Heilmann: I think that's what his position was, but he wanted the Court as a group of nine Justices to handle that question.
Unidentified Justice: Was he right?
Thomas F. Heilmann: I don't think so.
I think in this case the qualities that make commercial speech commercial speech are the fact that it's fact-based information combined with information solely about business.
Unidentified Justice: Well, certainly Valentine against Christianson has been eroded substantially, hasn't it?
Thomas F. Heilmann: That's right, Your Honor.
And we don't mean to suggest--
Unidentified Justice: Maybe he was right.
Thomas F. Heilmann: --Well, we don't mean to suggest that just because speech is commercial speech that it does not have any constitutional protection.
In the Bolger case, a substantial degree of constitutional protection is afforded to commercial speech.
But the way to handle issues like this is to call it commercial speech.
Unidentified Justice: Well, did I understand you earlier to say that what this poses is commercial speech, that's all, therefore it has no First Amendment effects?
Thomas F. Heilmann: That's right.
Unidentified Justice: And that's your position, is it?
Thomas F. Heilmann: That's right.
If this isn't commercial speech and the large body of precedent in the lower courts are wrong, then I think the message that will be delivered by the Greenmoss case is that commercial speech doctrine applies only to commercial advertising and activity like that.
Unidentified Justice: Well what's wrong with that?
Thomas F. Heilmann: Well, if that's so I question whether the Government will lose its power to regulate, by content or otherwise, a whole gamut of "commercial speech".
In other words, will a consumer credit agency say that the rules under the Consumer Credit Reporting Act are unenforceable because of the free speech clause?
Will licensing of doctors and lawyers raise full freedom of speech?
I suggest that companies like Dun & Bradstreet will come in in those contexts, Your Honor, and say, all we want... and I'm quoting from the Dun & Bradstreet brief here...
"is the limited protection that you gave people in Gertz. "
Unidentified Justice: Well, in view of the development of the law about commercial speech and the movement toward limiting it to advertising, would it make sense to try to draw a distinction between public speech and private speech instead?
Thomas F. Heilmann: That may be a possibility, Your Honor.
I think in this case the real issue... I think it is commercial speech.
But the real issue when everything is moved away is, do presumed and punitive damages unreasonably chill this type of speech?
Without necessarily getting involved in--
Unidentified Justice: Did you present this argument to the Vermont court?
Thomas F. Heilmann: --Yes, we did.
We argued that this was commercial speech before the Vermont Supreme Court.
Unidentified Justice: Well, I know you argued it was commercial speech.
But did you go on and argue this is commercial speech, it deserves no protection because it's false?
Thomas F. Heilmann: That's right.
That's what we said.
Unidentified Justice: And the way they responded, that isn't the issue they responded to?
Thomas F. Heilmann: No, the court didn't address that issue.
Unidentified Justice: They responded to the argument about the applicability of Gertz.
Thomas F. Heilmann: That's right, Your Honor.
Unidentified Justice: So you're presenting this as an alternate grounds for affirmance?
Thomas F. Heilmann: Yes.
Even apart from the commercial speech question in this case, I think the type of speech that's involved raises a very fundamental reason why the Gertz doctrine is inapplicable.
To me there has always been something hollow about what Dun & Bradstreet is asking the Court to do here, and I think when all the rhetoric is removed what Dun & Bradstreet is asking the Court to do is to apply New York Times and Gertz to protections for concededly false statements of fact, which statements stand totally and exclusively by themselves.
The facts here are not made in support of or associated with any thesis.
They are not made to advance any idea.
This is a different type of situation than the Court had in Gertz.
But in Gertz you said that a false fact without more has absolutely no constitutional protection.
Well, here the entire conceptual structure of these credit reports is only grounded in fact.
Their usefulness is directly and exclusively tied to their accuracy.
Unidentified Justice: Of course, you could say the same thing about the ad in the New York Times case, couldn't you?
Thomas F. Heilmann: No, I don't think you can, Your Honor, because there is a message there.
There is no message here.
The efficacy and the total intrinsic value of this speech depends only on its factual nature.
Unidentified Justice: Well, but Mr. Heilmann, supposing they had a credit rating and said, we now give this company a credit rating of C instead of B, reason, bankruptcy filed.
So that you then have a message and then a false fact in support of it.
Thomas F. Heilmann: Well, I have trouble with--
Unidentified Justice: Some of these things are--
Thomas F. Heilmann: --I have a great deal of trouble determining what, if any, that message would be.
There's really no thesis that a company like Dun & Bradstreet--
Unidentified Justice: --The message would be his credit isn't too good any more.
Thomas F. Heilmann: --But I don't think that that's the thesis we're talking about.
I think there is really no thesis in that type of analysis.
Unidentified Justice: I know in this particular report it's kind of a one-fact special report.
But it seems to me very often these reports have a lot of facts in them, and you might have one of them false and a lot of others that are not false, and the conclusion that's doubtful.
Thomas F. Heilmann: To follow up what you said earlier, this may be a very rare situation.
This may be the only type of case dealing with just credit reports about facts, that you have to analyze what was said in Gertz and the other cases about facts standing alone.
Unidentified Justice: Well, yes, but if you're right about your commercial speech ground you never get to all this other argument.
Thomas F. Heilmann: That's correct, Your Honor.
Unidentified Justice: Because I guess you rely on the first requirement for constitutional protection that the Court suggested in Central Hudson.
Thomas F. Heilmann: We do, and it's never been--
Unidentified Justice: You say that there's no constitutional objection to the suppression of commercial messages that do not accurately inform the public.
Thomas F. Heilmann: --That's right.
Unidentified Justice: And if it's... you say that if it's conceded this report was false, they have conceded themselves out of First Amendment protection.
Thomas F. Heilmann: Yes, because--
Unidentified Justice: Because this is commercial speech.
Thomas F. Heilmann: --Not only because it's commercial speech.
Unidentified Justice: Well, if we agree with that isn't that the end of the case?
Thomas F. Heilmann: I think that is the end of the case.
Unidentified Justice: Do you agree with Mr. Garrett that there's no evidence at all about damages?
Thomas F. Heilmann: No, I don't.
My name is Heilmann, Your Honor.
Mr. Garrett argued for Dun & Bradstreet.
I don't agree that there's no evidence of damages at all.
Unidentified Justice: Well, what evidence?
Would you mind giving me, not too much, but just--
Thomas F. Heilmann: --I'll give you just a thumbnail sketch of what happened.
What happened in this case, Your Honor, was that the bank that our client had done business with for many years received the bankruptcy report and, in close proximate time thereafter, not only told our client to take a particular loan request that was on the table elsewhere, but to take the entire banking--
Unidentified Justice: --How big was the loan?
Thomas F. Heilmann: --The loan I think was for $20,000.
We had about $96,000 in other loans with that bank.
And that bank received the Dun & Bradstreet report and shortly thereafter asked our client to go elsewhere.
We went elsewhere.
Unidentified Justice: And that was put in evidence?
Thomas F. Heilmann: That was put in evidence, Your Honor.
Additionally, what I'd like to point out about the compensatory damage award here is that I don't think presumed damages have any application at all on what I call the compensatory damage award.
Number one, there were no compensatory damages in fact awarded because what the trial court said was that, assuming there's a high enough level of culpability... that is, using that state common law test for commercial credit reporting agencies, Greenmoss had to prove culpability far higher than negligence to receive any verdict.
If we didn't defeat the privilege, we would not receive anything.
But if we did defeat the privilege... and we did that in this case... the damages under any presumption were, as the trial court said, one dollar.
The trial court said that substantial damages were not permitted unless Greenmoss proved they in fact occurred; and in the very next sentence said compensation had to be specifically related to damages that were actually caused by D&B.
Further, compensatory damages here were only lost profits and and out of pocket losses.
Now, the court allowed the jury to assess pre-judgment interest at Vermont's statutory rates on a per annum basis from the date of injury to the date of verdict.
Dun & Bradstreet in its brief says that the most actual damages we showed was $36,000.
When you calculate the interest on $36,000 at the rates the trial court allowed the jury to do, you come up with a figure of $50,022.30.
I think that is exactly what the compensatory damage award did in this case.
Secondly, Dun & Bradstreet points out that $36,000 is only one year of lost profits, ignoring the evidence at transcript 99 and 104 that an additional $42,000 of lost profits was incurred in the next year thereafter.
Curiously, the aspect of--
Unidentified Justice: Excuse me.
Do you think that Gertz applies at all in this?
Thomas F. Heilmann: --No, I don't.
Unidentified Justice: So that you wouldn't need to prove fault, either?
Thomas F. Heilmann: No, we wouldn't have to prove fault.
Unidentified Justice: You just go under traditional libel law?
Thomas F. Heilmann: That's right.
Unidentified Justice: Once you've proved falsity and the kind of libel that justifies damages, then the jury is free to presume?
Thomas F. Heilmann: That's right.
But I'd like to focus, Your Honor, on the state's interest in presumed damage, and I'd like to move a little bit differently than this Court did in Gertz.
I would submit that presumed damages, especially in cases like this where you have defamation of a corporation, it really doesn't involve the plaintiff proving the quantum of damages that makes presumed damages so necessary to the states for preservation of reputation.
Quite to the contrary, I suggest to the Court that it's making the causal link between demonstrated injury and the defendant's acts that really involves the states' interests.
If a plaintiff comes into court, as did Elmer Gertz, and says, I've been defamed, but says nothing else about suffering damages... Justice Stevens, your opinion in the Court of Appeals case in the Gertz case points that out; there was no evidence of actual damage in Gertz... I would suggest that a jury will not hand out and a judge will not condone a hefty verdict under a charge like the charge in the Greenmoss case.
It's the causality link in the presumption that has the important state function.
It's the tracing and linking between the loss and the wrongful conduct that creates the problem for the defamed person.
Unidentified Justice: Mr. Heilmann, were the instructions given given at your request?
Thomas F. Heilmann: Yes, Your Honor... well, they were Dun & Bradstreet's instructions almost verbatim.
But we did ask the court to charge under traditional common law libel.
The trial court used virtually all of Dun & Bradstreet's requests.
Unidentified Justice: One other point.
The argument was made here about Dun & Bradstreet had a lot of similar points with a newspaper.
Thomas F. Heilmann: I don't think they have a similarity with the newspapers, Your Honor.
Unidentified Justice: Was it argued below?
Thomas F. Heilmann: Yes, it was, in the Vermont Supreme Court.
We never got to the question of whether Gertz should apply at the trial court level.
They just didn't raise it until after the verdict.
But getting back to where the legitimate state function comes in here--
Unidentified Justice: May I ask one other question about the instructions, before we lose it.
The instruction on the qualified privilege of a credit reporting agency that was given, was that given at your opponent's request over your objection?
Thomas F. Heilmann: --Yes.
The court adopted their request verbatim... no, they didn't request it verbatim.
The trial court I believe went to the Vermont Supreme Court law library during the lunch recess and got that charge.
It wasn't really what Dun & Bradstreet had asked for.
Unidentified Justice: But you objected to that charge?
Thomas F. Heilmann: Oh, yes.
Unidentified Justice: Did not Gertz say that included within actual damages could be injury to reputation?
Thomas F. Heilmann: That's right.
Unidentified Justice: Did you ask for an instruction along those lines?
Thomas F. Heilmann: No, we didn't, Your Honor, and the reason we didn't do that is because we're dealing with defamation of a corporation, and I felt as a trial strategy it was a difficult thing to suggest to a jury that a corporation can be humiliated, and so I didn't ask for--
Unidentified Justice: You may lose your reputation with respect to paying your debts.
Thomas F. Heilmann: --You certainly can.
But I thought with a Vermont jury it was better to say to them that you lose your profits and you lose your out of pocket damages.
Unidentified Justice: You mean they're that hard-headed in Vermont?
Thomas F. Heilmann: Well, sometimes they're cheap, Your Honor.
But the presumption that allows substantial damages without even an offer of evidence of actual injury, which is what you had in Gertz, is one thing.
But here the legitimate state function of presumed damages is that the intuition of common experience as it has found its way in the common law through centuries of defamation precedent counseled that it's certain that the harm proved is causally related to the defamation when those two things coexist in time.
And I think that's really the function that the states have here.
Bear in mind what Dun & Bradstreet is asking this Court to do is to say that the states' interests don't matter, and the effect of this case if Dun & Bradstreet is right will be without question to totally constitutionalize the state law of defamation.
Now, I think there is another role or another state interest that states have in defamation, and that is the interest, as the Vermont Supreme Court pointed out, in the difference between an individual who lives in a world that is increasingly dominated by large commercial entities, may well be less able to bear the burden of the consequences of the falsehood than the business that sells the report.
I think that's another legitimate state interest involved here.
Finally, Vermont, different than Gertz and in fact different than many states, has a specific constitutional provision that protects the reputation of its citizenry.
Our constitution specifically says that the character of our citizens has special protection.
So I think the key to this case here is to say, does a constitutional interest apply?
We say the only way the constitutional interest can apply is if there is a real valid threat of self-censorship.
I don't think there's a valid threat of self-censorship.
Unidentified Justice: May I ask one question.
I think you're getting to your end.
Take your opponent's hypothetical of a newspaper of general circulation that has a column on the back: Recent legal developments, subhead bankruptcies, and they mistakenly say your company went into bankruptcy, the same facts.
What happens with that?
Thomas F. Heilmann: Well, the issue again is self-censorship.
Is the newspaper going to say that they won't publish this fact... and we're not talking about your analysis of Greenmoss' business.
We're talking about this fact, Greenmoss is bankrupt.
If the newspaper is going to say they won't publish the fact because of presumed damages, and if they won't publish that for that reason, for the reason of presumed and punitive damages, then the news will just be pablum, and that's the fear that the Court has, obviously.
Unidentified Justice: Let me be sure I understand your answer.
You're saying a different rule would apply to that case than to this case?
Thomas F. Heilmann: Yes.
I'm getting into the answer that I think is involved here.
The issue is chilling of speech.
I don't think a company like Dun & Bradstreet is going to be chilled, because, for one thing, the news media very rarely simply publishes a fact.
They publish the fact in connection with a thesis.
Unidentified Justice: But in Justice Stevens' question I thought he did give you a hypothetical where the newspaper published a fact somewhat separately from its editorial and news coverage.
And I think his question was what should be the rule in that case as to the newspaper.
Thomas F. Heilmann: Well, I'm not really addressing what should happen in the situation with the newspaper.
I don't think you can take the result--
Unidentified Justice: If you won't answer it for him, will you answer it for me?
Thomas F. Heilmann: --Yes, I will, Your Honor.
I think under Gertz if there was negligence, which in this case there is obviously negligence, the plaintiff would be entitled to the Gertz... the plaintiff would be limited by the Gertz rule.
But I really think we have a different type of defendant here.
Gertz talks about broad rules of application, and you don't have to look at every particular possible exception.
But I would say one other thing, hopefully to more fully answer your question, Your Honor, and that is in this case if the exact same facts occurred we may have the same result.
If the newspaper did exactly what Dun & Bradstreet did, by sending a 15 year old high school kid with no training up to the federal court in Burlington for $200 a year and never told her what she was supposed to do up there, never edited the information, never followed its own rules that it had on the books for prepublication verification--
Unidentified Justice: Well, you're just arguing you'll win under the actual malice standard, so you can go ahead and retry the case and you'll still win.
That's what you're really saying now, I think.
Thomas F. Heilmann: --Well, I think I'm just saying in those hypotheticals what Dun & Bradstreet is trying to tell you is that the newspaper would not have the same result, and I disagree with that.
Unidentified Justice: Well, the question is really should the same standard apply to the two papers, and I think you say no.
Thomas F. Heilmann: I do say no, Your Honor.
Unidentified Justice: You've answered it.
Do you think you would give a $75,000 punitive damage against a local newspaper?
Thomas F. Heilmann: I don't know what a jury would do, Your Honor.
I think when you're dealing with the type of instructions that we had in this case, the instructions were very carefully drafted to deal with the question of the defamation and the punitive damage award, and they didn't focus on the speech.
They focused on the entire gamut of conduct.
It wasn't really looking at the speaker and saying that speech is bad and we're going to punish it by way of punitive damages.
It really looked at the entire course of conduct under traditional common law rules.
One thing that I'd like to point out finally is that, let's suppose, to follow up on your point, Your Honor, that Dun & Bradstreet got the same protection that Robert Welch, Incorporated, got.
Under this trial what would happen is that constitutional protection for actual damages would apply because of Gertz, and then the constitutional damages for punitive damages under New York Times would apply.
But in addition to that, not only would the plaintiff, but Dun & Bradstreet would look for the common law punitive damage charge just to get to the question of any compensatory damage, and then common law malice to think about and focus upon the other activity that this defendant engaged in.
So you would have four separate things for the jury to handle.
I think that would just hopelessly confuse a jury.
There's been a lot of commentary about the difficulty between actual malice and common law malice and constitutional malice, and essentially what they're asking the Court to do is to have a trial where there are those four instructions.
Unidentified Justice: Of course, the net result if you go back to the Gertz case is you may end up with more money, even after a second trial.
Thomas F. Heilmann: Well, I understand that that is what happened with Mr. Gertz, Your Honor.
But the problem in Mr. Gertz' case is he didn't come in and show any--
Unidentified Justice: It could happen here, too, because there's no North Carolina against Pierce problem, I guess, in this area of the law.
Thomas F. Heilmann: --I think the difficulty that this case presents really shows why Gertz was formulated just to handle media defendants.
This defendant has never claimed until this afternoon that it's a media defendant.
The case proceeded to the Vermont Supreme Court and the certiorari petition was granted solely based on non-media status.
And I think the difficulties here with Gertz show that the decision was very carefully framed in both rationale, philosophy, and language to deal with a specific type of defendant.
My final point is this.
I mentioned earlier that if this case is extended, if Gertz is extended to this type of a defendant, what we will have is the total constitutionalization of the state laws of libel.
And I think we really have to ask ourselves whether that's appropriate policy.
Now, we have made accommodations as a society to the reputation of our citizens for the benefit of strong First Amendment protections.
But if Gertz applies here, I'd suggest to the Court it will mean that reputation is so cheap and so unvalued in our society that it can be destroyed by the local gossip monger or by a huge company that pays an untrained high schooler $200 a year to perform a task she was never trained to do.
If private reputation can be so easily damaged, then we have to ask the other question: What benefit is there to a good reputation?
I think the Court will have to question what such a result will do to the positive normative benefits that reputation contributes to our society, and at the same time consider what it will do to the goal that the framers had in mind for the First Amendment if over-the-fence rumor and idle gossip at the water cooler receives constitutional protection.
Every constitutional... every libel case in the country will have the Gertz standard if Dun & Bradstreet is correct in this case.
I think enough speech has been protected under the New York Times formula where you look at the plaintiff and enough speech has been protected when you look at media defendants.
I don't think there's a need to extend Gertz any further.
Chief Justice Warren E. Burger: Thank you, gentlemen.
The case is submitted.
Unidentified Justice: The Honorable Court is now adjourned until Monday next at 10:00.
ORAL ARGUMENT OF GORDON LEE GARRETT, JR., ESQ., ON BEHALF OF THE PETITIONER
Chief Justice Warren E. Burger: We will hear arguments first this morning in Dun and Bradstreet against Greenmoss Builders.
Mr. Garrett, you may proceed whenever you are ready.
Gordon Lee Garrett Jr: Mr. Chief Justice, and may it please the Court, this is a case about damages for defamation.
The question presented is one that ten years ago this Court in Gertz versus Robert Welch, Inc., sought to answer.
What is the proper accommodation between the law of defamation and the freedoms of speech and press protected by the First Amendment?
The Gertz decision recognized two very important things.
It recognized that the states have a substantial interest in protecting the reputations of its citizens.
Also, it recognized that absent actual malice, the states have no interest in awarding either presumed or punitive damages and that the First Amendment precludes such awards.
In its holding, it accommodated these two competing interests.
It held that a private defamation plaintiff who establishes liability under a less demanding standard, that the New York Times test of actual malice may only recover damages which compensate him for actual injury.
It is these constitutional rules prohibiting awards of proved, presumed, and punitive damages absent calculated falsehood that Petitioner Dun and Bradstreet asks this Court to apply.
We believe that Gertz properly considered the tension between First Amendment freedoms on the one hand and reputational interest on the other.
Neither Greenmoss Builders nor the Vermont Supreme Court advanced any reason why the states have a greater interest in awarding presumed and punitive damages against a non-media defendant who speaks about business matters or matters about the arts than a media speaker.
Unidentified Justice: I wonder if you would tell me your definition of the difference between media and non-media.
I can understand it clearly if a private individual writes a letter and makes the statement.
That person as an individual is probably non-media.
But what is your definition of non-media generally?
Gordon Lee Garrett Jr: Your Honor, I think that is the rub in this case when it comes to deciding constitutional limitations on presumed and punitive damages.
Obviously, the media could be defined as one who uses a medium to communicate information, and Dun and Bradstreet, much like a newspaper, does that.
We hire reporters to obtain information which our subscribers will want.
Unidentified Justice: Now, we have in Washington I don't know how many, but I suppose it must be a great number of letters, like The Kipplinger Letter, that goes out every week or periodically, sometimes on a broad range of subjects, sometimes on a limited subject like labor law.
Is that media or non-media?
Gordon Lee Garrett Jr: It seems to me, Your Honor, while The Kipplinger Letter, like Dun and Bradstreet, may not be considered the traditional media, it is certainly media in that it is an organization that communicates information to its readers which have a reason to know that.
Unidentified Justice: Is that issue before us, counsel?
You didn't bring that issue up here.
Gordon Lee Garrett Jr: The media/non-media issue?
That is the very basis that the Vermont Supreme Court ruled against Dun and Bradstreet in this case.
Unidentified Justice: I know, but they held that you were non-media.
Gordon Lee Garrett Jr: They held... they said--
Unidentified Justice: Did you challenge that in your petition for certiorari?
Gordon Lee Garrett Jr: --Oh, absolutely, Your Honor.
Well, we did not... we have never taken the position, Your Honor, that we were the traditional media.
Unidentified Justice: Are you taking the position that you are media?
Gordon Lee Garrett Jr: We certainly take the position that we are media for the application of the Gertz rules on presumed and punitive damages.
Unidentified Justice: Well, of course, your first question presented in certiorari is, do the First and Fourteenth Amendments to the Constitution permit private plaintiffs to recover presumed compensatory damages or generally for libel against a non-media defendant?
Gordon Lee Garrett Jr: That is correct, Your Honor.
As I said, we have never taken the position that Dun and Bradstreet was part of the traditional media like the New York Times or [= CBS], but we certainly are media in the sense that we communicate information to our subscribers.
Unidentified Justice: Yes, but the way you present the case to us is that... let's assume that this is a non-media defendant, and then does Gertz apply to non-media defendants.
That is the question you put to us.
Gordon Lee Garrett Jr: That is correct--
Unidentified Justice: So we have to get into whether Dun and Bradstreet is or isn't a media defendant?
Gordon Lee Garrett Jr: --Your Honor, I think it is--
Unidentified Justice: You say we don't, really, in this question.
Gordon Lee Garrett Jr: --Well, I think it is quite correct that the constitutional prohibitions against presumed and punitive damages don't depend on the nature of the speaker or the subject matter of his speech.
Unidentified Justice: Right.
I thought you thought in order to win your case you would have to convince us that Gertz applies to non-media defendants generally, and I think that is your whole argument, too, in your brief.
Gordon Lee Garrett Jr: I think certainly that that would win the case for us, Your Honor.
Unidentified Justice: How do we reach that question if we don't know what a non-media defendant is?
Gordon Lee Garrett Jr: Well, I think that is the very problem in the case, Your Honor, that it would force the Court to go back to basically the Rosenbloom ad hoc test to make determinations on who is and who is not the media, and I think the most important thing is that the rationale for the Gertz opinion simply does not depend on those kinds of distinctions.
The states have no interest in awarding presumed and punitive damages absent actual malice.
Unidentified Justice: Against anyone.
Gordon Lee Garrett Jr: Against anyone.
Unidentified Justice: That is your argument, I think.
Gordon Lee Garrett Jr: That is our argument, but I would suggest to the Court that if the Court is concerned that a media/non-media distinction should be made in certain contexts, this is not the one to make it in.
There may be areas where that would be appropriate, but not in connection with the awards of presumed and punitive damages.
Unidentified Justice: But I thought your position was and is that it makes no difference who the defendant may be.
If you sued me for libel, for example, the rule would be the same in your view.
Gordon Lee Garrett Jr: That is correct.
We do not believe that an individual could be awarded presumed damages, because that simply is not proper for the states.
Unidentified Justice: Yes, right, and while we are getting at definitions, how do you define the difference between presumed and punitive damages?
Gordon Lee Garrett Jr: Your Honor, in traditional libel law, presumed damages really took the place of compensatory or actual damages.
Punitive damages on the other hand were more of a punitive punishment measure.
The problem in the cases, however, Your Honor, is that they are both used selectively to punish unpopular speakers.
I think it is very difficult to make a distinction when it comes to the effect of presumed and punitive damages on First Amendment activities.
Unidentified Justice: If you went back to the common law perception of presumed damages as being a substitute for actual damages, would that make a difference in your submission?
Gordon Lee Garrett Jr: No, Your Honor, because the only rule we are asking for is that the jury not be told that damages are presumed.
We are fully prepared to live with the Gertz rule that says a defamation plaintiff may recover all injuries... excuse me, all damages for his actual injury.
Unidentified Justice: Will you sort of itemize what they may be?
Gordon Lee Garrett Jr: Well, for example--
Unidentified Justice: Under the Gertz formula.
Gordon Lee Garrett Jr: --Under the Gertz formula, for individual, it may be humiliation, it may be embarrassment, it may be damage to reputation.
There are a number of intangible things.
For other plaintiffs, such as a corporation, it could be lost profits, it could be an inability to borrow money which affected the business, it could be the business's reputation.
Unidentified Justice: You agree with Gertz that you don't have to prove actual pecuniary loss?
Gordon Lee Garrett Jr: I agree with Gertz that for the private individual, he not prove actual pecuniary loss, and I think the Gertz rule says that you don't have to give a damage figure.
Unidentified Justice: But even with respect to a corporation, it could be a loss of reputation, as in this case.
I say, there could be a loss of a corporation's reputation.
In this case, for example, the problem was a report of bankruptcy, which doesn't do a corporation very much good.
Gordon Lee Garrett Jr: That's correct, Your Honor.
The distinction in this case, rather than proving a quantum of damages, is proving a causal connection between the fact that the report was issued and the individuals to whom it was issued to took any action adverse to Greemoss.
Unidentified Justice: Would you agree that any damages can be proved in this case?
Gordon Lee Garrett Jr: Based on the evidence in the lower court, or could be?
Unidentified Justice: Could be.
Gordon Lee Garrett Jr: Oh, yes, I think damages could be proved, but what the jury could not be told was damages are presumed.
I think that is the single rule that we ask this Court to apply, as well as the prohibition against punitive damages.
Unidentified Justice: Do punitive damages serve the same purpose as presumed damages?
I assume not.
I would like to know what you think.
Your Honor, traditionally punitive damages have been used to deter conduct.
That is the rationale behind them.
I guess technically speaking there is a difference between presumed and punitive damages as far as their effect.
However, I think in the area of libel law, they both have the same effect.
When a jury is told that you may presume damage, we believe that that... by the very nature of that charge you chill First Amendment activity.
A punitive damage award is a private fine.
Do you agree with that?
Gordon Lee Garrett Jr: That's correct, Your Honor.
It's a private fine unfortunately based on various state standards which do not give juries much guidance.
And we think in the area of libel law, the actual malice test focuses on the conduct of the defendant at the time he made the publication, and that is the correct test.
Unidentified Justice: Would your view, and this is the last question I will ask you for a while, I think, would your view of punitive damages apply to a garden variety tort case other than the tort of libel where compensatory damages can be proved?
Gordon Lee Garrett Jr: Well, Your Honor, I think--
Unidentified Justice: That is not the question before you, but I am interested in your perception of the purpose and range of punitive damages.
Gordon Lee Garrett Jr: --Well, Your Honor, I think as the Court indicated in Smith versus Wade, punitive damages are a very troublesome area in the law.
You know, I am reminded of what Justice Rehnquist wrote in that decision from Oliver Wendell Holmes.
You know, a dog can tell the difference between accidentally kicked and being stomped every day.
Well, if you stomp somebody every day, you are going to chill their activity, and the real problem is that punitive damages often chill beneficial conduct, that they are too far ranging, and it is a very difficult problem in the law, separate and apart from the libel area, Your Honor.
Unidentified Justice: You are having private parties impose punitive fines.
Gordon Lee Garrett Jr: That's correct.
Unidentified Justice: Without due process of law?
Gordon Lee Garrett Jr: It is a close question, depending on the standards.
I do not believe that is the case in the First Amendment test of actual malice, but when punitive damages, for example, can be given, as they were in this case, Your Honor, for something called reckless disregard of the interests of the plaintiff, that is a fairly broad ranging--
Unidentified Justice: Isn't that language from New York Times against Sullivan?
Gordon Lee Garrett Jr: --I am sorry, Your Honor?
Unidentified Justice: Isn't the reckless disregard from Sullivan?
Gordon Lee Garrett Jr: No, Your Honor.
The lower court was reckless disregard for the interests of the plaintiff.
Unidentified Justice: That language.
That language is--
Gordon Lee Garrett Jr: Oh, certainly, reckless disregard, but it is for a different interest, reckless disregard for the truth in New York Times versus something called reckless disregard for the interests of the plaintiff.
We believe, Your Honor, that the facts of this case highlight the very concern that the Court recognized in Gertz, presumed and punitive damages awarded by juries to punish an unpopular speaker.
Here we sent a special notice to five people.
It was corrected shortly thereafter.
None of these individuals were a customer of Greenmoss.
As I said, we sent the retraction immediately.
Plaintiff called not one recipient of the notice to the stand to testify.
There was no causal connection between our report and the alleged lost profits of the company.
What occurred was a jury instruction that allowed the jury to award unlimited amounts of presumed and punitive damages.
The jury was instructed that this was a case of libel per se, and that damage and loss were conclusively presumed.
The court instructed the jury that it could award presumed or exemplary damages based on something called actual malice, which was never defined for the jury.
The lower court found that its jury charge was misleading, and granted Dun and Bradstreet a new trial.
The Supreme Court of Vermont reversed, finding that Dun and Bradstreet was a non-media defendant, and that non-media defendants, a state could award presumed and punitive damages.
What the Vermont Supreme Court did was focus on the status of D&E on what it termed as a non-media defendant and the content of its message.
The Vermont Supreme Court fails to identify any state interest which justifies awards of presumed and punitive damages against Dun and Bradstreet any more than against a small newspaper or a local radio station.
The issue in this case, simply put, is this.
If the Burlington Vermont publishes Greenmoss is bankrupt, they are entitled to a constitutional instruction that precludes the awards of presumed and punitive damages, yet if Dun and Bradstreet publishes that same information to its subscribers because they want to know, they are not entitled to that constitutional protection.
Unidentified Justice: --Are you entitled to an instruction that no damages can be awarded even if they are proved unless... without proof of fault?
Gordon Lee Garrett Jr: Yes, we believe that we are entitled to the full standard, and even Sunward, that filed an amicus brief in this case said we are entitled at least to the fault standard.
In this case we do not contest fault.
Unidentified Justice: I suppose if you say that the Gertz rules don't apply against non-media defendants, the fault requirement would disappear too, I suppose.
Gordon Lee Garrett Jr: That's correct.
In other words, if that were the case, Your Honor, a plaintiff could merely prove falsity of the report and go to the jury on damages.
Unidentified Justice: Go back to the old rule.
Gordon Lee Garrett Jr: That's absolutely correct, Your Honor.
Unidentified Justice: Mr. Garrett, you suggest there can't be a difference between your client and a newspaper of general circulation.
Supposing there were a statute that said credit reporting agencies that report of a bankruptcy must in addition state the source of their information.
Would that be constitution?
I don't suppose you could compel a newspaper to do that, but could you compel a credit reporting agency to do that?
Gordon Lee Garrett Jr: Your Honor, I think the Miami Herald case answered it for the newspapers.
Unidentified Justice: Right.
Gordon Lee Garrett Jr: I see differences, Your Honor, in connection with requiring credit reporting agencies, for example, the Fair Credit Reporting Act, from requiring disclosures and from requiring identity of information.
To me that is much different than a warning of presumed or punitive damages, and I think there is arguably a state and federal interest in the former, but not the latter.
Unidentified Justice: I agree.
It is, however, quite clearly it would be a regulation of content, and you would nevertheless say it would be permissible.
Gordon Lee Garrett Jr: I think regulation of content in certain instances like that could be permissible.
I do think there is a distinction, Your Honor, in regulating awards of presumed and punitive damages based on the subject matter of the speech.
Unidentified Justice: Supposing I went one step further and my statute said that if you fail to do this, you should be subject to a $100 fine, purely punitive.
Gordon Lee Garrett Jr: --I think the difference in that, Your Honor, is, you are not regulating the speech so much as you are the violation of a federal or state statute, and to me that is different, because in my case you are punishing speech.
And I think to go further with your question, Justice Stevens, the actual malice test of New York Times and said further in Time, Inc., versus Firestone was designed to avoid looking at the subject matter.
You focused on misconduct.
And I believe in Time, Inc., versus Firestone the Court acknowledged that too often when we look at subject matter we skew the balance of the state interest on the one hand and the First Amendment on the other, and that is what the Vermont Supreme Court did in this case.
It skewed the balance between free speech and state interest in reputation.
It allowed the jury to compensate Greenmoss beyond actual injury.
It allowed the jury to punish Dun and Bradstreet, not because of any showing of calculated falsehood, but simply because that special notice turned out to be false.
The First Amendment rests on the assumption of the widest possible dissemination of information from diverse sources.
There is no reason to permit defamed private plaintiffs in a business context or defamed private plaintiffs by a non-media defendant for windfall damages, because the effect is still the same.
It is punishment.
The prospect of discretionary awards has a chilling effect on what is published and when, whether media or non-media.
Unidentified Justice: Are you saying that presumed damages are a punishment?
That certainly wasn't the basis on which the libel law developed.
It was the idea that the kinds of injuries you suffer in libel to reputation are not easily quantified in dollar amounts, isn't it?
Gordon Lee Garrett Jr: That is certainly historical, but Your Honor, in looking at the jury verdicts, the Sunward case that filed an amicus brief, $3.5 million, when a jury is allowed to give damages without any regard to actual injury, that can be punishment, because it can be used to punish an unpopular speaker.
Unidentified Justice: Well, you say without any regard to actual injury.
Gordon Lee Garrett Jr: That's correct.
Unidentified Justice: Are you saying then that damage or ruining a reputation is not actual injury?
Gordon Lee Garrett Jr: Your Honor, that certainly could be actual injury, but in the business context that we are in, it is no different from proving damages for a corporation, for breach of contract or any other thing.
You have to come into court with competent evidence.
Unidentified Justice: But Gertz says you don't have to itemize dollar amounts, like pain and suffering, medicals, and that sort of thing.
So, I mean, if you are going to have damages to reputation, it is going to be a lump sum type of thing that you can't relate to dollar testimony, isn't it?
Gordon Lee Garrett Jr: That's correct, Your Honor, but you still have to prove a causal connection between the publication of defamatory words and the damage.
Unidentified Justice: Surely, but--
Gordon Lee Garrett Jr: And that is what was lacking in this case.
Unidentified Justice: --Well, it may be lacking in this case, but your suggestion that any award of $3.5 million for damages to reputation must be punishment because it couldn't possibly have amounted to that much I would think would depend very much on the facts and circumstances of each case.
Gordon Lee Garrett Jr: Your Honor, I would agree with you if no presumed damage charge is given, but when the jury is told damages are presumed, and then this Court or any court reviewing that has no idea what the jury based it on, and that is the problem with the presumed damage charge.
Unidentified Justice: You mean you think there ought to be proof of some damage?
Gordon Lee Garrett Jr: There ought to be proof of actual injury.
Unidentified Justice: Well, all right.
Let's assume you get one witness come in and say, I think less of Dun and Bradstreet than I did before.
As a matter of fact, I have cancelled my subscription, which ought to injure them.
That is the defendant.
I know, but nevertheless--
--there is proof, there is proof of an injury, and now is that enough for you, or would you have to quantify it?
Gordon Lee Garrett Jr: I think that a plaintiff could come into court with a witness and say, my injury, or my reputation has been injured.
No dollar figure has to be assigned to that, but once an injury is proved, it doesn't mean that you can presume any amount of damages based on that.
You may get damages which naturally flow from the damage to reputation.
Unidentified Justice: Then you really think that you have to do the impossible, prove the amount of the damage?
Gordon Lee Garrett Jr: No, sir.
I did not suggest that, Your Honor.
I merely suggested that the fact that you have one witness that says the plaintiff's reputation has been damaged--
Unidentified Justice: Well, he has proved injury.
He proves an injury.
Gordon Lee Garrett Jr: --That's correct, and he may get all the damages for that actual injury.
Unidentified Justice: Let me put this to you.
Suppose the witness that Justice White has postulated was one of the directors of the bank where Greenmoss did business, and under examination he said that this was discussed for a half hour at a meeting of the bank's board of directors, and that the conclusion was from the president, summing it up, from now on keep a very close eye on Greenmoss Builders, because there is something wrong here.
Now, is that a damage or is it not?
Gordon Lee Garrett Jr: Your Honor, it is very difficult for me to say that that is a damage to a corporation.
Unidentified Justice: That is why perhaps the law has said that certain damages can be presumed.
Gordon Lee Garrett Jr: Your Honor, I don't believe that's what the law said in Gertz.
Certainly before that it did.
Unidentified Justice: I am talking about the law of Delaware.
The common law of the states has been that--
Gordon Lee Garrett Jr: The common law of the states certainly has been a presumption that--
Unidentified Justice: --because this injury is so difficult to measure, there is a presumption that is permitted by the jury.
Gordon Lee Garrett Jr: --That certainly was the common law prior to Gertz, Your Honor.
Unidentified Justice: Well, suppose the president--
--If somebody comes in and says that you... I am a corporation doing business, and you have circulated a statement that I am bankrupt, isn't that damage per se, without more?
Gordon Lee Garrett Jr: No, Your Honor, I don't believe it is.
Unidentified Justice: Well, let me put it this way.
It won't help them.
Gordon Lee Garrett Jr: It may not help them, but it may not hurt them either, Your Honor.
Unidentified Justice: You mean... would you do business with a bankrupt corporation?
Gordon Lee Garrett Jr: If I got a notice that someone was bankrupt, and I knew it was wrong, and it didn't affect my relationship, I don't believe that makes any difference, Your Honor.
Unidentified Justice: Would you buy any stock in that corporation?
Gordon Lee Garrett Jr: If I knew it was incorrect, certainly, Your Honor.
Unidentified Justice: Oh, I didn't say... would you buy stock in a bankrupt corporation?
Gordon Lee Garrett Jr: No, Your Honor.
Unidentified Justice: Well, then, that's an injury, isn't it?
Gordon Lee Garrett Jr: If the fact of the publication resulted in that.
Unidentified Justice: What?
Gordon Lee Garrett Jr: If the fact of the publication resulted in that effect.
Unidentified Justice: Well, I ask you, would you buy stock in a corporation that Dun and Bradstreet said was bankrupt?
Gordon Lee Garrett Jr: No, sir, I would not.
Unidentified Justice: That is sort of an injury, isn't it?
Gordon Lee Garrett Jr: If in fact it was incorrectly reported, and that was a result, yes, that would be a quantifiable injury, Your Honor.
Unidentified Justice: And compensable.
Gordon Lee Garrett Jr: That is correct, if in fact that occurred.
Unidentified Justice: What is this case?
Gordon Lee Garrett Jr: This case is, there was no... the jury was allowed to presume damages, and there was no causal--
Unidentified Justice: Isn't this presuming what I just said?
Gordon Lee Garrett Jr: --No, Your Honor.
They were told damages are presumed, period, and there was no causal connection by evidence between the publication of the report and any action by the people that received it.
No showing that anyone did anything toward Greenmoss as a result of that--
Unidentified Justice: Well, what was the purpose of Dun and Bradstreet's publication?
Gordon Lee Garrett Jr: --To inform its subscribers about an event which it thought was correct.
Unidentified Justice: True.
Gordon Lee Garrett Jr: That is correct.
Unidentified Justice: And it was a lie.
Gordon Lee Garrett Jr: That is correct.
And Your Honor, it is no different than the lie in every libel case.
It is no different than the lie in Gertz versus Welch.
Unidentified Justice: Well, in most of the libel cases I have done, you can get punitive damages.
Gordon Lee Garrett Jr: If you meet a certain standard.
That's correct, Your Honor.
Unidentified Justice: That's right.
Is it the same, really?
Couldn't they pick up the telephone and call the clerk of the court where the bankruptcy was asserted to have been filed and said, is Greenmoss Builders... has Greenmoss Builders filed or has someone sought a bankruptcy on them?
It is very easy to find out the truth, the fact, isn't it?
Gordon Lee Garrett Jr: Your Honor, this is verifiable information, no matter whether it is published in Dun and Bradstreet or a local newspaper.
It is a matter of public record.
Unidentified Justice: Well, it is a lot easier than what a newspaper is frequently confronted with.
Gordon Lee Garrett Jr: I would not think so, Your Honor, when it comes to reporting matters of public record.
Both Dun and Bradstreet and the newspapers can make mistakes.
They are reading the same document.
If I might, I would like to reserve the remainder of my time for rebuttal.
Chief Justice Warren E. Burger: Mr. Heilmann.
ORAL ARGUMENT OF THOMAS F. HEILMANN, ESQ., ON BEHALF OF THE RESPONDENT
Thomas F. Heilmann: Thank you, Your Honor.
Mr. Chief Justice, and may it please the Court, before commencing my argument, I would like to correct what I think is not the evidence before this Court, and I'd like to start by focusing on this correction report.
The correction report, which was a very important part of this case, we say was worse than the actual report of the bankruptcy.
In other words, we were focusing on the conduct of this defendant after the publication.
The corrective report, we said, was more damaging in many respects because it left creditors with ambiguity.
The second point that I want to correct is that Mr. Garrett tells you that there was no showing that anyone did anything at the bank with respect to the Greenmoss Builders.
That is not what the evidence demonstrated.
First, the evidence demonstrated that the specific loan request, and the Vermont Supreme Court found this, the specific loan request was immediately suspended, and we are talking about August in Vermont, when you have to start building.
Secondly, in close temporal proximity to the report of the bankruptcy, a bank that had a perfectly good relationship with this construction company all of a sudden told that construction company not only will we deny that request for a loan, but we would like you to go somewhere else for all of your banking business.
I don't think that it is credible to say that no one showed any injury, no one showed any harm resulting from the bankruptcy.
Unidentified Justice: Mr. Heilmann, doesn't that merely establish the proposition that if you are required to prove actual injury, you will be able to do so?
Thomas F. Heilmann: No, Your Honor.
Unidentified Justice: How does that go to the question whether you need to prove actual injury?
Thomas F. Heilmann: Your Honor, I think it focuses on the conduct of Dun and Bradstreet after the publication, which I think is a separate issue.
Unidentified Justice: Which again, I suggest, just means you can win the case if you have to go back and try it according to their theory.
Thomas F. Heilmann: As far as Dun and Bradstreet's argument, their initial question before the Court, I think there are two different starting points.
To Dun and Bradstreet, the existence of full First Amendment protection for these credit reports is a given proposition, and I don't think that they identify or associate themselves with the recognized First Amendment interest in the area of defamation.
On the contrary, they start with the proposition that the common law of defamation doesn't have legitimacy.
If there is no full First Amendment interest that Dun and Bradstreet can point to in a defamation context, the Court cannot reshape the common law because it feels the common law is imperfect or unwise.
So, in order to vest--
Unidentified Justice: Well, Mr. Heilmann did you really answer Justice Stevens' question?
Could you prove actual damages here if you had to?
Thomas F. Heilmann: --In this case, I think we could prove actual damages.
I think that--
Unidentified Justice: Do you think that most libel plaintiffs can prove actual damages if they have to?
Thomas F. Heilmann: --I think that the presumption is necessary to assist private plaintiffs to bridge several causation gaps.
I think many private plaintiffs may be able to prove some form of actual injury.
I am thinking now about Mr. Gertz, who on retrial testified that he suffered emotional distress.
Unidentified Justice: But you would have real problems with quantifying the... even if you... you could prove an injury, but to prove the extent of it would be extremely difficult, I suppose, without the aid of a presumption.
Thomas F. Heilmann: Well, I think so, Your Honor.
I think that is where the common law has its most beneficial effects, because the intuition of the common law says that harm has occurred, and these presumptions assist the private plaintiff in demonstrating and getting to the jury the kind of harm.
Unidentified Justice: What is the presumption you contend is appropriate?
Does it tell us the amount of damages?
Is there any presumption that concerns the amount of damages?
Or does the presumption really go to the fact of damage?
Thomas F. Heilmann: I think the presumption goes to the fact of damage, and not so much to the amount of the damage, and I really think the presumption--
Unidentified Justice: So that if you are able to prove the fact of damage independently, then you don't need the presumption.
Doesn't it depend--
Thomas F. Heilmann: --Your Honor, we--
Unidentified Justice: --Doesn't it depend, counsel, on a jury's evaluation of in effect punishment, how vicious, how bad was the libel, or how mild and inconsequential was it, and if they think it was very vicious and very bad, they might give a large punitive damage, presumed damage, or if they thought it was casual and inconsequential, they would give one dollar, as sometimes happens.
Thomas F. Heilmann: --That may be so, Your Honor.
That is more in connection with the punitive damage than presumed damage.
Justice Stevens, I would like to finish--
Unidentified Justice: How do you distinguish punitive and presumed?
Thomas F. Heilmann: --Well, I think that in this case, for example, the presumed damages were equated with actual injury within the description utilized by the Court in Gertz.
Punitive damage has, if you will, the white knight aura, the private attorney general.
Unidentified Justice: What do you think this large verdict was, presumed or punitive or both?
Thomas F. Heilmann: Well, this verdict was separated, $50,000 was actual, $300,000 was punitive.
The large part was therefore punitive, the deterrence aspect.
If I may, I would like to get back to the question that you posed.
You talk about the presumption.
Gertz doesn't talk about the presumption.
What Gertz talks about is the presumption of substantial damages.
There are many common law presumptions, and I don't think Gertz focused on all common law presumptions in the defamation context.
The common law presumption that I am focusing on here is the presumption of causation, and I think that is particularly important when a business libel is concerned, because as Mr. Garrett pointed out, there is a federal statute dealing with the Consumer Credit Reporting Act, but there is no federal or state statute dealing with business credit reports.
Therefore, a bank, a creditor does not have to talk with you about the reasons why your credit was rejected.
The bank can simply say, and this was the testimony at the trial, the bank can simply say, we have no obligation to speak with you about it.
Therefore in business libel, it is very difficult to prove these kinds of issues.
But with respect to Gertz, I think that what Dun and Bradstreet is essentially focusing on in the Gertz case is, they are trying to avail themselves of the strategic protection aspect of Gertz.
Now, when I say strategic protection, I mean two things within the context of Gertz.
Number One, Gertz necessarily protects by way of the scope of the ruling all media speech irrespective of whether that speech raises a public issue and irrespective of whether the speech is of a general or public concern.
The second part of the strategic protection of Gertz is that it protects false speech so that true speech can have breathing space.
Therefore it is a broad prophylactic rule.
Here, the type of speech that is involved in this case falls within the strategic protection rule of Gertz.
And on the type of speech, I would, without trying to split hairs, I would like to go back to the facts here a bit and point out that we have talked about "Greenmoss is bankrupt" as being the statement that was made.
The specific statement that was made, without splitting hairs, is that "Greenmoss filed for bankruptcy".
That is, I submit, a purer statement of fact than the statement "Greenmoss is bankrupt".
So, the question before the Court is, what strategic protection is necessary to protect business credit reports?
And will there be ad hoc balancing if the distinction created by the Court here is retained?
I don't think there are valid fears of ad hoc balancing along partisan lines by saying that an admittedly non-media defendant should not receive full First Amendment protection.
Dun and Bradstreet said, well, we circulated information and therefore we are like the media.
In other words, they claim they are closer to the line between media and non-media than perhaps some other non-media defendants.
But in terms of the traditional First Amendment values in defamation cases, they aren't closer to the line.
They are among the farthest away from that line, especially when you look at the rationale behind Gertz and New York Times.
Fostering public debate, robust debate about public issues.
I really don't think that self-censorship is a valid and legitimate interest when a company like Dun and Bradstreet is concerned.
In short, D&E would simply have you return the Gertz decision to the constitutional garage, excise all reference in the majority and concurring opinions to the media and the press, and put forth a new, improved 1984 model Gertz with full First Amendment protection for every speaker and every form of speech, regardless of that speaker's need for protection and regardless of the significance or importance of the speech involved.
It is the strategic protection area of Gertz that Dun and Bradstreet's particular speech here falls into, and I think the Court should recognize that aspect of the argument.
When Dun and Bradstreet tells you that it is an unpopular speaker, what it says in its briefs is that it is an unpopular speaker because it is an out-of-state financial reporting company.
This is not the kind of unpopularity that the Court sought to protect in Gertz, even assuming that those features make Dun and Bradstreet unpopular, which I don't think they necessarily do, and the civil rules of procedures have avenues for avoiding that kind of unpopularity, to wit, removal.
The message that they--
Unidentified Justice: Could Dun and Bradstreet have removed this case?
Thomas F. Heilmann: --Yes, they could have, Your Honor.
It was a diversity case, and the ad damnum was sufficient to take the case to federal court.
The message that Dun and Bradstreet conveys is not of necessity unpopular.
Gertz talked about viewpoints and opinions being unpopular.
There is no viewpoint and no opinion here.
Unidentified Justice: Well, Mr. Garrett, what damages did you ask for in your complaint?
Thomas F. Heilmann: When we initially filed the complaint, as I have pointed out in my latest brief, we asked for... there were two plaintiffs.
Mr. Flannagan was also a plaintiff.
We asked for $7,500 compensator, $15,000 punitive.
After discovery was over, we submitted a request to the court to amend that ad damnum to seek $300,000 in damages, and as I have pointed out in the appendix--
Unidentified Justice: Did they grant that or not?
Thomas F. Heilmann: --The court didn't act on it, because under the Vermont procedure, the ad damnum is a totally irrelevant concept other than establishing the jurisdictional predicate.
Unidentified Justice: And the jury gave you $15,000 actual?
Thomas F. Heilmann: No, $50,000.
Unidentified Justice: $50,000.
Thomas F. Heilmann: Yes.
Unidentified Justice: And $300,000?
Thomas F. Heilmann: That's right.
I might point out that on that $300,000, many of the actions that we say were outrageous conduct occurred after the complaint was filed.
The main point that Dun and Bradstreet ignores is that credit reports are fact-oriented, which contain no opinion and no editorialization.
They are not opinions as to creditworthiness.
Their own witnesses admitted this at the trial, and the evidence in this case belies the suggestion that they are opinions as to creditworthiness.
And therefore Dun and Bradstreet--
Unidentified Justice: Give us an example of that.
What did they do or say?
Thomas F. Heilmann: --We asked their witnesses at trial whether this was an opinion as to creditworthiness, and they immediately said, no, we don't analyze creditworthiness.
We analyze these facts.
We have a rating system.
If they fall within the rating system, then we give them the specific categorization.
Unidentified Justice: Hasn't that got something to do with your view of their creditworthiness, what category you put them in?
Thomas F. Heilmann: I don't think it has to do with--
Unidentified Justice: Don't your customers think it does?
Thomas F. Heilmann: --Well, they said that the customers understand what those ratings mean, but it is not so much creditworthiness.
It is things like size of assets to the value of the debt of the corporation, things like that, basic, factually verifiable information.
But using the broad rules of general application as the majority did in Gertz, there is a very basic difference between media defendants and defendants like Dun and Bradstreet.
A media defendant as a basic proposition simply doesn't have the incentive to publish anything that might lead to a libel suit other than with some media defendants a sense of professionalism.
Therefore, when a media defendant is involved, libel is not just a cost of doing business like highway accidents and equipment failures are to a trucking company.
The media can avoid liability without discontinuing its business by ceasing to carry or publish the material that creates the risk.
Much to the contrary, Dun and Bradstreet has a tremendous pecuniary interest in publishing this material, this particular fact-based information.
So, for them it really is a cost of doing business: for the media, it's not.
In fact, on the strategic protection of Gertz aspect, the breathing space to commit error is very effectively rebutted, I think, by one of D&B's own amici.
The association to which this petitioner belongs says,
"The type of information companies like Dun and Bradstreet disseminate. "
and I am quoting,
"depends for its success on a constant striving for accuracy because the specific markets served are highly sensitive to error. "
This suggests Dun and Bradstreet doesn't need breathing space.
It also suggests that the kind of breathing space needed where free debate prevails just doesn't exist here.
Dun and Bradstreet doesn't say that it will stop publishing this information, and it doesn't say it will tone these reports down.
It simply says it will check them more carefully, and then publish them.
This is not, we think, self-censorship under the cases decided by the Court, and given the admitted need for accuracy, even if this is censorship, the needs for accuracy outweigh it.
In summary, I don't think that this is the type of speech that should get full First Amendment protection.
I would like to address Dun and Bradstreet's arguments that the state has no legitimate interest in presumed damages.
The only thing Gertz focused on, as I have alluded to, is the presumption of substantial money damages in a setting where [= Mr.] Gertz offered no evidence of any actual injury at all.
From that limited perspective, which was the only feature of the common law of defamation addressed by the Court in Gertz, Dun and Bradstreet claims the states have no interest at all in presumed damages.
In a business libel setting, that isn't so.
Here, the amount of damages proved were limited to profit and out-of-pocket loss, so we didn't have the broader type of injury permissible under the Gertz rule.
Secondly, the amount of damages that are proved under ordinary trial practice, introduction of evidence, cross examination, contrary witnesses, that is all available to a defendant in a defamation case, and it was available here.
Point Number Three, as I have talked about, the causal link between demonstrated injury and a defendant's acts may be one of the most important aspects of the common law of defamation, and I don't think Gertz addresses that.
Fourth, where business libel is concerned, it is very difficult to locate the person who actually made the decision to withhold business credit, especially where, as I have said, in business credit contexts, the creditor does not have to talk with you.
On punitive damages, D&B's conduct, not its publication, is what caused this punitive award, and the Vermont Supreme Court's decision recognized that.
As D&B's concession at the last oral argument demonstrates, punitive damages do deter.
They do work.
The punitive damages here were focused on the flaws in the information-gathering system that D&B has erected, and the gross and extreme insensitivity and total lack of cooperation by that system with the person it harmed.
For example, Dun and Bradstreet refused for no reason to give Greenmoss the names of the recipients of the reports so it could help itself cure the defamation.
The final reason why Gertz should not be expanded to this non-media defendant is that what automatically flows from Dun and Bradstreet's position is that the Gertz doctrine will apply irrespective of the significance of the speech, so no matter how trivial, unimportant, or meaningless the speech is, it always will be deemed more constitutionally significant than the state's interest and reputation.
That makes the First Amendment apply to the most trivial and meaningless speech imaginable while private reputation is sacrificed.
I think core notions of the First Amendment would be obliterated in defamation cases because they wouldn't have relevance, as would in the long run the positive, normative goals of our society in fostering good reputation, because after all, the rules of defamation are just society's statement about the importance and value of a good reputation.
And finally, the person who subsidizes D&B's expansion of the Constitution is the defamed individual.
If he is unable to obtain redress because of the First Amendment, he subsidizes defamatory speech.
Unidentified Justice: But, Mr. Heilmann, there is no suggestion that he is not entitled to redress.
It is, he is not entitled to punitive damages or to redress unless he proves he has been injured.
So there is no subsidy, is there?
Thomas F. Heilmann: I think so, Your Honor.
If you accept Dun and Bradstreet's proposition that every presumption at common law is defeated by the Gertz case, a business libel plaintiff may have a very difficult time ferreting out the kind of witnesses that will establish the causation.
Unidentified Justice: Well, yes.
Thomas F. Heilmann: That is my point, Your Honor.
Unidentified Justice: But if he does have the witnesses and can prove the fact of damage, then your subsidy argument collapses.
Thomas F. Heilmann: If he can show some kind of witness connection, but it is a difficult proposition.
Unidentified Justice: And does he need punitive damages to avoid a subsidy?
Thomas F. Heilmann: I didn't hear the last part.
Unidentified Justice: Does he need punitive damages to avoid the subsidy?
But aside for a moment the presumed damages.
Punitive damages, you certainly can't say punitive damages... a rule which foreclosed punitive damages without proof of actual malice certainly wouldn't be a subsidy, would it?
Thomas F. Heilmann: There was no presumption at all about punitive damages in this case.
In fact, there was... the Court specifically made that--
Unidentified Justice: No, but the punitive damage issue is whether you may recover punitive damages without proving actual malice, in the New York Times standard.
Of course, you think you can prove actual malice, and therefore you may get your punitive damages, but I just don't follow your subsidy argument.
That's all this is addressed to in this case.
Thomas F. Heilmann: --Let me address the second doctrinal difference between Greenmoss and Dun and Bradstreet's positions.
We say this case should be decided under the Court's commercial speech rules.
Credit reports share the same earmarks and characteristics of the kind of speech the Court has previously categorized as commercial speech.
Now, there is no special or necessary magic in the label "commercial speech".
The label is not important.
It is the underlying characteristics of the speech which is important.
Those characteristics indicate the Gertz rationale doesn't apply here.
Indeed, in Virginia Pharmacy, Justice Blackmun anticipated the attributes that may control the resolution of credit report defamation by comparing New York Times with a credit reporting case, Grove versus Dun and Bradstreet.
A fuller examination indicates those attributes do govern.
Now, our argument starts from the recognition that communications concerning commercial transactions relate to the system of property rights rather than a system of free expression.
They therefore operate in a separate realm of social activity.
In this connection, the reasons that Dun and Bradstreet advances in support of its claim that it should receive full First Amendment protection under the Constitution can be utilized by the Court in deciding whether to give this form of speech First Amendment protection under the commercial speech cases.
What functions do credit reports serve?
The answer is, they inform private economic decisions, just like ads.
Credit reports don't affect public opinion.
Publications which inform and assist private economic decisions have been held by this Court to constitute commercial speech.
Credit reports have basic characteristics that the Court has identified concerning commercial speech.
First of all, because of their factual nature, they are easily verifiable.
Now, as we have heard, there is a critical need for accuracy with credit reports.
That is also true with respect to the commercial speech cases, where it is recognized that such speech only assists the consumer in making proper economic decisions when it is true and not misleading.
Factual data, like the information here, can be tested empirically and corrected to reflect the truth without jeopardizing free dissemination of thought.
D&B has extensive knowledge of the business credit market.
It is well situated to evaluate the accuracy of its data.
Secondly, credit report speech is hardy and it is durable.
Now, in an effort to avoid the application of the commercial speech doctrine, Dun and Bradstreet says, if you are not talking about your own product or service, you can't engage in commercial speech.
That is a futile dividing line, because it runs head-on into comparative advertising theories.
For example, if Ford Motor Company says, our cars handle better than BMW's, I would suggest that Ford Motor Company probably has bought a BMW and has checked that out.
That is comparative advertising, but Ford is speaking about something it doesn't make.
The Bolger Youngs Products case expressly disclaims the suggestion that Dun and Bradstreet has made to the Court here.
I think as a final point Dun and Bradstreet says that you must look at the interest of the speaker, the interest of the audience, and the interest of the target of this speech.
Well, look at the interest of this speaker and ask Dun and Bradstreet why strategic protection should be afforded to this very durable, this very hardy, and this easily verified speech.
Look at the interest of the audience.
False credit reports are disastrous for the audience.
They have no utility at all.
Look at the interest of the target.
Greenmoss is a company that never participated in the Dun and Bradstreet system, and thus two entities in this triangle cannot tolerate falsehoods.
The third entity, D&B, has not shown that its voice will be stilled if First Amendment protection is not extended to it.
Chief Justice Warren E. Burger: Very well.
Do you have anything further, Mr. Garrett?
ORAL ARGUMENT OF GORDON LEE GARRETT, JR., ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL
Gordon Lee Garrett Jr: If I could respond specifically to several points, Your Honor--
Chief Justice Warren E. Burger: You have five minutes remaining.
Gordon Lee Garrett Jr: --I am sorry?
Chief Justice Warren E. Burger: You have five minutes remaining.
Gordon Lee Garrett Jr: Thank you, Your Honor.
Quantifying damages in this case is no different for a corporation than in quantifying damages in any tort or other contract case.
For example, if a corporation is suing on negligent misrepresentation or fraud, that corporation has to prove actual injury.
Unidentified Justice: Suppose Greenmoss had been a listed security on the New York Stock Exchange, and within three or four days after this report there was a wave of selling, and the stock dropped 25 percent.
Damage to someone.
Gordon Lee Garrett Jr: There may be damage.
The question is, did our report cause that damage.
And if a recipient of the report says, I sold my stock short because of that report, that is clearly damage, Your Honor.
Unidentified Justice: Well, wouldn't a jury be permitted to infer a nexus between the wave of selling and the report if it were shown simply that the stockholders had received the report?
Now, that is damage.
That doesn't damage Greenmoss directly, but it damages Greenmoss's standing in the business community, and with its bank, and with a lot of other people, doesn't it?
Gordon Lee Garrett Jr: It may well, Your Honor, and that evidence can be brought in to show that, and Greenmoss would be entitled to damages for that actual injury, and we have no problem with that.
Unidentified Justice: Can you put a caliper on it and measure it in precise dollars?
Gordon Lee Garrett Jr: No, but you can bring a witness to court that said he acted adversely because of that.
And that is what we think the rule against presumed damages would at least require some causation.
Unidentified Justice: What if he did?
What if he brought that witness?
Then I suppose you would say you still can't award damages without proof of how much.
Gordon Lee Garrett Jr: No, Your Honor.
We would be perfectly satisfied with whatever the state rules are for awarding damages.
Unidentified Justice: Well, just bring in somebody, I have sold my stock because of this report.
Now, usually you have to prove how much, don't you?
Gordon Lee Garrett Jr: Well, Your Honor, in most injuries for a corporation, that is what damage is all about.
They are injured in dollar and cents terms, and it seems to me that that could be proved by having one, an expert testify concerning what the effect was because of that stock--
Unidentified Justice: So you would require proof of how much.
Gordon Lee Garrett Jr: --I am not necessarily saying how much, Your Honor, but there has to be something more so that a jury just doesn't speculate.
Unidentified Justice: Here, Mr. Garrett, the Vermont Supreme Court said that after the Dun and Bradstreet report the bank put off any further... any future consideration of credit to plaintiff until the discrepancy was cleared up.
Now, if that is in evidence, do you still say you need a witness to come in and say that the bank's putting off credit to the plaintiff damaged the plaintiff?
Gordon Lee Garrett Jr: Your Honor, if putting off the credit in fact damaged Greenmoss, we believe that could be shown.
Unidentified Justice: And you don't need to quantify the damage.
Why couldn't a jury simply reasonably conclude from the fact that the bank did put off consideration that Greenmoss was damaged?
Gordon Lee Garrett Jr: Because a jury would not be allowed to speculate as to that amount any more in this context than any other context involving proof of damage, Your Honor.
Unidentified Justice: Speculate as to causation, or speculate as to amount?
Gordon Lee Garrett Jr: I don't believe they can speculate under the state law as to either.
Unidentified Justice: Well, which do you think they would be speculating about here?
Gordon Lee Garrett Jr: In your example, it may well be damages.
Unidentified Justice: Certainly there is causation, isn't there?
Gordon Lee Garrett Jr: No, Your Honor.
I don't believe so.
On that one piece of testimony was that it was from the plaintiff's president--
Unidentified Justice: Well, which the jury is perfectly entitled to believe.
Gordon Lee Garrett Jr: --All right.
And the bank officer, who was the only person that testified at trial, said, and we quote his testimony at length in the reply brief, the day I got the special notice, I didn't believe it, I called in John Flannagan, he told me there's nothing to it, and that is the end of it.
Unidentified Justice: Well, but the jury doesn't have to believe the bank officer.
It can believe the plaintiff.
And the Vermont Supreme Court said the evidence showed that the bank put off any future consideration of credit to plaintiff until the discrepancy was cleared up.
I don't see where there is speculation there.
Gordon Lee Garrett Jr: It seems to me there is speculation as to proof, Your Honor.
If I might make two other quick points, certainly the state doesn't have any more substantial interest in awarding presumed or punitive damages in a defamation case where actual malice is not shown than it does for fraud.
In this case, there were five recipients.
They could have been called to the stand, and none were.
Thank you very much.
Chief Justice Warren E. Burger: Thank you, gentlemen.
The case is submitted.