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MARCONE v. PENTHOUSE INTL.

November 17, 1983

FRANK J. MARCONE
v.
PENTHOUSE INTERNATIONAL, LTD.



The opinion of the court was delivered by: BRODERICK

 BRODERICK, J.

 A jury has awarded compensatory damages of $30,000 and punitive damages of $537,500 to the plaintiff, Frank J. Marcone, and against the defendant, Penthouse International, Ltd., in this diversity defamation action. In an earlier opinion, 533 F. Supp. 353 (E.D. Pa. 1982), this Court ruled that the plaintiff was not a public figure for the purposes of this action, and that the relevant Constitutional limitations on the Pennsylvania law of defamation were those imposed by Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974). The Court also predicted that the Supreme Court of Pennsylvania would retreat from its holding in Matus v. Triangle Publications, Inc., 445 Pa. 384, 286 A.2d 357 (1971), cert. denied, 408 U.S. 930, 33 L. Ed. 2d 343, 92 S. Ct. 2494 (1972) and allow a private figure defamation plaintiff to establish liability under Pennsylvania law based upon a showing of negligence. See Bufalino v. Associated Press, 692 F.2d 266, 274 (2d Cir. 1982), cert. denied, 462 U.S. 1111, 103 S. Ct. 2463, 77 L. Ed. 2d 1340 (1983).

 The defendant has moved for judgment notwithstanding the verdict or, in the alternative, for a new trial. The primary grounds advanced in support of the motion are: (a) the Court erred in charging the jury that an award of punitive damages required that the plaintiff prove knowledge of falsity or reckless disregard for truth or falsity by a preponderance of the evidence, the correct burden of proof being "clear and convincing" evidence; (b) the plaintiff failed to provide sufficient evidence of knowledge of falsity or reckless disregard for the truth to support the jury's award of punitive damages; (c) the plaintiff failed to prove that the article was false; (d) the plaintiff failed to present competent evidence of special harm or other actual injury resulting from the libel; and (e) the amount of the punitive damages awarded was so excessive as to indicate passion and prejudice and was disproportionate to the award of compensatory damages. For the reasons which follow, the defendant's motion for judgment notwithstanding the verdict will be denied, and the motion for a new trial will be denied, conditioned upon the plaintiff's acceptance of a reduction of the punitive damage award to $200,000.

 
Motions for a new trial require the exercise of discretion by the Court whose "duty is essentially to see that there is no miscarriage of justice." 6A Moore's Federal Practice P 59.08[5], at 59-160 (footnote omitted) (2d ed. 1974); Thomas v. E.J. Korvette, Inc., 476 F.2d 471, 474-75 (3d Cir. 1973). The jury's verdict may be set aside only if manifest injustice will result if it were allowed to stand. The Court may not substitute its own judgment for that of the jury merely because the Court may have reached a different conclusion. To grant a motion for judgment n.o.v., the Court must find as a matter of law that the plaintiff failed to adduce sufficient facts to justify the verdict. Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205, 1210 (3d Cir.), cert. denied, 400 U.S. 826, 91 S. Ct. 51, 27 L. Ed. 2d 55 (1970). Such a motion "may be granted only when, without weighing the credibility of the evidence, there can be but one reasonable conclusion as to the proper judgment." 5A Moore's, supra, P 50.07[2], at 50-77 (footnote omitted); Korvette, supra, at 474.

 Douglas W. Randall, Inc. v. AFA Protective Systems, Inc., 516 F. Supp. 1122, 1124 (E.D. Pa. 1981), aff'd 688 F.2d 820 (3d Cir. 1982). In the present case, the Court finds that the jury verdict is supported by the evidence and that the evidence is more than sufficient to meet the applicable Constitutionally-imposed standards. In addition, the Court does not believe that any trial errors exist which warrant the granting of a new trial and that no manifest injustice will result if the jury verdict is allowed to stand, so long as the amount of the punitive damages award is reduced to $200,000.

 A. STANDARD OF PROOF OF ACTUAL MALICE

 The most troublesome contention raised by the defendant is that the Court erred in giving the jury the following interrogatory with respect to punitive damages:

 
Do you find that the plaintiff proved by a preponderance of the evidence that the portions of the article which were defamatory of the plaintiff and untrue were published by the defendant either with knowledge of their falsity or with reckless disregard as to whether they were true or false?

 The error, according to the defendant, was in charging that this finding must be made by a preponderance of the evidence rather than by clear and convincing evidence. The defendant contends that this error requires a new trial. To succeed in this contention the defendant must show that the standard of the Court's instruction was erroneous, and that the failure to instruct as to the correct standard requires a new trial. As set forth below, the Court does not believe that it instructed the jury improperly, although the question is not free from doubt. However, even if the standard of the Court's instruction were incorrect, the error would not require a new trial, since under Pennsylvania law and under the relevant holdings of the Supreme Court the findings required to satisfy Constitutional standards may be made by this Court. The Court finds that the plaintiff has demonstrated that the defendant published the material defamatory of him with knowledge of falsity or reckless disregard of its truth or falsity, and the Court finds that this has been proven by clear and convincing evidence as well as by a preponderance of the evidence. A proper Constitutional basis therefore exists for the jury's award of punitive damages in this case.

 As the Third Circuit as stated "adjudication of a defamation case under Pennsylvania law involves two principal inquiries: (1) whether the defendants have harmed the plaintiff's reputation within the meaning of state law; and (2) if so, whether the First Amendment nevertheless precludes recovery." Steaks Unlimited, Inc. v. Deaner, 623 F.2d 264, 270 (3d Cir. 1980). If the plaintiff is a private figure, "the First Amendment forbids states to impose liability without fault, but otherwise permits them to 'define for themselves the appropriate standard of liability for a publisher or broadcaster of defamatory falsehood injurious to a private individual.'" 623 F.2d at 272 (quoting Gertz v. Robert Welch, Inc., 418 U.S. 323, 347, 94 S. Ct. 2997, 3010, 41 L. Ed. 2d 789 (1974)). As stated above, this Court has determined that Pennsylvania would allow a private figure to establish liability upon a showing of negligence, and this standard of liability is within the Constitutional requirements of Gertz.

 Determination of damages in defamation actions, like determination of liability, follows the same two-step inquiry: the requirements of state law must be met, and the restrictions on the state law cause of action imposed by the Constitution must not be violated. Again, within the limitations imposed by Gertz a state is free to define the relevant standards of proof. Dixson v. Newsweek, Inc., 562 F.2d 626, 629 (10th Cir. 1977); Pirre v. Printing Developments, Inc., 468 F. Supp. 1028, 1043 (S.D.N.Y.) aff'd mem. 614 F.2d 1290 (2d Cir. 1379). In this diversity case governed by Pennsylvania law, the Court, as stated at trial, must "apply the Pennsylvania law as to punitive damages except insofar as the Pennsylvania law as to punitive damages may have been limited by the Gertz language." (N.T. 7.185).

 
The law in Pennsylvania is clear on the circumstances in which an award of punitive damages is permitted. "Punitive damages are damages, other than compensation, or nominal damages, awarded against a person to punish him for his outrageous conduct." Chambers v. Montgomery, 411 Pa. 339, 344, 192 A.2d 355, 358 (1963), quoting Restatement of Torts, § 908(1). See also, Focht v. Rabada, 217 Pa. Super. 35, 268 A.2d 157 (1970); Chuy v. Phila Eagles Football Club, 595 F.2d 1265 (3d Cir. 1979); Thomas v. American Cystoscope Makers, Inc., 414 F. Supp. 255 (E.D. Pa. 1976). "Punitive damages are awarded only for outrageous conduct, . . . for acts done with a bad motive or with a reckless indifference to the interests of others." Chambers, supra, quoting Restatement of Torts, § 908(1), comment (b).

 Gertz imposes Constitutional limitations on the recovery of damages by private individuals in defamation actions. The Supreme Court imposed these limitations to insure that excessive and unpredictable damage awards do not serve to "punish unpopular opinion rather than to compensate individuals for injury sustained by publication of a false fact," and do not "unnecessarily exacerbate[] the danger of media self-censorship." 418 U.S. at 349-50, 94 S. Ct. at 3012. With respect to compensatory damages the Supreme Court stated:

 
It is necessary to restrict defamation plaintiffs who do not prove knowledge of falsity or reckless disregard for the truth to compensation for actual injury. We need not define "actual injury," as trial courts have wide experience in framing appropriate jury instructions in tort actions. Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering. Of course, juries must be limited by appropriate instructions, and all awards must be supported by competent evidence concerning the injury, although there need be no evidence which assigns an actual dollar value to the injury.

 Id. Compensatory damages are thus limited to compensation for actual injury, proven by competent evidence, although what constitutes actual injury is broadly defined.

 The standard of the Constitutional limitation on the award of punitive damages is stated in two places in Gertz. The Court states its holding as follows: "we hold that the States may not permit recovery of presumed or punitive damages, at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth." 418 U.S. at 349, 94 S. Ct. at 3011. After a discussion of the dangers of punitive damage awards in defamation actions against media defendants, the Court summarizes its holding: "In short, the private defamation plaintiff who establishes liability under a less demanding standard than that stated by [ New York Times v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964)] may recover only such damages as are sufficient to compensate him for actual injury." 418 U.S. at 350, 94 S. Ct. at 3012.

 The New York Times standard requires defamation plaintiffs who are public figures or public officials to prove "actual malice", that is, knowing falsity or reckless disregard of the truth or falsity of the defamatory statement, to establish liability. 376 U.S. at 280, 84 S. Ct. at 726. The standard has been further defined in a series of Supreme Court cases.

 
Recklessness means that the publisher "in fact entertained serious doubts as to the truth of his publication," St. Amant v. Thompson, 390 U.S. 727, 731, 88 S. Ct. 1323, 1325, 20 L. Ed. 2d 262 (1968), or had a "subjective awareness of probable falsity." Gertz v. Robert Welch, Inc., 418 U.S. 323, 335 n.6, 94 S. Ct. 2997, 3005 n.6, 41 L. Ed. 2d 789 (1974). This standard makes it "essential to proving liability that the plaintiff focus on the conduct and state of mind of the defendant." Herbert v. Lando, 441 U.S. 153, 160, 99 S. Ct. 1635, 1640, 60 L. Ed. 2d 115 (1979). Although a publisher does not have an absolute duty to investigate, St. Amant v. Thompson, 390 U.S. 727, 733, 88 S. Ct. 1323, 1326, 20 L. Ed. 2d 262 (1968), a publisher cannot feign ignorance or profess good faith when there are clear indications present which bring into question the truth or falsity of defamatory statements.

 Gertz v. Robert Welch, Inc. (Gertz II), 680 F.2d 527, 538 (7th Cir. 1982), cert. denied, 459 U.S. 1226, 103 S. Ct. 1233, 75 L. Ed. 2d 467 (1983).

  Although the Supreme Court's opinion in Gertz clearly adopts the standard of conduct set forth in New York Times v. Sullivan as a predicate to the award of punitive damages in a private figure defamation case, Gertz does not explicitly state what standard of proof should be applied. In public figure cases, actual malice, or " Times malice," must be shown by clear and convincing evidence before liability may be imposed. Gertz, 418 U.S. at 342, 94 S. Ct. at 3008; Steaks Unlimited, 632 F.2d at 275. No Third Circuit or Supreme Court case since Gertz has spoken to the question of what standard should be applied to punitive damages recoveries by private figures. Furthermore, the Court has found no Pennsylvania case holding that clear and convincing proof is required under state law before punitive damages may be awarded, and we predict that if faced with the question whether a higher standard should be applicable in defamation cases the Pennsylvania Supreme Court would adhere to a preponderance standard. Authority from other jurisdictions bearing directly and explicitly on the question of what standard of proof is required by Gertz is surprisingly sparse and seems to weigh in favor of a preponderance standard. Compare Rimmer v. Colt Industries Operating Corp., 656 F.2d 323, 331 (8th Cir. 1981) (Bright, J., concurring) (preponderance standard); Pirre v. Printing Developments, Inc., 468 F. Supp. at 1040, 1043 (same); Miller v. Lear Siegler, Inc., 525 F. Supp. 46, 62 (D. Kan. 1981) (same) with General Products Co. v. Meredith Corp., 526 F. Supp. 546, 552 (E.D. Va. 1981) (clear and convincing standard); Fitzgerald v. Penthouse Int'l, Ltd., 525 F. Supp. 585, 597 (D. Md. 1981) (same), rev'd 691 F.2d 666 (4th Cir. 1982) (appeals court did not reach burden of proof issue in deciding that a genuine issue of material fact existed as to actual malice), cert. denied, 460 U.S. 1024, 103 S. Ct. 1277, 75 L. Ed. 2d 497 (1983). Several courts have also stated that a showing of actual malice is required before punitive damages may be awarded to a private figure plaintiff, without stating explicitly the standard of proof to be applied. Golden Bear Distributing Systems v. Chase Revel, Inc., 708 F.2d 944, 947 (5th Cir. 1983) (implying that the standard is the same as that needed to establish liability by a public figure); Wilson v. Scripps-Howard Broadcasting Co., 642 F.2d 371, 375 n.1 (6th Cir.), cert. granted, 454 U.S. 962, 102 S. Ct. 500, 70 L. Ed. 2d 377, appeal dismissed, 454 U.S. 1130, 102 S. Ct. 984, 71 L. Ed. 2d 119 (1981); Littlefield v. Fort Dodge Messenger, 614 F.2d 581, 584 (8th Cir.), cert. denied, 445 U.S. 945, 63 L. Ed. 2d 779, 100 S. Ct. 1342 (1980); Jenoff v. Hearst Corp., 453 F. Supp. 541 (D. Md. 1978), aff'd 644 F.2d 1004 (4th Cir. 1981) (implying the standards are the same); Handelman v. Hustler Magazine, Inc., 469 F. Supp. 1053, 1059 n.11 (S.D. N.Y. 1979).

 It might well be contended that uniformity in the application of the actual malice standard could be furthered by imposing the clear and convincing standard on private figures seeking to recover punitive damages, just as it is imposed on public figures seeking to establish liability. In addition, the Supreme Court has noted that the "strong and legitimate state interest in compensating private individuals for injury to reputation . . . extends no further than compensation for actual injury," Gertz, 418 U.S. at 348-49, 94 S. Ct. at 3011; this lessened state interest with respect to punitive damages may allow the imposition of a higher standard of proof to protect First Amendment values. See also Acosta v. Honda Motor Co., Ltd., 717 F.2d 828, 839 (3d Cir. 1983) (imposing clear and convincing standard to recover punitive damages in a strict liability action under Virgin Islands law; consequences require "particularly careful scrutiny"). On the other hand, requiring a plaintiff to prove actual malice in itself represents a significant accommodation of the state's interest in punishing and deterring wrongful conduct to First Amendment values, even if a preponderance standard is applied. In addition, the full measure of protection given the media in public figure cases may not be necessary when the state imposes restrictions on the amount of punitive damages, so that the dangers of the wholly uncontrolled and unpredictable awards cited by the Supreme Court are not present. See Pirre, 468 F. Supp. at 1040. As will be discussed below, under Pennsylvania law punitive damages must be reduced by the Court when they are so grossly excessive as to offend the Court's sense of justice.

 While the Court continues to believe it was correct in charging on a preponderance of the evidence standard, this question need not be decided to dispose of the present case because the Court finds that the plaintiff has proved, by clear and convincing evidence, that the defendant acted with reckless disregard of the truth or falsity of the defamatory statements it published concerning the plaintiff. While Gertz sets forth the burdens which the Constitution places on a private individual seeking to recover damages in a defamation action, Gertz does not require that a jury find that the plaintiff has made the Constitutionally-required showings. In Time, Inc. v. Firestone, 424 U.S. 448, 96 S. Ct. 958, 47 L. Ed. 2d 154 (1976), the Supreme Court was faced with a case involving a private individual in which no question of fault had been submitted to the jury. The Court stated:

 
The failure to submit the question of fault to the jury does not of itself establish noncompliance with the constitutional requirements established in Gertz, however. Nothing in the Constitution requires that assessment of fault in a civil case tried in a state court be made by a jury, nor is there any prohibition against such a finding being made in the first instance by an appellate, rather than a trial, court. The First and Fourteenth Amendments do not impose upon the States any limitations as to how, within their own judicial systems, factfinding tasks shall be allocated. If we were satisfied that one of the Florida courts which considered this case had supportably ascertained petitioner was at fault, we would be required to affirm the judgment below.

 424 U.S. at 461, 96 S. Ct. at 969. Although this discussion was dicta in light of the Court's ultimate determination that no adequate finding of fault had been made at any point, this Court is reluctant to reject reasoning set forth at such length in an opinion joined in by six Justices, particularly since this reasoning was not challenged in the concurring opinion or in either dissenting opinion. It thus appears that this Court should look to the law of Pennsylvania for guidance on the respective roles of Court and jury in determining whether Constitutional requirements have been met in a defamation action. The Supreme Court of Pennsylvania has squarely addressed this question in a public figure case, stating as follows:

 
We do not agree, however, that the jury must be instructed that a public-figure plaintiff must prove "actual malice" by "clear and convincing" evidence rather than by a preponderance of the evidence. The United States Supreme Court said in New York Times Co. v. Sullivan, supra, 376 U.S. at 285-286, 84 S. Ct. at 729: "Applying these standards, we consider that the proof presented to show actual malice lacks the convincing clarity which the constitutional standard demands, and hence that it would not constitutionally sustain the judgment for respondent under the proper rule of law." (Emphasis added). While the existence or absence of actual malice is a question of fact for the jury, whether there is sufficient evidence in the case to warrant such a finding by the jury is a question of law for the court and is reviewable on appeal. See New York Times Co. v. Sullivan, supra, n. 26 at 285, 84 S. Ct. at 728. Thus the United States Supreme Court has said: "This Court's duty is not limited to the elaboration of constitutional principles; we must also in proper cases review the evidence to make certain that those principles have been constitutionally applied. * * * We must "make an independent examination of the whole record," * * * so as to assure ourselves that the judgment does not constitute a forbidden intrusion on the field of free expression." New York Times Co. v. Sullivan, supra, at 285, 84 S. Ct. at 729. Therefore, in these statements, we believe ...

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