- Study Questions
-
- 1. According to the review of the facts, on what legal
claim did the district court initially award Food Lion
$5.5 million in punitive damages? Was this amount later
reduced by the district court?
2. What did the appellate court rule concerning Food Lion's
fraud claim? Why reasoning do they provide?
3. Does the appellate court agree the district court that
there was breach of duty involved? If so, what damages were
assessed?
4. Did the appellate court agree with the district court that
the reporters may be found liable for trespass? If so, what
damages were assessed?
- 5. Do the punitive damages against Food Lion remain in
effect as a result of the appellate court's review? Why
or why not?
6. Does the court believe that breach of duty or trespass
claims made by Food Lion unfairly single out the press?
7. Last but not least, may Food Lion use non-reputational
torts to recover damages that resulted from the publication of
the PrimeTime Live segment? In the same vein, why didn't Food
Lion originally sue for libel?
-
-
-
- Don't forget to follow the briefing
steps in How to read
a case
-
-
-
FOOD LION, INCORPORATED,
Plaintiff-Appellee,
v.
CAPITAL CITIES/ABC, INC.; LYNNE
LITT, a/k/a Lynne Neufes; ABC HOLDING
COMPANY; AMERICAN BROADCASTING
COMPANIES, INCORPORATED;
Appeals from the United States District
Court for the Middle District of North Carolina, at
Winston-Salem. N. Carlton Tilley, Jr., Chief District
Judge. (CA-92-592-6)
Argued: June 4, 1998
Decided: October 20, 1999
- Before NIEMEYER, MICHAEL, and MOTZ, Circuit Judges.
- OPINION
-
- MICHAEL, Circuit Judge:
(summary)
-
- Two ABC television reporters, after using false resumes
to get jobs at Food Lion, Inc. supermarkets, secretly
videotaped what appeared to be unwholesome food handling
practices. Some of the video footage was used by ABC in a
PrimeTime Live broadcast that was sharply critical of
Food Lion. The grocery chain sued Capital Cities/ABC,
Inc., American Broadcasting Companies, Inc., Richard
Kaplan and Ira Rosen, producers of PrimeTime Live, and
Lynne Dale and Susan Barnett, two reporters for the
program (collectively,"ABC" or the "ABC
defendants"). Food Lion did not sue for defamation,
but focused on how ABC gathered its information through
claims for fraud, breach of duty of loyalty, trespass,
and unfair trade practices. Food Lion won at trial, and
judgment for compensatory damages of $1,402 was entered
on the various claims. Following a substantial (over $5
million) remittitur, the judgment provided for $315,000
in punitive damages. The ABC defendants appeal the
district court's denial of their motion for judgment as a
matter of law, and Food Lion appeals the court's ruling
that prevented it from proving publication damages.
Having considered the case, we (1) reverse the judgment
that the ABC defendants committed fraud and unfair trade
practices, (2) affirm the judgment that Dale and Barnett
breached their duty of loyalty and committed a trespass,
and (3) affirm, on First Amendment grounds, the district
court's refusal to allow Food Lion to prove publi-cation
damages.
-
I.
(facts)
-
- In early 1992 producers of ABC's PrimeTime Live program
received a report alleging that Food Lion stores were
engaging in unsanitary meat-handling practices. The
allegations were that Food Lion employees ground
out-of-date beef together with new beef, bleached rank
meat to remove its odor, and redated (and offered for
sale) products not sold before their printed expiration
date. The producers recognized that these allegations
presented the potential for a powerful news story, and
they decided to conduct an undercover investigation of
Food Lion. ABC reporters Lynne Dale (Lynne Litt at the
time) and Susan Barnett concluded that they would have a
better chance of investigating the allegations if they
could become Food Lion employees. With the approval of
their superiors, they proceeded to apply for jobs with
the grocery chain, submitting applications with false
identities and references and fictitious local addresses.
Notably, the applications failed to mention the
reporters' concurrent employ-ment with ABC and otherwise
misrepresented their educational and employment
experiences. Based on these applications, a South
Carolina Food Lion store hired Barnett as a deli clerk in
April 1992, and a North Carolina Food Lion store hired
Dale as a meat wrapper trainee in May 1992.
-
- Barnett worked for Food Lion for two weeks, and Dale for
only one week. As they went about their assigned tasks
for Food Lion, Dale and Barnett used tiny cameras
("lipstick" cameras, for example) and
microphones concealed on their bodies to secretly record
Food Lion employees treating, wrapping and labeling meat,
cleaning machinery, and discussing the practices of the
meat department. They gathered footage from the meat
cutting room, the deli counter, the employee break room,
and a manager's office. All told, in their three
collective weeks as Food Lion employees, Dale and Barnett
recorded approximately 45 hours of concealed camera
footage.
-
- Some of the videotape was eventually used in a November
5, 1992, broadcast of PrimeTime Live. ABC contends the
footage confirmed many of the allegations initially
leveled against Food Lion. The broadcast included, for
example, videotape that appeared to show Food Lion
employees repackaging and redating fish that had passed
the expiration date, grinding expired beef with fresh
beef, and applying barbeque sauce to chicken past its
expiration date in order to mask the smell and sell it as
fresh in the gourmet food section. The program included
statements by former Food Lion employees alleging even
more serious mishandling of meat at Food Lion stores
across several states. The truth of the PrimeTime Live
broadcast was not an issue in the litigation we now
describe.
-
- Food Lion sued ABC and the PrimeTime Live producers and
reporters. Food Lion's suit focused not on the broadcast,
as a defamation suit would, but on the methods ABC used
to obtain the video footage. The grocery chain asserted
claims of fraud, breach of the duty of loyalty, trespass,
and unfair trade practices, seeking millions in
compensatory damages. Specifically, Food Lion sought to
recover (1) administrative costs and wages paid in
connection with the employment of Dale and Barnett and
(2) broadcast (publication) damages for matters such as
loss of good will, lost sales and profits, and diminished
stock value. Punitive damages were also requested by Food
Lion.
-
- The district court, in a remarkably efficient effort,
tried the case with a jury in three phases. At the
liability phase, the jury found all of the ABC defendants
liable to Food Lion for fraud and two of them, Dale and
Barnett, additionally liable for breach of the duty of
loyalty and trespass.
-
- Prior to the compensatory damages phase, the district
court ruled that damages allegedly incurred by Food Lion
as a result of ABC's broadcast of PrimeTime
Live--"lost profits, lost sales, diminished stock
value or anything of that nature"--could not be
recovered because these damages were not proximately
caused by the acts (fraud, trespass, etc.) attributed to
the ABC defendants in this case. Operating within this
constraint, the jury in the second phase awarded Food
Lion $1,400 in compensatory damages on its fraud claim,
$1.00 each on its duty of loyalty and trespass claims,
and $1,500 on its fraud claim. At the final stage the
jury lowered the boom and awarded $5,545,750 in punitive
damages on the fraud claim against ABC and its two
producers, Kaplan and Rosen. The jury refused to award
punitive damages against the reporters, Dale and Barnett.
In post-trial proceedings the district court ruled that
the punitive damages award was excessive, and Food Lion
accepted a remittitur to a total of $315,000.
-
- After trial the ABC defendants moved for judgment as a
matter of law on all claims, the motion was denied, and
the defendants now appeal. Food Lion cross-appeals,
contesting the district court's ruling that the damages
the grocery chain sought as a result of the PrimeTime
Live broadcast were not recoverable in this action. We
now turn to the legal issues.
-
II.
A.
-
- We must first consider whether the ABC defendants can be
held liable for fraud, breach of the duty of loyalty, and
trespass as a matter of North Carolina and South Carolina
law and whether the North Carolina Unfair Trade Practices
Act (UPTA) applies
-
- 1. Fraud
-
- Food Lion, proceeding under the proof limitations on
damages, sought $2,432.35 in compensatory damages on its
fraud claim and the jury awarded $1,400. According to
ABC, the district court erred in upholding the verdict on
this claim because Food Lion did not prove injury caused
by reasonable reliance on the misrepresentations made by
Dale and Barnett on their job applications. We agree.
-
- To prove fraud under North Carolina law, the plaintiff
must establish that the defendant (1) made a false
representation of material fact, (2) knew it was false
(or made it with reckless disregard of its truth or
falsity), and (3) intended that the plaintiff rely upon
it. In addition, (4) the plaintiff must be injured by
reasonably relying on the false representation. It is
undisputed that Dale and Barnett knowingly made
misrepresentations with the aim that Food Lion rely on
them. Thus, only the fourth element of fraud, injurious
reliance, is at issue. Food Lion claimed two categories
of injury resulting from the lies on the job
applications: the costs associated with hiring and
training new employees (administrative costs) and the
wages it paid to Dale and Barnett.
-
- The main component of Food Lion's claim for fraud damages
relates to administrative costs resulting from its
employment of Dale and Barnett. These are routine costs
associated with any new employee, including the costs of
screening applications, interviewing, completing forms,
and entering data into the payroll system. Also included
are estimated costs attributable to trainees for lower
productivity and customer dissatisfaction. Food Lion
offered testimony that these costs totaled $1,944.62. It
is undisputed that the jobs held by Dale and Barnett,
meat wrapper trainee and deli clerk, were ones with high
turnover. Still, Food Lion claims that because of the
reporters' misrepresentations on their employment
applications, it was forced to "incur these
[administrative] costs for two more employees,"
Appellee's Opening Br. at 15, because the reporters quit
their jobs after one or two weeks.
-
- As indicated, under North and South Carolina law a
plaintiff claiming fraud must show injury proximately
caused by its reasonable reli-nce on a misrepresentation.
In this case, therefore, Food Lion had to show (1) that
it hired Dale and Barnett (and incurred the
administrative costs incident to their employment)
because it believed they would work longer than a week or
two and (2) that in forming this belief it reasonably
relied on misrepresentations made by Dale and Barnett.
-
- On their job applications Dale and Barnett did
misrepresent matters such as their backgrounds,
experience, and other employment. They did not, however,
make any representations about how long they would work,
and Food Lion did not ask for any. To the contrary, the
applications signed by Dale and Barnett expressly
provided that either side--company or employee--could
terminate the employment at any time. Each application
contained the same provision, written in no uncertain
terms: "I also understand and agree that if
employed, employment is for an indefinite period of time,
and that I have the right to terminate my employment at
any time for any reason, as does the Company." Food
Lion also understood what this meant. As one of its
payroll managers acknowledged on cross-examination,
"when Food Lion hires a new deli clerk or a new meat
clerk ... it assume[s] the risk that that person might
stay only a few days." Dale and Barnett were, in
short, at-will employees.
-
- Because Dale and Barnett did not make any express
representations about how long they would work, Food Lion
is left to contend that misrepresentations in the
employment applications led it to believe the two would
work for some extended period. There is a fundamental
problem with that contention, however. North and South
Carolina are at-will employment states, and under the
at-will doctrine it is unreasonable for either the
employer or the employee to rely on any assumptions about
the duration of employment. At-will employment means that
(absent an express agreement) employers are free to
discharge employees at any time for any reason, and
employees are free to quit. Food Lion's claim for
administrative costs attributable to Dale and Barnett is
simply inconsistent with the at-will employment doctrine.
Under that doctrine Food Lion could not reasonably rely
on the sort of misrepresentations (about background,
experience, etc.) made by the reporters to conclude that
they would work for any extended period. As a result,
Food Lion did not show that the administrative costs were
an injury caused by reasonable reliance on the
misrepresentations.
-
- Food Lion also sought to recover the full amount
($487.73) of the wages it paid to Dale and Barnett,
arguing that it was fraudulently induced to pay the wages
because of the misrepresentations on the reporters'
employment applications. The last (proximate cause)
element of fraud is again the only one at issue: Food
Lion had to show that it paid the wages in reasonable
reliance on the misrepresenta-ions.
-
- The question is what was the proximate cause of the
issuance of paychecks to Dale and Barnett. Was it the
resume misrepresentations or was it something else? It
was something else. Dale and Barnett were paid because
they showed up for work and performed their assigned
tasks as Food Lion employees. Their performance was at a
level suitable to their status as new, entry-level
employees. Indeed, shortly before Dale quit, her
supervisor said she would "make a good meat
wrapper." In sum, Dale and Barnett were not paid
their wages because of misrepresentations on their job
applications. Food Lion therefore cannot assert wage
payment to satisfy the injurious reliance element of
fraud. The fraud verdict must be reversed.
-
- 2. Breach of Duty
-
- ABC argues that Dale and Barnett cannot be held liable
for a breach of duty of loyalty to Food Lion under
existing tort law in North and South Carolina. It is
undisputed that both reporters, on behalf of ABC, wore
hidden cameras to make a video and audio record of what
they saw and heard while they were employed by Food Lion.
Specifically, they sought to document, for ABC's
PrimeTime Live program, Food Lion employees engaging in
unsanitary practices, treating products to hide spoilage,
and repackaging and redating out-of-date products. The
jury found that Dale and Barnett breached their duty of
loyalty to Food Lion, and nominal damages of $1.00 were
awarded.
-
-
- Because Dale and Barnett did not compete with Food Lion,
misappropriate any of its profits or opportunities, or
breach its confidences, ABC argues that the reporters did
not engage in any disloyal conduct that is tortious under
existing law. Indeed, the district court acknowledged
that it was the first court to hold that the conduct in
question "would be recognized by the Supreme Courts
of North Carolina and South Carolina" as tortiously
violating the duty of loyalty. Food Lion, Inc. v. Capital
Cities/ABC, Inc., 964 F.Supp. 956, 959 n.2
(M.D.N.C.1997). We believe the district court was correct
to conclude that those courts would decide today that the
reporters' conduct was sufficient to breach the duty of
loyalty and trigger tort liability.
-
- What Dale and Barnett did verges on the kind of employee
activity that has already been determined to be tortious.
The interests of the employer (ABC) to whom Dale and
Barnett gave complete loyalty were adverse to the
interests of Food Lion, the employer to whom they were
unfaithful. ABC and Food Lion were not business
competitors but they were adverse in a fundamental way.
ABC's interest was to expose Food Lion to the public as a
food chain that engaged in unsanitary and deceptive
practices. Dale and Barnett served ABC's interest, at the
expense of Food Lion, by engaging in the taping for ABC
while they were on Food Lion's payroll. In doing this,
Dale and Barnett did not serve Food Lion faithfully, and
their interest (which was the same as ABC's) was
diametrically opposed to Food Lion's. In these
circumstances, we believe that the highest courts of
North and South Carolina would hold that the
reporters--in promoting the interests of one master, ABC,
to the detriment of a second, Food Lion-- committed the
tort of disloyalty against Food Lion.
-
- Our holding on this point is not a sweeping one. An
employee does not commit a tort simply by holding two
jobs or by performing a second job inadequately. For
example, a second employer has no tort action for breach
of the duty of loyalty when its employee fails to devote
adequate attention or effort to her second (night shift)
job because she is tired. That is because the inadequate
performance is simply an incident of trying to work two
jobs. There is no intent to act adversely to the second
employer for the benefit of the first. Cf. Long, 439
S.E.2d at 802 (finding disloyalty when employee
"deliber-ately" acquired an interest adverse to
his employer). Because Dale and Barnett had the requisite
intent to act against the interests of their second
employer, Food Lion, for the benefit of their main
employer, ABC, they were liable in tort for their
disloyalty.
-
- We hold that, insofar as North and South Carolina law is
concerned, the district court did not err in refusing to
set aside the jury's verdict that Dale and Barnett
breached their duty of loyalty to Food Lion.
-
- 3. Trespass
-
- ABC argues that it was error to allow the jury to hold
Dale and Barnett liable for trespass on either of the
independent grounds (1) that Food Lion's consent to their
presence as employees was void because it was based on
misrepresentations or (2) that Food Lion's consent was
vitiated when Dale and Barnett breached the duty of
loyalty. The jury found Dale and Barnett liable on both
of these grounds and awarded Food Lion $1.00 in nominal
damages, which is all that was sought in the
circumstances.
-
- In North and South Carolina, as elsewhere, it is a
trespass to enter upon another's land without consent.
See, e.g., Smith v. VonCannon, 197 S.E.2d 524, 528
(N.C.1973); Snow v. City of Columbia, 409 S.E.2d 797, 802
(S.C.Ct.App.1991). Accordingly, consent is a defense to a
claim of trespass. See, e.g., Miller v. Brooks, 472
S.E.2d 350, 355 (N.C.Ct.App.1996), review denied, 483
S.E.2d 172 (N.C.1997). Even consent gained by
misrepresentation is sometimes sufficient. See Desnick v.
American Broad. Cos., 44 F.3d 1345, 1351-52 (7th
Cir.1995) (Posner, C.J.). The consent to enter is
canceled out, however, "if a wrongful act is done in
excess of and in abuse of authorized entry." Miller,
472 S.E.2d at 355 (citing Blackwood v. Cates, 254 S.E.2d
7, 9 (N.C.1979)). Cf. Ravan v. Greenville County, 434
S.E.2d 296, 306 (S.C.Ct.App.1993) (noting that the law of
tres-pass protects the "peaceable possession"
of property).
-
- We turn first to whether Dale and Barnett's consent to be
in nonpublic areas of Food Lion property was void from
the outset because of the resume misrepresentations.
"[C]onsent to an entry is often given legal
effect" even though it was obtained by
misrepresentation or concealed intentions. Desnick, 44
F.3d at 1351. Without this result, a restaurant critic
could not conceal his identity when he ordered a meal, or
a browser pretend to be interested in merchandise that he
could not afford to buy. Dinner guests would be
trespassers if they were false friends who never would
have been invited had the host known their true
character, and a consumer who in an effort to bargain
down an automobile dealer falsely claimed to be able to
buy the same car elsewhere at a lower price would be a
trespasser in a dealer's showroom.
-
- Id.
-
- Of course, many cases on the spectrum become much harder
than these examples, and the courts of North and South
Carolina have not considered the validity of a consent to
enter land obtained by misrepresentation. Further, the
various jurisdictions and authorities in this country are
not of one mind in dealing with the issue. Compare
Restatement (Second) of Torts, ß 892B(2) (1965)
("[i]f the person consenting to the conduct of
another ... is induced [to consent] by the other's
misrepresentation, the consent is not effective for the
unexpected invasion or harm") and Shiffman v. Empire
Blue Cross and Blue Shield, 681 N.Y.S.2d 511, 512
(App.Div.1998) (reporter who gained entry to medical
office by posing as potential patient using false
identification and insurance cards could not assert
consent as defense to trespass claim "since consent
obtained by misrepresenta-tion or fraud is
invalid"), with Desnick, 44 F.3d at 1351- 53 (ABC
agents with concealed cameras who obtained consent to
enter an oph- thalmic clinic by pretending to be patients
were not trespassers because, among other things, they
"entered offices open to anyone"); Baugh v.
CBS, Inc., 828 F.Supp. 745, 757 (N.D.Cal.1993)
("where consent was fraudulently induced, but
consent was nonetheless given, plaintiff has no claim for
trespass").
-
- We like Desnick's thoughtful analysis about when a
consent to enter that is based on misrepresentation may
be given effect. In Desnick ABC sent persons posing as
patients needing eye care to the plaintiffs' eye clinics,
and the test patients secretly recorded their
examinations. Some of the recordings were used in a
PrimeTime Live segment that alleged intentional
misdiagnosis and unnecessary cataract surgery. Desnick
held that although the test patients misrepresented their
purpose, their consent to enter was still valid because
they did not invade "any of the specific
interests[relating to peaceable pos- session of land] the
tort of trespass seeks to protect:" the test
patients entered offices "open to anyone expressing
a desire for ophthalmic services" and videotaped
doctors engaged in professional discussions with
strangers, the testers; the testers did not disrupt the
offices or invade anyone's private space; and the testers
did not reveal the "inti-mate details of anybody's
life." 44 F.3d at 1352-53.
-
- We return to the jury's first trespass finding in this
case, which rested on a narrow ground. The jury found
that Dale and Barnett were trespassers because they
entered Food Lion's premises as employees with consent
given because of the misrepresentations in their job
applications. Although the consent cases as a class are
inconsistent, we have not found any case suggesting that
consent based on a resume misrepresentation turns a
successful job applicant into a trespasser the moment she
enters the employer's premises to begin work. Moreover,
if we turned successful resume fraud into trespass, we
would not be protecting the interest underlying the tort
of trespass--the ownership and peaceable possession of
land. The jury's finding of trespass therefore cannot be
sustained on the grounds of resume misrepresentation.
-
- There is a problem, however, with what Dale and Barnett
did after they entered Food Lion's property. The jury
also found that the reporters committed trespass by
breaching their duty of loyalty to Food Lion "as a
result of pursuing [their] investigation for ABC."
We affirm the finding of trespass on this ground because
the breach of duty of loyalty--triggered by the filming
in non-public areas, which was adverse to Food Lion--was
a wrongful act in excess of Dale and Barnett's authority
to enter Food Lion's premises as employees. See generally
Blackwood, 254 S.E.2d at 9 (finding liability for
trespass when activity on property exceeded scope of
consent to enter).
-
- The Court of Appeals of North Carolina has indicated that
secretly installing a video camera in someone's private
home can be a wrongful act in excess of consent given to
enter. In the trespass case of Miller v. Brooks the
(defendant) wife, who claimed she had consent to enter
her estranged husband's (the plaintiff's) house, had a
private detective place a video camera in the ceiling of
her husband's bed-room. The court noted that "[e]ven
an authorized entry can be trespass if a wrongful act is
done in excess of and in abuse of authorized entry."
Miller, 472 S.E.2d at 355. The court went on to hold that
"[e]ven if [the wife] had permission to enter the
house and to autho-rize others to do so," it was a
jury question"whether defendants' entries exceeded
the scope of any permission given." Id. We
recog-nize that Miller involved a private home, not a
grocery store, and that it involved some physical
alteration to the plaintiff's property (instal-lation of
a camera). Still, we believe the general principle is
applicable here, at least in the case of Dale, who worked
in a Food Lion store in North Carolina. Although Food
Lion consented to Dale's entry to do her job, she
exceeded that consent when she videotaped in non-public
areas of the store and worked against the interests of
her sec-ond employer, Food Lion, in doing so.
-
- We do not have a case comparable to Miller from South
Carolina. Nevertheless, the South Carolina courts make
clear that the law of trespass protects the peaceable
enjoyment of property. See Ravan, 434 S.E.2d at 306. It
is consistent with that principle to hold that consent to
enter is vitiated by a wrongful act that exceeds and
abuses the privilege of entry.
-
- Here, both Dale and Barnett became employees of Food Lion
with the certain consequence that they would breach their
implied promises to serve Food Lion faithfully. They went
into areas of the stores that were not open to the public
and secretly videotaped, an act that was directly adverse
to the interests of their second employer, Food Lion.
Thus, they breached the duty of loyalty, thereby
committing a wrongful act in abuse of their authority to
be on Food Lion's property.
-
- Accordingly, as far as North and South Carolina law is
concerned, the jury's trespass verdict should be
sustained.
-
- 4. Unfair Trade Practices Act
-
- Dale worked in a Food Lion store in North Carolina. Based
on the jury's finding of fraud and a special
interrogatory, the district court determined that ABC and
Dale were liable under the North Carolina UTPA, N.C.
Gen.Stat. ß 75-1.1. Because Food Lion elected to take
damages on the fraud claim, the district court awarded no
damages on the UTPA claim. ABC argues that the Act does
not apply to the circumstances of this case, and we
agree.
-
- North Carolina's UTPA prohibits "[u]nfair methods of
competi-tion" and "unfair or deceptive acts or
practices" that are "in or affecting
commerce." N.C. Gen.Stat. ß
75-1.1(a)."Commerce" is defined to include
"all business activities, however denominated."
N.C. Gen.Stat. ß 75-1.1(b). Food Lion contends that
Dale's misrepresentations on her job application were
"deceptive acts" "in or affecting
com-merce" because they were made to further the
production of PrimeTime Live, a business activity.
-
- Although the UTPA's language is quite broad, "the
Act is not intended to apply to all wrongs in a business
setting." HAJMM Co. v. House of Raeford Farms, Inc.,
403 S.E.2d 483, 492 (N.C.1991). The Act's primary purpose
is to protect the consuming public. It gives a private
cause of action to consumers aggrieved by unfair or
deceptive business practices. In addition, businesses are
sometimes allowed to assert UTPA claims against other
businesses because"unfair trade practices involving
only businesses" can "affect the consumer as
well." United Labs., Inc. v. Kuykendall, 370 S.E.2d
375, 389 (N.C.1988). But one business is permitted to
assert an UTPA claim against another business only when
the businesses are competitors (or poten-tial
competitors) or are engaged in commercial dealings with
each other.
-
- The district court found an UTPA violation because ABC is
a business that engaged in deception. However, the
deception--the mis-representations in Dale's
application--did not harm the consuming public. We
therefore reverse the district court's judgment that the
ABC defendants, including Dale, were liable under the
North Carolina UTPA.
-
B. First Amendment & Newsgathering
-
- ABC argues that even if state tort law covers some of
Dale and Barnett's conduct, the district court erred in
refusing to subject Food Lion's claims to any level of
First Amendment scrutiny. ABC makes this argument because
Dale and Barnett were engaged in newsgather-ing for
PrimeTime Live. It is true that there are "First
Amendment interests in newsgathering." In re Shain,
978 F.2d 850, 855 (4th Cir.1992) (Wilkinson J.,
concurring). See also Branzburg v. Hayes, 408 U.S. 665,
681 (1972) ("without some protection for seeking out
the news, freedom of the press could be
eviscerated."). However, the Supreme Court has said
in no uncertain terms that"generally applicable laws
do not offend the First Amendment simply because their
enforcement against the press has incidental effects on
its ability to gather and report the news." Cohen v.
Cowles Media Co., 501 U.S. 663, 669 (1991);
-
- The torts Dale and Barnett committed, breach of the duty
of loyalty and trespass, fit neatly into the Cowles
framework. Neither tort targets or singles out the press.
Each applies to the daily transactions of the citizens of
North and South Carolina. If, for example, an employee of
a competing grocery chain hired on with Food Lion and
videotaped damaging information in Food Lion's non-public
areas for later disclosure to the public, these tort laws
would apply with the same force as they do against Dale
and Barnett here. Nor do we believe that applying these
laws against the media will have more than an
"inci-dental effect" on newsgathering. See
Cowles, 501 U.S. at 669, 671-72. We are convinced that
the media can do its important job effectively without
resort to the commission of run-of-the-mill torts.
-
C. Awarding of punitive damages dropped
-
- For the foregoing reasons, we affirm the judgment that
Dale and Barnett breached their duty of loyalty to Food
Lion and committed trespass. We likewise affirm the
damages award against them for these torts in the amount
of $2.00. We have already indicated that the fraud claim
against all of the ABC defendants must be reversed.
Because Food Lion was awarded punitive damages only on
its fraud claim, the judgment awarding punitive damages
cannot stand.
-
III.
(publication damages)
-
- In its cross-appeal Food Lion argues that the district
court erred in refusing to allow it to use its
non-reputational tort claims (breach of duty of loyalty,
trespass, etc.) to recover compensatory damages for ABC's
broadcast of the PrimeTime Live program that targeted
Food Lion. The publication damages Food Lion sought (or
alleged) were for items relating to its reputation, such
as loss of good will and lost sales. The district court
determined that the publication damages claimed by Food
Lion "were the direct result of diminished consumer
confidence in the store" and that "it was[Food
Lion's] food handling practices themselves--not the
method by which they were recorded or published--which
caused the loss of consumer confidence." Food Lion,
Inc. v. Capital Cities/ABC, Inc., 964 F.Supp. 956, 963
(M.D.N.C.1997).
-
- The court therefore concluded that the publication
damages were not proximately caused by the
non-reputational torts committed by ABC's employees. We
do not reach the matter of proximate cause because an
overriding (and settled) First Amendment principle
precludes the award of publication damages in this case,
as ABC has argued to the district court and to us. Food
Lion attempted to avoid the First Amendment limitations
on defamation claims by seeking publication damages under
non-reputational tort claims, while holding to the normal
state law proof standards for these torts. This is
precluded by Hustler Magazine v. Falwell, 485 U.S. 46
(1988).
-
- Food Lion acknowledges that it did not sue for defamation
because its "ability to bring an action for
defamation ... required proof that ABC acted with actual
malice." Appellee's Opening Br. at 44. Food Lion
thus understood that if it sued ABC for defamation it
would have to prove that the PrimeTime Live broadcast
contained a false statement of fact that was made with
"actual malice," that is, with knowledge that
it was false or with reckless disregard as to whether it
was true or false. See New York Times Co. v. Sullivan,
376 U.S. 254, 279-80 (1964). It is clear that Food Lion
was not prepared to offer proof meeting the New York
Times standard under any claim that it might assert. What
Food Lion sought to do, then, was to recover
defamation-type damages under non-reputational tort
claims, without satisfying the stricter (First Amendment)
standards of a defamation claim. We believe that such an
end-run around First Amendment strictures is foreclosed
by Hustler.
-
- In Hustler a popular liquor advertisement prompted the
magazine to run a parody of the ad, labeled as such, that
featured the Reverend Jerry Falwell
"discussing" an incestuous sexual act he had
undertaken while drunk in disgusting circumstances.
Falwell sued the magazine and its publisher, Larry Flynt,
seeking damages for libel and inten-tional infliction of
emotional distress. At trial the jury held against
Falwell on the libel claim, specifically finding that the
ad parody could not reasonably be understood as
describing actual facts about Falwell or actual events in
which he participated. The jury, however, found for
Falwell on the emotional distress claim and awarded
com-pensatory and punitive damages.
-
- It was clear that Falwell, in asserting the claim for
intentional infliction of emotional distress, sought
"damages for emotional harm caused by the
publication of an ad parody offensive to him."
Hustler, 485 U.S. at 50 (emphasis added). In the Supreme
Court the question was whether Falwell had to satisfy the
heightened First Amendment proof standard set forth in
New York Times. Hustler confirms that when a public
figure plaintiff uses a law to seek damages resulting
from speech covered by the First Amendment, the plaintiff
must satisfy the proof standard of New York Times. Here,
Food Lion was not prepared to meet this standard for
publication damages under any of the claims it asserted.
Unless there is some way to distinguish Hustler (we think
there is not, see below), Food Lion cannot sustain its
request for publication damages from the ABC broadcast.
-
- Food Lion argues that Cowles, supra, and not Hustler
governs its claim for publication damages. According to
Food Lion, Cowles allowed the plaintiff to
recover--without satisfying the constitu-tional
prerequisites to a defamation action--economic losses for
publishing the plaintiff's identity in violation of a
legal duty arising from generally applicable law. Food
Lion says that its claim for damages is like the
plaintiff's in Cowles, and not like Falwell's in Hustler.
This argument fails because the Court in Cowles
distinguished the damages sought there from those in
Hustler in a way that also distin-guishes Food Lion's
case from Cowles:
-
- Cohen is not seeking damages for injury to his reputation
or his state of mind. He sought damages ... for breach of
a promise that caused him to lose his job and lowered his
earning capacity. Thus, this is not a case like Hustler
... where we held that the constitutional libel standards
apply to a claim alleging that the publication of a
parody was a state-law tort of intentional infliction of
emotional distress.
-
- Cowles, 501 U.S. at 671. Food Lion, in seeking
compensation for matters such as loss of good will and
lost sales, is claiming reputa-tional damages from
publication, which the Cowles Court distin-guished by
placing them in the same category as the emotional
distress damages sought by Falwell in Hustler . In other
words, according to Cowles, "constitutional libel
standards" apply to damage claims for reputational
injury from a publication such as the one here.
-
- Food Lion also argues that because ABC obtained the
videotapes through unlawful acts, that is, the torts of
breach of duty of loyalty and trespass, it (Food Lion) is
entitled to publication damages without meeting the New
York Times standard. The Supreme Court has never
suggested that it would dispense with the Times standard
in this situation, and we believe Hustler indicates that
the Court would not.
-
- In sum, Food Lion could not bypass the New York Times
standard if it wanted publication damages. The district
court therefore reached the correct result when it
disallowed these damages, although we affirm on a
different ground.
-
IV.
(Summary)
-
- To recap, we reverse the judgment to the extent it
provides that the ABC defendants committed fraud and
awards compensatory damages of $1,400 and punitive
damages of $315,000 on that claim; we affirm the judgment
to the extent it provides that Dale and Barnett breached
their duty of loyalty to Food Lion and committed a
trespass and awards total damages of $2.00 on those
claims; we reverse the judg-ment to the extent it
provides that the ABC defendants violated the North
Carolina UTPA; and we affirm the district court's ruling
that Food Lion was not entitled to prove publication
damages on its claims.
-
-