The Virginia Defamation Law Blog

December 10, 2012

Defamatory Statements to Credit Reporting Agencies Held Not Preempted by FCRA

Michelle Bourdelais brought a defamation claim in the Richmond Division of the Eastern District of Virginia against Chase Bank and Chase Home Finance, based on Chase’s alleged reporting of inaccurate information about the status of her mortgage payments to consumer reporting agencies. Chase moved to dismiss the claim, arguing that it was preempted by the Fair Credit Reporting Act. Judge Henry E. Hudson denied the motion, allowing the claim to proceed.

The Fair Credit Reporting Act (“FCRA”) contains two seemingly conflicting sections. Section 1681t(b)(1)(F) appears to preempt all state laws regarding the liability of credit reporting agencies, whereas § 1681h(e) preempts only certain types of common law actions and then only under certain circumstances. The court noted that although the Fourth Circuit has not addressed the issue, seven of nine district courts in the Fourth Circuit have reconciled this conflict by using the “statutory approach” and holding that §1681t(b)(1)(F) only applies to state statutory claims and § 1681h(e) only addresses state common law claims.

Bourdelais argued that the preemption provisions did not apply at all because Chase did not act as a furnisher of information to consumer reporting agencies and Kroll Factual Data, the party who provided Bourdelais’ credit report, was not a consumer reporting agency (“CRA”) within the meaning of the FCRA. The court rejected this argument and noted that the FCRA definitions of “furnisher” and “consumer reporting agency” clearly include Chase and Kroll.

December 5, 2012

How to Lose Your Defamation Case in Three Easy Steps

by Lee E. Berlik

First, don’t hire a lawyer. (What do lawyers know about defamation law, anyway?) Second, refuse to comply with the court’s orders and local rules. Finally, file a whole bunch of frivolous and nonsensical motions, such as a “Motion for Declaration All Rulings & Judgments Be Rendered Null & Void,” a motion against opposing counsel for engaging in “felonious conspirator tactics,” and a “Motion to Declare All Your Base Are Belong to Us.” With the exception of the “all your base” example, a defendant recently tried all of these tactics in North Carolina federal court and came away with a judgment against him that included punitive damages.

William Mann, a member of the Professional Golfers Association Hall of Fame, acquired a North Carolina country club but then declared bankruptcy and moved to South Carolina. M. Dale Swiggett sent a letter to hundreds of recipients accusing Mann of fraud and crimes and claiming Mann left North Carolina after declaring bankruptcy and paid cash for his South Carolina house. Swiggett then sent a letter to the judge who had presided over Mann’s bankruptcy, accusing Mann of covering up “sludge spreading and spills.”

Mann sued Swiggett in the Eastern District of North Carolina for libel, seeking $2 million in compensatory damages and $2 million in punitive damages for injury to his reputation and livelihood. Swiggett, acting pro se, responded by overloading the court’s docket with numerous groundless motions, inducing the court to strike his Answer as a sanction. After entering summary judgment in Mann’s favor, the only remaining issue was the amount of damages.

November 29, 2012

Statements Based on Undisputed Facts Cannot Be Made With Actual Malice

by Lee E. Berlik

Attorney Ephraim Ugwuonye filed a defamation action against Omoyele Sowore, founder of Saharareporters.com, based on articles appearing on that website. Having previously been found in another case to be a public figure, Ugwuonye was required to demonstrate by clear and convincing evidence that the statements at issue were (1) defamatory; (2) false; and (3) made with actual malice. Public figures are required to prove that the defendant published a false statement with actual knowledge of its falsity or with reckless disregard for its truth. In this particular case, Mr. Ugwuonye was unable to meet that burden and the court entered summary judgment in favor of Mr. Sowore.

The statements at issue concerned real estate transactions in which Ugwuonye represented the Nigerian Embassy. The article claimed that Ugwuonye withheld the Embassy’s $1.5 million IRS tax refund due from the sales because the Nigerian government owed him legal fees for representation in other litigation. The article also commented on past professional misconduct proceedings against Ugwuonye and referred to Ugwuonye’s “professional shadiness.”

The court found that prior to writing the article, Sowore investigated public records, researched cases involving Ugwuonye and also spoke to Ugwuonye by phone. Ugwuonye admitted that he withheld the tax refund as a fee to compensate him for legal work. The court found that statements that were not disputed could not have been Generic gavel.jpg made with actual malice. Additionally, Ugwuonye did not submit any evidence that the statement regarding Ugwuonye’s past professional misconduct proceeding was made with actual malice, and because the statement was substantially accurate, he could not overcome the qualified privilege for fair and substantially accurate reports on legal proceedings. Finally, Ugwuonye did not offer evidence that the reference to “professional shadiness” was done with actual malice, and it also amounted to non-actionable opinion and privileged reporting.

November 5, 2012

Government Defamation May Violate Civil Rights

by Lee E. Berlik

In theory at least, when a government agency defames an individual, the defamation may be characterized as a violation of civil rights: a deprivation of “liberty” without due process of law. The United States Supreme Court, however, has held that an ordinary state-law defamation claim against the government will usually not be sufficient to state a civil rights claim. Under the “stigma plus” or “reputation-plus” test, a plaintiff must prove some loss beyond loss of reputation, such as the loss of a job. A recent New York case demonstrates how difficult it can be to maintain such an action.

Michael Jones, Jr., was Canandaigua, New York’s Planning Board Attorney in 2008. Per agreement, he billed at two rates, depending on the circumstances. The Town Board approved his billing statements until August when members of the Town Board challenged the billing. The Town Board investigated and published a report accusing Jones of ethical violations. It referred the matter to the District Attorney and took steps to get him fired, get him to resign, or prevent his contract from being renewed. He completed his contractual term but did not seek renewal, believing doing so would be futile.

Claiming the extensive press coverage hurt his legal practice, Jones sued the Town, the majority Town Board members, and the Town Board attorneys for several state law actions, including defamation. In his federal actions, he claimed the Town violated his right to substantive due process and his civil rights, denying him a property right of continued service as Planning Board Attorney and defaming him so badly that the stigma has substantially harmed his ability to practice law.

November 2, 2012

D.C. Defamation Cases Continue to Meet Anti-SLAPP Statute

by Lee E. Berlik

Statements made in the course of litigation by parties to the case are absolutely privileged and cannot form the basis of a defamation action. At the same time, reporters enjoy a “fair report” privilege that allows them to report and comment on judicial proceedings without fear of defamation liability, even if they repeat the allegedly defamatory statements in their coverage of the case, provided the report is a fair and accurate description of the case. Does it follow, then, that a litigant can make defamatory comments to a reporter during the course of a case? Most courts would answer that in the negative, since the reporter is not involved in the case. But if that litigant is speaking about an issue of public interest, such as the operation of the District’s financial office, his comments may be protected by D.C.’s anti-SLAPP act.

Eric Payne, former contracting director for the District of Columbia, sued D.C.’s Chief Financial Officer, Natwar Gandhi, for wrongful termination. In an interview with The Washington Post, Gandhi claimed that he fired Payne because he was “a very poor manager,” “nasty to people,” and “rude to outsiders.” Payne then sued Gandhi and the District of Columbia alleging that these remarks defamed him. The city has indicated that it plans to file a special motion to dismiss the case under the city’s anti-SLAPP statute.

A “SLAPP” (or Strategic Lawsuit Against Public Participation) can exist in many forms but traditionally consists of a frivolous lawsuit filed by one side of a public debate against someone who has exercised the right of free speech to express an opposing viewpoint. The anti-SLAPP statute was enacted primarily to protect citizen activists from these lawsuits filed for intimidation purposes, but can be applied in any situation where the lawsuit threatens the right of advocacy on issues of public interest.

October 29, 2012

Summary Judgment Still Possible in Virginia State Court

by Lee E. Berlik

On October 4, 2012, the Virginia Supreme Court rejected the appeal of a personal trainer, represented by Virginia Beach lawyer Jeremiah A. Denton III, and allowed to stand the summary judgment order entered by the Norfolk Circuit Court against the trainer on her defamation claim. This shows just how serious the Virginia Supreme Court is about the absolute privilege that extends to defamatory statements made in demand letters preliminary to contemplated litigation and sent in good faith. Summary judgment is appropriate if a defamation claim is based on a privileged statement.

Darryl and Julie Cummings were members of the Norfolk Yacht and Country Club (“NYCC”). Deborah Allison, a personal trainer at NYCC and at Norfolk Academy, pursued and entered into a physical relationship with Julie. Darryl reported Addison’s actions to NYCC management. Though the NYCC warned her not to pursue Julie Cummings on NYCC property, Addison disobeyed and was fired. Cummings and his wife ultimately divorced.

Darryl sued Addison for intentional infliction of emotional distress, tortious interference, and professional malpractice. Addison counterclaimed for intentional infliction of emotional distress, tortious interference with contract, tortious interference with a contract expectancy, and defamation. Addison’s claims stemmed from Cummings’ email to the NYCC president, a draft complaint he sent to NYCC’s attorney, and emails he sent to Norfolk Academy’s headmaster.

October 28, 2012

Does D.C.’s Anti-SLAPP Statute Apply in Federal Court?

by Lee E. Berlik

Former Georgia State Director for Rural Development, Shirley Sherrod, filed a defamation action in the United States District Court for the District of Columbia against bloggers Andrew Breitbart and Larry O’Connor based on a blog post allegedly portraying her as racist. The court denied defendants’ special motion to dismiss under D.C.’s anti-SLAPP Act. Defendants appealed, and the case is now pending before the United States Court of Appeals for the District of Columbia Circuit

The district court cited three reasons for its dismissal. First, it found that entertaining defendants’ motion would require retroactive application of the anti-SLAPP statute as Sherrod filed her complaint on February 11, 2011 and the D.C. anti-SLAPP Act did not become effective until March 31, 2011. Typically, only statutes that are purely procedural in nature can be applied retroactively, and the court held that the Act is substantive (or has substantive consequences). Defendants argue that whether the statute only applies to actions filed after its effective date is an issue of first impression, and summary disposition of a case of first impression involving a newly enacted statue that protects important First Amendment rights is not appropriate.

The district court found that even if the statute were purely procedural, the Erie doctrine, which requires federal courts sitting in diversity to apply state substantive law and federal procedural law, bars its application in federal court. Finally, the district court held that even if defendants could show that the statute is both retroactive and applicable in federal court, the plain language of the statute bars the motion to dismiss–the statute provides that a party may file a special motion to dismiss within 45 days after service of the claim, and here, the motion was filed more than two weeks after the 45 days had passed.

October 8, 2012

Defamation Case Against Eliot Spitzer and Slate Dismissed

by Lee E. Berlik

Libel and slander claims depend to a large extent on whom the plaintiff targeted with the allegedly defamatory statement. Defamatory words may not support a cause of action unless they directly or inferentially refer to the plaintiff–this has come to be known as the “of and concerning” test. The defamation case filed against former Governor Eliot Spitzer and Slate Magazine Slate for a column Mr. Spitzer wrote in 2010 about an insurance bid-rigging scandal was recently dismissed by a New York court on the ground that the article did not sufficiently identify the plaintiff–a former insurance executive at Marsh & McLennan–as the subject of the statements.

William Gilman’s work for Marsh included negotiating “contingent commissions”–fees paid by insurers to insurance brokers who place insurance business with the insurer. As attorney general, Spitzer took the position that Marsh’s use of such commissions was illegal. A lawsuit ensued and Gilman was convicted of one count of restraint of trade and competition. While Gilman’s appeal was pending, the trial judge vacated his conviction because exculpatory evidence had not been disclosed during trial. Spitzer wrote an article published on Slate.com in response to a Wall Street Journal article criticizing his handling of the Marsh case. Gilman brought a claim for defamation against Spitzer and Slate based on statements in Spitzer’s article.

Gilman’s defamation claim was based on (1) a reference to “the many employees of Marsh who have been convicted and sentenced to jail terms” and (2) the statement that Marsh’s employees “pocketed … increased fees and kickbacks.” Defendants argued that neither of the challenged statements was “of and concerning” Gilman and therefore could not be defamatory.

September 19, 2012

Defamation Claims Require Proof of Fault

by Lee E. Berlik

A former bank teller’s defamation and wrongful termination action against Wells Fargo, filed in the Western District of Virginia, has been decided in Wells Fargo’s favor. Judge Samuel G. Wilson granted the bank’s motion for summary judgment due to the failure of the teller to make a coherent, factual showing that the bank was at fault, or that the alleged defamatory statements were false.

The teller, Adrienne Sewell, was terminated for violating the bank’s policies and procedures. Wells Fargo rules limited the amount of cash tellers could retain in their cash drawers. To stay below the maximum, sellers would “sell” cash to a second teller, record the transaction electronically then deliver the cash in person. On several occasions, teller Adrienne Sewell and others failed to physically move the cash, thereby misstating their balance sheets and having too much cash in their bank drawers. At the end of the day, they would “buy back” the cash, thereby righting the balances, but the practice violated bank rules. The bank investigated her activities, gathered documents, and obtained admissions from Sewell and others that they had violated bank policy and procedure.

Sewell sued Wells Fargo for defamation, breach of contract, and wrongful termination. She argued the bank defamed her by telling others she had falsified documents and had violated bank procedures.

September 17, 2012

Punitive Damages in Libel Case Reduced by 75%

by Lee E. Berlik

A jury awarded Russell Ebersole $7,500 in compensatory damages and $60,000 in punitive damages on his libel claim against Bridget Kline-Perry in the United States District Court for the Eastern District of Virginia. Ms. Kline-Perry moved for a new trial or, alternatively, a reduction of the punitive damages award, which the court treated as a motion for remittitur. Finding $60,000 to be unconstitutionally excessive, the court remitted the punitive damages to $15,000 and gave Mr. Ebersole the option of accepting the reduced amount or requesting a new trial.

The court agreed with Ms. Kline-Perry that the $60,000 award of punitive damages violated her right to due process. When faced with an excessive verdict, courts will generally order a remittitur. Remittitur is a process by which the court reduces the damages award while giving the plaintiff the option of re-trying the case in lieu of accepting the reduction. The Federal Rules of Civil Procedure do not provide specifically for remittitur, but precedent holds that a court should order remittitur when a jury award is so excessive as to result in a miscarriage of justice.

In determining whether a jury award of punitive damages violates due process, courts consider (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded and the civil penalties authorized or imposed in comparable cases.