The New Jersey Superior Court, Appellate Division, ruled Nov. 12, 2008 that the “fair report privilege” does not extend to fair and accurate reports of a complaint filed by a debtor’s trustee in a bankruptcy case, at least until there has been “judicial review” of the complaint.
The decision would have allowed Thomas John Salzano – accused of fraud in a 2006 bankruptcy filing – to proceed with his defamation case against two newspapers that reported the allegations set forth in the pleadings. But the state’s high court quickly stepped in and stayed the ruling on Jan. 13, 2009, pending its decision on whether to hear the newspapers’ appeal.
The “fair report privilege” protects media defendants from liability for the publication of defamatory material if the publication is a full, fair, and accurate report of an official government action or a public meeting. The privilege generally covers reports on judicial proceedings and documents, but some jurisdictions recognize an exception for pleadings or other filings that have not yet received judicial consideration. The New Jersey mid-level appellate court’s decision in Salzano v. North Jersey Media Group, Inc., 958 A.2d 1023 (N.J. Super. Ct. App. Div. 2008), endorsed the so-called pleadings exception.
The case originated March 1, 2006 when the bankruptcy trustee for NorVergence Inc., a Newark, N.J.-based telecommunications company, filed a complaint alleging Salzano used $500,000 in company funds for personal entertainment and to purchase a home. A story the next day in The Record (Hackensack, N.J.) reported the allegations in the complaint under the headline “Man Accused of Stealing $500,000 for High Living.” Versions of the story also ran on two Web sites and in the Glen Ridge Voice, a weekly newspaper in eastern New Jersey.
The Record story said that Salzano “allegedly stole” money from the company and went on to relate details about NorVergence’s collapse amid allegations of fraud and corruption. The company’s chief managing officer was Thomas N. Salzano, Thomas John Salzano’s father.
Following publication of the stories, Thomas John Salzano filed a complaint in New Jersey state court alleging that the claim he “stole” money from NorVergence was false and defamatory. North Jersey Media Group, owner of both newspapers, moved for dismissal for failure to state a claim and the trial court agreed, but the Appellate Division reversed.
The New Jersey appellate court held that the story was a “fair and accurate” representation of the bankruptcy trustee’s complaint. But the three-judge panel nevertheless reversed the lower court, holding the fair report privilege does not apply because the trustee’s complaint had not yet been subjected to “judicial action” when the stories ran. The court did not specify what it meant by “judicial action,” or a phrase it used synonymously, “judicial review.”
“To summarize, because the trustee’s complaint was filed in the bankruptcy court the day prior to the first of these articles, and was not subject to any sort of judicial review by the time the articles were published, we must conclude that the fair report privilege does not apply and defendants were not relieved of liability for republishing the alleged defamatory statements contained within the bankruptcy complaint on that basis,” Judge Clarkson S. Fisher Jr. wrote for the unanimous three-judge panel.
The court acknowledged that several jurisdictions have explicitly rejected the so-called pleadings exception to the fair report privilege, but nonetheless endorsed it following limited discussion. Citing the Restatement (Second) of Torts, the court noted that the historic justification for the exception is to discourage litigants with bad motives from filing complaints containing defamatory information in order to establish grounds for the privilege, then publicizing the defamatory information under the protection of the privilege and withdrawing the complaint.
The court did not consider other potential disincentives to such a course of action. For example, in a federal court, Rule 11 of the Federal Rules of Civil Procedure authorizes a judge to sanction an attorney or unrepresented party for signing a complaint if it is filed for an improper purpose or it contains factual information that has no evidentiary basis. New Jersey’s own procedural rule 1:4-8 provides a similar remedy in state court.
After dealing with the fair report privilege, the court went on to hold that the allegedly defamatory stories were about matters of public concern, and therefore only actionable under New Jersey law if they were published with “actual malice.” The standard requires that Salzano prove the defendants knew the stories were false or acted with reckless disregard for the truth. The appellate court remanded the case to the trial court to allow Salzano an opportunity to amend his complaint and present proof of actual malice.
After the Appellate Division issued its ruling, Salzano said the decision would “fortify” the First Amendment because it would ensure “integrity in reporting while protecting private citizens,” according to a Nov. 19, 2008 Record story. “Reporters should verify their facts and verify the sources where they get their facts from.”
Attorneys for The Record, however, disagreed with Salzano’s characterization of the case. They said the decision would impair free speech rights and chill reporting on judicial proceedings, the November 19 story said.
Following the appellate court decision, the newspaper appealed to the New Jersey Supreme Court where it was supported by an amicus brief filed by the New Jersey Press Association and 18 other press and civil liberties groups. The Press Association’s Dec. 11, 2008 brief argued that the appellate court’s decision not only misinterpreted prior New Jersey precedent concerning the fair report privilege, but also violated the First Amendment to the U.S. Constitution.
The brief said the Appellate Division misinterpreted the 1994 New Jersey Supreme Court case Costello v. Ocean County Observer, 643 A.2d 1012 (N.J. 1994). In Costello, the state high court held that the fair report privilege did not apply to a story about a harassment complaint, not because it was a complaint that had yet to receive judicial attention, but because the report itself was not “full, fair, and accurate.” According to the brief, discussion in Costello of the pleadings exception was therefore dicta, and the Salzano court should not have treated it as binding precedent.
More importantly, the amicus brief argues that the Salzano court’s interpretation of the fair report privilege violates the First Amendment, a discussion that is absent from Judge Fisher’s opinion in the case.
In Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975), the U.S. Supreme Court held that “States may not impose sanctions on the publication of truthful information contained in official court records open to public inspection.” According to the brief, the word “truthful” means that the report must be an accurate representation of the public record, but does not require that the underlying facts contained in the record actually are true. The fair report privilege is therefore not just a common law privilege, but a constitutional privilege that New Jersey courts lack authority to undermine, the brief argues.
On Jan. 13, 2009 the state’s chief justice issued a stay preventing enforcement of the mid-level appellate court’s decision pending a resolution from the New Jersey Supreme Court on whether to hear the appeal. As the Bulletin went to press, the court had not issued a decision.
Thomas Cafferty, an attorney for the New Jersey Press Association, said in a Jan. 14, 2009 story reported by the Reporters Committee for Freedom of the Press that the high court’s decision to issue a stay was an encouraging sign. “We hope this bodes well for the court taking the case and ultimately reversing the appellate decision,” he said.
– Michael Schoepf