Insurers Beware: A Chink in the Armor of New York v. Sullivan

Actual Malice in Republication of Defamation by Implication

Sep 23, 2021

FACTS

Representative Nunes has been a Member of Congress since 2003. He worked on his family’s farm in California as a child, and later owned farmland with his brother. In 2006, the Nunes family sold its farmland in California, and the Congressman’s parents and brother moved to Sibley, Iowa, where his father purchased a dairy farm, NuStar Farms. According to the complaint, the farm is operated by the Congressman’s family without his involvement, and the Congressman has no financial interest in the farm.

On September 30, 2018, Esquire magazine (then owned by Hearst) published an article about Representative Nunes and the farm. Lizza authored the piece. The online version is entitled “Devin Nunes’s Family Farm Is Hiding a Politically Explosive Secret.” The print version is entitled “Milking the System,” and includes a caption that asks two questions about a Congressman who has “spun himself as a straight talker whose no-BS values are rooted in his family’s California dairy farm”: “So why did his parents and brother cover their tracks after quietly moving the farm to Iowa? Are they hiding something politically explosive?”

The article maintains that Representative Nunes and his family hid the fact that the family farm is now in Iowa and declares it “strange . . . that the family has apparently tried to conceal the move from the public-for more than a decade.”

The article later asserts that the farm uses undocumented labor: “According to two sources with firsthand knowledge, NuStar did indeed rely, at least in part, on undocumented labor. One source . . . had personally sent undocumented workers to Anthony Nunes Jr.’s farm for jobs” and “assert[ed] that the farm was aware of their status.”

Two statements insinuate that the farm’s use of undocumented labor is the reason that Representative Nunes and his family were hiding the family’s move and their operation of an Iowa dairy farm. The article also accuses Representative Nunes of improper conduct during his tenure as Chairman of the House Intelligence Committee. The article says that he used his chairmanship (1) “to spin a baroque theory about alleged surveillance of the Trump campaign that began with a made-up Trump tweet about how ‘Obama had my “wires tapped” in Trump Tower, ‘” and (2) as a “battering ram to discredit the Russia investigation and protect Donald Trump at all costs, even if it means shredding his own reputation and the independence of the historically nonpartisan committee in the process.”

After the article was published, Nunes sued Lizza and Hearst in the district court, alleging common-law defamation and conspiracy. The complaint, as amended, claims express defamation based on eleven alleged false statements in the article, and defamation by implication. The alleged defamatory implication is that the article implies falsely that Representative Nunes “conspired or colluded with his family and with others to hide or cover-up” that the farm “employs undocumented labor.”

The trial court dismissed the complaint and Nunes appealed the dismissal. Nunes contended that his complaint states a claim for express defamation and defamation by implication. Defamation is an invasion of the interest in reputation and good name that is comprised of the twin torts of libel and slander-the former being written and the latter being oral. Nunes’s complaint sounds in libel.

Because Representative Nunes is a public figure, the Supreme Court’s jurisprudence on the First Amendment also requires him to prove by clear and convincing evidence that the defamatory statement is false and was made with actual malice. [Harte-Hanks Commc’ns, Inc. v. Connaughton, 491 U.S. 657, 659 (1989); N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964).]

A claim asserting defamation by implication requires proof of similar elements, except that a plaintiff need not show that individual statements are defamatory. The implication constitutes defamation even though the particular facts are correct, unless it qualifies as an “opinion.”

The Eighth Circuit agreed with the district court that the complaint fails to state a claim for express defamation based on the statements, and adopted the court’s conclusions. Nunes contended that his complaint states a plausible claim for defamation by implication. It is well settled that the arrangement and phrasing of apparently nonlibelous statements cannot hide the existence of a defamatory meaning when a reader could reasonably arrive at the implication, the author may be accountable.

Here, the article’s principal theme is that Nunes and his family hid the farm’s move to Iowa-the politically explosive secret.

A conspiracy is an agreement that requires knowledge-here, knowledge that the farm employed undocumented labor-and a knowing agreement to cover up that politically embarrassing fact. Whether Nunes knew about the farm’s hiring practices, including the potential use of undocumented labor, and whether he agreed with others to keep that information secret, are issues of verifiable fact. The implication is “sufficiently factual to be susceptible of being proved true or false,” so it is not a protected opinion.

To demonstrate that a defendant intended subjectively an implication, it is sufficient to show that the particular manner or language in which the true facts are conveyed, supplies affirmative evidence suggesting that the defendant intends or endorses the defamatory inference. The Eighth Circuit found that Nunes plausibly alleged that Lizza and Hearst intended or endorsed the implication that Nunes conspired to cover up the farm’s use of undocumented labor.

The next issue for consideration is “actual malice.” The Supreme Court’s interpretation of the First Amendment requires a public official to prove that defamatory statements or implications are made with “actual malice,” meaning with knowledge that it was false or with reckless disregard of whether it was false or not.. In this context, reckless conduct is not measured by whether a reasonably prudent man would have published. Instead, the defendant must have made the false publication with a high degree of awareness of probable falsity, or must have entertained serious doubts as to the truth of his publication.

Under the demanding standard set by the New York Times case, the Eighth Circuit agreed with the district court that the complaint is insufficient to state a claim of actual malice as to the original publication.

There is a distinction in defamation law between an original publication and a republication. In that situation, the publication reaches a new group and the repetition justifies a new cause of action. The justification for this exception to the “single publication” rule is that the subsequent publication is intended to and actually reaches a new audience. A speaker who repeats a defamatory statement or implication after being informed of its falsity “does so at the peril of generating an inference of actual malice.” Bertrand v. Mullin, 846 N.W.2d 884, 901 (Iowa 2014). Once the publisher knows that the story is erroneous the argument for weighting the scales on the side of its first amendment interests becomes less compelling.

Nunes’s initial complaint was filed on September 30, 2019. The complaint denied that Nunes had any involvement in the farm’s “operations,” denied that there was a “secret” involving the farm’s move to Iowa and his alleged hypocrisy on immigration policy, and denied that he “was involved in, covered-up, . . . conspired with others to conceal, or was aware of criminal wrongdoing.”

Nonetheless, on November 20, 2019, Lizza posted a tweet with a link to the article. The complaint plausibly alleges that the article defames Nunes by implication. The complaint adequately alleges that Lizza intended to reach and actually reached a new audience by publishing a tweet about Nunes and a link to the article. In November 2019, Lizza was on notice of the article’s alleged defamatory implication by virtue of this lawsuit. Under those circumstances, the complaint sufficiently alleges that Lizza republished the article after he knew that the Congressman denied knowledge of undocumented labor on the farm or participation in any conspiracy to hide it.

Republication of a statement after the defendant has been notified that the plaintiff contends that it is false and defamatory may be treated as evidence of reckless disregard. The Eighth Circuit remanded for further proceedings on Nunes’s claim alleging defamation by implication, and the related claim alleging a common-law conspiracy, as to the publication of November 20, 2019.

ZALMA OPINION

Insurers who insure against defamation and have relied on the “actual malice” requirement of defamation of a public figure, should read this decision with care. Although the Eighth Circuit refused to reconsider New York Times v. Sullivan it found actual malice in the republication and allows Nunes to go forward with his suit against Lizza and Hearst. Their insurers will be required to defend through trial and may find a claim for payment of damages. The issue may also reach the Supreme Court where some justices have discussed the need to reconsider the New York Times v. Sullilvan case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at https://www.rumble.com/zalma ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Insurers Beware: A Chink in the Armor of New York v. Sullivan

Actual Malice in Republication of Defamation by Implication

FACTS

ZALMA OPINION

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