Jacron Sales Co. v. Sindorf

Levine, J., delivered the opinion of the Court. We are asked here to determine the extent to which the First and Fourteenth Amendments to the Federal Constitution are applicable to actions for defamation by private individuals against defendants who are not ⁵⁸² publishers or broadcasters; alternatively, we shall decide as a matter of state law whether the law of defamation should be changed in view of recent decisions of the Supreme Court. See Gertz v. Robert Welch, Inc., 418 U. S. 323 , 94 S. Ct. 2997 , 41 L.Ed.2d 789 (1974). These questions arise from an action for slander brought by appellee, Jack Sindorf (Sindorf), against his former employer, Jacron Sales Co., Inc. (Jacron).

When the case came on for trial before a jury in the Circuit Court for Prince George’s County, the court directed a verdict for Jacron at the close of all the evidence. On appeal, the Court of Special Appeals reversed the judgment and remanded the case to the circuit court for a new trial. Sindorf v. Jacron Sales Co., 27 Md. App. 53 , 341 A. 2d 856 (1975). We then granted certiorari.

Early in 1972, Sindorf entered the employ of Jacron, a Philadelphia-based company, as a construction tools salesman. Sindorf submitted a letter of resignation terminating that relationship some 18 months later, and within a few days thereafter began working in a similar capacity for a Maryland company known as the Tool Box Corporation. In his letter of resignation to Jacron, Sindorf had acknowledged that he was in possession of inventory belonging to Jacron worth $2,451.77, and further stated that although he regarded the material in his possession as part payment of commissions due him, he would return the property “at such time as” he received the sum of $2,561.50, representing unpaid commissions of $2,100 and other miscellaneous amounts owed to him by Jacron. In addition to enclosing invoices for the inventory in his possession, he expressed his regret at the need for proceeding in such a manner, which was pursuant to the advice of counsel, but noted that his efforts to “collect the money” due him “through normal business channels” had been unsuccessful.

Within two days after he commenced his employment with Tool Box, Sindorf was asked to come from his Pennsylvania home to Maryland for a conference with William R. Brose (Brose); the president of the company. At that meeting, Brose related a recorded telephone conversation between him and one Robert Fridkis (Fridkis), ⁵⁸³ vice president of Jacron Sales of Virginia, a subsidiary of Jacron, who had never been Sindorf’s employer. 1 The tape recording was played for the jury, and a transcript of the dialogue was received in evidence. 2 As related by Brose, the substance of Fridkis’ statement was that there were “quite a few cash sales and quite a bit of merchandise that were uncounted [sic] for.” This suggested to Brose, according to his testimony, that possibly Sindorf “had taken items, either for possibly for his own use ... or for a cash sale,” i.e., implying that they had been stolen by Sindorf. When confronted by Brose with Fridkis’ statements, Sindorf branded them as untrue; furthermore, despite an “extremely careful” check of the Tool Box inventory entrusted to Sindorf during his nine months of employment, nothing was ever found to be missing. We note that neither in the Court of Special Appeals nor in this Court has appellant contended that Fridkis’ statements did not constitute slander per se.

Testimony revealed that Fridkis had placed the call to Brose on instructions from the president of the parent corporation in Philadelphia. Those instructions, however, had not implicated Sindorf in any theft or other criminal conduct. In the president’s own words, he told Fridkis: “. . . to call the Tool Box and see if Mr. Sindorf was working for them. We explained to Bob how the man had left us, keeping the merchandise in his possession, our merchandise, and we wanted to verify his employment, whether he was working there while he was still on our payroll or had he just started with Tool Box.” Apparently, when Fridkis reported to the president the outcome of his discussion with Brose, he merely “verified [Sindorf’s] employment. . . .” In directing a verdict for the defendant, the trial court ruled that although Sindorf had established a case of slander ⁵⁸⁴ per se warranting its submission to the jury, Jacron was protected by a common law conditional privilege which had not been lost because Sindorf had failed “to show actual malice.” Shortly after an appeal had been lodged, the Court of Special Appeals ordered the parties to address their briefs, in part, to the decision in Gertz v. Robert Welch, Inc., supra, which the Supreme Court had handed down on June 25, 1974, more than two months after the trial of this case.

The Court of Special Appeals held that Sindorf had presented sufficient evidence of malice to warrant submission of the question of abuse of the common law conditional privilege to the jury, thus compelling a reversal of the circuit court decision. Further, the Court of Special Appeals said that since the defamatory statements here were of a “purely private” nature, this case was beyond the reach of Gertz . I Although we too regard this case as one of defamation of a private individual as to a purely private matter, we think the Court of Special Appeals has misread Gertz in concluding that the holding there applies “only when a private individual is defamed as to a matter of general or public interest.” 27 Md. App. at 90 . No consideration of Gertz , however, would be productive without first referring, at the very least, to three prior decisions of the Supreme Court: New York Times Co. v. Sullivan, 376 U. S. 254 , 84 S. Ct. 710 , 11 L.Ed.2d 686 (1964); Curtis Publishing Co. v. Butts, 388 U. S. 130 , 87 S. Ct. 1975 , 18 L.Ed.2d 1094 (1967); and Rosenbloom v. Metromedia, 403 U. S. 29 , 91 S. Ct. 1811 , 29 L.Ed.2d 296 (1971).

At common law, the only defenses available to a publisher of defamatory material were truth and the common law privileges. Then, in its landmark decision in New York Times, the Supreme Court held that in a state libel trial, a public official must establish “malice,” defined as a knowing falsity or a reckless disregard for the truth, on the part of the publisher to recover damages for defamatory statements ⁵⁸⁵ concerning the plaintiffs official conduct. 3 The traditional defense of truth, the Court held, did not provide adequate protection to the First Amendment rights of the press. Three years later, in Curtis Publishing Co. v. Butts, supra, 4 ’ another unanimous Court expanded the class of plaintiffs subject to the New York Times test to include “public figures.” Although Mr. Justice Harlan wrote the opinion for the Court, a majority agreed with Mr. Chief Justice Warren’s definition of a public figure, which included not only public officials but also those individuals who are “nevertheless intimately involved in the resolution of important public questions or, by reason of their fame, shape events in areas of concern to society at large.” 388 U. S. at 164 . The Chief Justice assumed that involvement in public issues or events itself guaranteed access to the means by which defamatory criticism might be controverted.

In Rosenbloom v. Metromedia, supra, in an opinion joined by only two other members of the Court, Mr. Justice Brennan appeared to extend the constitutional privilege enunciated in New York Times yet another step further by applying it to defamatory falsehoods if the statements concern matters of public or general interest, regardless of the status of the person defamed. 5 The essence of the opinion is this: “If a matter is a subject of public or general interest, it cannot suddenly become less so merely ⁵⁸⁶ because a private individual is involved, or because in some sense the individual did not ‘voluntarily’ choose to become involved. The public’s primary interest is in the event; the public focus is on the conduct of the participant and the content, effect, and significance of the conduct, not the participant’s prior anonymity or notoriety... .” 403 U. S. at 43 . Subsequent history has proved the separate dissenting opinions of Mr. Justice Harlan and Mr. Justice Marshall more durable than the plurality opinion of Mr. Justice Brennan. Justice Harlan urged in his dissent in Rosenbloom that the New York Times privilege should not apply to private persons because of the diminished likelihood of “securing access to channels of communication sufficient to rebut falsehoods.” 403 U. S. at 70 .

To this extent, Mr. Justice Marshall, joined by Mr. Justice Stewart, was in general agreement. The disagreement between the two dissenting opinions was over the matter of punitive damages. Justice Harlan was of the view that the states might allow such damages in amounts bearing “a reasonable and purposeful relationship to the actual harm done,” 403 U. S. at 75 , while Justice Marshall expressed the view that both punitive and presumed damages should not be allowed because they resulted in self-censorship. Thus was the stage set for Gertz .

There, the plaintiff was a Chicago attorney prosecuting a civil action for the family of a youth who had been shot and killed by a police officer. The officer had previously been convicted of second degree murder in the incident, but the plaintiff had neither participated in the criminal proceeding nor discussed the officer with media representatives. Nevertheless, the defendant published an article characterizing the plaintiff as the “architect of the criminal prosecution” which it portrayed as part of a nationwide Communist conspiracy to discredit local law enforcement agencies. The article falsely accused the plaintiff of membership in Communist-front organizations and of having a criminal record.

After a jury had awarded the plaintiff $50,000 in damages, the trial ⁵⁸⁷ court, anticipating Rosenbbom and granting the defendant’s motion for a judgment n.o.v., ruled that the New York Times standard should govern even though the plaintiff was neither a public official nor a public figure. On appeal, the United States Court of Appeals upheld the trial court on the ground that, regardless of whether the plaintiff was a public figure, the defamatory statements concerned an issue of significant public interest. Gertz v. Robert Welch, Inc., 471 F. 2d 801 (7th Cir. 1972). The Supreme Court, with a majority of five, held that the constitutional privilege articulated in New York Times does not extend to defamatory falsehoods concerning an individual who is neither a public official nor a public figure.

Rather than expand the New York Times standard to falsehoods relating to private persons when made in connection with events of public interest, as the Rosenbbom plurality had done, the Court applied a number of restrictions to the law of libel designed to accommodate freedom of the press with the state’s interest in protecting a private person’s reputation. The Court held that in cases of defamation of private persons (1) the state may not impose liability without fault, but with that limitation may adopt any other standard of media liability, and (2) in cases where the New York Times test of knowing or reckless falsity is not met, the state may permit recovery for “actual injury” but not presumed or punitive damages. Such “actual injury” was not confined to out-of-pocket loss, but may include “impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering.” 418 U. S. at 850 . After then determining that Gertz was neither a public official nor a public figure, the Court reversed and remanded the case for a new trial.

The Court’s shift in emphasis from First Amendment protection of free expression to the state interest in protecting the reputation of the plaintiff who is a private individual represented a rejection of the rationale underlying the plurality opinion in Rosenbbom. In sum, the Court held that a private individual deserves a greater degree of protection than does a public figure because the ⁵⁸⁸ latter usually has a greater access to the media to rebut defamatory charges and, unlike the private individual, usually has chosen to run “the risk of closer public scrutiny.” 418 U. S. at 344 . Thus, the Rosenbloom test, whether the matter is of “public or general” concern, did not afford sufficient recognition of the legitimate state interest in enforcing a remedy for injury to a private person’s reputation. Additionally, the Gertz Court found the Rosenbloom plurality approach unacceptable because it imposed on courts the task of deciding on an “ad hoc” basis what issues were of “general or public interest,” a task which the Court doubted the wisdom of committing “to the conscience of judges.” 418 U. S. at 346 .

The Court of Special Appeals read the Gertz holdings to apply only when a private person is defamed as to a matter of general or public interest, and not when the reputation of a private individual is tarnished by a report of a private matter not of general or public concern, that is, a purely private defamation. 27 Md. App. at 90 . Hence, the court concluded that since the case before it involved neither a public individual confronted with the New York Times privilege, nor a matter of public or general interest, it was “free to define the limits of recovery,” 27 Md. App. at 90 , because “[sjtate law [was] in full force and effect.” Id. at 93 . Accordingly, the Court of Special Appeals did not apply Gertz and, since it was of the view that there was sufficient evidence of common law malice to defeat the conditional privilege protecting the defendant, reversed and remanded for a new trial. We are not fully in accord with these views.

The Court of Special Appeals’ conclusion that the Gertz holding applies only where a private person is defamed in regard to a matter of public or general interest finds no support in the Gertz decision itself. To the contrary, the opinion for the Court by Mr. Justice Powell is punctuated with manifestations that the “public or general interest” test was being jettisoned. 418 U. S. at 343-44 . The Court stated that the “extension of the New York Times test proposed by the Rosenbloom plurality would abridge [the] legitimate state interest to a degree that [it found] unacceptable,” and ⁵⁸⁹ declared that the “ ‘public or general interest’ test for determining the applicability of the New York Times standard to private defamation actions inadequately serves both of the competing values at stake.” Id. at 346. That Gertz was regarded as having rejected the Rosenbloom plurality opinion and as a withdrawal “to the factual limits of the pre-Rosenbloom cases” is confirmed by the concurring opinion of Mr. Justice Blackmun, 418 U. S. at 353 , which gave Justice Powell’s opinion the approval of a majority, and even more forcefully by Mr. Justice White’s dissent where he stated that “[t]he Court now repudiates the plurality opinion in Rosenbloom.... ”Id. at 378-79.

The very essence of the Gertz decision, as we noted early on, was the shift in focus from the protection of free expression, which undergirded New York Times and its progeny, including Rosenbloom , to the state interest in protecting private persons who have been defamed. It was because the Rosenbloom approach did not afford sufficient recognition of this state interest that the Gertz Court found it unacceptable and sounded the death knell for the “public or general interest” test as a constitutional requirement. See Anderson, Libel and Press Self-Censorship, 53 Texas L. Rev. 422, 445 (1975); Brosnahan, From Times v. Sullivan to Gertz v. Welch: Ten Years of Balancing Libel Law and the First Amendment, 26 Hastings L. J. 777, 791-92 (1975); Comment, The Law of Libel — Constitutional Privilege and The Private Individual: Round Two — Gertz v. Robert Welch, Inc., 12 San Diego L. Rev. 455 , 466 (1975); Note, Gertz v. Welch: Reviving the Libel Action, 48 Temp. L. Q. 450, 459 (1975).

The Court of Special Appeals rested its holding that the Gertz rules apply only when a private person is defamed concerning a matter of public or general interest on the rationale of New York Times, that in response to the command of the First Amendment a constitutional privilege is necessary to protect uninhibited public debate. The Court of Special Appeals reasoned that this rationale applies to private persons only when they are defamed in regard to matters of public or general interest, that public debate is ⁵⁹⁰ not fostered when the subject matter is private. As we have stressed, however, this overlooks the gravamen of the Gertz holding embodied in the changing emphasis from the value of uninhibited debate to the state interest in protecting private persons “for the harm inflicted on them by defamatory falsehood.” 418 U. S. at 341 . Undeniably, the Gertz holding effects sweeping changes in the law of defamation.

The Court seeks to eliminate in cases of private plaintiffs the threat of self-censorship, the very objective of the New York Times rule, but instead of shielding the media from private plaintiffs with the New York Times privilege, it does so by protecting them against strict liability as well as presumed and punitive damages. Beyond this, the states are free to fashion their own rules. We read Gertz to apply to actions brought by private persons regardless of whether the subject matter of the defamation is one of public or general interest. Accordingly, as a matter of federal constitutional law, those defendants who are protected by Gertz would be insulated from strict liability, and presumed and punitive damages in any defamation case maintained by a private person.

II This case also presents the question whether a non-media defendant, such as Jacron, is within the class of defendants to be afforded the protection of the Gertz holding. 6 It is plain that the holding in Gertz was limited to media expression. See Brosnahan, supra, 26 Hastings L. J. at 792-93; Frakt, The Evolving Law of Defamation: New York Times Co. v. Sullivan to Gertz v. Robert Welch, Inc. and Beyond, 6 Rutgers-Camden L. J. 471, 507-509 (1975); Nimmer, Introduction — Is Freedom of the Press a Redundancy: What Does it Add to Freedom of Speech? 26 Hastings L. J. 639, 649-50 (1975); see also Restatement (Second) of Torts § ⁵⁹¹ 580B, Comment e (Tent. Draft No. 21,1975). Apart from the fact that the defendant in Gertz was a member of the media, whose defamatory act consisted of the publication of a libelous statement, the majority opinion is riddled with references to “publishers and broadcasters,” “the press and broadcast media,” and “the news media.” Similar terms appear in the concurring opinion of Justice Blackmun and the dissenting opinions of the Chief Justice and Justice Brennan.

Justice White stands alone in his view that Gertz applies to all defamation actions. We must nevertheless make an informed prediction as to whether at some future date the Supreme Court will extend the Gertz holding to defamatory expression of any kind by non-media defendants. Even if we were to decide here that the Court will not so extend Gertz, we would consider whether, in any event, we should do so as a matter of state law. The history of New York Times provides an instructive analogy.

Although that case arose in a media context, the holding contained no caveat restricting its application to media publications; nor has the Supreme Court hesitated to apply it in non-media cases. In Garrison v. Louisiana, 379 U. S. 64 , 85 S. Ct. 209 , 13 L.Ed.2d 125 (1964), the defamatory comments were made during a press conference, and in St. Amant v. Thompson, 390 U. S. 727 , 88 S. Ct. 1323 , 20 L.Ed.2d 262 (1968), they were made during a televised speech. In both instances, the media merely served as a vehicle for the defamatory statements by the defendants and the Court focused on free speech and public debate rather than on the protection of the media. In Henry v. Collins, 380 U. S. 356 , 85 S. Ct. 992 , 13 L.Ed.2d 892 (1965), the Court in a short per curiam opinion applied New York Times where an individual who had been arrested by a police chief charged in a letter to a deputy sheriff and in a statement read to several wire services that the arrest was a “diabolical plot.” Similarly, in non-media cases arising from labor disputes the Court has found the constitutional privilege applicable.

Letter Carriers v. Austin, 418 U. S. 264 , 94 S. Ct. 2770 , 41 L.Ed.2d 745 (1974); Linn v. Plant Guard Workers, 383 U. S. 53 , 86 S. Ct. 657 , 15 L.Ed.2d 582 (1966). A number of lower courts have also ⁵⁹² applied the New York Times standard in non-media cases, 7 and one court has applied New York Times in an action by an officer of a private club for defamations arising out of communications between club members concerning his activities. Evans v. Lawson, 351 F. Supp. 279 (W.D. Va. 1972). Nor do we discern any persuasive basis for distinguishing media and non-media cases.

The rationale for the application of a constitutional privilege in New York Times, Curtis and Gertz is that the defense of truth is not alone sufficient to assure free and open discussion of important issues. Issues of public interest may equally be discussed in media and non-media contexts, and the need for a constitutional privilege, therefore, obtains in either case. See Restatement (Second) of Torts § 580A, Comment h (Tent. Draft No. 21, 1975); but cf. Nimmer, supra.

The proposition that the press enjoys greater rights than members of the public generally was rejected by the Supreme Court in Pell v. Procunier, 417 U. S. 817, 834-35 , 94 S. Ct. 2800 , 41 L.Ed.2d 495 (1974), where a newspaper argued that it had a constitutional right to interview inmates of a state correctional system despite a regulation prohibiting such contacts. Wholly apart from any possible Supreme Court holding in the future based on constitutional grounds, we conclude as a matter of state law that the Gertz holding should apply to media and non-media defendants alike, and to both libel and slander. As one commentator stated: “. . . Regardless of constitutional strictures, it would be a bizarre result as a matter of tort law to hold individual defendants liable without fault while the media were liable only for negligence.

The standard tort rationale for strict liability is that it ⁵⁹³ serves to spread the cost of injury over all the users of a given product; in short, it is a theory of enterprise liability. Further, an individual’s defamatory statement is, on the whole, likely to create a smaller risk of harm than a media publication. Finally, the media are more likely to be aware of the risk of liability, and thus more likely to insure against it. . . .” The Supreme Court, 1973 Term, 88 Harv. L. Rev. 41 , 148 n. 52 (1974).

Any rule according less favorable treatment to certain types of non-media defendants might well present “difficult questions concerning the roles of the press and other speakers in our society.” Anderson, supra, 53 Texas L. Rev. at 442-43 n. 95. Furthermore, most non-media private defamations arise in the context of one of the common law privileges; “[t]he completely gratuitous private defamation is rare.” Thus, experience suggests that liability without fault is unusual in non-media private