(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued October 24, 1994 -- Decided March 15, 1995
Garibaldi, J., writing for the Court.
On Sunday, August 21, 1988, The Record published a special report by its Special Investigative News
Editor and staff writer, Bruce Locklin that accused Turf Lawn Mower Repair, Inc., (Turf) and its owner and
president, John L. Gloria, of deceptive business practices that "ripped-off" customers. Locklin quoted former
employees, former customers and a competitor to demonstrate and support the allegations of deceptive
business practices at Turf. Readers of Locklin's articles were informed that customers paid for more than
they received, that Turf used old parts but charged customers for new parts, and that customers were
charged for work that was never done. Locklin's article also described three independent tests conducted by
The Record, in which Turf recommended or performed unnecessary work.
On January 10, 1989, Gloria and Turf (collectively, plaintiffs) filed suit against The Bergen Record
Corporation, which publishes The Record and The Sunday Record; the papers' editor, the publisher, Locklin,
and Mary Anne DeMarco, an investigative researcher (collectively, defendants), alleging that: defendants had
committed libel by maliciously publishing a news article about plaintiffs; defendants had slandered plaintiffs
by quoting Turf's former employees who made false and malicious statements to injure plaintiffs' good name;
and defendants intentionally interfered with plaintiffs' prospective business advantage (loss of prospective
customers and income) and Gloria had suffered mental anxiety, emotional distress, and embarrassment as a
result of the alleged tortious conduct of defendants.
At the conclusion of discovery, defendants moved for summary judgment, contending that plaintiffs
had failed to demonstrate that defendants acted with actual malice in publishing the investigative report. The
trial court applied the actual-malice standard of proof because plaintiffs had conceded its applicability, and
granted the motion, finding that plaintiffs failed to raise a genuine issue of actual malice. The Appellate
Division affirmed the grant of summary judgment to defendants, finding that the sale of lawn mowers is a
subject of legitimate public interest and, thus, the actual-malice standard applied. The concurring judge
found that because plaintiffs had conceded the applicability of that standard, it was unnecessary to determine
whether Turf's business involved a matter of legitimate public interest.
The Supreme court granted plaintiffs' petition for certification to determine the appropriate standard
of proof for businesses in a defamation action.
HELD: In a defamation action, the negligence standard applies to businesses involved with an everyday
product or service, whose practices do not constitute consumer fraud, impinge on the health and
safety of New Jersey citizens, or comprise activity within a highly-regulated industry. However, to
protect the public interest and the press, an actual-malice standard of proof will be imposed on an
ordinary business when the media's allegations of consumer fraud, if true, would constitute a
violation of the Consumer Fraud Act.
1. The public-policy considerations behind the actual-malice standard demonstrate that courts should
not impose such a standard on every business. Nor has it been demonstrated that the failure to apply that
heightened standard on businesses will have a chilling effect on the press. (pp. 10-14)
2. In defamation actions brought by a private person, the actual-malice standard is applied in order to
protect speech that affects the health and safety of the public, or involves a highly regulated industry. That
heightened standard, however, was never intended to extend to all consumer investigative reporting. While
the actual malice standard should continue to apply to businesses that are of inherent public concern, it
should not apply to businesses whose products or services do not intrinsically involve a legitimate public
interest, such as a business that sells and repairs lawn mowers. (pp. 14-25)
3. Ordinary businesses are neither traditional public figures nor do they engage in activities that
constitute traditional matters of public concern. As such, the negligence standard best balances the interests
of the public in preserving an uninhibited, robust, and free press and the interests of a private individual and
a business in preserving their reputation and good name. Of course, the public has a legitimate interest in
any business charged with criminal fraud, a substantial regulatory violation, or consumer fraud that raises a
matter of legitimate public concern. In those instances, the actual-malice standard will apply, regardless of
the type of business involved. Here, Turf's business would trigger the negligence standard, unless the acts
alleged by The Record constitute consumer fraud that raises a matter of legitimate public concern. (pp. 25-28)
4. What constitutes consumer fraud depends generally on whether the alleged activities of the business
would be actionable under the Consumer Fraud Act (Act). If the court determines that substantially all the
allegations set forth in the article, if true, would support a consumer fraud complaint, then the actual-malice
standard will apply. To constitute consumer fraud sufficient to trigger the heightened standard, the business
practice in question must be "misleading" and stand outside the norm of reasonable business practice in that
it will victimize the average consumer, and thus directly involve a matter of legitimate public concern. The
actual-malice standard applies if the article read as a whole and drawing all reasonable and normal
inferences, describes conduct that would lead an average reader to conclude that the owner engaged in
business practices that were unconscionable, misleading, deceptive, and reflecting bad faith. (pp.31-34)
5. Locklin's accurate reporting of interviews with customers who had filed complaints with the Better
Business Bureau, except for the Clansky interview, illustrate only bad employee attitude and discourtesy,
sloppy business practices, and poor business judgment. Locklin's failure to disclose in the article that the
four former employees he interviewed had been fired casts doubt on his use of their statements to support
allegations of consumer fraud. Moreover, the statements made by Turf's competitor offer some
corroborative evidence that Turf's conduct constituted consumer fraud but would not, alone, support a
consumer fraud claim. However, Locklin's reporting of Turf's conduct during the second and third tests
could lead an average reader to conclude that Turf's business practices were misleading, deceptive, and in
violation of the Act. Turf's rebuilding of the carburetor in a mower that was in good condition and the
installation of new points in a machine that did not need points, in conjunction with the second test, is
conduct sufficient to support a claim that Turf committed consumer fraud under the Act. (pp. 35-42)
6. Because Locklin's article described sufficient uncontradicted assertions of Turf's conduct that, if true,
would support a claim of consumer fraud, actual malice was the appropriate standard for summary judgment.
In this case, summary judgment was properly granted because plaintiffs failed to establish by clear and
convincing evidence that defendants published the article either with knowledge that the statements were
false or with reckless disregard of whether they were false. Thus, plaintiffs failed to prove that Locklin
demonstrated actual malice in his reporting. (pp. 42-45)
The Court AFFIRMS the judgment of the Appellate Division and the trial court's order granting
defendants' motion for summary judgment for the reasons expressed in this opinion.
POLLOCK, J., concurring, in which JUSTICE O'HERN joins, agrees with the majority that the
Bergen Record did not publish either with knowledge that the facts in the subject articles were false or with
reckless disregard for the truth or falsity of those facts. However, unlike the majority, Justice Pollock would
stop there because he believes the majority opinion points in too many directions to be followed
unquestioningly.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER and STEIN join in JUSTICE
GARIBALDI'S opinion. JUSTICE POLLOCK filed a separate concurring opinion in which JUSTICE
O'HERN joins. JUSTICE COLEMAN did not participate.
SUPREME COURT OF NEW JERSEY
A-
27 September Term l994
TURF LAWNMOWER REPAIR, INC.,
a New Jersey corporation and
JOHN L. GLORIA,
Plaintiffs-Appellants,
v.
BERGEN RECORD CORPORATION,
BRUCE LOCKLIN, MARY ANNE
DE MARCO, DAVID HALL, AND
BYRON CAMPBELL,
Defendants-Respondents,
and
EDWARD MITCHELL, d/b/a Eddie's
Power Equipment, MARK WINNERS,
ROBERT VROEGINDAY, DOUGLAS
LIVINGSTON, JOHN DOE and
RICHARD ROE, INC.,
Defendants.
Argued October 24, l994 -- Decided March 15, 1995
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
269 N.J. Super. 370 (l994).
Richard E. Brennan argued the cause for
appellants (Shanley & Fisher and Mark P.
Denbeaux, attorneys; Mr. Brennan, Mr.
Denbeaux, and Joseph M. Cerra, on the
briefs).
Peter G. Banta argued the cause for respondents (Winne, Banta, Rizzi, Hetherington & Basralian, attorneys; Donald
A. Klein and Craig L. Levinsohn, on the
brief).
Thomas J. Cafferty argued the cause for
amicus curiae, New Jersey Press Association
(McGimpsey & Cafferty, attorneys; Mr.
Cafferty and Arlene M. Turinchak, on the
brief).
The opinion of the Court was delivered by
GARIBALDI, J.
This defamation appeal involves two newspaper articles that
accused plaintiffs, Turf Lawnmower Repair, Inc., (Turf) and its
owner and president, John L. Gloria, of deceptive business
practices that "ripped off" customers. In this appeal we
determine whether actual malice is the appropriate standard for
all businesses, or whether negligence is the more appropriate
standard of proof in defamation actions that involve businesses
whose activities do not concern matters of public health or
safety, do not constitute consumer fraud, or whose businesses are
not subject to substantial government regulations.
On Sunday, August 2l, l988, The Record published a special report by its Special Investigative News Editor and staff writer, Bruce Locklin, entitled, "A clip joint for lawn mowers, Tests, ex-workers reveal Teaneck shop deceives, overcharges." A sub-article entitled "Looking for honesty with a faulty machine" accompanied the lead article.
The lead article's author was Locklin, who characterized Gloria, the owner of Turf Lawn Mower Repair, as "fiercely
ambitious." "[H]e set out to become a millionaire by age 30 and
later run for Congress." Locklin also reported that Gloria, then
age twenty-nine, had made his first million. Locklin then wrote:
But his success is flawed. Though his shop
did about l2,000 repair jobs in the past
three years, former employees estimate that
60 percent to 80 percent were rip-offs.
Most customers who paid for tune-ups got
little more than an oil change and a new
spark plug -- for which they typically were
overcharged $20 to $30. Some paid for new
parts and got used parts from junked mowers.
Many were charged for repair work that was
never done.
Independent tests conducted by The Record
produced similar results. Reporters brought
in mowers in need of simple repairs. Each
time, Turf recommended or performed
unnecessary work.
Locklin continued, quoting former customers, former
employees, and a competitor:
There's a pervasive rudeness at Turf, where
employees often add insult to injury. One
customer, Andrea Daglezt of Bogota, said the man
behind the counter talked to her as if she were an
idiot. "That guy almost had my fist down his
throat," she said. "He was so nasty. . . ."
Winners is a former Turf mechanic who stayed
on for about a year after Gloria became boss.
"When he worked for Bob, he was a nice guy.
As soon as he took over, everything changed,"
Winners said. "I ended up quitting because
. . . I was tired of customers getting ripped
off."
Winners said Gloria made bogus tuneups
standard procedure. No longer did mechanics
routinely install new points and condensers
or rebuild carburetors by replacing worn
parts.
Instead, the mowers got nothing more than
fresh oil, a spark plug, and a quick cleanup.
Labor time dropped from 30 or 40 minutes per
mower to about 5 minutes.
Three other former mechanics, who each worked
at Turf for about two years during the l980-86 period, said they had the same
instructions: Do the fake tuneups -- but at
full tuneup prices.
Mowers often broke down later in the season,
the mechanics said, generating more repair
work and opportunities to sell new mowers.
Bob Vroeninday, 27, now an auto mechanic in
Ridgefield Park, said that when he was
working for Turf in l982 and l983, Gloria
used parts from junked mowers for repair work
-- without telling customers.
"On a cracked flywheel, he'd use an old one
and charge you for a new one because that
stuff you can't see," Vroeninday said.
Winners and Vroeninday said Gloria often lied
to customers who brought in mowers that had
jammed after hitting something solid. He
would say the mower's crankshaft needed to be
straightened when, in fact, the machine
needed only a small part called a keyway.
Its price? About $l.
"A job that should have cost $20 would cost
about $90," Vroeninday said.
If a customer spotted a rip-off and
complained, Gloria blamed his workers.
Doug Livingston, a Turf mechanic from l984 to
l986, recalled how Gloria tried to make him
the scapegoat to appease an angry customer.
"He immediately turned around and pointed at
me and said, 'This is the guy who worked on
it. It's not my fault he didn't do his
job.'"
Livingston, who now works at a Fair Lawn shop, said Gloria sometimes got vindictive if a customer became impatient. "He would get
mad at him and just kick the machine in the
back and say, 'Don't touch that for a week.'"
One customer got sick of being told "we're
working on it" for more than a month. Ron
Broking, who owns Ronnie's Restaurant in
Palisades Park, went around back and found
his mower untouched.
"It never, never got looked at," Broking
said. "That's what burned me up because it
was a lie." Broking packed his mower in his
car and took it to another shop.
Mel Clansky of New Milford had a tougher time
of it. He paid Turf $54 to fix his electric
mower. But when he took it home, it still
didn't work. Clansky took it back to Turf
and, while waiting, bought a new machine for
$l50. Turf called and wanted $200 to repair
the old machine.
Clansky just wanted the mower returned, but
Turf couldn't find it. He gave up in
disgust.
"I wasn't going to bother taking the time off
to go to small claims court," Clansky said.
"It was unbelievable."
After these lengthy assertions, Locklin commented on The
Record's tests:
[T]ests conducted by The Record produced
evidence of systematic rip-offs at Turf.
Reporters took mowers there three times.
Turf employees misdiagnosed problems,
recommended work that wasn't needed and
charged for work that wasn't done. . . .
The Record's tests at Turf started in June
with a Lawnboy machine that needed carburetor
repair. Turf kept the machine three weeks,
charged a $20 diagnostic fee, and said it
couldn't be fixed.
A Turf salesman offered to take the $20 off the price of a new mower, saying that even
the manufacturer couldn't fix the Lawnboy.
He pointed to Turf's standard tuneup price
and said, "We could have got you for $50 or
$60."
A reporter took the mower to a Lawnboy dealer
in Nanuet, N.Y., where it was repaired and
tuned up. Later, a second reporter took the
same machine back to Turf. This time the
spark plug clamp had been disconnected, and
the reporter said she couldn't get the
machine started.
Turf kept the machine another three weeks,
charged a $20 diagnostic fee, and recommended
an unnecessary $60 tuneup.
In the third test, a reporter took a Bobcat
mower in good working condition to Turf.
Again, the spark plug clamp was pulled loose
so the machine wouldn't start.
Turf kept the machine four weeks and charged
$63 for a tuneup. A Turf mechanic said he
rebuilt the carburetor and installed new
points. But the mower has a solid-state
ignition: It has no points.
Earlier in the article, Locklin described Gloria's response
when Gloria agreed to an interview with him and his investigative
researcher, Mary DeMarco. When Gloria was told about the
results of The Record tests, Locklin wrote Gloria confessed that
"his quality controls slipped this year because he was heavily
involved in other investments and politics." Locklin quoted
Gloria as saying: "`I had my fingers in so many pots that they
were getting burned.'" Locklin had referred to Gloria's
potential involvement in "revolutionizing" the lawn mower repair
industry earlier in the article.
In addition to detailing Gloria's political work for then
presidential candidate Jack Kemp, Locklin also highlighted
earlier in the article some inspirational elements of Gloria's
success story.
His father is a postman, and his mother is a
waitress. He grew up in New Milford, a few
blocks from the [Turf] mower shop. He got a
job there when he was l4. By the time he
graduated from Ramapo College at age 20, he
was managing the place. Gloria had planned
to go to law school, but Bob Engel, the mower
shop owner, offered to sell the business.
Gloria went for it.
At the beginning of the article, Locklin emphasized the Small
Business Administration's selection of Gloria as New Jersey's
young entrepreneur of l986.
In a sub-article, Locklin explained his method, logic, and
results of the loose-spark-plug test conducted at Turf and at
eleven other shops on one occasion. Of the twelve, six shops
identified the rigged problem, Turf and five other shops did not.
Locklin characterized the test as "Bozo-with-a-mower." In that
sub-article Locklin concluded:
A reporter took the same machine to Turf Lawn
Mower Repair in Teaneck and told the same
story. Turf said the mower probably needed a
tuneup. The reporter left the mower. Four
weeks later, the mower was ready, its spark
plug cap in place. The bill was $63.
On January l0, l989, on his own behalf and on behalf of Turf, Gloria, acting as president and sole stockholder of Turf, filed a three-count complaint against The Bergen Record Corporation, which publishes The Record and The Sunday Record newspapers; David Hall, editor; Byron Campbell, publisher; Bruce Locklin, Investigative News Editor; and Mary Anne DeMarco, investigative researcher. In that complaint plaintiffs alleged that defendants had maliciously published a news article about plaintiffs (count one -- libel); that Mark Winners, Robert Vroeginday, and Douglas Livingston (Turf's former employees) had given false and malicious statements to defendants to injure plaintiffs' good name (count two -- slander); and that because of the tortious conduct of defendants and former Turf employees, plaintiffs had suffered the loss of prospective customers and income and Gloria had suffered mental anxiety, emotional distress, and embarrassment (count three -- intentional interference with prospective business advantage). In August of l990, plaintiffs also filed a complaint against a competitor in the business, Edward Mitchell doing business as Eddie's Power Equipment (Mitchell), claiming that Mitchell had cooperated with Locklin in gathering information that had appeared in The Record article to destroy plaintiffs' business. All claims against the former Turf employees were dismissed later by consent.
After extensive discovery, defendants and Mitchell moved for
summary judgment, which the trial court granted. Mitchell's
motion is not before us. In granting defendants' motion, the
trial court held:
For the purposes of summary judgment, this
court accepts plaintiff's version of any
contradicted facts. This court accepts that
in retrospect the tests were unfair, the
informants biased, and the questions loaded.
Nevertheless, the comments of each individual
to Bruce Locklin were highly detailed and
cumulatively very similar. There was no
allegation of deliberate knowledge of
falsehood but of reckless disregard.
The trial court applied the actual-malice standard because
plaintiffs had conceded its applicability. Although concluding
that plaintiffs had failed to establish actual malice, the trial
court stated:
Here, although the methods employed may have
been negligent or even grossly negligent, the
notes and interviews of Locklin are
sufficiently detailed and cumulatively are
specific and corroborative.
This court is mindful of the article's
detrimental impact on plaintiff. Viewed from
the perspective of the justice system,
plaintiff did not get a fair trial before the
verdict of Locklin was published in The
Record. Yet, this court must be mindful of
the importance of a free press to our society
and the reasons underlying the tremendously
difficult standard imposed by our Supreme
Court in defamation cases.
Plaintiff fails to raise a genuine issue of
actual malice and summary judgment is
granted.
The Appellate Division affirmed the trial court's grant of
summary judgment to defendants.
269 N.J. Super. 370 (1994). A
majority of that court found that the sale and repair of lawn
mowers is "a subject of legitimate public interest." Id. at 376.
The court found no difference between a business that provides
goods and one that provides services. Ibid. The concurring
judge affirmed the trial court because she concluded, as had the
trial court, that plaintiffs had conceded the applicability of
the actual-malice standard. Thus, the concurring judge found it
"unnecessary to decide whether [petitioners'] business involving
the sale and repair of lawn mowers is a matter of legitimate
public interest." Id. at 380. (Wefing, J.A.D., t/a,
concurring). We granted plaintiffs' petition for certification.
l
36 N.J. 30 (l994).
We first address whether actual malice is the appropriate standard of proof in defamation actions involving any business whose activities are the subject of a newspaper article. The majority of the Appellate Division held that the actual-malice standard applies because "any person or business which opens itself to the general public thereby subjects itself to the scrutiny that naturally comes with the attention it seeks, and thus creates a subject of legitimate public interest." 269 N.J. Super. at 376. Plaintiffs contend, however, that the imposition of the actual-malice standard of liability is inappropriate. To
subject the local shoemaker, corner newspaper stand owner, and
other similarly situated business owners to such a heightened
standard of proof places an impossible burden on them. Most
local businesses and their owners do not voluntarily thrust
themselves into public controversy merely by opening a business.
Nor do they have the prominence or financial ability to present
their cases effectively to the public if unfairly or falsely
attacked by the media. Defendants, however, contend that
imposition of the actual-malice standard is needed to protect the
free flow of information.
An examination of the law of defamation discloses that such
a broad privilege is unnecessary and strikes an improper balance
between the public's interest in preserving an uninhibited,
robust, and free press and in protecting the good name and
reputation of a business and its owner. Reviewing the public-policy considerations behind the actual-malice standard
demonstrates that courts should not impose it on every business.
Nor will the failure to apply the higher standard of actual
malice on such businesses have a chilling effect on the press.
For years most state defamation laws gave redress to a
defamed private person for proving only that a false publication
subjected "him to hatred, contempt, or ridicule." See Gertz v.
Welch, Inc.
418 U.S. 323, 370,
94 S. Ct. 2997, ___,
41 L. Ed.2d 789, 822 (1974)(White, J., dissenting). In New York Times Co. v.
Sullivan, (New York Times), however, the United States Supreme
Court placed limits on state defamation law and developed the
actual-malice standard for recovery by public officials.
376 U.S. 254, 279-280,
84 S. Ct. 710, ___,
11 L. Ed.2d 686, 706
(1964). Extending that standard to public figures three years
later, the Court in Curtis Publishing Co. v. Butts also extended
the privilege to defendants who write or report on non-public or
private persons 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. 130, 164,
87 S. Ct. 1975, ___,
18 L. Ed.2d 1094, 1116
(1967)(Warren, C.J., concurring). Hence, the genesis of "public
concern" in First Amendment law.
In Rosenbloom v. Metromedia, Inc.,
403 U.S. 29,
91 S. Ct. 1811,
29 L. Ed.2d 296 (l97l), a plurality of the Court further
extended the New York Times standard to all libel actions,
regardless of a plaintiff's status, so long as the defamatory
statement relates to matters of "public or general interest."
Three years later, the Court, realizing that it had extended the
requirement of actual malice too far, repudiated Rosenbloom's
"public or general interest test" for private persons. Gertz,
supra, 4l8 U.S. at 346, 94 S. Ct. at ___, 4l L. Ed.
2d at 809.
The Supreme Court recognized that because private persons lack
"access to the channels of effective communication . . . to
counteract false statements" and because they have "relinquished
no part of [their] good name[s]" by "thrust[ing] themselves to
the forefront of particular public controversies in order to
influence the resolution of the issues involved," private persons
are entitled to greater protection than public persons. Id. at
344-45, 94 S. Ct. at 3009, 4l L. Ed.
2d at 808.
The Court concluded that "the state interest in compensating
injury to the reputation of private individuals requires that a
different rule should obtain with respect to them." Id. at 343,
94 S. Ct. at ___, 4l L. Ed.
2d at 807. Thus, Gertz made it clear
that the federal constitution does not require "private persons"
to demonstrate actual malice before they can prevail in a
defamation suit against a media defendant even if the matter is
one of legitimate public concern. Nevertheless, Gertz continued
to allow each state to define its own appropriate standard of
liability for a publisher or broadcaster of defamatory falsehood
injurious to a private person. Id. at 347, 94 S. Ct. at ___, 4l
L. Ed.
2d at 809.
However, the Gertz Court did provide certain safeguards for
the press. First, the Court held that a state could not impose
liability without requiring some showing of fault. Ibid.
Second, the Court held that a state could not permit recovery of
presumed or punitive damages on a showing of less than actual
malice. Id. at 349, 94 S. Ct. at ___, 4l L. Ed.
2d at 8l0. The
Court later imposed on private-figure plaintiffs "the burden of
showing falsity as well as fault before recovering damages."
Philadelphia Newspapers, Inc. v. Hepps,
475 U.S. 767, 776, 106 S.
Ct. 1558, ___,
89 L. Ed.2d 783, ___ (1986). Moreover, as an
additional protection "`in cases raising First Amendment issues .
. . appellate court[s] must . . . make an independent examination
of the whole record' in order to make sure that `the judgment
does not constitute a forbidden intrusion on the field of free
expression.'" Milkovich v. Lorain J. Co., 497 U.S. l, 17,
110 S.
Ct. 2695, ___, lll L. Ed.2d l, l7 (l990) (quoting Bose Corp. v.
Consumers Union,
466 U.S. 485, 499, l04 S. Ct. l949, ___,
80 L.
Ed.2d 502, ___ (1984) (quoting New York Times, supra, 376 U.S.
at 284-86, 84 S. Ct. at 7l0, ll L. Ed.
2d at 686) (omission in
original). The Court also recognized that ample constitutional
safeguards protect the press adequately, and therefore concluded
that establishing another First Amendment protection for
defamatory statements made by the media was unnecessary. Id. at
l9, ll0 S. Ct. at ___, lll L. Ed.2d at l8 (holding that
statements categorized as "opinion" as opposed to "fact" are not
exempt from defamation claim).
Although each state might formulate slight variations, forty-two jurisdictions in the United StatesSee footnote 1 hold that
negligence is the standard for private plaintiffs to recover
against a media defendant even when the subject matter of the
speech is of public concern. That choice of standard is
significant because it supports our finding that the failure to
impose the actual-malice standard in every defamation action
involving a business product or service will not have a chilling
effect on the press. Neither amicus curiae, the New Jersey Press
Association, nor defendants have presented any evidence to the
contrary.
Given the size and variety of the foregoing authority, we
are unable to delineate each state's nuances in imposing such a
negligence standard. However, we discuss the standard in
California because its seminal case is so factually similar to
this case. In Brown v. Kelly Broadcasting Co.,
771 P.2d 406, 435
(1989), the California Supreme Court held that a state statute
did not contain a broad public-interest privilege for the
television station that had televised consumer affairs' reports
critical of a local home contractor. To mend the damage to her
professional reputation, the contractor sought a retraction from
the broadcasting company and an investigation from the
Contractor's State License Board. Id. at 409. The broadcasting
company refused to retract the allegations made by the homeowner
on its televised programs and claimed that it had given the
contractor an opportunity to defend herself on its second
broadcast, but she had refused to do so. Ibid. The Contractor's
State License Board refused to undertake an investigation to help
the contractor because it found no factual support for the
homeowner's televised allegations against the contractor. Ibid.
At trial, the broadcasting company won summary judgment by
claiming that it enjoyed a privilege under the California statute
as well as federal law, which allowed it to publish any story in
the public interest about a private person, regardless of its
libelous or slanderous effects, so long as it did not do so with
malice. Id. at 409-10. The California Court of Appeals affirmed
this privilege, but found sufficient evidence to question whether
the broadcasting company had acted with malice. Id. at 410.
Relying on its own statutory interpretation and law developed by the United States Supreme Court, the California Supreme Court rejected the privilege sought by the media. The Brown court also noted the following public policy considerations underlying its decision. First, it found that "the breadth of the privilege sought by defendants is difficult to overstate." Id. at 423. It "would be so broad that it would apply to almost every defamatory communication . . . [so that] the media in every defamation action would . . . argue that the communication was a matter of public interest." Id. at 413, 423. Second, noting the overwhelming weight of authority from other states and the Restatement (Second) of Torts, § 580B (1989), which adopted the negligence standard, the Brown court saw no reason to "deny California citizens protection for their reputation equal to that provided in other states." Id. at 425. Third, the court recognized the importance of a private person's reputation, and remembered that "`the defamation action, properly limited, also plays an important role in a free society as it represents the individual's sole remedy against the occasional excesses of the print and electronic media which often have vast resources to inflict untoward damage upon an individual.'" Ibid. (quoting Miami Herald, supra, 423 So. 2d at 387). Fourth, the Brown court recognized the substantial constitutional protections that exist for the news media. Id. at 428-29. Fifth, the court saw no need to expand the privilege of the media because the negligence
standard is not a standard of strict liability, and a journalist
need act only with reasonable care to avoid liability under a
negligence standard. Id. at 430. Sixth, the defendant did not
show that the "free flow of information has been restricted even
in the slightest degree in the overwhelming number of states that
has adopted a negligence standard." Ibid. Finally, the press
can always correct its error. Id. at 431. For all those
reasons, the California Supreme Court found the negligence
standard is appropriate for private plaintiffs who have been
defamed through a story that the media considers of public
concern. Id. at 423.
Currently, only three jurisdictions use the actual-malice
standard in defamation actions brought by private persons:
Colorado, Indiana, and our own state. Commentators explain those
three deviations from the majority of states as acceptance of
Justice Brennan's reasoning in Rosenbloom, supra, that the public
nature of the disputed statement, rather than the public status
of the plaintiff, should trigger the standard of actual malice.
Ronald Smolla, Law of Defamation, 3-28 (l988). However, as we
previously explained, that reasoning has been repudiated by the
Supreme Court in Gertz and is not followed in most states.
Indeed, federal courts have cast doubt on the wisdom in both
Colorado and Indiana of applying the actual-malice standard so
broadly. See Sunward Corp. v. Dun & Bradstreet, Inc.,
811 F.2d 511, 526-529 (10th Cir. 1987) (quoting Kuhn v. Tribune-Republican
Publishing Co.,
637 P.2d 315, 319 (Colo. 1981)) (hinting that the
Colorado Supreme Court has misplaced the actual-malice standard
developed for "`good faith critics of public officials'"); see
supra note 1 (noting that federal court convinced the Alaska
Supreme Court to lower its standard to negligence).
Judges in both Indiana state and federal courts have noted
the lack of acceptance of Indiana's standard and reasoning but
have refused to abandon the standard because the Supreme Court of
Indiana has not expressed disapproval of it. Jean v. Dugan,
20 F.3d 255, 262 (7th Cir. 1994); Chang v. Michiana Telecasting
Corp.,
900 F.2d 1085, 1087-88 (7th Cir. 1990).
The law of New Jersey parallels the complex, yet ever-changing, law of defamation in both federal and other state courts. As we have stated previously, "The evolution of the law of defamation reflects the tension between society's competing interests in encouraging the free flow of information about matters of public concern and in protecting an individual's reputation." Dairy Stores, Inc. v. Sentinel Publishing Co., 104 N.J. 125, 135-36 (1986).
We are committed to the principle that debate on public issues should be uninhibited, robust, and wide open. Sisler v. Gannett Co., l 04 N.J. 256, 266 (1986); see Dairy Stores, supra, 104 N.J. at 138. However, we have also recognized that "`[t]he law of defamation embodies the important public policy that
individuals should generally be free to enjoy their reputations
unimpaired by false and defamatory attacks.'" Costello v. Ocean
County Observer,
136 N.J. 594, 606 (1994)(quoting Swede v.
Passaic Daily News,
30 N.J. 320, 331 (1959)).
To balance these public policy considerations, the
jurisprudence developed by this Court has followed the United
States Supreme Court's delineation of the class of defamation
plaintiffs into public or private figures. In Sisler, supra, we
termed this balancing test one between the "warring interests of
free speech and individual reputation." 104 N.J. at 265. As in
many federal cases since Gertz, the designation of an individual
plaintiff as a public or private figure became the critical
determination in many defamation actions. E.g., Costello, supra,
136 N.J. at 612-14; Sisler, supra, 104 N.J. at 269-70.
Underlying that focus was "the idea that individuals who have
knowingly and voluntarily exposed themselves to public commentary
can more fairly be required to shoulder a heavier burden of proof
in order to establish actionable defamation." Sisler, supra, 104
N.J. at 265.
After Gertz, the Supreme Court noted that the type of speech
does have relevance, for it is speech on matters of public
concern that is at the heart of the First Amendment's protection.
Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc.,
472 U.S. 749,
758-59,
105 S. Ct. 2939, ___, 86 L. Ed.2d 593, 602-03 (l985).
Thus, to accompany our delineation of defamation plaintiffs, this
Court also developed a classification for the subject matter of
the speech involved based on public policy considerations. That
classification for defamation actions is the heart of the
controversy before us. Following N.Y. Times, supra, we sought to
protect speech that relates to a matter of legitimate public
concern because of "`a profound national commitment to the
principle that debate on public issues should be uninhibited,
robust, and wide-open.'" Kotlikoff v. The Community News,
89 N.J. 62, 73 (1982)(quoting N.Y. Times, supra, 376 U.S. at 270, 84
S. Ct. at 721, 11 L. Ed.
2d at 701). However, we also found
speech not pertaining to matters of public concern as resting
"more lightly on the free speech/reputation interest scale."
Sisler, supra, l04 N.J. at 266.
In Dairy Farms and Sisler, we constructed a test to reflect
public policy considerations often ignored in other states. See
l04 N.J. at l4l-46; l04 N.J. at 279. In those cases we sought to
protect speech that affects the health and safety of the
citizenry, or involves a highly regulated industry. However, a
close reading of Dairy Stores and Sisler discloses that we never
intended to extend the heightened standard of actual malice to
all consumer investigative reporting. In Dairy Stores, we
extended the heightened standard of proof only to defamatory
communications regarding activities that affect the public
interest. The Court recognized
that not everything that is newsworthy is a
matter of legitimate public concern, and that
sorting such matters from those of a more
private nature may be difficult.
Some courts have developed criteria for
determining whether the activities and
products of corporations constitute matters
of public interest. As previously indicated,
matters of public interest include such
essentials of life as food and water.
Widespread effects of a product are yet
another indicator that statements about the
product are in the public interest. Still
another criterion is substantial government
regulations of business activities and
products.
Because the bottling and selling of drinking water was regulated by the State of New Jersey and drinking water was an essential of life, we held in Dairy Stores that the subject matter of the newspapers' articles, drinking water, was a legitimate concern of the public because of the long history of this state's regulation in that area. Id. at l45. However, this Court correctly reserved for another day the task of developing "a more complete definition of legitimate concerns of the public." Ibid.
Nor does Sisler support defendants' position. Sisler involved a retired banker who had loans from a bank of which he had been the founder and former president. A newspaper published a story asserting that the banker had received undercollateralized loans from the bank to finance his horse farm. Suing in defamation, the banker argued that he was a private person and that an ordinary-negligence standard governed.
Employing a negligence standard, a jury returned a substantial
verdict in his favor. Although we agreed that the plaintiff was
neither a public figure nor a limited public figure, we
nonetheless vacated the award, holding that an actual-malice
standard should govern. We reasoned:
Plaintiff founded [the bank], and served as
its President and Director for almost twenty
years. He was therefore undoubtedly
thoroughly and intimately conversant with all
of the public and governmental interests that
attend the banking industry. Plaintiff would
know of course that banks are regularly
examined and audited. Moreover, the
transaction itself was fraught with public
implications. Plaintiff received a large
loan from [the bank], secured by a mortgage;
this occurred shortly after his retirement
from official bank positions. Most people in
the business and commercial world would
expect that a large loan between a bank and
its founder and former president would
attract special scrutiny and examination.
See N.J.S.A. l7:9A-72 (special guidelines for
loans to bank directors or executive
officers).
Based on this factual scenario, we held that:
when a private person with sufficient
experience, understanding and knowledge
enters into a personal transaction or
conducts his personal affairs in a manner
that one in his position would reasonably
expect implicates a legitimate public
interest with an attendant risk of publicity,
defamatory speech that focuses upon that
public interest will not be actionable unless
it has been published with actual malice.
However, we noted that
our precedents have not totally subjugated
the individual's interest in the name of free
speech. For instance, the fair comment
privilege, which at common law protected
opinion on topics of public concern, also
took into account individual fairness.
Implicit in the determination of what was a
matter of legitimate public concern for
purposes of accrual of the fair comment
privilege was a fairness assessment based on
the voluntariness or expectation of exposure
and publicity.
Both Dairy Stores and Sisler involved business activities
that intrinsically implicated important public interests, a
matter of public health -- the sale of such an essential of life
as bottled water -- and an industry heavily regulated by the
government -- banks. We continue to apply the actual-malice
standard to businesses that are of such inherent public concern.
However, we do not find the actual-malice standard appropriate or
necessary with regard to businesses like the sale and repair of
lawn mowers, the repair of shoes, the cleaning of clothes, and
numerous other local businesses that involve everyday products or
services that do not intrinsically involve a legitimate public
interest.
Like federal law and the vast majority of state law, the
defamation law of our state holds the media responsible for
libelous or defamatory statements about private citizens.
Statements made by the media about public figures are treated
differently from those of private citizens. Private persons are
defined by their failure to thrust themselves voluntarily into
the public limelight and by their inability to respond to
criticism of them in the media. We find most ordinary businesses
and their owners are like private persons, and therefore,
generally, the defamation rules we apply to private persons are
equally applicable to them.
Many businesses are sole proprietorships or small
individually-owned stores, like a local "mom and pop" stationery
store, shoemaker, tailor, cleaner, or barber. Although those
stores are important in the daily life of their communities,
their owners are not "public figures." Nor do their activities
involve "matters of public concern" that the United States
Supreme Court and the vast majority of federal and state courts
have made subject to the heightened actual-malice standard of
proof. Neither the public nor the owners of those ordinary
businesses see the owners in the vortex of a public controversy
by selling their product or service to the public. Nor does our
opinion change because those businesses do limited advertising.
Most businesses do advertise if only in a local shopping flyer,
to attract customers and to succeed. Such advertising is
insufficient to thrust the business or its owner into the public
spotlight.
Moreover, most of those businesses and their owners have
neither the financial resources nor "access to the channels of
effective communication . . . to counteract false statements" to
protect their business and their livelihood from a defamatory
newspaper report. Gertz, supra, 4l8 U.S. at 344, 94 S. Ct. at
3009, 4l L. Ed.
2d at 808. They are neither traditional `public
figures' nor do they engage in activities that constitute
traditional matters of public concern. Therefore, in respect of
such prosaic and innocuous everyday businesses, we conclude that
the negligence standard best balances the interests of the public
in preserving an uninhibited, robust, and free press and the
interests of a private individual and a business in preserving
their reputation and good name.
The public does, however, have a legitimate interest in any
business charged with criminal fraud, a substantial regulatory
violation, or consumer fraud that raises a matter of legitimate
public concern. When the media addresses those issues of
legitimate and compelling public concern, the actual-malice
standard of proof will apply, regardless of the type of business
involved. In so ruling, we seek a balance between a private
person's right of privacy and the public's right to know of
various dangers in our society.
Here, we find that the sale and repair of lawn mowers is a
business that normally would trigger the negligence standard.
Certainly, the operations of a lawn-mower-repair shop are
unregulated and do not impact on any of the "essentials of life."
And the factors that motivated us in Sisler to apply the
heightened-proof standard are plainly missing from this case.
The simple business of lawn-mower repair is not imbued "with all
of the public and governmental interests that attend the banking
industry." Sisler, supra, l04 N.J. at 275. In addition, lawn-mower-repair shops are not "regularly examined and audited" by
any regulatory agency. Ibid. Accordingly, unless the acts
alleged by The Record constitute consumer fraud that concern a
matter of legitimate public interest, the negligence standard
will apply.
The New Jersey Legislature has enacted a statute that aims to protect consumers from fraud in the sale or advertisement of merchandise, New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1
to -48 (the Act). First enacted in 1960, the Legislature has frequently amended the statute to "`give New Jersey one of the strongest consumer protection laws in the nation.'" Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994) (quoting Governor's Press Release for Assembly Bill No. 2402, at 1 (Apr. l9, l97l)). The focus of the Act is the activity of a corporation that constitutes an "unlawful practice." For example, N.J.S.A. 56:8-2, dealing with fraud in connection with sale or advertisements by merchants, reads:
the act, use or employment by any person of
any unconscionable commercial practice,
deception, fraud, false pretense, false
promise, misrepresentation, or the knowing
concealment, suppression, or omission of any
material fact with intent that others rely
upon such . . . whether or not any person has
in fact been misled, deceived or damaged
thereby, is declared to be an unlawful
practice. . . .
"[T]he phrase `unconscionable commercial practice' is not defined
in the Act. Acknowledging that `unconscionability' is an
`amorphous concept obviously designed to establish a broad
business ethic,' we have defined the term as `[t]he standard of
conduct contemplat[ing] * * * good faith, honesty in fact and
observance of fair dealing.'" Meshinsky v. Nichols Yacht Sales,
Inc., ll
0 N.J. 464, 472 (l988) (quoting Kugler v. Romain,
58 N.J. 522, 544 (l97l).
In Cox, we also determined that to violate the Act a "person
must commit an unlawful practice" under the Act which we found
fell "into three general categories: affirmative acts, knowing
omissions, and regulation violations." Cox, supra, l38 N.J. at
l7. The "capacity to mislead, however, is the prime ingredient
of all types of consumer fraud." Ibid.
Hyland v. Zuback, l
46 N.J. Super. 407 (App. Div. l976),
presents an instructive example of consumer fraud. There, the
owner of a small pleasure boat complained to the Attorney General
about the owner of a business who hauled, repaired, and stored
motorboats. Id. at 409. The original agreement between the
consumer and the business owner was for work on the boat that
would cost $50 and would be finished within a few days. Ibid.
Several weeks later, the business owner phoned the consumer and
urged him to agree to replacement of an additional part. The
consumer refused. At that time the business owner assured the
consumer that "the job was progressing as planned . . . [and]
assured him that everything was fine and that he need not worry."
Id. at 414. Over one month after the parties had contracted, the
business owner presented the consumer with a bill for $468. The
business owner had not consulted the consumer about the
substantial increase. Id. at 412. At the time of pick-up, the
business owner threatened the consumer that if he did not pay the
increased bill, he would keep the boat in storage and continue to
charge him for such storage. In addition to the increased cost,
the consumer's complaint at the time of pick-up and payment was
that a part specified to be fixed in the original contract had
not been replaced. The business owner testified that the part
did not need replacement. Ibid. The consumer later discovered
that his boat was inoperable, and he spent an additional $300 and
several months returning his boat to operating condition. Id. at
413.
The Appellate Division found the cost overrun an
unconscionable practice that was an "act of a quality which the
Legislature sought to suppress" in enacting N.J.S.A. 56:8-2. Id.
at 414. Moreover, the business owner's "practice" of lulling the
consumer into a false sense of security during the extended work
with its increased cost as well as his practice of presenting the
consumer with an ultimatum when the consumer went to retrieve his
boat was more than "mere omission"; such practice constituted
deception and misrepresentation. Id. at 415. See also Levin v.
Lewis, l79 N.J. Super. l93 (App. Div. l98l) (finding violation of
Consumer Fraud Act where two consumers each originally given a
firm price for completion of work were subsequently billed more
than twice the original price).
The series of business dealings in Hyland and Levin
constituted consumer fraud. If the media publicized those
activities, the actual-malice standard would apply, as it would
for media coverage on highly regulated industries or businesses
whose activities concern of health and safety.
No hard and fast rules exist to determine whether alleged consumer fraud conduct reported in a newspaper article raises a matter of public concern sufficient to trigger the actual-malice standard. What constitutes consumer fraud depends not on the manner of investigation employed by the media to capture the story, but generally on whether the alleged activities of the business would constitute a cause of action under the Consumer Fraud Act. Moreover, the article must deal primarily with consumer fraud viewed as a whole in light of all surrounding
circumstances. If the court determines that substantially all
the allegations set forth in the article, if true, would support
a consumer fraud complaint, then the actual-malice standard will
apply.
The Act and our own jurisprudence provide a plethora of
examples of what does or does not amount to consumer fraud.
Mere puffery does not constitute consumer fraud. Nor does
charging five or five-hundred dollars more for an item than the
price charged by a nearby competitor amount to consumer fraud.
Usually, consumer fraud involves a pattern of repetitive conduct,
not separate incidents. Minor disagreements between consumer and
business owner over quality of customer service, timing of
service, or increased price is not consumer fraud. To constitute
consumer fraud sufficient to trigger the actual-malice standard,
the business practice in question must be "misleading" and stand
outside the norm of reasonable business practice in that it will
victimize the average consumer, and thus most clearly and
directly involve a matter of legitimate public concern. The
conduct of the business owners in Levin, supra, l79 N.J. Super.
l93 and Hyland, supra,
146 N.J. Super 409, supra at ___ (slip
op. at 28-30), are examples of such egregious business practices.
Our standard recognizes a distinction between consumer fraud
and mere customer dissatisfaction. We thereby seek to
accommodate the need of the public to learn of highly suspect
business practices that clearly implicate matters of public
concern, and the vulnerable position of the business owner whose
mechanic fixes three problems when a car has four problems, or
whose sales assistant is grumpy and less than helpful to a
customer who requires immediate service. That business owner may
not run the best business in the area, but the owner is not
guilty of consumer fraud. And if a media report defames a
business owner's reputation based on grounds that fall short of
conduct that violates the Act, that person need prove only
negligence on the part of the media defendant.
In establishing the applicable burden of proof (actual malice vs. negligence), we direct our analysis to whether an article reports a matter of consumer fraud that amounts to a legitimate public concern. We examine the article in its entirety assuming that all its allegations are true. If, drawing all reasonable and normal inferences, the article reads fairly and describes conduct, activities, and events that would lead an average reader to conclude that the owner engaged in business practices that were unconscionable, deceptive, misleading, and reflected bad faith, then the actual-malice standard would be applicable.
However, in drawing the reasonable inferences, we consider the evidence that the plaintiff introduces to show that the article does not set forth consumer fraud conduct that would constitute a violation of the Act. Turf vigorously opposed the
motion for summary judgment. There was extensive discovery.
Numerous and voluminous depositions, affidavits, supplemental
affidavits, and experts' reports, together with tapes and
transcripts of tapes, were filed. In determining whether
plaintiff has introduced sufficient evidence to show that the
article fails to set forth acts of consumer fraud that raise
matters of legitimate public concern, the reporter's conduct is
irrelevant. Rather, we focus on Turf's actions. Thus, our
examination of the record is similar to that undertaken by the
Supreme Court in Time, Inc. v. Firestone,
424 U.S. 448,
96 S. Ct. 958,
47 L. Ed 2d l54 (l976) (holding actual-malice standard not
applicable because a wealthy Palm Beach socialite's involvement
in a much-publicized divorce did not make her a public figure)
and Gertz, supra, 4l8 U.S. at 344-45, 94 S. Ct. at 3009, 4l L.
Ed.
2d at 808 (limiting the applicability of the actual-malice
standard to "public figures" and "public officials" who had
"thrust themselves to the forefront of particular public
controversies."), and by this Court in Sisler, supra, l04 N.J. at
268-70 (applying actual-malice standard to newspaper article
about a former bank president that concerned a matter of
legitimate public interest).
With those principles in mind, we consider whether Turf's actions, as set forth in the article, would constitute an "unlawful practice" under the Act. Generally, conduct of a
business that is alleged to be consumer fraud but does not
constitute a violation of the Act will not be deemed to raise a
matter of legitimate public concern that would trigger use of the
actual-malice standard.
To support The Records' allegations, Locklin reported that
an investigation of the Better Business Bureau's records produced
five complaints against Turf during Gloria's ten-year ownership.
Two of those complaints also appeared on the docket in small-claims court. In the article, Locklin qu
oted Ms. Daglezt, one of the small-claims plaintiffs, as stating
"that [a Turf employee] almost had my fist down his throat. He
was so nasty." Locklin interviewed, but did not quote, Doris
Green, who had also filed a complaint against Turf in small-claims court. Turf picked up two lawn mowers from her for
servicing. She alleges that a Turf employee told her at that
time that pick-up and delivery would cost $15. When a Turf
employee told her that the second lawn mower was beyond repair,
she told him that she wanted it, but a Turf employee explained
that it had b