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PERFECT FIT INDUS. v. ACME QUILTING CO.

January 10, 1980

PERFECT FIT INDUSTRIES, INC., Plaintiff, against ACME QUILTING CO., INC., Defendant.


The opinion of the court was delivered by: MOTLEY

MEMORANDUM OPINION

Perfect Fit Industries, Inc. ("Perfect Fit") has moved 1) pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, for judgment dismissing Acme Quilting Co., Inc.'s ("Acme") counterclaims notwithstanding the verdict; or, in the alternative, 2) pursuant to Rule 59 of the Federal Rules of Civil Procedure, for a new trial of those counterclaims.

 A trial of the issues arising out of three counterclaims asserted by Acme was conducted before a jury commencing on October 30, 1979. Two of the counterclaims were for common law libel, one was for common law slander. One libel counterclaim involved a letter dated March 18, 1977, from Alvin Levine, Perfect Fit's vice-president, to Elliot Stone, president of Gimbel Brothers (Gimbel's). The March 18 letter charged Acme with submitting a "doctored" sample of its product. A second libel counterclaim involved a letter dated April 18, 1977, from Levine to George Christopher, also of Gimbel's. The April 18 letter apparently suggested that Acme used "various influences" in order to promote its product. The slander counterclaim involved an alleged statement by Levine to Linda Golub, a Gimbel's employee, that Acme had supplied women to Gimbel's buyers.

 Perfect Fit moved for a directed verdict of dismissal, both at the close of Acme's case and at the close of the entire case. Those motions were denied. The case was submitted to the jury on special questions, pursuant to Rule 49 of the Federal Rules of Civil Procedure. The jury returned a verdict in favor of Acme for an aggregate sum of $ 7.5 million, consisting of.$ 2.5 million in compensatory damages and $ 5 million in punitive damages. On each of the libel counterclaims, the verdict was for $ 500,000 in compensatory damages and $ 1 million in punitive damages. On the slander counterclaim, the verdict was for $ 1.5 million in compensatory damages and $ 3 million in punitive damages.

 Motion for Judgment Notwithstanding the Verdict

 In considering Perfect Fit's motion for judgment notwithstanding the verdict, the evidence must be viewed in the light most favorable to Acme. See Armstrong v. Commerce Tankers Corp., 423 F.2d 957, 959 (2d Cir. 1970), cert. denied, 400 U.S. 833, 91 S. Ct. 67, 27 L. Ed. 2d 65 (1970). The motion should be granted only if 1) there is a complete absence of probative evidence to support a verdict for Acme; or 2) the evidence is so strongly and overwhelmingly in favor of Perfect Fit that reasonable and fair minded persons in the exercise of impartial judgment could not arrive at a verdict against Perfect Fit.

 Perfect Fit argues that the allegedly defamatory communications made by Perfect Fit to others were upon a subject in which Perfect Fit and the others both had an interest, and accordingly, the communications were protected by a qualified privilege. See Stillman v. Ford, 22 N.Y.2d 48, 53, 290 N.Y.S.2d 893, 897, 238 N.E.2d 304 (1968). This qualified privilege may be overcome and defeated by a showing by Acme that the allegedly defamatory statements were motivated by actual malice. See id. In other words, a qualified privilege negates any presumption of implied malice flowing from the allegedly defamatory statements, and places the burden of proving actual malice upon Acme. See Toker v. Pollak, 44 N.Y.2d 211, 219, 405 N.Y.S.2d 1, 5, 376 N.E.2d 163 (1978). Actual malice has been defined by the New York Court of Appeals as "personal spite or ill will, or culpable recklessness or negligence." Hoeppner v. Dunkirk Printing Co., 254 N.Y. 95, 106, 172 N.E. 139, 142 (1930). Perfect Fit argues that there was insufficient evidence to go to the jury on the question of actual malice, and therefore, that judgment notwithstanding the verdict should be granted in favor of Perfect Fit.

 In support of its position, Perfect Fit notes that at one point in the trial the court found that there was evidence from which the jury might find that Levine had acted "at least negligently, not recklessly." (Tr. 511) As Acme has correctly noted, this passage has apparently been subject to an inadvertent error by the court reporter in the preparation of the transcript. In fact, the court stated that there was evidence from which the jury might find that Levine had acted "at least negligently, if not recklessly." The version urged by Perfect Fit would be senseless, given the context of the statement including the court's denial of Acme's motion for a directed verdict and the court's instructions to the jury.

 The evidence indicating actual malice on the part of Levine, while certainly not overabundant, was sufficient to allow the question of actual malice to go to the jury. Of course, actual malice may be demonstrated by either direct or circumstantial evidence. In the case at hand, there was sufficient circumstantial evidence from which the jury might infer actual malice.

 For example, the jury might infer actual malice from the fact that Levine allegedly made statements defaming Acme in three separate communications. Repeated acts of defamation could properly be considered by the jury in determining actual malice. Moreover, the jury might consider Levine's testimony that he redrafted one letter fifteen times. The jury could consider this deliberate action as evidence possibly indicating actual malice. Finally, actual malice might be inferred from the communications themselves, to the extent that they contained statements aimed directly at Acme's reputation. As the Second Circuit has noted, "(malice) may be inferred from the very violence and vituperation apparent upon the face of the libel itself." Reynolds v. Pegler, 223 F.2d 429, 434 (2d Cir. 1955). In summary, there was sufficient evidence to go to the jury on the question of actual malice.

 Perfect Fit also argues that judgment notwithstanding the verdict should be granted on the ground that Acme failed to prove that it sustained actual injury. In Gertz v. Robert Welch, Inc., 418 U.S. 323, 349, 94 S. Ct. 2997, 3012, 41 L. Ed. 2d 789 (1974), the Supreme Court restricted "defamation plaintiffs who do not prove knowledge of falsity or reckless disregard for the truth to compensation for actual injury." The Court explained:

 
Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering. Of course, juries must be limited by appropriate instructions, and all awards must be supported by competent evidence concerning the injury, although there need be no evidence which assigns an actual dollar value to the injury.

 Id. at 350, 94 S. Ct. at 3012.

 In the case at hand, there was sufficient competent evidence from which the jury might find actual injury in the form of impairment of Acme's reputation. In particular, Elliot Stone, president of Gimbel's, wrote after receiving Levine's letter of March 18, 1977, that the letter was a 'serious accusation." While a subsequent Gimbel's investigation of Levine's allegations concluded that the allegations were false, the jury might conclude that the 'serious accusation" in the letter impaired Acme's reputation. While three witnesses testified that their opinion of Acme's reputation was not affected by the allegedly defamatory communications, a jury might choose to infer from the evidence as a whole that other individuals who received the allegedly defamatory communications would not share the views of the three witnesses and that, ...


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