The opinion of the court was delivered by: SWEET
Defendants Hustler Magazine, Inc. ("HMI") and Flynt Distributing Company, Inc. ("FDC") have brought a motion, pursuant to Rules 50(b) and 59(b), Fed.R.Civ.P., for judgment notwithstanding the verdict, or, in the alternative, for a new trial. Judgment was entered on October 17, 1985 following the bifurcated trial of this libel action brought by Robert Guccione ("Guccione"), among other things, the publisher of Penthouse, Inc. The jury awarded Guccione $1.00 in compensatory damages and a total of $1.6 million in punitive damages of which $900,000 was assessed against HMI and $600,000 against FDC. For the reasons set forth below, the defendants' motions will be denied.
I. Framework of the Litigation
This diversity action was initially brought by Guccione and Penthouse, Inc., alleging defamation, invasion of privacy and copyright infringement for the publication of a photograph and article in the November, 1983 issue of Hustler magazine, a national magazine with an avid readership. The defendants named in the complaint were Larry Flynt ("Flynt"), HMI and FDC. This action is one of several actions filed by Guccione in response to unfavorable publications which have appeared in Hustler, the most significant action being being a libel suit in Ohio in which a jury verdict was rendered against Flynt and HMI in the amount of $40 million. This verdict was affirmed with respect to the liability of Flynt and HMI while reversed as to the damages.
The course of the instant litigation has been mapped by the earlier opinions dated April 17, 1984, June 1, 1984, February 1, 1985, August 16, 1985, and September 17, 1985. During this pretrial period, the complaint against Flynt was dismissed for lack of personal jurisdiction in New York and the causes of action for invasion of privacy and copyright infringement were dismissed. The defendants also sought to dismiss the libel claim in two motions for summary judgment in which they asserted the absence of actual malice and the substantial truth of the publication. The summary judgment motions, brought respectively at the inception and conclusion of discovery, were each denied.
The trial was conducted during two weeks in September, 1985 at which time further motions were asserted and briefed on a daily basis. As noted above, judgment was entered against the defendants for a total of $1.6 million in punitive damages. Following the trial, the parties have contested the execution of judgment, and execution has been stayed to permit the defendants to pursue post trial and appellate remedies upon the posting of a bond in the reduced amount of $400,000. According to the defendants, a greater bond would have destroyed their ability to continue operations. The amount of the bond has been the subject of continuing discovery. Finally, the defendants brought the present motions which were submitted after oral argument on November 22, 1985.
A considerable amount of time, energy, and money has been expended by counsel by both sides to bring this grudge match to this court. Their ingenuity and skill has required an equivalent effort by the court to obtain a resolution. Contrary to some recent libel actions in this court, the issues presented are not of commanding public interest but rather highly personal.
II. The Libelous Statement and Applicable Standards
The short article in Hustler contained the following false statement which forms the basis for this libel action: "Considering he is married and has a live-in girlfriend, Kathy Keeton, . . . we wonder if he [Guccione] would let either of them pose nude with a man." This statement was false when published in November, 1983 since it is uncontested that Guccione obtained a divorce from his wife in 1979 and has not subsequently remarried.
As determined at trial, the above statement includes a specific accusation that Guccione was engaged in an adulterous relationship since the reference to a "live-in girlfriend" implies a sexual relationship outside of marriage. As such, the false statement lies within that category of libel per se as defined under New York law. Libel per se provides a unique right of action for those statements that "tend to expose the plaintiff to public contempt, ridicule, aversion or disgrace, or include an evil opinion of him in the minds of right-thinking persons, and to deprive him of their friendly intercourse in society." Rinaldi v. Holt, Rinehart & Winston, Inc., 42 N.Y.2d 369, 379, 397 N.Y.S.2d 943, 366 N.E.2d 1299 (N.Y. 1977). Words that impute the commission of an indictable offense comprise one category of libel per se under New York law. See Moore v. Francis, 121 N.Y. 199, 202-03, 23 N.E. 1127 (N.Y. 1890); Privitera v. Town of Phelps, 79 A.D.2d 1, 435 N.Y.S.2d 402, 404 (N.Y.App.Div. 1981). Under New York law, "[a] person is guilty of adultery when he engages in sexual intercourse with another person at a time when he has a living spouse. . . ." N.Y. Penal Law § 255.17 (McKinney's 1967). As found by the court at trial, the statement charging that Guccione had a "live-in girlfriend" implies that he was engaged in sexual intercourse with someone other than his spouse and therefore the statement does charge the commission of a crime.
The defendants urge that, while adultery is an indictable crime, such an offense is so commonplace and so infrequently enforced that it should not be considered a crime for the purposes of libel law. This argument, however, finds no support from the applicable New York authorities. See Matherson v. Marchello, 100 A.D.2d 233, 473 N.Y.S.2d 998, 1004 (N.Y.App.Div. 1984); Jordan v. Lewis, 20 A.D.2d 773, 247 N.Y.S.2d 650, 651 (N.Y.App.Div. 1964); Bergmann v. Jacobs, 157 N.Y.S.2d 50, 51-52 (N.Y.Sup.Ct. 1956). These cases do not suggest that the crime of adultery is so insignificant that such an accusation fails to support an action for libel per se. Therefore, until either the courts or legislature of New York indicate otherwise, this court is bound to accept Guccione's complaint as an appropriate pleading under the doctrine of libel per se. The consequence of this holding, critical to this action, is that Guccione is not required to prove special damages, i.e. actual damage to his reputation, in order to maintain this action. See Matherson, supra, 473 N.Y.S.2d at 1000-01; Wachs v. Winter, 569 F. Supp. 1438, 1443 (E.D.N.Y. 1983). That is fortunate for Guccione who failed to establish any such damages.
As explained in the June 1, 1984 opinion, Guccione was found to be a public figure in his libel suit in Ohio and therefore would be collaterally estopped from claiming otherwise here. Sine he has also conceded that he is a public figure, there is no question that he must meet the stringent standard of proving actual malice to recover for the false statement. New York Times Co. v. Sullivan, 376 U.S. 254, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964).
III. Judicial Review of Actual Malice
The First Amendment concerns present in this libel action alter the usual presumptions adopted when considering a motion for judgment notwithstanding the verdict. Just as an appellate court has an obligation to make an independent review of the trial record to ensure that there has been no unconstitutional intrusion on free expression. Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 510-11, 80 L. Ed. 2d 502, 104 S. Ct. 1949 (1984), so the trial court must reexamine the evidence when presented with a motion for judgment n.o.v. It is necessary therefore for "[j]udges, as expositors of the Constitution, [to] independently decide whether the evidence in the record is sufficient to cross the constitutional threshold that bars the entry of any judgment that is not supported by clear and convincing proof of 'actual malice.'" Id. at 511; see Mr. Chow of New York v. Ste. Jour Azur S.A., 759 F.2d 219, 230 (2d Cir. 1985).
A. Evidence Admitted at Trial
At trial Guccione presented evidence which tended to demonstrate both components of the actual malice standard: that the defendants actually knew that the statement was false and alternatively that the defendants published the statement in reckless disregard of its truth or falsity.
The evidence established that Flynt, the publisher of HMI, had created the article which contained the libelous statement. The article appeared in the "Bits and Pieces" section of the magazine and by deposition testimony, Bruce Helford, the editor responsible for the "Bits and Pieces" section, testified that Flynt had given him for article at an editorial meeting with instructions to include it is the November, 1983 issue of Hustler. Flynt testified that he wrote all of the article with the exception of certain changes that were made by the editorial and legal department. The legal department personnel who reviewed the article included David Kahn ("Kahn"), general counsel for HMI and Neil Adelman ("Adelman"), assistant general counsel.
Helford testified that at the time when the article was first handed to him by Flynt, he was unsure whether it could be included in the November issue since that issue had already been laid out and prepared for publication. He stated that after being told by the production department that the article could be included, the preparation of the article was done in a "big rush" and was finished within one day. Helford and another editor, Richard Lewis, testified that HMI had a policy of verifying information published in the magazine and that they employed four people in the HMI research department who checked the accuracy of proposed articles. However, the article containing the false statement was never forwarded to the research department for verification.
Helford, while he prepared the article for proper publication format, did not have any imput with regard to the substance of the article. Helford did testify that he attended a meeting with Flynt and Kahn in which Kahn suggested alterations in the text. Both Kahn and Adelman testified that they reviewed the article and proposed changes in several sentences of the article.
There was no testimony to indicate that the single statement at issue in this case was ever discussed by Flynt, Kahn and Adelman in the course of revising the article. Thus, there was no direct testimony that these participants considered the implications or veracity of the statement. On one intermediate draft of the article, the statement was underlined which indicates that it was reviewed by someone, however, there was no testimony which revealed any significance to the underlining.
Each of the three involved in the drafting -- Flynt, Kahn and Adelman -- asserted that they believed at the time they wrote the article that Guccione was married to Muriel Guccione and that he was living with Kathy Keeton, thus claiming a good faith belief in the statement. Flynt stated that he had read articles in magazines which stated that Guccione was married. He also testified that he was friends with Irwin Billman and Jim Goode, two former executives of Penthouse Magazine who were employees of Guccione. Flynt asserted that these men had informed him that Guccione was married and never told him about any divorce. According to Flynt's testimony, his discussions with Goode extended for about one week and during these conversations Goode informed him that Guccione was promiscuous. As explained by Lewis, an HMI editor, Flynt's discussions with Goode were undertaken in early 1983 pursuant to Flynt's desire to publish an investigative article examining Guccione's business and personal life. This proposal was apparently abandoned after Goode told Flynt that while willing to provide sources and information, he was not interested in writing the article.
Flynt's testimony setting forth the sources for his statement was undermined by inconsistent answers given in response to pretrial interrogatories. At that time, Flynt did not mention any of these particular sources but instead responded that the facts regarding Guccione's marital status and girlfriend were "common knowledge in the news magazine industry and most likely in the general public." Adelman and Kahn testified that their understanding of Guccione's marital status was based on unspecified discussions and articles. Kahn did testify that he had read an interview given by Gucciones in which he recalled that Guccione stated he had been living with Keeton for ten or fifteen years. Circumstantial evidence in support of the professed beliefs of Flynt, Kahn and Adelman was provided by the ...