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GLOBE COMM. v. R.C.S. RIZZOLI PERIODICI

January 29, 1990

GLOBE COMMUNICATIONS CORP., PLAINTIFF,
v.
R.C.S. RIZZOLI PERIODICI, S.P.A., DEFENDANT.



The opinion of the court was delivered by: Sand, District Judge.

OPINION

Defendant R.C.S. Rizzoli Periodici, S.p.A. ("Rizzoli") moves this Court pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the complaint for failure to state a claim. We deny Rizzoli's motion.

Facts

Plaintiff Globe Communications Corp. ("Globe") publishes the weekly magazine Globe, which is sold throughout the United States and Canada. In May 1984, Rizzoli, a large international publisher based in Italy, published an article in its Italian language magazine Novella 2000 entitled "CAT STEVENS: ENOUGH OF MUSIC, NOW I JUST WANT TO BE AN AYATOLLAH!" (translated from the original Italian) (the "Rizzoli Article"). The Rizzoli Article reported that the singer and entertainer Cat Stevens had converted to the Islamic religion and adopted the Islamic name Yusuf Islam, described his life in Teheran and dedication to Islamic religious principles, and suggested that the new convert was developing a close relationship with the Ayatollah Khomeini.

That month, a reporter for Globe, Len Stone, purchased a copy of the Novella 2000 issue containing the Cat Stevens article. Globe then published in its June 19, 1984 edition of Globe (Volume 31, No. 25) an article entitled "Pop Superstar's Startling Conversion" ("Globe Article") which repeated the substance of the Rizzoli Article, attributing statements of European reporters as its source.

Mr. Islam sued Globe alleging that the Globe Article was false and defamatory and placed him in a false light. After Globe determined through discovery that many of the facts contained first in the Rizzoli Article and then in the Globe Article were false, it agreed to settle the suit brought by Mr. Islam. Globe now seeks to recover from Rizzoli the settlement costs and attorney fees it incurred in the defamation suit and punitive damages. Globe's complaint asserts three causes of action against Rizzoli for intentional misrepresentation, contribution and equitable subrogation.

Choice of Law

A threshhold issue which must be resolved is whether the law of Florida, New York, or Italy controls in determining whether the complaint alleges viable causes of action. Choice of law questions are decided issue by issue. We therefore examine the choice of law issue as it relates to each of the three claims asserted.

Our jurisdiction is based on diversity of citizenship. This Court therefore applies the choice of law rule of New York, the forum state, in determining the applicable substantive law. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). New York courts choose the substantive tort law of the state that has the most significant relationship with the occurrence and with the parties. Babcock v. Jackson, 12 N.Y.2d 473, 482, 240 N.Y.S.2d 743, 752, 191 N.E.2d 279, 285 (1963). But see Lund's, Inc. v. Chemical Bank, 870 F.2d 840, 845 (2d Cir. 1989) (lex loci delecti "`remains the general rule in tort cases to be displaced only in extraordinary circumstances.'"), citing Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698, 699, 405 N.Y.S.2d 441, 442, 376 N.E.2d 914, 915 (1978) (per curiam). Although New York has not adopted the Restatement (Second) of Conflict of Laws (1969), the Restatement advocates a similar approach to choice of law questions, RCA Corp. v. Tucker, 696 F. Supp. 845, 855 (E.D. N Y 1988), and lists the relevant factors to be considered by courts. See Restatement (Second) of Conflicts of Laws §§ 6, 145(2), 148.

The first cause of action in the complaint alleges intentional misrepresentation. Rizzoli argues that either Italy or New York has the most significant relationship to the alleged tort; Globe urges this Court to apply Florida law. Not surprisingly, Rizzoli also argues that Italian law does not impose liability for the acts alleged in the complaint. Globe, on the other hand, submits an affidavit from its Italian law expert that reaches the opposite conclusion. We do not resolve this conflict concerning Italian law because New York's choice of law principles require the application of Florida law in this case.

It is unclear whether New York interest analysis requires a court to start its analysis by reference to the lex loci delecti rule. In fraud cases, moreover, since the harm suffered is intangible, our determination of the place of harm necessarily involves evaluation of competing state interests. Therefore, our analysis starts with the lex loci delecti rule and then considers the state interests implicated.

In this case, the wrongful conduct took place in Italy where the Novella 2000 article was first published. While the site of the injury was clearly in the United States where the article was read and relied upon, the parties disagree over where the more significant acts in reliance occurred. Rizzoli argues that since Len Stone, the Globe reporter purchased and read the article in New York, the reliance, and therefore the injury, occurred in New York. See Complaint ¶ 15; Affirmation of Joseph D. Pope ¶ 2. Globe, on the other hand, argues that reliance occurred in Florida since its employees and agents there authored and decided to publish the Globe article. See Complaint ¶ 16; Transcript of Oral Argument on November 17, 1988 at 11. In Schultz v. Boy Scouts of America, Inc., 65 N Y2d 189, 491 N.Y.S.2d 90, 480 N.E.2d 679 (1985), the New York Court of Appeals held that "when the defendant's [wrongful] conduct occurs in one jurisdiction and the plaintiff's injuries are suffered in another, the place of the wrong is considered to be the place where the last event necessary to make the actor liable occurred." Id., 65 N.Y.2d at 195, 491 N.Y.S.2d at 94, 480 N.E.2d at 683 (citations omitted). The tort of fraudulent misrepresentation requires a false statement, action by the plaintiff in reliance and resultant damages. Until an individual acts in reliance on a false statement and suffers damage, there can be no legal claim for fraudulent misrepresentation. Whether the last event necessary to the cause of action against Rizzoli is the decision by Globe to publish, the publication of the Globe article or the imposition of damages, all three occurred in Florida where Globe has its principle place of business and defended the lawsuit brought by Mr. Islam. Florida is the place where the great majority of the acts giving rise to liability took place.

Florida is also the state with the most significant interest in the tort alleged. The tort rule here is a conduct regulating rule, and both Italy and Florida have an interest in regulating the conduct alleged. Rizzoli is an Italian organization, and Italy has an interest in providing clear standards of liability for publishers. See Davis v. Costa-Gavras, 580 F. Supp. 1082, 1092 (S.D.N.Y. 1984). Florida, on the other hand, has interests in both protecting its domiciliaries from fraudulent reporting and compensating those who incur damages. Since Globe maintains its principle place of business in Florida, Globe's economic loss is sited there. New York has no interest since no significant conduct occurred in New York. To some extent, every tort rule is designed both to provide clear standards of liability and to protect and compensate injured parties. In this case, Florida's concern with the conduct is greater and more direct than Italy's. The consequences of fraudulent reporting most directly impact on the recipient who acts in reliance. Since Globe is a Florida domiciliary, acted in reliance in Florida and incurred loss in Florida, Florida has the more significant relationship with the alleged tort, and this Court will apply Florida law.

Finally, Rizzoli argues that the application of Florida law would violate its constitutional right to due process. The Supreme Court held in Allstate Ins. Co. v. Hague, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981), that "for a State's substantive law to be selected in a constitutionally permissible manner, the State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair." Id. at 312-13, 101 S.Ct. at 640. Florida has a significant relation to this litigation. Rizzoli's computerized subscription list indicates direct subscription sales to subscribers in 38 states and includes 60 subscribers residing in Florida. Rizzoli also has repeatedly contracted with an exclusive United States distributor for the sale of its periodicals throughout the United States. While the number of issues sold in Florida comprise only a small percentage of Rizzoli's total sales, Rizzoli has regularly sold issues of Novella 2000 throughout the United States and in Florida. See Keeton v. Hustler ...


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