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March 25, 1997

AEQUITRON MEDICAL, INC., a Minnesota Corporation, Plaintiff, against CBS, INC., a New York Corporation, and CBS NEWS, a Division of CBS, INC., Defendants.

The opinion of the court was delivered by: CHIN


 On November 2, 1989, defendants CBS, Inc. and CBS News (together, "CBS") broadcast a national news segment on infant heart rate and respiration monitors. The news segment reported that the monitors, which are used to protect infants against sudden infant death syndrome ("SIDS"), were defective and suggested that the flaws were potentially life-threatening. The broadcast focused in particular on monitors manufactured by plaintiff Aequitron Medical, Inc. ("Aequitron").

 Aequitron brought this action contending that the November 2, 1989 broadcast contained false and defamatory statements about Aequitron and its SIDS monitors. Two causes of action remain in the case: Aequitron contends that, by virtue of these false statements, CBS (i) engaged in tortious interference with prospective business advantage and (ii) violated the Minnesota Uniform Deceptive Trade Practices Act (the "MDTPA").

 To prevail on either claim, Aequitron must prove that the statements made by CBS were indeed false and that they were made by CBS with actual malice or with knowledge of their falsity. On the record before the Court, however, it is clear that certain of the statements in question were "substantially true." Moreover, even assuming that certain of the statements were false or that factual issues exist as to the falsity of certain of the statements, no reasonable jury could conclude that CBS acted with actual malice or that CBS made the statements with knowledge that they were false. Indeed, the statements were made as part of an investigative story about a consumer product that was in fact the subject of lawsuits and government investigations. No reasonable jury could conclude that the statements were made with a "high degree of awareness of probable falsity." Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 688, 105 L. Ed. 2d 562, 109 S. Ct. 2678 (1989), or that CBS "entertained serious doubts as to the truth of [their] publication." St. Amant v. Thompson, 390 U.S. 727, 731, 20 L. Ed. 2d 262, 88 S. Ct. 1323 (1968).

 Accordingly, CBS's motion for summary judgment dismissing the remaining claims in the case is granted. Aequitron's cross-motion for leave to amend its complaint to add a claim for punitive damages is denied.


 A. Facts

 Aequitron manufactures, sells and distributes infant heart rate and respiration monitors used to protect infants against SIDS. The monitors were designed to sound an alarm if a baby stopped breathing or the baby's heart stopped beating.

 On November 2, 1989, defendants CBS aired on its nationwide television show "CBS This Morning" a segment about SIDS monitors featuring reporter Erin Moriarty ("Moriarty"). The broadcast described the alleged flaws in the monitors and reported that the monitors were the subject of on-going investigations, lawsuits and congressional hearings.

 The central flaw alleged to plague the monitors was their purported susceptibility to electromagnetic interference from household appliances such as hairdryers or televisions. The monitors purportedly could mistake these signals for the baby's heartbeat and respiration, as a consequence of which the alarms could fail to sound even though the baby's heartbeat or breathing had stopped.

 In particular, the broadcast focused on plaintiff's monitor. Included in the program was an interview with Dr. Joseph Dyro, an expert in biomedical engineering who had performed several tests on plaintiff's monitor prior to being approached by CBS for the telecast.

 For the interview, Dr. Dyro conducted a test of plaintiff's monitor in his laboratory. During the test the monitor, while hooked up to a plastic doll, failed to emit any signals warning that there was no heartbeat. The doctor explained on the air that the monitor was detecting very small electrical signals that caused it not to sound an alarm. Moriarty then concluded that "if that occurs on a real baby that stops breathing, the monitor may not sound, and the baby could die."

 Aequitron asserts that CBS deceived the viewing audience by not revealing that the doll was hooked up to an electronic device that simulated the normal impulses given off by the human body and that caused the monitor to malfunction. While the effect of this device on the test is hotly disputed, it is undisputed that the use of this device was not explained to the television viewer.

 The broadcast also televised a portion of a videotaped deposition of plaintiff's vice-president, Robert Samec, taken in a lawsuit brought against plaintiff by the parents of a baby who had died while hooked up to plaintiff's monitor. In the excerpt, Samec is asked whether he has confirmed reports of alarm failures on plaintiff's monitors, to which he replies, "Yes, but not in any report of death or injury." In a voiceover, Moriarty then states that the monitor's operating manual does not warn of the possible consequences of the monitor's failure. Samec is then depicted as testifying that he did not "think it was necessary to be that specific" with respect to the consequences.

 During the broadcast, Moriarty also stated that Aequitron had refused CBS's request for an interview. Aequitron contends that this statement was false because it had advised CBS that it would be willing to be interviewed, as long as the interview were "live" and not on tape. Aequitron also contends that Moriarty falsely stated on the segment that "most of the experts" were of the view the monitors could give "a false sense of security" when only one expert -- Dr. Dyro -- had actually made that statement to CBS. Aequitron also contends that Moriarty falsely stated that the monitoring devices were designed "to end the problem" of SIDS, for the devices were not designed for all babies.

 The program also included an interview with parents whose babies had allegedly died of SIDS while hooked up to plaintiff's monitor and concluded with a report on the status of the federal investigation into the monitors. *fn1"

 B. Procedural History

 Aequitron commenced this lawsuit in the United States District Court for the District of Minnesota on April 11, 1991, alleging four causes of action against CBS: (1) violation of the MDTPA; (2) trade libel; (3) tortious interference with prospective business advantage; and (4) defamation. In January 1993, the court granted defendants' motion to dismiss Aequitron's trade libel and defamation claims for lack of personal jurisdiction, and transferred the MDTPA and tortious interference claims to the Southern District of New York pursuant to 28 U.S.C. § 1404(a).

 The case was originally assigned to Judge Sotomayor. While the case was before her, CBS moved to dismiss on statute of limitations grounds. Judge Sotomayor denied the motion, holding that Minnesota law, with its two year statute of limitations, governed the remaining claims, which were filed 18 months after the November 2, 1989 broadcast. Aequitron Medical, Inc. v. CBS, Inc., 1994 U.S. Dist. LEXIS 942, No. 93 Civ. 950, 1994 WL 30414, at *4 (S.D.N.Y. Feb. 2, 1994). Subsequently, Aequitron moved to amend its complaint to re-assert the trade libel and defamation claims that had been dismissed by the district court in Minnesota. Judge Sotomayor denied leave to amend on futility grounds, holding that the claims were time-barred under Minnesota law because service of process had not been properly made with respect to the trade libel and defamation claims and Aequitron had not attempted to effect proper service on CBS within the statutory time limit. 1994 U.S. Dist. LEXIS 942, No. 93 Civ. 950, 1994 WL 414361, at *4 (S.D.N.Y. Aug. 5, 1994).

 The action was reassigned to me in November 1994. Aequitron then moved to compel certain discovery, and CBS cross-moved for summary judgment. Aequitron's motion was granted and CBS's motion for summary judgment was denied with leave to renew after the completion of discovery. 1994 U.S. Dist. LEXIS 942, No. 93 Civ. 950, 1995 WL 406157, at *4 (S.D.N.Y. July 10, 1995). Discovery has now been completed, and CBS has renewed its motion for summary judgment on the two remaining claims: tortious interference with prospective business relationships and deceptive trade practices. In addition, Aequitron has moved to amend its complaint to assert a claim for punitive damages.


 A. Standard for Summary Judgment

 Summary judgment will be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). Accordingly, the court's task is not to "weigh the evidence and determine the truth of the matter but [to] determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). To defeat a motion for summary judgment, however, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). There is no issue for trial unless there exists sufficient evidence in the record favoring the party opposing summary judgment to support a jury verdict in that party's favor. Anderson, 477 U.S. at 249-50.

 With these principles in mind, I turn to Aequitron's two claims: tortious interference with prospective business relationship and the MDTPA.

 B. Tortious Interference with Prospective Business Relationship

 Aequitron's tortious interference with prospective business relationship claim raises two issues: First, whether, as CBS contends, the "special rules of defamation" apply to a tortious interference claim that is based on allegedly defamatory conduct (Def. Mem. at 40); and, second, if so, whether Aequitron has presented sufficient evidence to raise a genuine issue of fact as to whether CBS acted with actual malice and whether CBS knew that the statements in question were false when they were broadcast on November 2, 1989.

 1. Tortious Interference and Defamation

 Under Minnesota law, "to establish a claim of tortious interference with a prospective business relationship, a plaintiff must prove the defendant intentionally committed a wrongful act which improperly interfered with the prospective relationship." Hunt v. University of Minn., 465 N.W.2d 88, 95 (Minn. Ct. App. 1991) (citing United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633 (Minn. 1982)). CBS contends that, under Minnesota law, where the tortious interference claim is based on conduct that sounds in defamation, the special rules of defamation apply. I agree.

 The leading Minnesota case on this issue is the decision of the Supreme Court of Minnesota in Wild v. Rarig, 302 Minn. 419, 234 N.W.2d 775 (Minn. 1975), cert. denied, 424 U.S. 902, 47 L. Ed. 2d 307, 96 S. Ct. 1093 (1976). There, in the context of a statute of limitations defense, the court held:

Dr. Wild's claim of wrongful interference with business relationships by means of defamation is essentially a part of his cause of action for defamation and consequently comes within [the Minnesota] 2-year statute of limitations. The defamation which is the means used to interfere with his business relationships action is the same defamation that Dr. Wild seeks to recover damages for under his defamation claim. It seems to us that, regardless of what the suit is labeled, the thing done to cause any damage to Dr. Wild eventually stems from and grew out of the defamation. Business interests may be impaired by false statements about the plaintiff which, because they adversely affect his reputation in the community, induce third persons not to enter into business relationships with him. We feel this phase of the matter has crystallized into the law of defamation and is governed by the special rules which have developed in that field.

 Likewise, the Eighth Circuit has held, with respect to defamation and tortious interference claims brought under Minnesota law in the context of a labor dispute, that the malice standard required for "actionable defamation claims . . . must equally be met for a tortious interference claim based on the same conduct or statements." Beverly Hills Foodland, Inc. v. United Food & Comm'l Workers Union, 39 F.3d 191, 196 (8th Cir. 1994)(footnote omitted). Indeed, the court held that "a plaintiff may not avoid the protection afforded by the Constitution and federal labor law merely by the use of creative pleading." Id.; accord Johnson v. CBS, Inc., No. Civ-3-95-624, slip op. at 5 (D. Minn. Sept. 4, 1996) (holding that where both defamation and tortious interference claims are pled and are based on same facts, Minnesota law requires the application of the actual malice standard to tortious interference claims). *fn3"

 A decision of the Seventh Circuit (applying Illinois law) also provides support for CBS's position. In Brown & Williamson Tobacco Corp. v. Jacobson, 713 F.2d 262 (7th Cir. 1983), a cigarette manufacture sued CBS and news commentator Walter Jacobson for libel and tortious interference with business relations. Judge Posner wrote:

any libel of a corporation can be made to resemble in a general way this archetypal wrongful-interference case, for the libel will probably cause some of the corporation's customers to cease doing business with it; and whether this involves an actual breaking of contracts or merely a withdrawal of prospective business would make no difference under the modern law of wrongful interference. But this approach would make every case of defamation of a corporation actionable as wrongful interference, thereby enabling the plaintiff to avoid the specific limitations with which the law of defamation -- presumably to some purpose -- is hedged about. We doubt that the Illinois courts would allow this end run around their rules on defamation, and we therefore need not consider any constitutional implications of their doing so.

 Id. at 273-74 (citations omitted).

 In the present case, Aequitron's tortious interference claim is based on the same allegedly defamatory conduct that formed the basis for its defamation claim. Although the defamation claim has been dismissed, Aequitron nonetheless has been permitted to pursue its claims on the merits -- based on the allegedly defamatory conduct -- through the tortious interference claim. In these circumstances, it is only fair, and indeed Minnesota law requires, that Aequitron's tortious interference claim be governed by the "special rules" applicable to defamation cases. Wild, 234 N.W.2d at 793. Accordingly, those "special rules" will be applied.

 2. Actual Malice

 To establish a claim for defamation, a plaintiff must prove that the defendant published: (1) a statement of fact; (2) that was false; (3) concerning the plaintiff; (4) tending to harm the plaintiff's reputation and to lower him or her in the esteem of the community. Foley v. WCCO Television, Inc., 449 N.W.2d 497, 500 (Minn. Ct. App. 1989). A plaintiff in a defamation action must satisfy all four elements to succeed. Id.

 In addition, a higher standard is imposed upon the plaintiff if the plaintiff is a public official or public figure. In that event, the plaintiff must prove by clear and convincing evidence that the defendant acted with "actual malice." New York Times v. Sullivan, 376 U.S. 254, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964); Curtis Publ. Co. v. Butts, 388 U.S. 130, 18 L. Ed. 2d 1094, 87 S. Ct. 1975 (1976); Gertz v. Robert Welch, Inc., 418 U.S. 323, 41 L. Ed. 2d 789, 94 S. Ct. 2997 (1974); Hunter v. Hartman, 545 N.W.2d 699, 703 (Minn. Ct. App. 1996). Under Minnesota law, the "actual malice" standard also applies when a corporate plaintiff sues a media defendant, if the defamatory material "concerns matters of legitimate public interest in the geographic area in which the defamatory material is published, either because of the nature of the business conducted or because the public has an especially strong interest in the investigation or disclosure of the commercial information at issue." Jadwin v. Minneapolis Star & Tribune Co., 367 N.W.2d 476, 487-88 (Minn. 1985) (footnotes omitted), rev'd on other grounds, 390 N.W.2d 437 (Minn. Ct. App. 1986) (emphasis added). This rule was created to "encourage the media to probe the business world to the depth which is necessary to permit the kind of business reporting vital to an informed public." Id.

 In the present case, it is undisputed that Aequitron is a corporate plaintiff and that CBS is a media defendant. The defamatory material is a matter of legitimate public interest, as it affects the health and well-being of babies and is subject to federal regulation. Thus, the actual malice standard applies.

 To show actual malice, the plaintiff must prove by clear and convincing evidence that "the defendant made defamatory statements either knowing the statements were false or acting recklessly with regard to whether the statements were true." Hunter, 545 N.W.2d at 703 (citing New York Times v. Sullivan, 376 U.S. 254, 279-80, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964)). A "reckless disregard for the truth" requires "more than a departure from reasonably prudent conduct"; there must be sufficient evidence to support a conclusion that "the defendant actually had a 'high degree of awareness of . . . probable falsity.'" Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 688, 105 L. Ed. 2d 562, 109 S. Ct. 2678 (1989) (citations omitted); see also Hirman v. Rogers, 257 N.W.2d 563, 566 (Minn. 1977) (actual malice requires "more than mere negligence and probably even more than highly unreasonable conduct" must be shown)(citations omitted). The failure of a publisher to conduct an investigation before publishing, even if a reasonably prudent person would have done so, is not sufficient to establish reckless disregard. Harte-Hanks Communications, 491 U.S. at 688; St. Amant v. Thompson, 390 U.S. 727, 731, 733, 20 L. Ed. 2d 262, 88 S. Ct. 1323 (1968) (plaintiff must demonstrate that the author "in fact entertained serious doubts as to the truth of his publication"). Truth, of course, is a complete defense. Stuempges v. Parke, Davis & Co., 297 N.W.2d 252, 255 (Minn. 1980). *fn4"

 In evaluating summary judgment motions in defamation cases, the Supreme Court has held that courts must take into account the "clear and convincing" standard of proof mandated by New York Times v. Sullivan, 376 U.S. 254, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964). Thus, in defamation cases, "there is no genuine issue of material fact if the evidence presented in the opposing affidavits is of insufficient caliber or quantity to allow a rational finder of fact to find actual malice by clear and convincing evidence." Anderson, 477 U.S. at 254.

 (a) The Use of an Electrical Device

 Aequitron alleges that CBS's failure to disclose Dr. Dyro's use of an electrical device and "K-Y Jelly" constituted a false statement of fact, because it was those devices that purportedly prevented the Aequitron monitors from sounding an alarm, not electromagnetic interference. Specifically, Aequitron alleges that "CBS and Moriarty were at all times . . . aware that the monitor reflected respiration and heart beat signals from the rubber doll solely as a result of the attachment of the certain electronic devices to the rubber doll." (Compl. P 18). Moreover, Aequitron contends that CBS's failure to inform the audience that without the use of the electronic device the lead alarm would have sounded constituted a false representation of fact. (Pl. Mem. in Opp. at 39). The difficulty with Aequitron's position, however, is that Dr. Dyro used the electronic device to simulate the electrical load of a non-breathing baby.

 According to Robert Samec, Aequitron's Vice President, the apnea monitor works by passing a small electric current through a baby's chest via two electrodes attached to the baby's skin. (Borger Aff. Ex. Y at 31). An electric signal is sent from one electrode through the human body and is then picked up by the other electrode, completing the circuit. (Id. at 72). K-Y Jelly is a substance occasionally used to connect the electrodes to the baby's skin.

 The monitor has three circuits. One circuit measures the change in "impedance" as the baby breathes, which can be an indication of respiration. (Id. at 32). Impedance, a measure of the total opposition to the current flow in an alternating-current circuit, is a measure of conductivity of organic matter. (Borger Aff. Ex. Y at 39-40) ("You measure base impedance in terms of ohms. Ohms is a measure of electrical resistance . . . [which is] resistance to current flow between two conductors, two conductive surfaces."). When the baby inhales, the impedance increases because air is non-conductive. (Id. at 44). When the baby exhales, impedance ...

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