Marcus N. Bressler v. Fortune Magazine, a Division of Time Inc.

971 F.2d 1226

• Court: Court of Appeals for the Sixth Circuit
• Decided: October 16, 1992
• Docket: 91-5601
• Status: Published

Opinions

RALPH B. GUY, Jr., Circuit Judge.

Defendant, Fortune Magazine, appeals a $550,000 jury verdict in a libel suit brought by plaintiff, Marcus Bressler. Bressler’s claim stemmed from a 1986 Fortune article which reported allegations that Bressler, an official of the Tennessee Valley Authority, had attempted to cover up safety violations at TVA’s Watts Bar nuclear plant. Fortune argues that Bressler, a public official, failed to establish that the article’s statements were false and that the reporters acted with actual malice. Fortune also contends that the district court erred in instructing the jury that Bressler need only prove the article’s falsity by a “preponderance of the evidence,” rather than by “clear and convincing” evidence.

Our thorough review of the record— which details the information provided by the various sources on which the Fortune reporters relied — reveals that the evidence falls short of demonstrating that the reporters realized their statements were false or had serious doubts as to the truth of their statements. We thus reach the contest over the article’s “falsity” only tangentially; we reach not at all the debate over the proper standard of proof for falsity in a public official’s libel suit. On the actual malice issue alone, we reverse and remand for entry of judgment in favor of Fortune.

I.

In October 1986, Fortune published an article focusing mainly on federal officials’ allegations that TVA’s chief of nuclear operations (not the plaintiff here) may have violated conflict-of-interest and salary rules. Seven of the article’s 33 paragraphs, however, reported on investigators’ “allegations about an attempted cover-up of safety questions at the Watts Bar plant.” Brian Dumaine, Nuclear Scandal Shakes the TVA, Fortune, Oct. 27, 1986, at 44.

The article explained that Howard Hasten, an “authorized nuclear inspector” with Hartford Steam Boiler, which had contracted with TVA to inspect the construction of the Watts Bar plant, discovered that welds in pipes carrying water to and from the nuclear reactor containment area had not been tested in accordance with the governing engineering code. At that stage of construction, performing the necessary tests and inspection would have been extremely time-consuming and costly, since many of the pipes had already been insulated and installed.

The article further stated that TVA had issued a safety report which recommended that the pipes be “used as is.” Hasten initially refused to sign this report, since the lack of proper testing violated minimum safety standards. “A burst pipe could set off a serious nuclear accident,” according to the article.

The Fortune story then noted that a “campaign ... to force Hasten to sign the report” was mounted, and that an internal investigation at TVA revealed that managers at TVA’s engineering codes and standards office (of which plaintiff Bressler is a member) called Haston’s superiors at Hartford to complain about Haston’s intransigence. Haston’s supervisor, Harold Robi-son, pressured Haston to sign; Haston finally did so, but wrote that his signature was only at Robison’s direction. The article went on to state that TVA investigator Jerry Smith had received anonymous telephone calls about pressure on Hartford inspectors and that TVA had received an anonymous letter threatening to publicize the welding problems unless TVA persuaded Hartford to increase its inspectors’ salaries. “According to TVA investigators,” the article continued, “Marcus Bres-sler ... tried to cover up the breach of safety standards” and “warned Hartford Steam Boiler to get its inspectors in line or TVA would not renew its inspection con-tract_”

The TVA Board of Directors assigned another internal investigator, Mansour Guity, to look into the origin of the anonymous extortion letter. Guity was unable to link the letter to Hartford inspectors, but, according to the article, Guity “did find out about the pressure Bressler had exerted to cover up the safety violation.” Investigators Smith and Guity later complained to the U.S. Labor Department that TVA management had harassed and intimidated them for voicing their safety concerns. The Labor Department ruled in their favor.

The Fortune story added that the “Hartford Steam Boiler incident was confirmed in a draft report by the Nuclear Regulatory Commission’s office of investigation.” The article attributed this information to “congressional sources.”

At Bressler’s ensuing libel trial, Fortune introduced the final report of the Nuclear Regulatory Commission which concluded, among other things, that TVA managers might have pressured Hartford to accept the “use as is” proposal in the report about the pipe welds even though the welds violated code requirements. Fortune also introduced the notes the reporters took during interviews with the private and federal investigators, who had identified Bressler as the source of the pressure, and the corroborating deposition testimony of two former TVA officials. The reporters’ testimony included explanations of how they developed the story and subjected it to the magazine’s pre-publication fact-checking process.. A journalism expert for plaintiff testified, over defendant’s objection, that the Fortune reporters’ investigation and writing “fell far below the standard of journalism” and that the reporters “knew [the article] was false.” We address this evidence more fully below.

The jury found that the statements about Bressler were false and. that the reporters had acted with actual malice. Bressler was awarded $250,000 in compensatory damages and $300,000 in punitive damages. The district court denied Fortune’s. JNOV and new trial motions, and Fortune now appeals.

II.

The trial judge determined that Bressler was a public official; as such, Bressler could prevail only by showing that Fortune published the article with actual malice, New York Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S.Ct. 710, 725-26, 11 L.Ed.2d 686 (1964), and by demonstrating that the “gist” of the article was false, Masson v. New Yorker Magazine, Inc., — U.S. -, -, 111 S.Ct. 2419, 2433, 115 L.Ed.2d 447 (1991).

In a recent public-figure libel case summarizing accepted formulations of the “actual malice” test, the Supreme Court stated that the test

requires at a minimum that the statements were made with a reckless disregard for the truth. And although the concept of “reckless disregard” “cannot be fully encompassed in one infallible definition,” we have made clear that the . defendant must have made the false publication with a “high degree of awareness of ... probable falsityf.]”

Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 667, 109 S.Ct. 2678, 2685,105 L.Ed.2d 562 (1989) (citations omitted). The Court emphasized that the inquiry is “subjective,” focusing on whether the defendant “ ‘in fact entertained serious doubts as to the truth of his publication.’ ” Id. at 688, 109 S.Ct. at 2696 (citation omitted). Actual malice, defined in this way, must be established by “clear and convincing proof.” Gertz v. Robert Welch, Inc., 418 U.S. 323, 342, 94 S.Ct. 2997, 3008, 41 L.Ed.2d 789 (1974). The question whether the record may support a finding of actual malice is a question of law. Harte-Hanks, 491 U.S, at 685, 109 S.Ct. at 2694.

The Harte-Hanks Court also set forth the duty of an appellate court considering a case such as this one.

In determining whether the constitutional standard has been satisfied, the reviewing court must consider the factual record in full. Although credibility determinations are reviewed under the clearly-erroneous standard ... the reviewing court must “ ‘examine for [itself] the statements in issue and the circumstances under which they were made to see ... whether they are of a character which the principles of the First Amendment ... protect[.]’ ”

Id. at 688, 94 S.Ct. at 2696 (citations omitted). Based on our review of the entire record — the several sources on which the Fortune reporters relied, the substance of those sources’ statements, and the content of the various documents consulted in preparing the article — we believe the evidence could not have supported a finding of actual malice under the "clear and convincing” standard. This determination obviates the need to address the proper standard by which a trier of fact must measure a publication’s falsity. Although our conclusion regarding actual malice in this case necessarily suggests that the gist of the article was substantially true, we do not reach this issue.

The “gist” of the contested portion of the Fortune article¹ was that plaintiff Bres-sler allegedly played a lead role in pressuring an independent inspector to certify, contrary to fact, that' certain safety-related welds in the Watts Bar plant met the engineering code requirements, and that Bres-sler also attempted to cover up that safety violation. We now examine the defendant’s basis for reporting such allegations.²

III.

In the course of researching a story on TYA’s non-operating nuclear power reactors and allegations that TVA’s chief of nuclear operations may have violated federal conflict-of-interest standards, Fortune reporters Brian Dumaine and Brett From-son learned about Nonconforming Condition Report (NCR) 5609. Howard Haston, the inspector from the Hartford company, had discovered that certain welds on pipes within the plant’s penetration assemblies had not been visually inspected for leakage during the mandatory “hydrostatic” (water-pressure) testing. Such inspection was required under the code promulgated by the American Society of Mechanical Engineers (ASME). It was Haston’s duty, as an authorized nuclear inspector, to check for compliance with the ASME code.³ Given the welds’ location within the plant, they were considered “safety-related” components.

Having discovered this noncompliahce, Haston prepared NCR 5609 describing the problem. TVA, so alerted, was supposed to suggest a means of solving the problem. Bressler, TVA’s specialist on the ASME code, discussed the matter with Haston’s superiors, Harold Robison and William Higginbotham. Haston did not know what Bressler said in these conversations, and thus could not say that Bressler made any threats regarding Hartford’s contract with TVA. Haston said, however, that given Higginbotham’s “volatile personality ... . any discussion between a client ... and that supervisor could have been construed as threatening because he was concerned about that.”

Faced with NCR 5609, TVA engineer Dorwin Etzler consulted with Bressler and decided to recommend that the welds be “used as is.” Bressler was “instrumental in suggesting [this] disposition,” according to Etzler’s trial testimony. Inspector Ha-ston’s signature was then required on the report in order to approve the “use as is” disposition. If Haston failed to sign it, TVA would have to obtain approval from the Nuclear Regulatory Commission (NRC) — which could delay the plant’s start-up. Bressler later admitted to NRC investigators that the planned schedule for fuel loading affected the decision to forgo the required inspection of the welds.

Haston initially refused to sign the report because to do so would be to certify that the welds met the ASME code, which they did not. Haston finally submitted to pressure from his superiors, but he also inscribed the “unprecedented” notation that his signature was only “per written and verbal direction of H.L. Robison.” Bressler conceded at trial that the welds did not meet the code.

Several months later, after TVA had certified to the NRC that the Watts Bar plant was ready for an operating license, a subcommittee of the House Committee on Commerce and Energy had assigned an investigator, John William. Nelson, to look into allegations, as Nelson put it, of “collusion between T.V.A. and Hartford Steam Boiler ... to the effect their on-site nuclear inspectors were being intimidated or forced to sign off on systems that they felt were not safe.”⁴ Shortly thereafter, an engineer on TVA’s internal investigatory unit, the Nuclear Safety Review Staff (NSRS), wrote a memorandum to the TVA Board. The engineer, Jerry Smith, told the Board that anonymous telephone callers had complained that the nuclear inspectors had been “bought off" or “told to back off by their employers as a result of ‘TVA pressure.’ ”

In response, the TVA Board hired an independent contractor, the Quality Technology Corporation (QTC), to investigate the matter raised in Smith’s memorandum. When an anonymous extortion letter arrived at TVA, threatening to inform the NRC of ASME code violations if Hartford inspectors were not given a raise, the TVA Board launched a second investigation. This second inquiry was headed by Mans-our Guity, also of the TVA’s internal investigatory unit (the NSRS). Guity reported to his TVA superiors that the evidence he had gathered showed that the extortion letter was written by a TVA employee and not a Hartford inspector; more importantly, Guity told the Board that there had been collusion between TVA and Hartford managers in coercing inspectors to accept nonconforming components. Guity told TVA Assistant General Counsel William Mason that Bressler had played a lead role in the apparent collusion by “using his position on various national code committees to cause Hartford to take positions on T.V.A. code technical issues that they wouldn’t otherwise take.”

Guity apparently had some difficulty completing his investigation, however. TVA management initially told Mason that the inspectors were refusing to talk to Guity. Mason later learned that the inspectors were willing to provide information, “and that the only problem was that there was this either perception or fact that the code section in [TVA’s] office of engineering was having this communication outside the procedure with Hartford” in an attempt to pressure the inspectors not to talk. Bres-sler was the TVA official responsible for code compliance.

During this time, Bressler met with Ha-ston’s superiors and other Hartford managers. Bressler told Hartford that he had lost confidence in the company as a result of the extortion letter, and he also complained that Hartford inspectors were communicating with QTC, the company the TYA Board had hired to investigate the origin of the anonymous phone calls and the extortion letter. Due in part to Bres-sler’s complaints, Hartford instituted new regulations restricting its inspectors’ ability to communicate with outside investigators. Robison, Haston’s supervisor at Hartford, also sent a memorandum to Hartford inspectors at Watts Bar warning them that “TYA has voiced a concern that the Authorized Nuclear Inspectors are spending too much time with the Quality Technology Corporation.”

Before the NSRS investigation into the alleged collusion was finished, Guity resigned, claiming that his TVA superiors were exerting “undue pressure” on him as a result of his initial findings. Guity filed a retaliation claim against TVA; Jerry Smith, also of the NSRS, did the same. Their claims were upheld.

The NRC then launched its own investigation into the allegations of collusion and intimidation of inspectors. Fortune reporter Fromson learned from Henry Myers, an advisor to a subcommittee of the House Committee on Commerce and Energy (whom the NRC had briefed on its investigation), that the NRC had uncovered evidence corroborating the NSRS findings. According to Fromson’s notes on his interview with Myers, Myers said the NRC had discovered “[t]hat there was a violation of the ASME code. That Bressler at TVA pressured Higginbotham [at Hartford].... That Higg[inbotham] told Robison tó pressure Haston. That Robison did so. Bres-sler is the guy who pressured Hartford....”⁵

Meanwhile, as the NRC pursued its investigation, Fortune reporter Brian Du-maine interviewed Owen Thero, a former investigator for QTC — the company the TVA Board had hired to look into the allegations of collusion and intimidation raised by Jerry Smith. Thero told Dumaine that Bressler had warned Hartford management, “If you don’t play ball — Hartford could lose [its] contract.”

Dumaine also interviewed Guity and Smith, the two NSRS investigators who had successfully sued TVA for retaliation. Dumaine’s interview notes indicate that Guity told the reporter that “the TVA management and Hartford managers forced (other) Hartford managers to sign off on pipes despite objections of Hartford inspectors[.]” Fortune reporter Brett Fromson also interviewed Guity on several occasions. According to Fromson’s interview notes, Guity informed him that “TVA pressured the home office of Hartford to accept the work.” “There was apparent collusion between the Hartford regional managers and the TVA managers to persuade the ANI [inspector] to approve penetration welds which were not hydro-statically tested.” Guity also said that TVA officials had attempted to thwart his investigation.

The reporters also examined transcripts of deposition testimony taken as part of Guity’s and Smith’s labor claims against TVA. Mason, TVA’s lawyer, had testified that there “was a serious question, whether there was an improper T.V.A. link that was defeating the purpose of the [Hartford inspection] contract[.]” Mason also testified that Guity had told Michael Kidd, who had headed the NSRS, “that Mark Bressler ... was using his position on various national code committees to cause Hartford to take positions on T.V.A. code technical issues that they wouldn’t otherwise take.” Mason further testified that Guity had told Mason that Bressler would contact the Hartford regional office about code compliance problems raised at the nuclear plant sites, and the regional office would then contact the sites and proceed to “explain away or order the resolution of the code issues ... despite the fact that the code or the required engineering and substitution for the code may not have been in fact done.” Both Mason and Kidd, whose deposition the reporters also studied, testified that Guity enjoyed a reputation as one of TVA’s top investigators.

Fromson interviewed another QTC investigator, William Kemp, who also pointed to Bressler as the TVA official pressuring Hartford on code issues. Kemp told From-son that when inspector Haston refused to sign NCR 5609, Bressler called Higginbotham, and Higginbotham then called Robison (Haston’s more immediate supervisor), complaining that, “[Y]our guy [Haston] is raising hell,” and instructing Robison to make Haston sign the report.

Fromson also spoke with Haston himself who, though initially reluctant to talk, stated that he had indeed signed the report only when Robison compelled him to, and that “Higginbotham was getting calls from Bressler, the guy in charge of ASME codes and standards[.]” Haston also told From-son that he didn’t think that Bressler had “ever directly threatened ... to pull the contract, but the fear that it might be pulled was always there for Hartford.”

When Fromson tried to reach Haston’s supervisors for comment, he was referred to Hartford’s attorney who said only that Hartford “has done nothing wrong.” Fromson claims he made repeated attempts to reach Bressler for comment, leaving messages with TVA’s public relations department and at Bressler’s own office. At trial, Bressler acknowledged receiving only one call from the reporter, which he did not return. Fromson said he read the relevant portions of the article to TVA’s public relations officer, who ultimately responded that TVA would have no comment.

Once Dumaine and Fromson had completed a first draft of the article, Fortune editors subjected it to the magazine’s standard fact-checking process, during which the reporters would read passages of the article to the sources from whom they had gleaned the information. None of these sources — including Guity, Myers, Kemp, Thero, and Smith — found the article inaccurate.⁶

IV.

The record, as summarized above, demonstrates that the Fortune reporters relied on a variety of mutually corroborative sources and materials. The reporters’ research revealed that four separate investigations — by QTC, the NRC, TVA’s own NSRS, and the House Committee on Commerce and Energy — had uncovered evidence that TVA, through Hartford management, had exerted pressure on Hartford inspectors. Three of these investigatory sources (Guity, Kemp, and Myers) specifically identified Bressler as the source of the pressure on Hartford, and a fourth (Thero) told Dumaine about a specific threat by Bressler regarding Hartford’s contract with TVA. The interview with inspector Hasten also confirmed that he signed NCR 5609 only under duress, that Bressler had had contact with Haston’s superiors while this report was being considered, and that any communication with Bressler, as a Hartford client, would have been deemed a threat to Hartford’s contract.

The reporters also examined the deposition testimony of TVA Assistant General Counsel William Mason and former NSRS chief Kidd which confirmed that Bressler was the source of pressure on the inspectors to accept nonconforming items, and that the inspectors had felt inhibited about talking to the outside investigators — due to pressure emanating from the “code section in the office of engineering” (Bressler’s domain).

Finally, the pre-publication checking process failed to reveal any inaccuracies, and the reporters sought comment from Hartford, TVA, and Bressler in particular.

Based on our detailed examination of the evidence on which Dumaine and Fromson relied in reporting the allegations — identified as such — in the Fortune article, we are convinced that the finding of actual malice in this case is unsupportable. The variety of the sources, their corroborative statements and apparent reliability,⁷ and the pre-publication scrutiny to which the sources’ information was subjected, all contribute to our conclusion. If the .televised reading of another’s affidavit accusing an official of bribery does not constitute actual malice even when the reader relies solely on the affidavit and makes no attempt to verify the accusation, then the comparatively extensive research effort by the Fortune reporters here, which gleaned consistent statements from multiple reliable sources, compels us to conclude that actual malice cannot be found on this record. There simply is not enough evidence to show that the defendant actually “entertained serious doubts as to the truth of [the] publication.” St. Amant v. Thompson, 390 U.S. 727, 731, 88 S.Ct. 1323, 1325, 20 L.Ed.2d 262 (1968).

We also reject Bressler’s attempt to analogize this case to Harte-Hanks. In that case, the Supreme Court found actual malice in the publisher’s failure to consult a key witness and listen to a readily available tape recording of a contested conversation. These efforts would have verified or contradicted the informant’s “highly improbable” charges, which five other witnesses had cast into serious doubt. Harte-Hanks, 491 U.S. at 691-92, 109 S.Ct. at 2697-98. Given the consistent stories which Fortune’s several sources had provided, and those sources’ apparent reliability, Fortune’s decision not to gain additional comment from Harry Jackson — whom Kemp had identified as an expert on code issues— cannot be equated with the Journal News’ failure in Harte-Hanks to interview Patsy Stephens and'listen to the tape recording of her interview with COnnaughton. Unlike in Harte-Hanks, we can find no evidence here of a “purposeful avoidance of the truth.” Id. at 692, 109 S.Ct. at 2698.

The judgment in favor of the plaintiff is REVERSED, and the case is REMANDED for entry of judgment in favor of the defendant.

1 . The dissent suggests that we have required Bressler, a minor figure in the article, to demonstrate the falsity of the entire article. Our analysis reveals, however, that we have done no such thing. We have focused solely on the discrete passages in dispute.

2 . The dissent relies on Masson in criticizing our purported rewriting of the article’s defamatory statements. Masson, however, in addition to confirming that it is the "gist” of the statements which must be examined, — U.S. at-, 111 S.Ct. at 2433, considered the significance of rewriting, or misquoting, by a defendant-publisher, and not by a reviewing court. Further, there has been no allegation that the Fortune reporters altered or fabricated any quotations.

3 .Before the Nuclear Regulatory Commission would allow Watts Bar to operate, inspectors like Haston had to certify that the plant complied with the ASME code, or that there had been a satisfactory "disposition" of any noncomplying materials or components.

4 . Nelson was deposed as a witness in a suit brought by a TVA investigator, Jerry Smith, against TVA. The Fortune reporters reviewed his deposition as part of their research for the article at issue here.

5 . The article states that Myers, identified as a "congressional source[],” had said the allegations were confirmed in a draft NRC report. The final NRC report, issued one month after the Fortune article appeared, confirmed that Hasten had been "coerced, pressured, harassed, threatened and/or intimidated by Higginbotham [or] Robison” into accepting TVA’s "use as is” disposition “which did not meet the minimum requirements of the ASME Code.” The NRC report also states that Bressler admitted the ASME code was violated when the welds were not visually examined during the hydrostatic testing, and that the fear of delaying the start-up of the reactor contributed to the decision to forgo such inspection. Significantly, the report concluded:

The decision by [Hartford] management to agree to the "accept as is” disposition of NCR 5609 may have been influenced by discussions between [Hartford] management and TVA personnel, [Hartford] management's sensitivity to TVA’s needs and desires, and the apparent perceived concern by [Hartford] management personnel that the actions of their ANIs [inspectors] could jeopardize their contract with TVA.

The report also stated that ”[t]here is testimonial evidence to support that TVA, through [Hartford], attempted to discourage the site ANIs from talking to QTC and NSRS personnel.” Bressler was one of only three TVA officials referred tp in this portion of the report; the other two were Dorwin Etzler, who had prepared the “use as is” recommendation after consulting Bressler, and Walter Joest, an engineer in TVA’s Codes, Standards, and Materials Group. Bressler was the TVA official in charge of code compliance.

As the dissent correctly notes, the final NRC report cannot be deemed probative of the reporters’ state of mind, as it was issued only after the article was published. (It is, however, pertinent to the falsity issue.) The draft of this report is properly considered in the actual malice inquiry in that Myers disclosed its conclusions to Fromson during the article’s preparation.

6 . Although the notes taken during this fact-checking routine were lost before trial, plaintiff did not offer any evidence — such as testimony by the sources purportedly consulted during this process — -to show that such checking never occurred.

7 . Bressler argues that Guity and Smith, major sources for the article, were obviously biased against TVA, having sued it for retaliatory discharge. However, these investigators’ success in their labor dispute bolsters the credibility of their claim that TVA thwarted their investigation into improper pressure exerted on Hartford inspectors. Further, the depositions of Mason and Kidd indicated to the reporters that Guity, considered one of TVA’s best investigators, was a credible source. Finally, as is evident from our decision in Perk v. The Reader's Digest Association, 931 F.2d 408, 411-12 (6th Cir.1991), reliance on hostile sources does not of itself necessarily constitute actual malice.