Howard v . Antilla CV-97-543-M 10/22/99 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Robert Howard

v. Civil N o . 97-543-M

Susan Antilla

O R D E R

Plaintiff Robert Howard brought this defamation suit to redress injuries he allegedly sustained after defendant Susan Antilla reported rumors regarding his identity in an article published in the New York Times. Howard believes he needs to know the source of those rumors to prosecute his case, while Antilla claims her sources are privileged information. Before the court are Plaintiff’s Motion to Compel Discovery Regarding Unnamed Informants (document n o . 3 1 ) , Defendant’s Objection thereto (document n o . 3 2 ) , Plaintiff’s Response (document n o . 34) and Plaintiff’s Supplemental Motion to Compel (document n o . 3 7 ) . As explained more fully below, Howard’s motion is denied. Background

Howard is chairman of Presstek, Inc., located in Hudson, New

Hampshire. Howard currently resides in New York, but has been a

New Hampshire resident. On October 2 7 , 1994, The New York Times

published Antilla’s article, entitled “Is Howard Really

Finkelstein?” The article raised the question whether Howard was

actually Howard Finkelstein, “a convicted felon who went to jail

for violations of securities laws, among other things.” Although

it is now undisputed that Robert Howard, the plaintiff here, is

not Howard Finkelstein, this action arises out of the damage to

Howard’s personal and business reputation which the article

allegedly caused.

Discussion

1. Discovery of Privileged Information.

Discovery in federal litigation is governed generally by

Fed. R. Civ. P. 2 6 , which provides, in part, “[p]arties may

obtain discovery regarding any matter, not privileged, which is

relevant to the subject matter involved in the pending action. .

..” Fed. R. Civ. P. 26(b)(1) (emphasis added). This discovery

dispute centers around whether or not the sources of the reported

rumor are privileged and, therefore, protected from discovery.

Discovery of privileged information is governed by the Federal

Rules of Evidence. See Fed. R. Evid. 1101(c) (“The rule with

2 respect to privileges applies at all stages of all actions,

cases, and proceedings.”); see also Fitzgerald Expressway v .

Sewerage Const., Inc.,

1 , 74 (1st Cir. 1999)

(explaining that even when a federal court exercises its

diversity jurisdiction and applies state law to the “substantive

rules of decision,” “it is equally axiomatic [ ] that federal

evidentiary rules govern”); see also 8 Charles A . Wright, Arthur

R. Miller and Richard L . Marcus, Federal Practice and Procedure:

Civil 2d § 2016 (1994) (explaining how the same rules of

privilege apply to discovery as apply at trial). Federal Rule of

Evidence 501 deals explicitly with the question of how to

determine what information is privileged, and, therefore, governs

this discovery dispute. See id.; see also 19 Wright, Miller and

Marcus, supra, § 4512 at 405 (1996) (“If a Federal Rule of

Evidence covers a disputed point of evidence, the Rule is to be

followed, even in diversity cases, and state law is pertinent

only if and to the extent the applicable Evidence Rules makes it

so.”).

Rule 5 0 1 , provides, in pertinent part:

Except as otherwise provided by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person . . . shall be governed by the principles of the

3 common law as they may be interpreted by the courts of the United States in light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person . . . thereof shall be determined in accordance with State law. Because Howard invoked this court’s diversity jurisdiction to

bring his libel action in federal court, see

,

“State law supplies the rule of decision.” See Fitzgerald

Expressway,

-74 (citing Erie R. C o . v . Tompkins,

4 , 78 (1938) and Blinzler v . Marriott Int’l Inc.,

(1st Cir. 1996) to explain that state law

provides the “substantive rules of decision” when parties

litigate in federal court based on diversity jurisdiction). As

state libel law governs this dispute, whether or not the

information sought is protected by a privilege also is a matter

of state law. See Fed. R. Evid. 5 0 1 , advisory committee notes.

Despite Rule 501's directive to apply state law regarding a press privilege, the parties argue here that whether the

confidential sources are protected from discovery depends on a

balancing test enunciated in Bruno & Stillman, Inc. v . Globe Newspaper Co.,

(1st Cir. 1980). 1 Bruno &

1 Howard asserts that Rule 501 requires New Hampshire’s privilege rule to govern, but then frames his argument around the Bruno & Stillman, Inc. balancing test.

4 Stillman, Inc. involved a libel claim by a Delaware corporation

operating out of New Hampshire which was criticized in a series

of articles published by The Boston Globe newspaper. While the

court does not explain its decision to forgo state law and,

instead, to announce a federal common law privilege rule, when

the decision was issued neither Massachusetts nor New Hampshire

had a state law based news reporter privilege rule.2 Moreover,

the decision indicates that the district court had forged a

federal common law privilege, which the Court of Appeals was

reviewing. See

. The Bruno & Stillman, Inc. court

appears, therefore, to have fashioned a federal common law

qualified privilege rule based on the First Amendment because the

state jurisdictions involved had not codified a newsman’s

privilege and their common law focused on the First Amendment

2 The New Hampshire common law rule pronounced in Downing v . Monitor Publishing Co., Inc.,

,

(1980), was issued on May 2 2 , 1980, one month before Bruno & Stillman, Inc. was argued at the Court of Appeals. Presumably the parties in Bruno & Stillman, Inc. did not argue (and had not briefed) the nascent N.H. rule to the First Circuit Court of Appeals. Similarly, at the time Bruno & Stillman, Inc. was decided, Massachusetts had not codified a newsman’s privilege, and its common law discussed any cognizable reporter’s privilege within the confines of the First Amendment. See e.g., In the Matter of Roche,

2 4 , 631-33,

(1980) (finding a qualified protection in the First Amendment for the “general right . . . to gather information and prepare it for expression”); c f . In the Matter of Pappas,

0 4 , 612-14,

9 7 , 302-04, aff’d,

(1971) (applying federal law to find no constitutional newsman’s privilege to refuse to testify before the grand jury).

5 origins of any such protection. Without an explicit state

statutory or common law rule to apply, the court applied a

federal common law privilege rule determined “in light of reason

and experience” as required by Rule 501.

Bruno & Stillman, Inc. and its progeny3 set a minimal

protection for First Amendment guarantees that arise not only for

the press, but for all matters involving free speech. See In re

Cusumano, 162 F.3d at 716 (extending the privilege to academic

researchers). As the court explained: Whether or not the process of taking First Amendment concerns into consideration can be said to represent recognition by the Court of a “conditional”, or “limited” privilege i s , we think, largely a question of semantics. The important point for purposes of the present appeal is that courts faced with enforcing requests for the discovery of materials used in the preparation of journalistic reports should be aware of the

3 Those cases which have applied the Bruno & Stillman, Inc. privilege rule have involved federal issues or claims, which under Rule 5 0 1 , “shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience.” See e.g. In re Cusumano,

0 8 , 716 (1st Cir. 1998) (applying Bruno & Stillman, Inc.’s balancing test to determine whether a nonparty could be subpoenaed under Fed. R. Civ. P. 45 to produce confidential material); United States v . LaRouche Campaign,

(1st Cir. 1988) (allowing television “outtakes” to be subpoenaed in a criminal proceeding after balancing the First Amendment concerns with defendants’ need for and any constitutional right to the information sought); see also Fed. R. Evid. 501 (providing that privileges be determined by federal common law unless state law supplies the rule of decision (emphasis added)).

6 possibility that the unlimited or unthinking allowance of such requests will impinge upon First Amendment rights. In determining what, if any, limits should accordingly be placed upon the granting of such requests, courts must balance the potential harm to the free flow of information that might result against the asserted need for the requested information. Bruno & Stillman, Inc.,

. Thus, the Bruno &

Stillman, Inc. balancing test sets a constitutional floor upon

which states can build to provide additional protections, but

beneath which state law cannot fall without offending First

Amendment guarantees.

When, as here, the First Amendment concerns arise in the

context of a state tort libel action, as opposed to a federal

criminal proceeding or an action involving the federal civil

subpoena power, Rule 501 requires the privilege rule attendant to

the state substantive law to be followed. See Fed. R. Evid. 5 0 1 ,

advisory committee notes; see also 8 Wright, Miller and Marcus,

supra, § 2016 at 224; 23 Wright, Miller and Marcus, supra, § 5426 at 749; see also 17 Moore’s Federal Practice, § 124.09[2](Matthew

Bender 3d ed. 1999). The Bruno & Stillman, Inc. rule anticipates

such a result, both in its recognition of Rule 501's flexibility

and in its directive that all the facts and circumstances of a

particular case be considered to resolve a discovery dispute, to

avoid “any black letter pronouncement or broad scale

confrontation between First Amendment and reputation interests.”

7 Bruno & Stillman, Inc.,

.

In this libel action, therefore, either New York or New

Hampshire law provides the applicable privilege rule. As

explained more fully below, New York law and New Hampshire law

regarding a privilege for confidential sources of news differ;

however, based on the facts of record before the court, both

states’ privilege rules protect Antilla’s confidential sources from discovery.4

2. State Privilege Rules.

Under New York law, reporters enjoy an absolute privilege to

protect confidential sources of news gathered in the course of

preparing a report. See U.S. v . Sanusi,

(E.D.N.Y. 1992) (canvassing the press privilege law in New York

and other jurisdictions). The New York rule provides:

Absolute protection for confidential news. Notwithstanding the provisions of any

4 Under well-settled Erie doctrine principles, New Hampshire’s choice of law rules would be followed to determine which state law to apply if a conflict exists between the state laws. See Klaxon C o . v . Stentor Elec. Mfg. Co.,

8 7 , 496 (1941) (holding the forum state’s choice of law doctrine governs); see also Am. Title Ins. C o . v . East West Fin. Corp.,

, 348 (1st Cir. 1992). Since the choice of law issue has not been adequately briefed and should be decided based on the libel claim itself, not on the privilege rule attendant thereto, I decline to make a decision at this juncture which is unnecessary to the resolution of the discovery dispute before the court and which would become binding on the parties as the law of the case.

8 general or specific law to the contrary, no professional journalist or newscaster . . . shall be adjudged in contempt by any court in connection with any civil or criminal proceeding, . . . for refusing or failing to disclose any news obtained or received in confidence or the identity of the source of any such news coming into such person’s possession in the course of gathering or obtaining news for publication or to be published in a newspaper . . . .

-h(b) (McKinney 1992). 5 Under the New York

rule, in a civil discovery dispute such as this, Antilla’s

sources are protected by an absolute privilege.

Under New Hampshire law, reporters enjoy only a qualified

press privilege which is similar to the federal balancing test of

Bruno & Stillman, Inc. See State v . Siel,

5 4 , 259,

(1982) (citing N.H. Const., p t . 1 , art. 22 as the basis

for a “qualified privilege for reporters in civil cases”). The

New Hampshire rule provides:

[T]here is no absolute privilege allowing the press to decline to reveal sources of information when those sources are essential to a libel plaintiff’s case. . . . Our earlier ruling . . . that there is a press privilege under the New Hampshire Constitution

5 Despite this unequivocal pronouncement, the absolute privilege grounded in the First Amendment must yield, at least, in certain criminal proceedings when competing constitutional guarantees are at stake. See e.g., Branzburg v . Hayes,

(1972) (requiring newsman to testify before the grand jury despite confidentiality of news sources); Sanusi,

(overcoming privilege where “necessary to ensure fair judicial process”).

9 not to disclose the source of information when the press is not a party to an action is not applicable here. That opinion expressly left open “whether libel actions would require disclosure.” . . . We do agree that some safeguard should exist to prevent an order of disclosure when the plaintiff’s claim of falsehood is entirely baseless. It is sufficient to require that the plaintiff satisfy the trial court that he has evidence to establish that there is a genuine issue of fact regarding the falsity of the publication. Downing,

. The Court further provided that

“when a defendant in a libel action, brought by a plaintiff who

is required to prove actual malice under New York Times [v.

Sullivan,

(1964)], refuses to declare his sources of

information upon a valid order of the court, there shall arise a

presumption that the defendant had no source.”

.

Under New Hampshire law then, when a libel action is brought

against a news reporter, the press privilege must yield if the

sources of information are essential to the plaintiff’s case and

the plaintiff has demonstrated that there is a genuine issue of fact regarding the falsity of the publication.

For Howard to overcome New Hampshire’s press privilege, he

must demonstrate that there is a genuine issue of fact regarding

the falsity of the publication and that the identity of the

confidential sources is essential to his case. See

at 386-

87. There is no dispute that the reported rumor was false.

Thus, the critical issue here is whether the identity of the

10 confidential sources is essential to Howard’s libel claim.

Although Howard asserts a libel claim in the complaint, the

pleadings, including the instant motion to compel, clearly treat

the cause of action as libel by implication.6 Indeed, facially

accurate news reports may give rise to defamatory inferences,

which is the essence of Howard’s claim here. A claim for libel

by implication focuses “not on the explicit statements but rather

on the implicit underlying defamatory inference, which may be a

malicious calculated falsehood, in which case the Times malice

standard would be satisfied.” Faigin v . Kelley, N o . 95-317-SD,

slip o p . at 10-11 (finding that defamation by implication is

actionable against public as well as private figures).

To prove libel by implication Howard must demonstrate that

Antilla subjectively or actually intended to impart the

6 Libel, which seeks to prove the falsity of a defamatory statement, see Faigin v . Kelly, __ F.3d __, N o . 98-1589, slip o p . at 8 (1st Cir. July 1 9 , 1999) (citing New Hampshire libel l a w ) , would not be appropriate here, where Howard has conceded that rumors were spread that he was Howard Finkelstein prior to the article’s publication on October 2 7 , 1994. See Plaintiff’s Response to Defendant’s First Request for Admissions (Exhibit A to Defendant’s Objection). The defamatory publication, therefore, was technically an accurate report of the rumors being disseminated, and proof of its falsity would be impossible. Nonetheless, this facially accurate factual report implied an underlying defamatory doubt regarding Howard’s background which is actionable. See Faigin v . Kelly, N o . 95-317-SD, slip o p . at 9 (D.N.H. Mar. 1 2 , 1998) (citing White v . Fraternal Order of Police,

1 2 , 518 (D.C. Cir. 1990) to explain libel by implication).

11 defamatory implication of the reported rumor. See

slip o p .

at 1 4 ; see also Dodds v . Am. Broadcasting Co.,

(9th Cir. 1998), cert. denied, ____ U.S. ____ 119 S . C t . 866

(1999) (explaining that “all the courts of appeal that have

considered cases involving defamation by implication have imposed

a similar actual intent requirement”). [B]ecause the Constitution provides a sanctuary for truth, a libel-by-implication plaintiff must make an especially rigorous showing where the expressed facts are literally true. The language must not only be reasonably read to impart the false innuendo, but it must also affirmatively suggest that the author intends or endorses the inference. Chapin v . Knight-Ridder, Inc.,

(4th Cir.

1993). Thus, Howard’s burden lies in proving how the language of

the article “affirmatively suggests” that Antilla intended to

create the inference, or endorsed the inference, that the rumor

had some truth to i t . See id.; see also Dodd,

(citing other circuit decisions holding that “the particular manner or language in which the true facts are conveyed” must

affirmatively demonstrate that the defendant intended to create

the defamatory inference).

Howard has failed to demonstrate how the names of the

confidential sources would in any way shed light on what Antilla

subjectively intended to convey in her article. See White,

(distinguishing between libel’s objective standard

12 and the subjective test of libel by implication). Howard

concedes that short-sellers were spreading the rumor that he was

Howard Finkelstein; that the Securities and Exchange Commission

would not clarify the confusion between the two individuals; and

that Howard Finkelstein is a convicted felon who used the name

Robert Howard as an alias. The article, therefore, conveyed

“materially true facts from which a defamatory inference can

reasonably be drawn,” but which is not enough to establish libel

by implication. Id. at 520. Howard’s burden is not to establish

that Antilla recklessly or maliciously disregarded the veracity

of her sources, see Downing,

, but rather to

establish that she reported the rumors in a way which could be

read to endorse the defamatory inference they created. See

White,

(requiring the language of the

communication to “suppl[y] additional, affirmative evidence

suggesting that the defendant intends or endorses the defamatory

inference” (emphasis in original)).

The names of the confidential sources simply are not

essential to Howard’s claim of libel by implication. The names

will not provide information regarding what Antilla intended to

convey when she wrote the article or whether she endorsed the

rumor reported. Absent evidence that the names are essential to

his claim, Howard has failed to overcome New Hampshire’s

13 qualified press privilege.

Accordingly, under either New York and New Hampshire

privilege rule, the names of the confidential informants are

protected from discovery.

CONCLUSION

For the reasons set forth above, Howard’s Motion to Compel

(document n o . 31) is denied.

SO ORDERED.

James R. Muirhead United States Magistrate Judge

Date: October 2 2 , 1999

cc: Charles G. Douglas, I I I , Esq. Peter W . Mosseau, Esq. Jonathan M . Albano, Esq.

14