Douglas v . Pratt CV-98-416-M 09/29/00 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Charles G. Douglas, III and Edward E . Hewson, Plaintiffs

v. Civil N o . 98-416-M Opinion N o .

Shannon Pratt and Associated Press, Defendants

O R D E R

Plaintiffs Charles G. Douglas, I I I , and Edward E . Hewson

allege that the Associated Press (AP) and Shannon Pratt defamed

them in a March 1 5 , 1998, article released by the AP (Count I ) .

Additionally, Counts I I I , IV, and V raise various claims sounding

in negligence and Count VI alleges that the AP’s actions violated

the New Hampshire Consumer Protection Act, N.H. RSA 358-A, et

seq. Douglas further alleges that the statements and the article

place him in a false light (Count I I ) . Defendants have filed

motions for judgment on the pleadings (document nos. 80 and 8 2 ) .

See Fed. R. Civ. P. 12(c). Plaintiffs object. Standard of Review

Federal Rule of Civil Procedure 12(c) provides that,

“[a]fter the pleadings are closed but within such time as not to

delay the trial, any party may move for judgment on the

pleadings.” In reviewing such a motion, the court must credit

all material allegations in the complaint as true and draw all

reasonable inferences in the non-moving party’s favor. See

Feliciano v . State of Rhode Island,

8 0 , 788 (1st Cir.

1998). The court may grant a motion for judgment on the

pleadings only if it appears beyond doubt that the plaintiffs can

prove no set of facts in support of their claims that would

entitle them to relief. See Gaskell v . The Harvard Cooperative

Society,

(1st Cir. 1993).

Factual Background1

On March 1 5 , 1998, an article appeared on page A10 of the

Portsmouth Sunday Herald entitled, “Caroline Douglas claims

1 This recitation of facts is based on Plaintiffs’ Third Amended Complaint and Plaintiffs’ memoranda in opposition to the present motion. They are taken as true for the purposes of this motion only.

2 husband owes $500K” (Sunday Herald Article). The article,

written by Katherine Webster, a reporter for the A P , was released

to and published by members of the A P , including the Portsmouth

Herald. The article included statements attributed to Pratt that

concerned Hewson’s appraisal of Douglas & Douglas, the former law

firm of Plaintiff Douglas and his former wife, which was

dissolved on December 3 1 , 1996.

The Sunday Herald article focuses on events involved in the

high profile divorce of Douglas, a former New Hampshire State

Supreme Court Justice and former Member of Congress, from his

former wife, Caroline, an attorney. Hewson prepared an appraisal

of Douglas & Douglas, for use in the divorce proceedings, which

valued the law firm at zero. The report submitted to the court

did not mention $950,211 worth of work pending in the firm, also

referred to as work-in-progress (WIP). The bulk of that figure

consisted of contingency fees the firm might obtain in the

future. In Hewson’s opinion, such contingency fees (paid if the

case is successful but not otherwise) cannot be valued until the

case is complete, and he planned to so testify at trial. The

primary focus of the Sunday Herald article was Mrs. Douglas’s

3 belief that she could not “get a fair divorce in New Hampshire,

because of her husband’s connections and the state’s lack of

safeguards against biased judges” Mrs. Douglas also faulted

Hewson’s appraisal, relied upon by the court in dividing the

marital property in the Douglas’s divorce. Mrs. Douglas is

quoted as saying “I only wonder how may other people in this

state have been hurt by cronyism, fraud and old-boy bias in the

courtroom?” Sunday Herald Article at ¶ 6. The article goes on

to recount the opinions of Mrs. Douglas’s own appraiser, and of

Pratt, regarding the Hewson appraisal report and the judge’s

reliance on i t .

The Douglas divorce trial was set for September 1 5 , 1998.

Mrs. Douglas failed to appear at the trial and the judge refused

to allow her brother, a paralegal who had previously represented

her, to proceed in her absence. Mrs. Douglas was defaulted and a

decree was entered in favor of M r . Douglas. At the time of the

AP article, Mrs. Douglas had appealed the property award,

assigning error to the judge’s refusal to allow her brother to

represent her. She also claimed that Hewson’s opinion – that the

law firm had no value – was incorrect, primarily because the

4 report omitted mention of the $950,211 worth of WIP. Because of

the default, the only valuation evidence presented to the divorce

court was Hewson’s report. Relying on Hewson’s zero valuation of

the couples’ law practice, the trial judge awarded Mrs. Douglas

back pay, but nothing for equity in the practice.

In January or February of 1998, Webster sent Pratt some

information related to Hewson’s appraisal. Mrs. Douglas and her

attorney had also been in contact with Pratt to request his

services in relation to her divorce.2 And, they had been in

contact with Webster. In late February, Pratt, after reviewing

Hewson’s curriculum vitae, wrote to Mrs. Douglas’s attorney. He

stated that Hewson appeared to have no training in business

valuation.

Court orders had been issued in the Douglas divorce

proceedings imposing rules of confidentiality regarding financial

information produced during discovery.

2 The pleadings do not state when this contact took place, other than prior to the publication of the Sunday Herald article.

5 Discussion

Douglas and Hewson allege that Pratt and the AP defamed them

in the article released by the AP and published by, among others,

The Portsmouth Sunday Herald on March 1 5 , 1998. Additionally,

they claim Pratt and the AP were negligent in publishing those

statements. Furthermore, Douglas claims invasion of privacy by

being placed in a false light.

Defendants assert that the statements contained in the March

1 5 , 1998, article are not actionable because they are protected

opinions rather than statements of fact. Defendants also deny

any negligence associated with making the statements or reporting

them. Additionally, Defendants contend that Plaintiff Douglas

cannot maintain a claim for defamation because the allegedly

defamatory statements were not “of and concerning him.” See

Restatement (Second) of Torts, § 564A.

Defamation (Count I )

Plaintiffs point to the latter portion of the Sunday Herald

article and the statements attributed to Pratt as constituting

“[t]he crux of the defamatory ‘sting’.” See Hewson’s Mem. in

6 Opp’n 5 (document n o . 8 3 ) . That portion of the article reads as

follows, with Pratt’s challenged statements underlined:

[T]he main difference between the two appraisals lies in the $950,211 in work in progress.

Hewson did not mention it in his reports, though the amount was listed in a footnote on the balance sheet he used.

Appraisers might disagree about what percentage of the $950,211 could be collected from clients; but “it’s totally improper to ignore it,” said Shannon Pratt of Portland, Ore., a nationally recognized expert. Pratt, managing director of Willamette Management Associates, publisher of a business appraisal newsletter and author of several texts on business appraisal, reviewed Hewson’s and Bishop’s reports for the Associated Press.

After adjusting Chuck’s tax returns and assuming that three-quarters of the work in progress could be collected, Bishop arrived at a value of $1.1 million using the same method Hewson employed, he said. Two other methods yielded slightly different results, but both topped $1 million, he said.

Pratt questioned why Judge Coffey accepted Hewson’s appraisal, since he did not follow accepted standards of business appraisal and his resume shows no training in business valuation.

“If I were a judge ... I would have to think hard about whether I would accept him as an expert or his report as credible evidence,” Pratt said. Pratt said he had no qualms about Bishop’s work.

7 Sunday Herald Article at ¶¶ 22-29. Plaintiffs contend that, in

the context of the whole article, these statements falsely imply,

as fact, that “Mr. Douglas was defrauding the court by using an

incompetent fraud as his expert,” Third Am. Compl. at ¶ 25

(document n o . 6 6 ) .

In order to assert a prima facie case of defamation in New

Hampshire, the “language complained of . . . must tend to lower

the plaintiff in the esteem of any substantial and respectable

group, even though it may be quite a small minority.” Thomson v .

Cash,

7 1 , 373 (1979). Under New Hampshire law, “the

threshold question [in a defamation action] is whether the

published words are reasonably capable of conveying the

defamatory meaning or innuendo ascribed to them by the

plaintiff.” Id. at 374. Whether a statement is capable of

defamatory meaning is a question of law. See id. If it i s , it

is a question for the jury whether such meaning was in fact

conveyed. See id. However, “an action in libel cannot be

maintained on an artificial, unreasonable, or tortured

construction imposed upon innocent words, nor when only

8 ‘supersensitive persons, with morbid imaginations, would consider

the words defamatory.” Id. at 373 (citation omitted).

The First Amendment unquestionably protects opinions from

defamation liability. There is no blanket protection for a

statement framed as an opinion, but, to be actionable, such a

statement must be factual or capable of being proven true or

false. See Milkovich v . Lorain Journal Co.,

, 20

(1990); Levinsky’s, Inc. v . Wal-Mart Stores, Inc.,

2 2 ,

127 (1st Cir. 1997); Phantom Touring, Inc. v . Affiliated

Publications,

2 4 , 727 (1st Cir. 1992). Generally, a

protected opinion is one that “involves expressions of personal

judgment. . . .” Gray v . S t . Martin’s Press, Inc.,

(1st Cir. 2000). This assessment must be made within the

broader context of the statements made. See Milkovich,

1 ; Phantom Touring,

; McCabe v . Rattiner,

(1st Cir. 1987). Therefore, “the question is not

whether challenged language may be described as an opinion, but

whether it reasonably would be understood to declare or imply

provable assertions of fact.” Phantom Touring,

.

Importantly, then, “if a statement of opinion either discloses

9 the facts on which it is based or does not imply the existence of

undisclosed facts, the opinion is not actionable.” Riley v .

Harr, Civ. A . N o . 98-712-M, slip o p . at 18 (D.N.H. March 3 , 2000)

(citing Levin v . McPhee,

(2d Cir.

1997))(internal quotations omitted). The statements challenged

by Plaintiffs in this case are plainly protected opinions, and

are not actionable.

A. Appraisers might disagree about what percentage of the $950,211 could be collected from clients; but “it’s totally improper to ignore it,” said Shannon Pratt of Portland, Ore., a nationally recognized expert.

Whether it was “totally improper” for Hewson to give no

weight to the value of work in progress is inherently a

subjective matter, and therefore not capable of being proven true

or false. Furthermore, even if Pratt’s statement could be

interpreted as implying that Hewson did something “wrong,” the

statement is still protected as loose figurative language,

hyperbole and epithet. Because the article outlines the

information on which Pratt based his opinion, his conclusion is

also fully explained by the facts available to him and disclosed

in the article. See Partington v . Bugliosi,

, 1156

10 (9th Cir. 1995) (“when a speaker outlines the factual basis for

his conclusion, his statement is protected by the First

Amendment”).

B. Pratt questioned why Judge Coffey accepted Hewson’s appraisal, since he did not follow accepted standards of business appraisal and his resume shows no training in business valuation.

The second challenged statement, as a whole, describes

Pratt’s own questioning of the judge’s decision to accept

Hewson‘s expert opinion, because Hewson “did not follow accepted

standards of business appraisal” (in Pratt’s opinion) and because

“his resume shows no training in business valuation.” Sunday

Herald Article at ¶ 2 6 . Plaintiffs claim the statement is

actionable because it amounts to defamatory assertions of fact

related to them on which Pratt based his questioning of the

judge’s reliance. However, it is clear from the surrounding

context that the comment was based on Hewson’s review of Hewson’s

reports (which Plaintiffs do not deny failed to include the WIP)

and that Pratt concluded Hewson “did not follow accepted

standards of business appraisal.” Thus, for the same reasons

that an opinion that Hewson did something “totally improper” is

11 protected, Pratt’s conclusion, as described in this statement, is

also protected. See Partington,

.

The second challenged portion of the statement - “his resume

shows no training in business valuation” - is true. See Third

Am. Compl. at ¶12 (document n o . 6 6 ) . Plaintiffs claim this is

defamatory because they imaginatively interpret it to falsely

attack Hewson’s credentials and, indirectly, Douglas’s own

employment of him as an expert, when Hewson, in fact, has

experience beyond what is included in his resume that would have

been revealed in trial testimony. But his resume did not reveal

that experience and the statement addresses the content of his

resume. Pratt did not falsely attack Hewson’s credentials,

because the reader was provided with information necessary to

fully understand that Pratt’s questioning of the judge’s reliance

on Hewson was based on Pratt’s review of the same limited

information available to the judge at the time the decision was

made to accept Hewson’s expert opinion – his resume.

12 C. “If I were a judge ... I would have to think hard about whether I would accept him as an expert or his report as credible evidence,” Pratt said. Pratt said he had no qualms about Bishop’s work.

The final challenged statement is an expression by Pratt of

what he would have done had he been the judge. That expression

is not actionable.

Despite Plaintiffs claim that the article implies Pratt

“purportedly engaged in a review of all the pertinent data,” see

Douglas Mem. in Opp’n at 25 (document n o . 9 3 ) , when the

challenged portion of the article is read as a whole - that i s ,

the specific statements attributed to Pratt are considered in the

context of the entire article - it is clear that Pratt’s opinion

or conclusion as to what he might have done had he been the judge

were based on his review of the two reports and Hewson’s resume.

Moreover, neither the article nor Pratt’s conclusions suggest

that Pratt based his opinion on anything but the reports and the

resume. Although Plaintiffs contend that the fact that Pratt had

spoken with Mrs. Douglas and her attorney “should have been

revealed” to illustrate his bias, as explained above, to be

actionable, the statement must imply that the opinion rests on

undisclosed facts, a situation not presented in this case. See

13 Levinsky’s,

; Riley, Civ. A . N o . 98-712-M at 1 8 .

Because the court finds the challenged statements constitute

opinions based on disclosed facts and do not imply the existence

of undisclosed defamatory facts, the statements are non-

actionable opinions.

The AP’s publication of Pratt’s opinions in the Herald

Sunday article is similarly protected. The statements are

presented in the article as Pratt’s opinions, based on disclosed

sources, to explain Mrs. Douglas’s belief that she was entitled

to more in the divorce award. Thus, they are protected under

Milkovich.

Because the statements are non-actionable protected

opinions, it is not necessary to determine whether they are “of

and concerning” Douglas, though it would be a stretch to so find.

False Light (Count II)

Plaintiff Douglas also alleges that the Sunday Herald

article amounts to an invasion of privacy, placing him in a false

light. Defendants claim New Hampshire does not recognize the

tort and, therefore, urge the court to dismiss i t .

14 While there is no New Hampshire precedent directly

recognizing the common law tort of false light invasion of

privacy, this court has previously concluded that, “[g]iven its

demonstrated commitment to the protection of privacy rights in

Hamberger [v. Eastman],

[(1964)], it is likely that

the New Hampshire Supreme Court would also recognize the false

light tort.” Riley, Civ. A . N o . 98-712-M at 4 6 . Nevertheless,

Douglas has not sufficiently supported a false light claim. On

the contrary, because false light claims are equally restricted

by constitutional protections, some statements cannot support a

false light claim. See Veilleux v . National Broadcasting Co.,

2 , 134 (1st Cir. 2000); Brown v . Herst Corp.,

1 , 27 (1st Cir. 1995). Because the challenged statements are

protected opinions, Douglas cannot rely on them to establish a

false light claim.

Negligence Claims (Counts III, IV, & V )

Plaintiffs also assert a negligence claim against Pratt

under theories of third-party liability and violation of

professional standards. Additionally, Plaintiffs have brought

15 claims for “negligent training and supervision” against the A P ,

and Hewson asserts a claim for “negligent reporting” against the

AP. Defendant AP contends that “dismissal of [these] counts is

subsumed under” the arguments for dismissal of the defamation

claim because these claims are also protected by the First

Amendment.

Negligence consists of the breach of a duty that causes

foreseeable harm. Gilbert v . Essex Group, Inc.,

(D.N.H. 1993). To avoid judgment on the pleadings,

Plaintiffs must adequately allege each of the elements of

negligence. See Gilbert v . Essex Group, Inc.,

.

The negligence claim against Pratt alleges breach of a duty

to third parties and violation of professional standards.

Plaintiffs have failed to adequately allege a cognizable duty

owed to them arising from the professional standards applicable

to appraisers, or any breach of duty to third parties. The

professional standards cited in Douglas’ memorandum refer to

duties owed to clients. Douglas was not a client of Pratt, nor

was Hewson. The “obligation to the general public as a third

16 party beneficiary of the work” cited by Plaintiffs, see Third Am.

Compl. at 12 (document n o . 6 6 ) , makes reference to the duty

recognized in Spherex, Inc. v . Alexander Grant & Co.,

(1982) – a duty owed by professional accountants to those who

foreseeably may rely on their work. See also Morvey v . Hanover

Insurance Companies,

(1986) (citing Spherex).

Neither Plaintiff claims to have relied on Pratt’s work, or that

Pratt should reasonably have foreseen such reliance. No facts

are pled which support any special circumstances giving rise to a

foreseeable, or actionable, duty owed by Pratt to Douglas or

Hewson. Pratt owed them no cognizable duty beyond those imposed

by the law of defamation and they cannot recover for negligence

based on Pratt’s statements.

Furthermore, to the extent Plaintiffs rest their negligence

allegations on an alleged breach of the confidentiality order

entered in the Douglas divorce proceedings, they have wholly

failed to provide the court with any legal support for the

proposition that such a breach can give rise to a private cause

of action for negligence. The Superior Court’s order was issued

in an equitable proceeding and is injunctive in character. If

17 the order has not been obeyed by someone subject to i t , a civil

contempt proceeding, before the issuing court, might well be

available, but a private common law negligence action is not.

See, e.g., Burke v . Guiney,

6 7 , 769 (1st Cir. 1983);

Eldim, Inc. v . Mullen,

(Mass. App. 1999).

The civil contempt complaint must be brought before the court

issuing the violated order, since that court is best able to

determine both the scope and intent of the equitable order and

the appropriate sanction(s) for its violation. See, e.g., D.

Patrick, Inc. v . Ford Motor Co.,

(7th Cir. 1993).

Turning to Plaintiffs’ claims against A P , the First

Amendment protects newspapers or news services from liability for

damages, except for publication of defamatory material (with

actual malice in the case of public figures). See, e.g., Evans

v . American Federation of Television and Radio Artists,

(S.D.N.Y. 1973), rev’d on other grounds, Buckley

v . American Federation of Television and Radio Artists,

(2d Cir. 1974) (reminding in dicta that “[t]here is no legal

requirement for the press to present a ‘fair’ balance of opinion

and analysis. Subject only to the laws of libel, there is not

18 even a requirement of truthfulness and accuracy.”); Langworthy v .

Pulitzer Publishing Co.,

(Mo. 1963) ("No

action for damages lies against a newspaper for merely inaccurate

reporting when the publication does not constitute libel.").

Since the Sunday Herald article did not defame plaintiffs, no

cause of action based on that publication can proceed.

Violation of Consumer Protection Act (Count VI)

Finally, Plaintiffs allege the conduct of the AP constitutes

a violation of the New Hampshire Consumer Protection Act, N.H.

RSA 358-A, e t . seq., because the AP disparaged the services or

businesses of the plaintiffs through false or misleading

representations of fact. Because the article did not contain

false or misleading representations of fact, Plaintiffs’ Consumer

Protection claim cannot survive either.

Conclusion

The statements challenged by Plaintiffs are non-actionable

protected opinions. Similarly, the AP’s use of the statements in

the context of the Sunday Herald article is protected because

19 there is no implication of fact. Basically, all of the asserted

claims are without merit. Accordingly, Defendants’ motions for

judgment on the pleadings (document nos. 80 and 92) are granted.

The Clerk of Court shall enter judgment in accordance with

the terms of this order and close the case.

SO ORDERED.

Steven J. McAuliffe United States District Judge

September 2 9 , 2000

cc: Charles G. Douglas, I I I , Esq. Irvin D. Gordon, Esq. Susanna G. Robinson, Esq. William L . Chapman, Esq.

20