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Brown & Williamson Tobacco Corp. v. Jacobson

(Libel US Dist. Ct. N. IL 1982 Pltf's Verdict) Citation: 713 F2d 262 (CA 7, Ill, 14 July 1983); 1985 WL 6432 (N.D.Ill. 14 Mar 1985); 644 F Supp 1240 (ND Ill, 7 Aug 1986); 827 F2d 1119 (CA 7, Ill, 12 Aug 1987); 485 US 993, 108 S Ct 1302, 99 L Ed 2d 512 (4 April 1988)

This libel suit was brought by Brown & Williamson Tobacco Corp. against Walter Jacobson and CBS.
The plaintiff alleged that the defendants broadcast an untrue FTC report with the intent that it cause harm to the plaintiffs reputation for honesty and decreased its sales of Viceroy Cigarettes. In 1981 FTC published a report that misconstrued a 1975 report by the Kennan research firm through the Ted Bates company to the plaintiffs. The original report suggested that the plaintiff base a series of advertisements to target at young smokers on cigarettes' place within the scheme of illicit activities that were attractive to young people including pot, beer, wine and sex. The FTC report indicated that the plaintiffs had done as Kennan recommended in their Viceroy advertising strategy. CBS then incorporated the FTC report into a broadcast by Walter Jacobson on November 11, 1981 which was rebroadcast on November 12, 1981 and March 5, 1982. The broadcast included defendant Jacobson reading portions of the report and saying, "They're not slicksters, they're liars." The plaintiffs claimed libel, wrongful interference, and violations of the Illinois Deceptive Business Practices Act and the Uniform Deceptive Business Practices Act. The plaintiffs sought compensatory, punitive and declarative relief, the latter saying that the broadcast was false.
The case was heard in the United States District Court for the Northern District of Illinois (No. 8201648), before the Honorable William T. Hart. The judge dismissed the complaint for failure to state a claim. The plaintiff appealed.
The United States Court of Appeals, Sevent Circuit (713 F2d 262) reversed the dismissal in part and affirmed in part on July 14, 1983. The court held that a broadcast accusing the plaintiffs of attracting children to its product by associating it with pleasurable but illicit activity (such as pot, beer, wine and sex) was libelous per se. It accused the plaintiffs of immoral conduct, which was defamatory on its face. Even if it were not, the plaintiff would have to be afforded an opportunity to amend its pleading. The defendants' fair and accurate summary defense was not so strong that it could be ruled on as a matter of law. The overall message of the FTC report and the broadcast based on it were sufficiently different to raise a question for the jury. The incidental effects of causing the plaintiffs customers to withdraw their business did not qualify as wrongful-interference, so that count of the complaint was rightfully dismissed. Since the broadcast targeted the producer rather than the product, the state and Uniform Deceptive Business Practices Acts did not apply either.
The judge (1985 WL 6432 (N.D.Ill.)) denied the defendants' motion for summary judgment on March 14, 1985. The judge ruled that a question of material fact existed as to whether defendant Jacobson's broadcast was a fair summary of a government report or contained distortions that would constitute actual malice toward the plaintiff. Jacobson's statement "They're not slicksters, they're liars" was understood by the judge to be a statement of fact and not protected opinion.
The trial was bifurcated into liability and damages portions, with the same jury hearing both parts. The jury found for the plaintiffs, awarding $3,000,000 in general damages, $2,000,000 in punitive damages against CBS and $50,000 in punitive damages against Jacobson.
On August 7, 1986, the judge (644 F Supp 1240) heard the defendants' motion for judgment notwithstanding the verdict. The judge held that the evidence was sufficient to show that the report concerned the plaintiff, since it referred to the producer of Viceroy Cigarettes, and that the finding in that report was false. There was no advertisement for Viceroy Cigarettes containing pot, wine, beer or sex from 1975-1982. He found evidence of actual malice (knowledge of falsity or reckless disregard for the truth) in the inconsistent testimony of Jacobson and Radutzky. The jury instructions regarding actual malice had been proper. It told the jury a subjective test should be used, based on what the defendants actually knew. The defendants failed to show that the broadcast was a fair summary of the government report because the evidence could be interpreted as having a greater sting than the report itself. The plaintiff had failed to show evidence of actual damages, but was entitled to nominal damages of $1, because it was a case of presumed damages under libel per se. The punitive damages against CBS of $2,000,000 and against Jacobson of $50,000 were proper, given the defendants' wealth, because the plaintiff had demonstrated actual or express malice. The defendants appealed.
The United States Court of Appeals, Seventh Circuit (827 F.2d 1119) affirmed the trial court's judgment in part and reversed in part on August 12, 1987. The court held that actual malice had been established by the defendants leading viewers to believe that the plaintiffs intentionally advertised to children using an association with illicit activity. The facts and circumstances surrounding the broadcast indicate it was not an opinion protected by the first amendment, but a factual report. The only advertisements the defendants were able to produce in support of their argument displayed smoking as a pleasurable, but not illicit, experience. Radutzky's intentional destruction of documents was evidence of actual malice. The court ruled that the plaintiff had suffered presumed damages (an estimate of the extent of actual damages) of $1,000,000 in harm to its reputation. The post-verdict media coverage should not have been included in the calculation of harm. The punitive damages were not excessive.
The Supreme Court of the United States (485 US 993) denied certiorari on April 4, 1988.