TORTS — Defamation

NuWave Investment Corporation v. Hyman Beck & Company

New Jersey Law Journal

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NuWave Investment Corporation v. Hyman Beck & Company, A-5275-10T1; Appellate Division; opinion by Messano, P.J.A.D.; decided and approved for publication September 19, 2013. Before Judges Messano, Lihotz and Kennedy. On appeal from the Law Division, Morris County, L-0411-06. DDS No. 36-2-1378 [38 pp.]

Plaintiffs Troy Buckner and John Ryan were principals of NuWave Investment Corporation, which Buckner founded after he left employment with defendant Hyman Beck & Company, the employer of defendants Alexander Hyman and Richard DeFalco. Defendant First Advantage Litigation Consulting, formerly known as BackTrack Reports Inc., prepared background investigative reports regarding the financial industry for clients considering investment opportunities. BackTrack prepared such reports on Buckner, Ryan and NuWave. Those reports included statements, many of which were attributed to the Hyman Beck defendants, that plaintiffs considered defamatory.

Plaintiffs filed a complaint asserting: trade libel and defamation against all defendants; intentional interference with economic advantage as to the Hyman Beck defendants; and negligence as to BackTrack. Plaintiffs subsequently filed an amended complaint asserting malicious abuse of process against BackTrack.

Plaintiffs' defamation claim against the Hyman Beck defendants was dismissed. Subsequent dismissals left only the defamation claim against BackTrack for trial.

The jury found BackTrack liable and awarded the following amounts as "presumed damages": NuWave — $1 million; Buckner — $150,000; Ryan — $50,000. The jury further determined that NuWave suffered $1.406 million in "actual damages" as a proximate result of BackTrack's defamatory statements, but neither Buckner nor Ryan suffered actual damages. The jury also determined that BackTrack proved Hyman "and/or" DeFalco had defamed plaintiffs and their defamation was "injurious to the plaintiffs," apportioning responsibility as follows: BackTrack — 37 percent; Hyman — 53 percent; DeFalco — 10 percent. Lastly, the jury determined that BackTrack "engaged in malicious or willful and wanton conduct entitling" plaintiffs to punitive damages of $250,000. The judge molded the verdict and entered an order for judgment that also included prejudgment interest.

BackTrack now appeals, arguing that the judge erred by permitting the jury to award "presumed damages." Plaintiff also appeals the dismissal of their claim against the Hyman Beck defendants as barred by the statute of limitations.

Held: In light of the Supreme Court's recent opinion, W.J.A. v. D.A., a jury may award nominal presumed damages in a libel case, but it may not make an award of both "actual" damages and presumed damages. An award in excess of $1 million in presumed damages cannot stand.

The trial judge determined that certain statements contained in the BackTrack reports were per se defamatory. Here, BackTrack argues that the statements were not defamatory because they were opinions or otherwise not actionable, and, even if the statements were factual, they were not per se defamatory. BackTrack further contends that, as a result of this erroneous ruling, the jury was told to consider "presumed damages," which, it argues, should not have been considered because there was no proof BackTrack acted with actual malice, and because plaintiffs introduced proof of, and the jury awarded, actual damages.

Here, the statements at issue were for the most part, not opinions, but rather Hyman's and DeFalco's factual assertions regarding Buckner's and Ryan's conduct while employed at Hyman Beck, and, to some extent, their conduct of NuWave's business after they left. The statements imputed serious ethical, if not criminal, breaches, and were the kind of statements that "subject a person to ridicule or contempt, or that clearly sound to the disreputation of" plaintiffs. The appellate panel finds no error in the judge's decision that the statements were defamatory.

As to BackTrack, the defamation was libel, not slander. Thus, it was inconsequential whether the statements fit into one of the categories of slander per se. Generally speaking, having once established that a statement was libelous, a plaintiff is entitled to have the jury instructed as to presumed damages.

In the wake of the Supreme Court's recent decision in W.J.A. v. D.A., the doctrine of presumed damages has limited continued vitality in these circumstances. Although W.J.A. makes clear that a defamation plaintiff may proceed to trial in the absence of proof of "actual harm" by using the "procedural mechanism" of presumed damages, the court did not explicitly address the issue raised by this appeal — that is whether a jury may award both presumed damages and damages based on proved "actual harm."

Under W.J.A., although an adequately instructed jury may make an award of presumed damages absent proof of actual harm to a plaintiff's reputation, the award must be "nominal." The policy undergirding the continued vitality of the doctrine of "presumed damages" is completely served if the jury accepts proof of "actual harm" flowing from the defamation and makes an appropriate award of damages. Therefore, the appellate panel concludes that a jury cannot do both, i.e., award both presumed nominal damages and other "actual damages."

In light of W.J.A., a jury should be instructed that it may award presumed damages of nominal value if a plaintiff fails to prove compensatory or other actual damages. The appellate panel therefore finds that the award of presumed damages that exceeded $1 million in this case must be vacated. The only remaining issue is whether that conclusion also requires vacation of the entire judgment and a new trial on damages.

Because the panel cannot ascertain with confidence whether, if properly instructed on the law of presumed damages in light of W.J.A., the jury would have reached a different result in its award of "actual damages," the entire judgment, including the judgment on punitive damages, must be vacated. The dismissal of plaintiffs' complaint against the Hyman Beck defendants based on the one-year statute of limitations applicable to defamation suits is affirmed.

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