D.  Product Disparagement Case Hinges

on Actual Malice, Avoidance of Truth

 

      The U.S. Court of Appeals for the Ninth Circuit dealt with the intersection of principles governing summary judgment standards and de novo appellate review of actual malice determinations in the context of a product disparagement suit in Suzuki Motor Corp. v. Consumers Union of United States, Inc., 292 F.3d 1192 (9th Cir. 2002).  The case arose from a story published by Consumers Union in its Consumer Reports magazine, in which it rated the Suzuki Samurai, a sport utility vehicle, as “Not Acceptable” due to its alleged propensity to roll over during accident avoidance tests.

      Suzuki sued Consumers Union for product disparagement under California law, and the parties agreed that First Amendment standards applicable in libel actions governed the dispute.  The case was thus litigated on the supposition that, for Suzuki to prevail, it had to sustain the burden of proving by clear and convincing evidence that Consumers Union published its statements disparaging the Samurai with actual malice – knowledge of falsity or reckless disregard for truth or falsity.  The district court dismissed the action on the ground that Suzuki had failed to produce sufficient evidence to overcome a motion for summary judgment by Consumers Union on the actual malice issue.

 

Ninth Circuit Reverses District Court

      The Ninth Circuit reversed and reinstated the claim in a 2-to-1 decision, and in the course of its opinion elaborated on the application of actual malice principles in the context of an appellate court’s review of a grant of summary judgment.

      Focusing on the U.S. Supreme Court’s discussion of the actual malice determination in Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657 (1989), the Ninth Circuit in Suzuki observed that plaintiffs may attempt to establish actual malice in two principal ways: (1) by demonstrating through direct proof that a publisher actually had a high degree of awareness of probable falsity; or (2) when such direct proof is missing, by evidence that there was obvious reason to doubt the accuracy of a story, and that the defendant did not act reasonably in dispelling those doubts.  While the mere failure to investigate will not alone support a finding of actual malice, the court explained, the “purposeful avoidance of the truth” is in a different category.

      In making these determinations at the summary judgment stage, the Ninth Circuit held that it is not appropriate to apply the “independent appellate review” requirement emanating from New York Times Co. v. Sullivan, 376 U.S. 254 (1964), in a manner that would jettison the normal standards applicable to grants of summary judgment.  Distilled, this meant that when the New York Times “clear and convincing” evidence requirement applies, the trial judge’s summary judgment inquiry as to whether a genuine issue on actual malice exists will be whether the evidence presented is such that a jury applying that evidentiary standard could reasonably find for either the plaintiff or the defendant.

      Applying this approach, the Ninth Circuit held that in light of the conflicting evidence before it, a jury could have found that Consumers Union knew that the Samurai did not tip more easily than other sport utility vehicles, and that Consumers Union had essentially rigged its product tests to produce a predetermined result.  While it was true that Consumers Union had offered evidence of the accuracy of its story, or at least of its subjective belief that the story was accurate, a jury would be free to disbelieve that evidence. 

      There was sufficient evidence, the court reasoned, from which a jury could reach the conclusion that Consumers Union was guilty of rigging its tests.  This included evidence that the driving test course had been modified for the Samurai test, evidence that the Samurai was repeatedly tested until it finally tipped over, and evidence regarding various reactions of Consumers Union employees to the tests.  The Ninth Circuit held that the district court had failed to give adequate weight to the test-rigging evidence, and that for summary judgment purposes the conflict in evidence was sufficient to require that the case be resolved by a jury.

      Similarly, the Ninth Circuit held that there was sufficient circumstantial evidence of a financial motive by Consumers Union to increase sales of Consumer Reports to support an ultimate conclusion of actual malice, and that once again the district court had erred in taking this issue from a jury.  While a defendant’s profit motive would not alone support an actual malice finding, the court reasoned, the evidence of a financial incentive dovetailed with the evidence of test rigging.  Consumers Union needed to boost its revenues to complete a capital campaign, the court stated, and a jury could determine that it succumbed to the temptation to rig test results to produce a rollover so as to increase magazine sales.

 

Purposeful Avoidance of the Truth?

      Summary judgment was also inappropriate, the court ruled, because Suzuki had put forward sufficient evidence to create a triable jury question on whether Consumers Union deliberately avoided the truth in the face of obvious reasons to doubt the accuracy of its story.  Suzuki relied on a study published by the National Highway Traffic Safety Administration (NHTSA) that criticized the testing procedures used by Consumers Union, as well as a British Department of Transport study that appeared to echo the NHTSA conclusions.  Among other evidence, Suzuki submitted expert witness testimony claiming that Consumers Union violated accepted standards of journalism in not conducting further investigation in light of this contradictory evidence.  

      The court held that while the expert testimony could not itself establish actual malice, it was probative of the propriety of Consumers Union’s behavior and was thus entitled to “appropriate weight.”  The court held that much of Suzuki’s argument regarding purposeful avoidance amounted to nothing more than disagreement with Consumers Union over the conclusions it reached – not enough to constitute purposeful avoidance of the truth. 

      With regard to one purposeful avoidance issue, however, the court sided with Suzuki. A significant element of the critique against Consumer Reports was that its testing procedures were overly influenced by “driver input.”  And indeed, there was some evidence that persons within the Consumers Union staff shared this assessment.  Nevertheless, Consumers Union did little to respond to this critique, although it was armed with the knowledge that its tests were potentially flawed by this problem. 

      In this posture a jury could reach the conclusion, the court held, that Consumers Union had deliberately avoided the truth.  Emphasizing the principle that on summary judgment motions all reasonable inferences must be indulged in favor of the non-moving party, the court reversed the grant of summary judgment and reinstated the suit for trial.

 

--Rodney A. Smolla