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GROSSMAN v. GOEMANS

March 10, 1986

ROBERT D. GROSSMAN, JR., ET AL., Plaintiffs,
v.
JOHN W. GOEMANS, ET AL., Defendants



The opinion of the court was delivered by: GASCH

 GASCH, Judge

 This diversity action for libel came before the Court for trial on February 21, 1986. The Court finds that plaintiffs are entitled to an award of $10,000 in damages from defendant John W. Goemans. *fn1" This memorandum constitutes the Court's findings of fact and conclusions of law.

 I.

 In 1983, plaintiffs Robert Grossman and Grossman & Flask, P.C., served as tax counsel to Goldmar Ltd., Inc. ("Goldmar") and Pangold Ltd., Inc. ("Pangold"), two firms engaged in leasing real property in Canada. On May 17, 1983, in response to a request from Arthur Rogow, president of Goldmar and Pangold, plaintiffs sent an opinion letter to Rogow which assumed the existence of hypothetical facts and concluded that certain rental payments made by Goldmar and Pangold were tax deductible. Rogow circulated the letter to investors.

 Stephen W. Sharmat, a Pangold investor, had retained Goemans to investigate Goldmar and Pangold and to explore prospects for establishing a Goldmar/Pangold investors group. On May 31, 1983, Goemans sent a letter to the Securities and Exchange Commission which accused Goldmar, Pangold, and their principals of fraud. Goemans also stated that, through issuance of the opinion letter, Grossman "has established himself and perhaps his law firm as an aider and abettor to the Goldmar/Pangold fraud if not as an actual co-conspirator thereto." The letter urged that Grossman "be enjoined . . . from furthering Rogow's fraudulent schemes."

 Goemans sent copies of his letter to an attorney and to 170 investors in Goldmar and Pangold. On June 15, 1983, Grossman received a letter from Dr. Irvin H. Jacobs, a Goldmar investor, who stated that he had received a copy of Goemans' letter and wanted Grossman's reply. The SEC never responded to Goemans' letter, and there is no evidence that the SEC ever pursued an action against plaintiffs for aiding and abetting or conspiring to further securities fraud.

 II.

 The four elements to a cause of action for libel are: (1) a false and defamatory statement; (2) unprivileged publication to a third party; (3) fault amounting at least to negligence on the part of the publisher; and (4) either actionability irrespective of harm or the existence of special harm caused by the publication. Restatement (Second) of Torts ยง 558 (1976); see Afro-American Publishing Co. v. Jaffe, 125 U.S. App. D.C. 70, 366 F.2d 649 (D.C. Cir. 1966).

 The factfinder must determine the truth or falsity of the alleged defamation. See Liberty Lobby, Inc. v. Anderson, 241 U.S. App. D.C. 246, 746 F.2d 1563, 1577-78 (D.C. Cir. 1984), cert. granted, 471 U.S. 1134, 105 S. Ct. 2672, 86 L. Ed. 2d 691 (1985). The Court finds that Goemans' allegations were false, since the uncontradicted evidence reveals that plaintiffs sent their opinion letter solely to express their legal opinion based upon hypothetical facts, and not to further fraud. *fn2" Moreover, in the District of Columbia, charges of criminal conduct are libelous per se. See Farnum v. Colbert, 293 A.2d 279 (D.C. App. 1972).

 Plaintiffs also have met the second element. Through production of the Goemans letter and the letter from Dr. Jacobs, plaintiffs have met their burden of establishing publication. See Howard University v. Best, 484 A.2d 958 (D.C. App. 1984). *fn3"

 Since plaintiffs are private individuals, they may recover upon a showing of negligence. See Dresbach v. Doubleday & Co., 518 F. Supp. 1285 (D.D.C. 1981); Phillips v. Evening Star Newspaper Co., 424 A.2d 78 (D.C. App. 1980), cert. denied, 451 U.S. 989, 68 L. Ed. 2d 848, 101 S. Ct. 2327 (1981). The record reveals that Goemans failed to make an adequate investigation of plaintiffs' conduct before making his charges. Indeed, Goemans admits that he did not engage in any research as to the legal conclusions reached in plaintiffs' opinion letter, but rather based his views upon "common sense." Deposition of John W. Goemans, Jan. 19, 1984 at 110-14. Goemans' conduct fell far short of the investigation a reasonable person would undertake before making allegations of criminal conduct. Cf. Joseph v. Xerox Corp., 594 F. Supp. 330 (D.D.C. 1984).

 Finally, plaintiffs have met the fourth element of a libel cause of action, because false allegations of criminal conduct are libelous per se and thus actionable without proof of special ...


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