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PEARCE v. E.F. HUTTON GROUP

July 14, 1987

John M. Pearce, Plaintiff,
v.
The E.F. Hutton Group, Inc., et al., Defendants



The opinion of the court was delivered by: FLANNERY

 Thomas A. Flannery, United States District Judge.

 This matter comes before the court upon defendant Griffin B. Bell's motions for partial summary judgment and for summary judgment. After hearing oral argument on these motions on March 9, 1987, and after considering the underlying papers, plaintiff's oppositions, and the entire record in this case, this court will grant the motion for partial summary judgment, and grant in part and deny in part the motion for summary judgment for the reasons stated below.

 I. BACKGROUND

 On May 2, 1985, E.F. Hutton & Company, Inc. ("Hutton"), a wholly owned subsidiary of defendant, The E.F. Hutton Group, Inc. ("Hutton Group"), pled guilty in the United States District Court for the Middle District of Pennsylvania to 2,000 counts of mail and wire fraud. The Department of Justice decided not to prosecute individual Hutton executives and instead accepted a plea from Hutton to pay a $ 2 million fine, reimbursement to the government for its costs, and restitution to defrauded banks. Hutton was also enjoined from engaging in certain cash management practices.

 The scandal and the Justice Department's handling of it led to a number of government probes and much public debate. As a result, the Hutton Group hired Griffin B. Bell and the law firm of King & Spalding in May, 1985 to conduct an investigation of the cash management program at Hutton which had resulted in the guilty plea. Based on this investigation, a report entitled "The Hutton Report" was issued on September 4, 1985 and was made available to the public by Mr. Bell at a press conference held in Washington, D.C. on the following day.

 The Hutton Report named a number of individuals as responsible for the fraudulent practices *fn1" that resulted in Hutton's guilty plea. The report also recommended certain sanctions for them. Among those deemed responsible for the fraud was John M. Pearce. Mr. Pearce had been branch manager of the Hutton office in St. Louis. After publication of the report, he was removed from that position, transferred to Florida, and eventually left the firm altogether. The State of Virginia took action against Pearce by barring him from being a Hutton manager there for five years. Pearce was also required to report to the securities regulators of the various states where he had been registered that an adverse action had been taken against him by his employer and the State of Virginia.

 Pearce filed suit on January 3, 1986 against the Hutton Group and Griffin Bell. He alleges that Bell was hired to produce a report that would place blame for the fraudulent cash management program with low level employees rather than with Hutton's senior officers. Besides being made a scapegoat, Pearce alleges that the report falsely states that he should have known his actions were illegal and in violation of firm policies and guidelines. Thus, plaintiff claims the Hutton Report libels him and places him in a false light. Plaintiff also charges that by mentioning him in the Hutton Report, defendants have misappropriated his name.

 On April 16, 1986, this court denied the Hutton Group's motion to stay these proceedings pending arbitration. On April 28, 1986, that decision was appealed. On June 10, 1986, a stay of this action, pending the appeal, was granted solely with regard to defendant Hutton Group. The Circuit Court heard oral argument on the appeal (D.C. Cir. No. 86-5281) on February 17, 1987 but no decision has been issued as yet. The case regarding defendant Bell was scheduled to go to trial on March 2, 1987. On February 9, 1987, however, trial was postponed because several motions had been filed that convinced the court this case was simply not ready to proceed. Among the motions filed, were the two dispositive motions presently before the court.

 Defendant Bell has filed a motion for partial summary judgment on the claims for punitive damages and the false light invasion of privacy claim. Bell has also filed a motion for summary judgment with respect to the remainder of plaintiff's claims.

 Plaintiff's original oppositions to Bell's motions were stricken from the record by this court in an opinion filed February 12, 1987, because they relied on inadmissible evidence. Plaintiff filed new oppositions on February 18, 1987. Defendant Bell renewed a motion to strike plaintiff's oppositions because they purportedly violated Fed. R. Civ. P. 56 and Local Rule 108(h). Bell claimed the oppositions were replete with false statements and with arguments, assertions, and allegations that are not referenced to the record. On March 9, 1987, the court ruled from the bench and denied Bell's renewed motion to strike. Following that ruling, the court heard oral argument on the motions for summary judgment.

 II. BARS TO PLAINTIFF'S CLAIMS

 As a preliminary matter, Bell argues that at least some of plaintiff's claims must be dismissed, regardless of how much supporting evidence plaintiff may have. First, plaintiff cannot raise a false light invasion of privacy claim since the applicable law is that of the State of Missouri, and Missouri does not recognize the false light invasion of privacy action. Second, plaintiff's misappropriation of name claim is inapplicable to the circumstances of this case. Finally, several of plaintiff's libel claims are not actionable since they involve statements that are absolutely privileged as expressions of opinion.

 A. Choice Of Law

 To determine which law applies to plaintiff's false light claim, the forum must apply the choice of law principles of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). This court must therefore apply the District of Columbia's choice of law rules to the problem. This is no simple task. Choice of law issues in defamation actions have historically presented difficult problems for the courts, *fn2" and these problems have only been magnified with the emergence of modern approaches to conflict of laws. *fn3" As at least one commentator has noted, American courts now follow no less than ten different approaches, not one of which can claim the allegiance of a majority of states. *fn4"

 1) Approach to conflict of laws in the District of Columbia

 Until about thirty years ago, the territorialist or "vested rights" approach adopted by the first Restatement of Conflict of Laws dominated American conflicts law. E. Scoles & P. Hay, Conflict of Laws § 17.2, at 552 (1984). The District of Columbia abandoned that approach in Tramontana v. S.A. Empresa De Viacao Aerea Rio Grandense, 121 U.S. App. D.C. 338, 350 F.2d 468 (D.C. Cir. 1965), cert. denied, 383 U.S. 943, 86 S. Ct. 1195, 16 L. Ed. 2d 206 (1966). *fn5" In its place, a "governmental interest analysis" approach was adopted. See generally Milhollin, The New Law of Choice of Law in the District of Columbia, 24 Cath. U.L. Rev. 448 (1975).

 Strictly speaking, interest analysis refers to the method developed by Professor Brainerd Currie. See R. Smolla, Law of Defamation § 12.03[5] (1986); Pielemeier, Multistate Defamation, supra note 2, at 396-98. Indeed, plaintiff appears to rely in part on arguments based on that form of interest analysis. Currie's approach, however, places heavy reliance on forum law. Pielemeier, Multi-state Defamation, supra note 2, at 396-97. See generally B. Currie, Selected Essays on the Conflicts of Laws (1963). Yet recent choice of law decisions by the District of Columbia courts put no such reliance on forum law. Thus, it is clear that the District does not follow Currie's brand of governmental interest analysis.

 Nevertheless, Currie's work provided the starting point for many of the current, policy-based approaches to conflict of laws. Among these numerous variations of interest analysis is the "most significant relationship" approach of the Restatement (Second) of Conflict of Laws. The Restatement (Second) developed over a seventeen year period which was marked by an at-first grudging and then a more whole-hearted acceptance of policy analysis. R. Cramton, D. Currie & H. Kay, Conflict of Laws: Cases - Comments - Questions 317 (1981). The end product combines presumptive jurisdiction-selecting rules with policy analysis. Id.

 It is the Restatement (Second) that guides choice of law decisions in the District of Columbia. *fn6" The most significant relationship approach *fn7" has even been used by this jurisdiction in other defamation/invasion of privacy cases. *fn8" Therefore, the Restatement (Second) of Conflict of Laws governs the choice of law issue in the case at bar.

 2) False conflict analysis

 The first step in deciding a choice of law problem is to determine whether there really is a conflict or whether the situation presents a "false conflict." *fn9" A false conflict exists when either (1) the potentially applicable laws do not differ, or (2) when, upon examination, one law -- by its terms or underlying policies -- is not intended to apply to a situation such as the one in issue. E. Scoles & P. Hay, Conflict of Laws at 17. Both concerns are raised in the instant case.

 Plaintiff argues that the laws of the District of Columbia and of the State of Missouri do not truly differ as to the existence of a false light invasion of privacy claim under the facts of this case. It is clear that the District of Columbia does recognize the false light action. See, e.g., Dresbach v. Doubleday & Co., 518 F. Supp. 1285, 1291 (D.D.C. 1981); Logan v. District of Columbia, 447 F. Supp. 1328, 1332-34 (D.D.C. 1978). The only issue is whether Missouri recognizes such a claim.

 The key case on this issue is the decision in Sullivan v. Pulitzer Broadcasting Co., 709 S.W.2d 475 (Mo. 1986). In Sullivan, a plaintiff was found to have filed a suit for defamation under the guise of an action for false light invasion of privacy in order to avoid the shorter statute of limitations for defamation actions. Id. at 476. The plaintiff contended the defendant had published a false accusation (that he had stolen materials, plans, and labor from the City of St. Louis for his personal benefit) that publicly portrayed him in a false light. Id. at 475. In holding that the plaintiff could not treat his claim as anything other than a defamation action, the court expressly rejected providing a false light claim when "one party alleges that the other published a false accusation concerning a statement of fact." Id. at 481.

 Though plaintiff Pearce is correct in pointing out that the Missouri court did leave open the possibility of a false light claim in other contexts, the instant case is clearly not among them. Pearce is alleging that defendants published false accusations about him -- precisely the situation the court in Sullivan rejected as providing grounds for a false light claim. The Sullivan court noted only two situations in which it might possibly recognize the false light tort. Id. at 480. The first is when one publicly attributes to the plaintiff some opinion or utterance, harmful or not, that is false. The classic case would be where one claims the plaintiff wrote a book or poem that he did not. The second situation is when one uses another's likeness in connection with a story that has no bearing on the plaintiff. Obviously, neither of these scenarios is applicable to the case at bar. Therefore, since Missouri would not recognize Pearce's false light invasion of privacy claim, while the District of Columbia would, the potentially applicable laws are in apparent conflict.

 The second step in determining whether a true conflict exists is to look at the differing laws and their underlying policies to see if they are all intended to apply to the situation at hand. By their terms, both Missouri's and the District's laws regarding false light actions are applicable to the present case. The underlying policies, however, are substantially different. The Missouri Supreme Court decision in Sullivan reflects that state's clear interest in refusing to allow false light actions to circumvent traditional restrictions on defamation claims. Id. at 480. Missouri has decided that defamation actions provide sufficient protection for its residents. Furthermore, the careful evaluation given the false light tort in Sullivan, as well as Missouri's much longer experience with privacy actions as compared to the District of Columbia's, *fn10" underscores the history and strength of Missouri's policy.

 In sharp contrast, the District of Columbia has a rather nebulous policy underlying the false light tort. Cases involving such claims simply adopt the Restatement formulations for privacy torts without significant analysis or evaluation of this type of claim. In fact, while the court in Dresbach v. Doubleday & Co., found no reason to distinguish false light from defamation, 518 F. Supp. at 1288, it did not set forth any policy reason for simultaneously providing both causes of action.

 Plaintiff has relied on language in Phillips v. Evening Star Newspaper Co. to argue that the District of Columbia has a policy of maximum protection for those placed in a false light. See 424 A.2d 78, 87 (D.C. 1980), cert. denied, 451 U.S. 989, 101 S. Ct. 2327, 68 L. Ed. 2d 848 (1981). Phillips, however, only discussed maximum protection in the context of a defamation action. Nothing was said to indicate that the District's policy of providing maximum protection to reputations also sought to provide plaintiffs with additional causes of action. It is just as plausible to presume that the false light tort was adopted solely to address concerns with privacy, rather than to augment the District's policy of maximum protection from defamation.

 Even assuming the District's adoption of the false light tort is due to a policy of providing maximum protection, that policy would not be advanced here. Plaintiff was domiciled in Missouri. He lived and worked there for four years before the alleged invasion of privacy. Though plaintiff was at one time a domiciliary of the District, his residence ended by 1981 and has never been resumed. *fn11" If plaintiff was not (and is not now) domiciled in the District of Columbia, the District's interests will not be advanced by an application of D.C. law.

 Since plaintiff was in St. Louis at the time Bell published his report, however, Missouri interests will be advanced by application of that state's law. Missouri has determined that the false light tort is unnecessary to protect its residents -- one of them being the plaintiff. Missouri has a greater interest in protecting free speech. Therefore, the case at bar presents a "false conflict." The only interested state is Missouri, which does not recognize the false light invasion of privacy claim.

 3) True conflict and the state with the most significant relationship

 Even assuming arguendo that there was a true conflict, Missouri has the most significant relationship to the occurrence and the parties, with respect to the false light claim. Under the Restatement (Second), the identification of "the state with the most significant relationship" involves a two-step process of identifying the relevant contacts with the respective states and then evaluating their significance in the light of, first, detailed prescriptive rules and, second, the policy-oriented general principles found in section 6(2). R. Cramton, D. Currie & H. Kay, Conflict of Laws: Cases - Comments - Questions, at 319-20.

 According to section 145(2) of the Restatement (Second), the relevant contacts in tort cases are :

 
(a) the place where the injury occurred,
 
(b) the place where the conduct causing the injury occurred,
 
(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and
 
(d) the place where the relationship, if any, between the parties is centered.

 Restatement (Second) of Conflict of Laws § 145(2) (1971).

 Item (d) is not applicable to the instant case. Item (b) is the least controversial. The District of Columbia is clearly the place of conduct since it is here that defendant Bell issued his report and gave the press conference. Though Bell argues that the place of conduct also includes those states where his report was prepared and disseminated, the principal acts of communication (allegedly putting plaintiff in a false light) occurred in the District. In any event, as is discussed shortly, the place of conduct is not a significant contact in the context of defamation and invasion of privacy actions.

 Items (a) and (c) are interrelated in the instant case. With regard to defendants, item (c) is not particularly relevant because neither Missouri nor the District are the domicile, residence, place of incorporation, or the principal place of business of the defendants. Reference to these contacts thus presents no means of determining which of the two jurisdictions has the stronger interest.

 As to the plaintiff, however, domicile and residence are significant contacts. Plaintiff was a domiciliary of Missouri. *fn12" Furthermore, because plaintiff was residing there at the time of the alleged invasion of privacy, Missouri is also the location of item (a) -- the place of injury. The place of injury plays a central role under Restatement (Second) analysis. For torts, this contact is the most important in the selection of the state of the applicable law. Restatement (Second) of Conflict of Laws § 145, comment (e), at 419. In contrast, the place of conduct plays a less important role, especially in a case such as defamation. Id. at 420. In the instant case, the place of injury is clearly Missouri. Though plaintiff has claimed he has numerous contacts and friends in the D.C. area, none of these are relevant to an invasion of privacy claim.

 While plaintiff's contacts with the District might give him grounds to argue that his reputation was injured here, reputation only relates to the defamation claim. Lumping defamation with invasion of privacy leads to error in choice of law because the two torts differ materially. Bernstein v. National Broadcasting Co., 129 F. Supp. 817, 824-25 (D.D.C. 1955), aff'd, 98 U.S. App. D.C. 112, 232 F.2d 369 (D.C. Cir.), cert. denied, 352 U.S. 945, 1 L. Ed. 2d 239, 77 S. Ct. 267 (1956). Invasion of privacy is a personal injury -- an injury to feelings. Id. at 825. Rules of privacy are designed to protect a person's interest in being let alone, not in one's reputation. Restatement (Second) of Conflict of Laws § 152, comment d. Clearly, an injury to one's feelings can only occur where the plaintiff is located at the time of the impact of the privacy invasion. Bernstein, 129 F. Supp. at 825-26. In the instant case, plaintiff was residing in Missouri at the time defendants issued their report.

 Though the opinion in Bernstein was written during the first Restatement era, the decision to draw a distinction between the torts of defamation and invasion of privacy did not rely on the outdated choice of law rules of the territorialist approach. In fact, the distinction was noted and relied on by the Restatement (Second). See Restatement (Second) of Conflict of Laws § 152, comment d.

 Even if the place of injury ordinarily was not the most important contact in tort actions, the Restatement (Second) goes further and specifically provides that in cases of multistate invasion of privacy, the state with the most significant relationship will usually be the state where the plaintiff was domiciled. Restatement (Second) of Conflict of Laws § 153; see also Crane v. Carr, 259 U.S. App. D.C. 229, 814 F.2d 758, 760 (D.C. Cir. 1987) ("Libel and 'false light,' are the kind [of claims] in which the injury, foreseeably, is felt with greatest force in the place where plaintiff lives.").

 Relying on the fact that rules of privacy are meant to protect feelings, the Restatement's drafters explained that the plaintiff's domicile should be the state of the most significant relationship because that is usually the state of the greatest injury. Restatement (Second) of Conflict of Laws § 153, comment d. The drafters went on to state that the law of the plaintiff's domicile will also be applied even though some or all of the defendant's acts were done in another state. Id.

 The Restatement (Second)'s preference for applying the law of the plaintiff's domicile has received considerable judicial approval. *fn13" Though commentators have expressed concern that courts will choose plaintiff's domicile from "an unconsidered application" of section 153, see Pielemeier, Multistate Defamation, supra note 2, at 396, such fear would be misplaced in the case at bar. Even under the general principles of section 6(2), *fn14" the District of Columbia cannot be deemed to have a more significant relationship to the occurrence and parties. Examination of various contacts bolsters the application of Missouri law.

 Plaintiff lived in Missouri for four years before the alleged invasion of privacy. He worked there for Hutton as a branch manager, the position in which he engaged in the activities in issue. He worked there twice as long as the two years he worked as branch manager in Maryland. He has not worked in the District of Columbia since the fall of 1979. Plaintiff and his wife apparently had at least as many friends and acquaintances in Missouri as in the District in 1985. In fact, she has named more people with whom the couple maintained contact from Missouri than from the entire Washington metropolitan area. Contact with Washington friends has been infrequent.

 Additionally, plaintiff left his job with Hutton in Missouri, moving to a position in Florida and ultimately leaving the firm. Plaintiff's privilege to manage a brokerage was suspended in Virginia, not the District. Although other states considered similar action, including Florida, Pennsylvania, and Missouri, apparently the District did not. Plainly, whatever contacts plaintiff has with the District of Columbia cannot outweigh the substantial connections that Missouri has with this issue.

 Finally, the court turns to plaintiff's contention that there is a trend by courts to apply the law most favorable to plaintiff. This position is simply untenable. The Restatement (Second) states that the law selected under section 153 even determines whether a right to privacy is to be recognized at all. Restatement (Second) of Conflict of Laws § 153, comment b. Furthermore, none of the cases relied on by plaintiff to support the alleged "trend" dates from the past decade. In contrast, there are a number of recent cases choosing laws unfavorable to plaintiffs. *fn15"

 Therefore, Missouri is the state with the most significant relationship to the false light claim. Since Missouri would not recognize plaintiff's false light action, the claim must be dismissed with prejudice.

 B. Misappropriation Of Name

 Plaintiff argues that even if his false light claim is precluded, he can proceed on another invasion of privacy theory -- misappropriation of name. The premise for this claim is that defendant used plaintiff's name and identity to gain substantial pecuniary benefit by having him serve as a scapegoat for Hutton's corporate abuses.

 Plaintiff's theory is plainly implausible. There is no evidence that plaintiff's name was of any particular value or that it was included in the Hutton Report to take advantage of plaintiff's reputation or the value associated with his name. There is no evidence that defendant Bell's compensation was somehow dependent on including plaintiff's name in the Hutton Report.

 The essence of a misappropriation of name action is that the defendant has used another's name to take advantage of some value associated with it -- not merely for informational purposes. Restatement (Second) of Torts § 652C, comment d (1977). "Incidental use of name or likeness or publication for a purpose other than taking advantage of a person's reputation or the value associated with his name will not result in actionable appropriation." Vassiliades v. Garfinckel's, 492 A.2d 580, 592 (D.C. 1985). In the case at bar, plaintiff has presented no evidence that defendants' use of his name was for anything other than for informational purposes. The misappropriation of name invasion of privacy claim must therefore be dismissed with prejudice.

 C. Absolute Privilege For Opinion

 Defendant Bell claims that several of his allegedly defamatory statements are simply opinion, so summary judgment must be granted as to them. Indeed, the Supreme Court has recognized that statements of opinion are absolutely exempt from libel suits under the first amendment. Gertz v. Robert Welch, Inc., 418 U.S. 323, 41 L. Ed. 2d 789, 94 S. Ct. 2997 (1974) (dictum); see also Ollman v. Evans, 242 U.S. App. D.C. 301, 750 F.2d 970, 974-75 (D.C. Cir. 1984) (en banc), cert. denied, 471 U.S. 1127, 86 L. Ed. 2d 278, 105 S. Ct. 2662 (1985).

 First, the common usage or meaning of the specific language of the challenged statement must be analyzed. Id. This is to determine whether the statement has a precise meaning and thus is likely to give rise to clear factual allegations. Id. at 980. "The classic example of a statement with a well-defined meaning is an accusation of a crime." Id.

 In the present case, Bell claims his statements, that plaintiff's actions were such that "no reasonable person could have believed that this conduct was proper" (Complaint at para. 21(d)) and were "so aggressive and egregious as to warrant sanctions" (Complaint at para. 21(g)), were mere expressions of opinion. So too, he claims, were his statements that plaintiff was "actually engaged in wrongdoing" (Complaint at para. 21(e)), and was a "moving force in improprieties" (Complaint at para. 21(f)).

 There is nothing "loosely definable" or "variously interpretable" about Bell's statements. This is not a situation involving some indefinite epithet, such as the "fascist" accusation in Buckley v. Littell, 539 F.2d 882 (2d Cir. 1976), cert. denied, 429 U.S. 1062, 50 L. Ed. 2d 777, 97 S. Ct. 785, 97 S. Ct. 786 (1977), or the "sloppy and irresponsible reporting" criticism in Cole v. Westinghouse Broadcasting ...


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