The opinion of the court was delivered by: GREEN
Joyce Hens Green, United States District Judge.
Defendant Booz-Allen & Hamilton, Inc. ("Booz-Allen") moves for summary judgment on an issue expressly left unresolved by the United States Court of Appeals for the District of Columbia in remanding this case: whether the first amendment protects defendant from this suit for negligent preparation of a report that allegedly caused economic injury to plaintiff, a state governmental agency. For the reasons set forth below, the Court finds that the negligence standard set forth by the South Carolina Supreme Court in this case adequately protects the first amendment interests of defendant and summary judgment is denied.
The report, entitled "An Economic Evaluation of Two Key South Atlantic Ports in the Major U.S. Trade Routes with Europe, Far East, Middle East, Mediterranean," was written by Booz-Allen's Transportation Consulting Division in Bethesda, Maryland, under the direction of Booz-Allen Vice President Leo J. Donovan and Dr. John C. Martin, the project manager for the report.
The objectives of the 80-page report were to compare and assess the "current potential" of the Port of Charleston and the Port of Savannah and "to identify and evaluate the key operational characteristics of the two South Atlantic ports." In late 1983, GPA distributed the report to thirteen existing and potential customers of the Charleston and Savannah Ports. Booz-Allen itself also provided the report to at least one such customer.
Alleging that the Booz-Allen report contained misleading, false, and damaging information, SCSPA and two union plaintiffs filed this action against Booz-Allen
on February 4, 1984 for negligence, libel, and tortious interference with contract. After three years of proceedings in this Court, the United States Court of Appeals for the District of Columbia Circuit, and the Supreme Court of South Carolina,
the scope of this case has been narrowed such that only SCSPA remains as a plaintiff and is now proceeding on one count of negligence, with a request for compensatory and punitive damages, and injunctive relief.
In remanding this case, the Court of Appeals cleared plaintiff's path to trial except for one potential obstacle. In a footnote, the Court of Appeals stated: "We express no opinion on the parting argument [Booz-Allen] raised in its brief that 'extending general negligence liability' to 'the conduct at issue [which] consisted entirely of speech' would collide with the first amendment. . . . That issue remains open for district court consideration on remand." South Carolina State Ports Authority v. Booz-Allen & Hamilton, Inc., [795 F.2d 1085, 1086 n.* (D.C. Cir. 1986). Not surprisingly, defendant has accepted the Court of Appeals' invitation to pursue this issue and now moves for summary judgment.
While the array of first amendment and defamation cases involving non-political speech provide valuable guidance on the issue presented in this case, no court has ever directly addressed the question of whether a plaintiff may pursue damages from speech under a negligence theory when the same plaintiff could not so proceed on the basis of libel. The absence of an analogous case is explained in part by the odd posture of this case -- plaintiff here is a governmental entity and under long-standing principles of libel law would not itself be entitled to seek damages for defamation. New York Times Co. v. Sullivan, 376 U.S. 254, 291, 11 L. Ed. 2d 686, 84 S. Ct. 710 (1964); City of Philadelphia v. The Washington Post Co., 482 F. Supp. 897, 898-99 (E.D. Pa. 1979) (citing The Mayor, Aldermen, and Citizens of Manchester v. Williams, 1 Q.B. 94 (1891)). Characterizing this case as an end-run around the libel laws, however, is not accurate, as plaintiff in this action does not claim damage to its reputation, but rather actual economic harm resulting from the circulation of the allegedly false information in defendant's report.
In determining whether the South Carolina state law of negligence to be applied to this case withstands first amendment scrutiny, it is important to set forth the exact nature of that cause of action as articulated by the South Carolina Supreme Court:
A cause of action for negligence requires: (1) the existence of a duty on the part of the defendant to protect the plaintiff; (2) the failure of the defendant to discharge the duty; (3) injury to the plaintiff resulting from the defendant's failure to perform. Winburn v. Insurance Co. of North America, 287 S.C. 435, 339 S.E. 2d 142 (Ct. App. 1985). See also, Horne v. Beason, 285 S.C. 518, 331 S.E. 2d 342 (1985). . . .
Liability for negligence in preparing reports has been extended to parties other than those to the contract in certain circumstances. 57 Am. Jur. 2d, Negligence, Section 51. Consultants such as BAH may be found liable in negligence to noncontracting parties who have reasonably relied on their reports in taking some action. See, Stagen v. Stewart-West Coast Title Co., 149 Cal. App. 3d 114, 196 Cal. Rptr. 732 (2d Dist. 1983); Carlotta v. T.R. Stark & Assoc., Inc., 57 Md. App. 467, 470 A.2d 838 (1984). We hold a duty to use due care, running from a consultant to the commercial competitor who is being critiqued, arises when the consultant undertakes to objectively analyze and compare the attributes of commercial competitors for the purpose of giving one a market advantage over the other. Under this analysis, BAH owed a duty to the S.C. ...