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Pan Am Systems, Inc. v. Atlantic Northeast Rails & Ports, Inc.

United States Court of Appeals, First Circuit

October 9, 2015

PAN AM SYSTEMS, INC.; SPRINGFIELD TERMINAL RAILWAY COMPANY; DAVID ANDREW FINK, Plaintiffs, Appellants,
v.
ATLANTIC NORTHEAST RAILS AND PORTS, INC.; CHALMERS HARDENBERG, Defendants, Appellees

As Amended November 4, 2015.

Page 60

[Copyrighted Material Omitted]

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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE. Hon. Nancy Torresen, U.S. District Judge.

Thad B. Zmistowski, with whom Jonathan A. Pottle and Eaton Peabody were on brief, for appellants.

Russell B. Pierce, Jr., with whom Norman, Hanson & DeTroy, LLC was on brief, for appellees.

Before Howard, Chief Judge, Thompson and Barron, Circuit Judges.

OPINION

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THOMPSON, Circuit Judge.

Overview

Today's appeal centers on a district judge's decision kicking out this battle-scarred defamation case on summary judgment. By way of introduction, plaintiffs are David Andrew Fink, Pan Am Systems, Inc., and Springfield Terminal Railway Company. Fink is the former President and CEO of Pan Am, the parent corporation of Springfield. Defendants are Chalmers Hardenbergh and Atlantic Northeast Rails & Ports, Inc. (" ANR& P," for short). Hardenbergh is a writer and editor at ANR& P, a trade newsletter and e-bulletin covering the railroad industry. So defendants are -- both sides tell us -- " media defendants" for all purposes relevant to this case. Saving certain details for later, we quickly sketch the main contours of the parties' dispute.

Basically, plaintiffs are upset because they think four ANR& P articles -- published between December 2009 and March 2011 -- contained false and defamatory statements. Discussing a train derailment on a Springfield-owned rail line, the first article -- after relying on reports in leading newspapers -- quoted a state official as saying the accident was " 'perfectly predictable'" because the " 'railroad system'" was " 'horrendously dilapidated.'" The next article said Springfield neither stationed a crew at a certain locale nor provided five-day-a-week service on a certain line -- despite " promis[ing]" to do both. Touching on Pan Am's " haz-mat service," the third article -- relying on an email from an unnamed source -- claimed Springfield " 'loses' cars on a consistent ongoing basis, including one car 'lost' for over 60 days." And finally, the last article said Pan Am's owner had " removed" Fink " from management," though some of ANR& P's sources did not know whether Fink had " definitely left" or whether the owner " came to New England to administer the coup de grace," but sources did express the hope that Fink's successor -- Fink's son, it turns out -- " might have more freedom either to spend more money on railroading, or put the existing money into different [and one would hope more productive] places." (Brackets in original.)

Fed up with these write-ups, plaintiffs sued defendants in diversity, alleging (as relevant here) defamation. According to Maine law -- which the parties agree applies to this litigation -- liability for defamation exists if there is

(a) a false and defamatory statement concerning another;
(b) an unprivileged publication to a third party;
(c) fault amounting at least to negligence on the part of the publisher; and
(d) either actionability of the statement irrespective of special harm or the existence of special harm caused by the publication.

Lester v. Powers, 596 A.2d 65, 69 (Me. 1991) (quoting Restatement (Second) of Torts § 558

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-- which we will call " RST" from now on).

Defendants moved to dismiss the complaint for failing to state a claim, arguing (among other things) that plaintiffs had insufficiently pled falsity and fault -- defamation elements (a) and (c), respectively. See Fed.R.Civ.P. 12(b)(6). Acting on the motion, the judge dismissed the complaint without prejudice, granting plaintiffs a chance to replead to fix these problems. The judge also ruled that defendants should be considered " media defendants" and that the complained-about speech involved " matters of public concern" (more on the quoted concepts later).

Taking their cue from the judge's order, plaintiffs seasonably filed an expanded complaint. Worried that a fight over the fault element might require them to divulge confidential sources and threaten their First-Amendment interests, defendants proposed -- and the district court accepted -- having the parties do discovery on all issues except fault, followed by summary judgment on those issues, followed by discovery on fault if needed. See Bruno & Stillman, Inc. v. Globe Newspaper Co., 633 F.2d 583, 597-98 (1st Cir. 1980) (discussing how bifurcated discovery like this can protect a defendant's journalistic sources). After the first discovery phase, defendants moved for summary judgment, maintaining that they had published nothing defamatory or false. See Fed.R.Civ.P. 56(a). Plaintiffs opposed the motion, naturally. But the judge granted the motion, concluding (in a nutshell) that none of the offending statements were actionable in defamation.

Plaintiffs now appeal, making the big-picture argument that the troublesome passages in the offending articles -- dealing with the derailment, promises, lost cars, and Fink's departure -- are capable of defamatory readings and are provably false. Wrong, and wrong again, defendants fire back. But, for reasons to appear shortly, we think plaintiffs are right about the lost-car comments. And so we reverse only on that issue.

Let us be perfectly clear, though. Our reversal on the lost-car comments does not mean that those comments may proceed to trial. After all, our analysis here concerns only part of the defamation inquiry -- whether the battled-over statements are capable of a defamatory meaning and whether they are provably false. There remains the question whether defendants were at fault. To show fault, plaintiffs will need to show at the very least that defendants were negligent -- and they may need to show that defendants acted with actual malice. See N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964) (holding that a public figure suing for defamation must show that the defendant acted with actual malice). Because the judge bifurcated discovery, she left the fault issue for another day. And so we must do the same.

Guiding Legal Principles

Summary Judgment

We give fresh review to the judge's summary-judgment ruling, drawing all reasonable inferences in favor of plaintiffs (the motion's opponents). See, e.g., Collazo-Rosado v. Univ. of P.R., 765 F.3d 86, 92 (1st Cir. 2014). And we will affirm only if no genuine issues of material fact muddle the dispute and only if defendants (the motion's proponents) merit judgment as a matter of law. See, e.g., id.

Two other things worth noting: First, to get the ruling flipped, plaintiffs must offer us " more than arguments woven from the gossamer strands of speculation and surmise." RTR Techs., Inc. v. Helming, 707 F.3d 84, 93 (1st Cir. 2013). And second, we

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can affirm the ruling on any ground apparent in the record, even one not relied on by the judge. See, e.g., Collazo-Rosado, 765 F.3d at 92.

Defamation

Modern defamation law is a complex mixture of common-law rules and constitutional doctrines. See, e.g., Levinsky's, Inc. v. Wal-Mart Stores, Inc., 127 F.3d 122, 132 (1st Cir. 1997). And working one's way through it all can be dizzying. But work our way we must. So off we go.

(a)

Common-Law Rules

Starting with Maine law, we see (and this is a paraphrase of what we said earlier) that a defamation cause of action " arises from (1) the defendant's unprivileged publication to a third party (2) of a false statement pertaining to the plaintiff (3) through fault amounting at least to negligence, (4) as long as the statement either is defamatory per se or causes special harm." [1] See Garrett v. Tandy Corp., 295 F.3d 94, 103 (1st Cir. 2002) (citing Rippett v. Bemis, 672 A.2d 82, 86 (Me. 1996)). A statement is defamatory if it tends to harm the reputation of another either by lowering the esteem in which he is held or by discouraging others from associating with him. See, e.g., Bakal v. Weare, 583 A.2d 1028, 1029 (Me. 1990) (relying on RST § 559). Because for-profit corporations have " business reputation[s]," they too can be defamed. See RST § 561 cmt. b; see also id. § 561(a) (explaining that " [o]ne who publishes a defamatory matter" concerning a for-profit corporation can be liable " if . . . the matter tends to prejudice [the corporation] in the conduct of its business or to deter others from dealing with it" ); see generally Vahlsing Christina Corp. v. Stanley, 487 A.2d 264, 265-66 (Me. 1985) (dealing with a defamation action brought by a corporation and its president). And keep in mind that one who repeats a defamatory statement may be as liable as the original defamer. See RST § 578.

Whether a statement is capable of a defamatory meaning is a threshold question for the court. See Bakal, 583 A.2d at 1030 (citing, among other authorities, RST § 614). To discern meaning, a court must draw from the context of the statement and not interpret words " in the most negative . . . way" imaginable. Id. (citing RST § 563 cmt. d for the in-context point); see also Veilleux v. Nat'l Broad. Co.,206 F.3d 92, 108 (1st Cir. 2000). This " is not a question of the intent of the speaker, or author, or even of the understanding of the plaintiff, but of the understanding of those to whom the words are addressed . . . ." Picard v. Brennan, 307 A.2d 833, 835 (Me. 1973) (quoting Chapman v. Gannett,132 Me. 389, 171 A. 397, 398 (Me. 1934)). But if the court concludes that the statement can reasonably carry both a defamatory and nondefamatory meaning, it is up ...


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