Franklin Pre v. NY Times Co ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
9-12-2005
Franklin Pre v. NY Times Co
Precedential or Non-Precedential: Precedential
Docket No. 04-3404
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-3404
FRANKLIN PRESCRIPTIONS, INC.,
t/a Franklin Drug Center
v.
NEW YORK TIMES CO.,
SANDRA COBURN, JOHN DOE, JANE DOE
Franklin Prescriptions, Inc.,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 01-cv-00145
(Honorable Cynthia M. Rufe)
Argued May 27, 2005
Before: SCIRICA, Chief Judge,
ALITO and GARTH, Circuit Judges
(Filed September 12, 2005)
GEORGE A. BOCHETTO, ESQUIRE (ARGUED)
DAVID P. HEIM, ESQUIRE
Bochetto & Lentz, P.C.
1524 Locust Street
Philadelphia, Pennsylvania 19102
Attorneys for Appellant
CARL A. SOLANO, ESQUIRE (ARGUED)
Schnader Harrison Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, Pennsylvania 19103
Attorney for Appellees
OPINION OF THE COURT
SCIRICA, Chief Judge.
Plaintiff/Appellant Franklin Prescriptions challenges the
jury instructions in this defamation action under Pennsylvania
law. At issue is whether plaintiff properly objected to the
court’s jury charge under Federal Rule of Civil Procedure 51,
2
and whether plaintiff was entitled to an instruction on presumed
damages and defamation per se. The District Court denied
Franklin Prescriptions’ motion for a new trial. We will affirm.
I.
Franklin Prescriptions, Inc., is a small pharmacy in
Philadelphia specializing in fertility medications. In 1996, the
company began marketing its niche products on the internet via
an information-only website. The website allows Franklin
Prescriptions’ customers to survey available products and
pricing, but does not enable the online purchase of prescription
drugs. Franklin Prescriptions only accepts drug orders by way
of mail, telephone, fax, or in person, and only then with a
doctor’s prescription.
On October 25, 2000, the New York Times published an
article entitled, “A Web Bazaar Turns into a Pharmaceutical
Free For All.” The article addressed the risks of purchasing
fertility drugs on the internet. It described “unscrupulous” and
“cloak and dagger” websites that process online orders for
controlled drugs without prescriptions. Franklin Prescriptions
was not mentioned in the text, but the article contained a graphic
insert with an image of the Franklin Prescriptions website that
identified Franklin Prescriptions by name. The insert was
placed next to a side-bar labeled “Safety Tips for Buying E-
Medicines” that warned readers to “[a]void sites that fail or
refuse to provide a United States address and phone number.”
Although Franklin Prescriptions’ website did, in fact, list the
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company’s address and telephone number, the partial image
reproduced for the article omitted this information.
Significantly, the published image also omitted part of the
website that stated in bold-face language: “Must have doctor’s
prescription from a physician licensed in the United States to
purchase Viagra.”
Franklin Prescriptions sued for defamation. The District
Court denied the New York Times’ motion for summary
judgment, finding a genuine issue of material fact on whether
the newspaper published the article with reckless disregard for
its falsity. The case went to trial, and the jury found the article
false and defamatory. But it awarded no damages, finding
Franklin Prescriptions suffered no actual harm caused by the
publication.
Before the jury was charged, Franklin Prescriptions
submitted proposed jury instructions on presumed damages and
defamation per se. Neither proposed instruction was given to
the jury. The parties dispute whether Franklin Prescriptions
objected to the lack of a presumed damages instruction.
Franklin Prescriptions submits that it did so—off the record—at
an in camera charging conference held in chambers. The New
York Times disputes this contention, maintaining that the
presumed damages instruction was not discussed at the
chambers charging conference. In its Memorandum Opinion
and Order, the District Court rejected Franklin Prescriptions’
assertion, stating that “the Court terminated the conference
before addressing Plaintiff’s presumed damages instruction.”
4
Franklin Prescriptions, Inc. v. The New York Times Co., 2004
WL 1770296, at *5 (E.D. Pa. Aug. 5, 2004). Whether or not an
objection was raised at the charging conference, it is undisputed
that Franklin Prescriptions never entered an on-the-record
objection to the lack of a presumed damages instruction.
In denying the motion for a new trial, the District Court
held that Franklin Prescriptions failed to object to the lack of a
presumed damages instruction under Fed. R. Civ. P. 51(c)(1),
which provides that a party objecting to jury instructions “must
do so on the record.” Additionally, the District Court held that
under Pennsylvania law Franklin Prescriptions was not entitled
to a jury instruction on presumed damages. Franklin
Prescriptions, 2004 WL 1770296, at *7-8.
II.
The District Court had diversity jurisdiction under 28
U.S.C. § 1332. We have appellate jurisdiction under 28 U.S.C.
§ 1291. Our standard of review turns on whether Franklin
Prescriptions properly objected to the relevant jury charge.
Where a party properly objects to a jury instruction under Fed.
R. Civ. P. 51, we exercise plenary review to determine whether
the instruction misstated the applicable law. Cooper Distrib.
Co., Inc. v. Amana Refrigeration, Inc., 180 F.3d 542, 549 (3d
Cir. 1999) (citing Walden v. Georgia-Pac. Corp., 126 F.3d 506,
513 (3d Cir. 1997)). Where a party fails to object properly, we
may review for “plain error in the instructions affecting
substantial rights.” Fed. R. Civ. P. 51(d)(2). Under the
5
discretionary plain error standard, we will reverse the trial court
only where a plain error was “fundamental and highly
prejudicial, such that the instructions failed to provide the jury
with adequate guidance and our refusal to consider the issue
would result in a miscarriage of justice.” Ryder v. Westinghouse
Elec. Corp., 128 F.3d 128, 136 (3d Cir. 1997).
III.
A.
The District Court held that Franklin Prescriptions failed
to preserve its presumed damages objection under Federal Rule
of Civil Procedure 51(c)(1), which provides that a party
objecting “to an instruction or the failure to give an instruction
must do so on the record, stating distinctly the matter objected
to and the grounds of the objection.” Notwithstanding the plain
language of Rule 51, Franklin Prescriptions contends it
preserved its objection by submitting a formal request for a
presumed damages charge and by pressing for that instruction
during the in camera charging conference.
Merely proposing a jury instruction that differs from the
charge given is insufficient to preserve an objection. Abuan v.
Level 3 Communications, Inc., 353 F.3d 1158, 1172 (10th Cir.
2003); Caruso v. Forslund, 47 F.3d 27, 31 (2d Cir. 1995);
Advisory Committee Note to Fed. R. Civ. P. 51 (“Many cases
hold that a proper request for a jury instruction is not alone
enough to preserve the right to appeal failure to give the
instruction.”). As the Advisory Committee Note to Rule 51
6
explains, challenges to the failure to give a proposed jury
instruction “must be renewed by objection.”
Nor does Franklin Prescriptions’ purported charging
conference objection preserve the issue. Franklin Prescriptions
cites to Smith v. Borough of Wilkinsburg, 147 F.3d 272, 277-78
(3d Cir. 1998), where a party submitted a proposed jury
instruction and later objected to its omission at an in camera
charging conference. We found the objection preserved under
Rule 51 because “the district court was fully apprised of [the
party’s] position, and it would serve no purpose to require
counsel to have formally reasserted the objection after the
charge had been given to the jury.” Id. at 278.
But Smith is unavailing here. The premise of Smith was
that the trial court was “fully apprised” of the party’s objection
and nevertheless rejected it. Both the parties and the District
Court in Smith agreed there had been an objection and a
definitive ruling on the issue. That is not the case here.
Franklin Prescriptions’ alleged off-the-record objection is
disputed by the New York Times. More importantly, it is flatly
contradicted by the District Court, which stated that Franklin
Prescriptions’ “recollection of the March 18, 2004 conference
is inaccurate . . . . the Court terminated the conference before
addressing Plaintiff’s presumed damages instruction.” 2004 WL
1770296, at *5. Unlike Smith, there is no consensus that the
District Court was fully apprised of Franklin Prescriptions’
objection and no indication of a definitive trial court ruling on
the matter. Cf. Fed. R. Civ. P. 51(d)(1)(B) (excusing a party’s
7
failure to object on the record where “the court made a
definitive ruling on the record rejecting the request”).
Furthermore, prior to charging the jury, the parties here
were provided with a written draft of the court’s proposed
instructions and explicitly invited to lodge exceptions for the
record. The record reveals no objection to the omission of a
presumed damages instruction. Franklin Prescriptions entered
certain objections to the charge but remained silent on the issue
of presumed damages. Nor did Franklin Prescriptions object to
the relevant aspects of the special verdict form, which instructed
the jury that it could not award damages absent a showing of
actual harm. The verdict form, like the proposed instructions,
precluded an award of presumed damages. Franklin
Prescriptions’ failure to object to either the court’s instructions
or the verdict sheet constitutes a failure to preserve its presumed
damages objection. Neely v. Club Med Mgmt. Servs., Inc., 63
F.3d 166, 200 (3d Cir. 1995) (en banc).
But there is a more fundamental reason to reject Franklin
Prescriptions’ presumed damages challenge—the plain language
of Federal Rule of Civil Procedure 51. The foregoing chain of
events, and the factual dispute the parties continue to press on
appeal, illustrates precisely the rationale behind the 2003
amendment of this rule. The amendment adding Rule 51(c)(1)
took effect on December 1, 2003, and applies to pending
proceedings “insofar as just and practicable.” See Orders of the
Supreme Court of the United States Adopting and Amending
Rules, Fed. R. Civ. P. 23, 51, 53, 54, and 71A (Mar. 17, 2003).
8
The amended rule provides, in clear terms, that parties must
object to proposed jury instructions “on the record, stating
distinctly the matter objected to and the grounds of the
objection.” Fed. R. Civ. P. 51(c)(1). The Advisory Committee
Note explains that “[s]ubdivision (c) . . . . makes explicit the
requirement that the objection be made on the record.”
Rule 51(c)(1) works in conjunction with Rule 51(b)(2)
and Rule 51(d) to forestall and resolve the very situation
presented here—a dispute among the parties regarding off-the-
record objections. Rule 51(b)(2) requires the court to “give the
parties an opportunity to object on the record and out of the
jury’s hearing to the proposed instructions.” Rule 51(c)(1), in
turn, requires that parties avail themselves of the on-the-record
opportunity. If a party fails to do so, Rule 51(d)(2) provides that
only discretionary “plain error” review may be available. See
Advisory Committee Note to Fed. R. Civ. P. 51 (“an error not
preserved under Rule 51 may be reviewed in exceptional
circumstances”). By mandating on-the-record exceptions, and
imposing a penalty for failure to enter them, Rule 51 serves the
critical purpose of apprising the trial court of possible errors in
the charge and affording the court and the parties an opportunity
for correction before submission of the case to the jury. See
Fashauer v. N.J. Transit Rail Operations, 57 F.3d 1269, 1288
(3d Cir. 1995).
The District Court in this case adhered to the Rule 51
framework. The parties were provided with a written draft of
the proposed jury charge and expressly invited to enter on-the-
9
record objections before the case went to the jury. Franklin
Prescriptions availed itself of this opportunity in certain
respects—registering on-the-record objections to several aspects
of the charge—but remained silent on the issue of presumed
damages. Accordingly, the objection was not properly
preserved, and we will consider it under the plain error standard
of review. Fed. R. Civ. P. 51(d)(2).
B.
Under the plain error standard, we consider, inter alia,
the “obviousness of the error, the significance of the interest”
involved, and “the reputation of judicial proceedings if the error
stands uncorrected.” United States v. Richards, 241 F.3d 335,
342 (3d Cir. 2001); see also Advisory Committee Notes to Fed.
R. Civ. P. 51(d)(2). Plain error review is discretionary—it
“should be exercised sparingly” and “should only be invoked
with extreme caution in the civil context.” Fashauer, 57 F.3d at
1289 (quoting United States v. Carson, 52 F.3d 1173, 1188 (2d
Cir. 1995)). Here, we will affirm because we see neither
fundamental error in the omission of a presumed damages
instruction nor prejudice resulting in a miscarriage of justice.
“Although replete with First Amendment implications, a
defamation suit fundamentally is a state cause of action.”
Schiavone Constr. Co. v. Time Inc., 847 F.2d 1069, 1082 (3d
Cir. 1988) (citations omitted). We apply Pennsylvania
defamation law in this diversity matter, with due regard for the
underlying First Amendment principles. Where a question of
10
state law is unsettled, we must predict the Pennsylvania
Supreme Court’s resolution of the issue, giving consideration to
applicable decisions of the intermediate appellate state courts.
Travelers Indem. Co. of Ill. v. DiBartolo, 131 F.3d 343, 348 (3d
Cir. 1997).
At issue is whether omission of a presumed damages
instruction constituted a fundamental error resulting in a
miscarriage of justice under Pennsylvania law. The District
Court ruled that Franklin Prescriptions was not entitled to an
instruction on “presumed damages” under Pennsylvania law.
2004 WL 1770296, at *7 (post-trial opinion and order).
“Presumed damages” allow a defamation plaintiff to recover
compensatory damages without proving the defamatory
statement caused actual harm. The rationale for this approach
is that it may be unfair to require proof of actual harm to
reputation because reputational injury is difficult to prove and
measure. See W. Page Keeton et al., Prosser & Keeton on The
Law of Torts § 116A, at 843 (5th ed. 1984). Before Gertz v.
Robert Welch, Inc., 418 U.S. 323 (1974), presumed damages
were available in Pennsylvania without constitutional
limitations. See, e.g., Fox v. Kahn, 221 A.2d 181, 184 (Pa.
1966). In Gertz, however, the Supreme Court held that the First
Amendment bars presumed damages absent a showing of
“knowledge of falsity or reckless disregard for the truth.” 418
U.S. at 349; see also Dun & Bradstreet v. Greenmoss Builders,
472 U.S. 749 (1985) (limiting Gertz to cases where the
11
challenged speech involves a “matter of public concern”)
(plurality opinion).
As support for the availability of presumed damages,
Franklin Prescriptions cites to a standard form Pennsylvania jury
instruction which provides: “[i]f you find that the defendant
acted either intentionally or recklessly in publishing the false
and defamatory communication you may presume that the
plaintiff suffered both injury to his reputation and the emotional
distress, mental anguish and humiliation such as would result
from such a communication.” 2 Pa. Sug. Stan. Civ. J. Inst. §
13.10(B) (2d ed. 2003). In Frisk v. News Co., the Pennsylvania
Superior Court upheld the validity of this instruction. 523 A.2d
347, 354 (Pa. Super. Ct. 1986).
But seven years after Frisk was decided, the
Pennsylvania Superior Court again considered presumed
damages in Walker v. Grand Central Sanitation, Inc., 634 A.2d
237 (Pa. Super. Ct. 1993). Walker held that “a defendant who
publishes a statement which can be considered slander per se is
liable for the proven, actual harm the publication causes.” Id. at
244. Under Walker, a slander per se plaintiff is required to
show “general damages”—proof of harm to reputation or
personal humiliation—but not “special damages”—proof of
actual monetary loss. Id. at 243-44 (“the burden is on the
plaintiff to establish at least general damages”); see also Brinich
v. Jencka, 757 A.2d 388, 397 (Pa. Super. Ct. 2000) (“‘[A]
defendant who publishes a statement which can be considered
slander per se is liable for the proven, actual harm the
12
publication causes.”) (quoting Walker). Although Walker
appears generally to foreclose presumed damages under
Pennsylvania law, it is not entirely clear whether presumed
damages remain available where the plaintiff proves actual
malice.1
Even if we assume, favorably to Franklin Prescriptions,
that Walker allows an award of presumed damages upon a jury
finding of actual malice, the jury here made no such finding.
Question five of the verdict sheet, to which Franklin
Prescriptions never objected, asked the jury to determine the
following:
Did Franklin Prescriptions, Inc. satisfy its
burden of proving by a preponderance of the
evidence that The New York Times acted
intentionally, recklessly or negligently when it
published the defamatory implication(s) in the
article?
1
Walker did not explicitly address the availability of
presumed damages in a case of actual malice—although it may
signal that presumed damages are unavailable in Pennsylvania
whether or not actual malice is proven. Compare Walker, 634
A.2d at 243 (“this Court entertains a policy against allowing
damages without any proof of actual harm”), with Beverly
Enters., Inc. v. Trump, 182 F.3d 183, 188 n.2 (3d Cir. 1999)
(noting, without citing Walker, that plaintiff need not prove
actual damages where defendant acted with actual malice).
13
The jury answered “yes” to this question, finding that the New
York Times acted “intentionally, recklessly or negligently”
(emphasis added). But this is not a finding of actual malice.2
The word “or” leaves open the possibility that the jury’s “yes”
to question five represented its belief that the New York Times
acted negligently. Mere negligence does not rise to the level of
actual malice, which requires a showing of knowledge or
reckless disregard of the publication’s falsity. See Norton v.
Glenn, 860 A.2d 48, 54 (Pa. 2004) (“actual malice will not be
made out on a mere showing that the media defendant was
negligent”). Furthermore, the burden of proof on question five
was “preponderance of the evidence,” not “clear and
convincing,” which a finding of actual malice requires. Bose
Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 511 n.30
(1984).
Question six of the verdict sheet, in turn, instructed the
jury to return to the courtroom if it found insufficient evidence
of actual harm. Franklin Prescriptions did not object to this
question, which asked the jury:
2
In the opening paragraph of its brief, Franklin Prescriptions
erroneously suggests that the jury found actual malice. Franklin
Prescriptions states the jury found that the New York Times
acted “negligently, recklessly, or intentionally (i.e., with actual
malice).” This quote is misleading. The words in parenthesis,
“i.e., with actual malice,” do not appear in the verdict form and
do not represent a finding of the jury.
14
Did Franklin Prescriptions, Inc., satisfy its burden
of proving by a preponderance of the evidence
that Franklin suffered actual harm that was
substantially caused by the article?
Answering question six in the negative, the jury found no actual
harm and returned to the courtroom without answering the
subsequent verdict sheet questions concerning actual malice.
In sum, it appears that Pennsylvania law is unsettled on
the availability of presumed damages in this case. Cf. United
States v. Vazquez, 271 F.3d 93, 100 (3d Cir. 2001) (explaining
that error is plain only where the proper course is “clear under
current law”) (en banc); Connelly v. Hyundai Motor Co., 351
F.3d 535, 546 (1st Cir. 2003) (holding that error cannot be plain
where current law is unsettled). In any event, we need not
decide this issue. Even assuming Pennsylvania allows presumed
damages upon a showing of actual malice, Franklin
Prescriptions initially failed to enter an on-the-record objection
to the lack of a presumed damages instruction and then acceded
to a verdict sheet that compelled the jury to return to the
courtroom before addressing the issue of actual malice.3
Because Franklin Prescriptions failed to seek or obtain an
antecedent jury finding of actual malice, we see no prejudice
3
We note that the structure of the verdict sheet may well have
been to Franklin Prescription’s advantage, as it authorized an
award of damages on the basis of mere negligence without
requiring an antecedent finding of actual malice.
15
rising to the level of plain error. Furthermore, the District Court
noted that “the evidence at trial fell well short of that necessary
for a showing of actual malice or reckless disregard.” 2004 WL
1770296, at *7. Accordingly, the District Court’s omission of
a presumed damages instruction cannot constitute a fundamental
error resulting in a miscarriage of justice, if it was error at all.
IV.
Franklin Prescriptions also contends it was entitled to an
instruction on defamation per se. According to Franklin
Prescriptions, the District Court’s failure to issue a “defamation
per se” charge mistakenly instructed the jury that proof of
specific financial harm was required to support an award of
compensatory damages. Franklin Prescriptions properly
objected at trial to the lack of a defamation per se instruction.
Defamation or slander per se occurs where a publication
“imputes to another conduct, characteristics, or a condition that
would adversely affect her in her lawful business or trade[.]”
Walker, 634 A.2d at 241. A defamation per se plaintiff need not
prove “special damages,” i.e., monetary or out-of-pocket loss.
Instead, a plaintiff need only prove “general damages,” i.e.,
“proof that one’s reputation was actually affected by the slander,
or that she suffered personal humiliation, or both.” Id. at 242.
The jury charge, while omitting the term “defamation per
se,” made clear that Franklin Prescriptions was not required to
prove financial harm. The jury charge was explicit that “actual
injury can include impairment of reputation,” that Franklin
16
Prescriptions should be compensated for “all harm it suffered,
” and that the jury could compensate for “the actual harm to the
plaintiff’s reputation.” We see no error. The District Court
accurately charged that the jury could award compensation
based on harm to reputation alone.
V. Conclusion
For the foregoing reasons, we will affirm the denial of
the motion for a new trial.
17