(CN) - Two newspapers in New Jersey can't assert the fair reporting privilege for their coverage of an allegedly defamatory bankruptcy complaint, because the privilege does not extend to preliminary pleadings, a New Jersey appeals court ruled.
Thomas John Salzano filed suit over articles published in The Record and The Glen Ridge Voice, and posted on the Web sites NorthJersey.com and LeasingNews.org, about Salzano's alleged misappropriation of funds from NorVergence, a defunct telecommunications company his father managed.
The publications reported that Salzano allegedly "stole" nearly $500,000 from the company, though the trustee's complaint stated only that the defendant "unlawfully diverted, converted and misappropriated" NorVergence's funds "for his own personal benefit." The trustee claimed Salzano charged $268,795 in "personal expenses, such as outings to bars and clubs, clothing and other personal expenses, between Nov. 25, 2002 and March 24, 2004."
The story ran under the headlines "Man accused of stealing $500,000 for high living," and "Argyle residence allegedly bought with stolen funds."
In his defamation complaint, Salzano said he became "unwittingly embroiled" in the bankruptcy proceedings through the trustee's "baseless and unsupported" claims, which the news organizations republished "intentionally, maliciously, and with reckless and/or negligent disregard of the truth." He added that the media's versions sensationalized the trustee's actual claim that he merely received diverted funds.
The Superior Court judge dismissed the complaint on the basis that Salzano failed to prove actual malice.
The appellate court took the media's view that "the sting of the article conveys essentially the same sting as the bankruptcy complaint," but ruled that the fair reporting privilege does not apply.
Initial proceedings are not covered by the privilege, Judge Fisher wrote, otherwise unscrupulous litigants would sue simply to defame the other party.
Without a privilege to republish defamatory material, newspapers must prove not only that the statements were made, but also that the substance of the statements is true.
Turning to the issue of actual malice, the court concluded that, although Salzano was a private person, he'd been caught up in a public matter and "must be held to the actual malice standard." The judges allowed him to amend his complaint to make his case for actual malice.
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