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allied-marketing-group-inc-dba-sweepstakes-clearinghouse-v-paramount ( 2003 )


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  •                                                              11th Court of Appeals

                                                                      Eastland, Texas

                                                                            Opinion

     

    Allied Marketing Group, Inc. d/b/a Sweepstakes Clearinghouse

    Appellant

    Vs.             No. 11-01-00240-CV   B Appeal from Dallas County

    Paramount Pictures Corporation; Paramount Stations Group, Inc.;

    Joe Tobin; Fernando Martinez; Chuck Whitlock; Barry Nolan;

    Lisa Gregorisch; and Diane Dimond

    Appellees

     

    Allied Marketing Group, Inc. d/b/a Sweepstakes Clearinghouse (Allied) appeals from the trial court=s order granting a traditional summary judgment and a no-evidence summary judgment in favor of Paramount Pictures Corporation; Paramount Stations Group, Inc.; Joe Tobin; Fernando Martinez; Chuck Whitlock; Barry Nolan; Lisa Gregorisch; and Diane Dimond (collectively referred to as Paramount).  Allied alleged that Paramount and other defendants defamed it in a Hard Copy television show segment about a Asweepstakes scam.@[1] Because we conclude that Paramount failed to meet its traditional summary judgment burden and that Allied met its no-evidence summary judgment burden, we reverse the trial court=s summary judgment and remand the cause to the trial court for further proceedings. 


    On February 8, June 17, and July 29, 1996, Hard Copy aired a segment about a sweepstakes scam.  In the segment, Hard Copy producer Chuck Whitlock, accompanied by a video camera operator, went to a number of homes.  When people answered their doors, Whitlock told them that he was with Sweepstakes Clearing House and that they had won $10,000 in a sweepstakes contest. He showed them ASweepstakes Clearing House@ checks made out for $10,000.  He then told the Awinners@ that they had to pay $250 in taxes before he could give them their checks.  Each Awinner@ wrote a $250 check, payable to the I.R.S., as directed by Whitlock. Whitlock then returned the $250 checks to the Awinners@ and informed them that he was doing a national consumer awareness show for Hard Copy.  Whitlock stated that A[t]his is a con that=s perpetrated all over the country from coast to coast.@  The segment=s narrator stated that con-artists cash the Aincome tax@ checks through a bogus company set up with the initials I.R.S.  A Hard Copy anchor referred to it as a Anationwide scam.@

    Paramount intended to use a fictional company name in connection with the sweepstakes company depicted in the segment and thought that ASweepstakes Clearing House@ was a fictional name.  However, unknown to Paramount, Allied had been using the name ASweepstakes Clearinghouse@ since 1984 in connection with a direct mail offer business.  Sweepstakes Clearinghouse=s stated goal Ais and always has been to promote, via direct mail, the sale of brand name products at discount prices, in connection with various sweepstakes for both cash and merchandise.@  It sends out millions of mailers a year to consumers and has conducted various kinds of sweepstakes contests, including a sweepstakes contest that has many similarities to the Ascam@ depicted on the Hard Copy segment.          

    This is Allied=s second appeal from a summary judgment in this matter.  In the first appeal, Allied complained that the trial court erred in concluding that Allied was a public figure for the purposes of its defamation claim.  In an unpublished opinion, the Dallas Court of Appeals held that Allied was not a public figure and, therefore, reversed the summary judgment and remanded the cause to the trial court for further proceedings.  See Allied Marketing Group, Inc. v. Paramount Pictures Corporation, No. 05-99-00165-CV, 2000 WL 283834, at *3 - *4 (Tex.App. - Dallas, March 17, 2000, pet=n den=d)(not designated for publication).


    After remand, Paramount moved for traditional and no-evidence summary judgments, asserting that Allied=s defamation claim failed because:  (1) the Hard Copy segment was not Aof and concerning@ Allied; (2) even if the Hard Copy segment was Aof and concerning@ Allied, the segment was a Afictional@ work, and Paramount did not intend to refer to Allied in the segment; and (3) even if the segment was Aof and concerning@ Allied, the segment did not defame Allied.  Paramount further asserted that, because the defamation claim failed, Allied=s other claims also failed.  In its first two appellate issues, Allied complains (1) that the trial court erred in granting summary judgment on its defamation claim based on conclusions that the Hard Copy segment was not Aof and concerning@ Sweepstakes Clearinghouse or defamatory and (2) that the trial court erred in granting summary judgment on its other claims.[2]

    The trial court did not specify the grounds for summary judgment in its order.  Therefore, we will affirm the summary judgment if any of the theories advanced in Paramount=s motion for summary judgment are meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989).

    We will apply the well-recognized standard of review for traditional summary judgments. We must consider the summary judgment evidence in the light most favorable to the non-movant, indulging all reasonable inferences in favor of the non-movant, and determine whether the movant proved that there were no genuine issues of material fact and that it was entitled to judgment as a matter of law. Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d 546 (Tex.1985); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex.1979).    

    The trial court must grant a no-evidence motion for summary judgment unless the non-movant produces evidence that raises a genuine issue of material fact on the challenged element of his claim or defense.  TEX.R.CIV.P. 166a(i). We review the evidence presented in response to a motion for a no-evidence summary judgment in the same way that we review the evidence presented in support of or in response to a motion for traditional summary judgment, and we accept as true evidence favorable to the non-movant and indulge every reasonable inference and resolve all doubts in favor of the non-movant.  Hight v. Dublin Veterinary Clinic, 22 S.W.3d 614, 619 (Tex.App.-Eastland 2000, pet’n den’d).  A no-evidence summary judgment is improper if the non-movant presents more than a mere scintilla of probative evidence to raise a genuine issue of material fact on the challenged element.  Hight v. Dublin Veterinary Clinic, supra at 619.  More than a mere scintilla of evidence exists when the evidence rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.  Hight v. Dublin Veterinary Clinic, supra at 619 (citing Merrell Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706 (Tex.1997), cert. den’d, 523 U.S. 1119 (1998)).          


    The plaintiff in a defamation case must establish four elements:  (1) the defendant published a factual statement; (2) that was defamatory; (3) and concerned the plaintiff; (4) while acting with negligence, if the plaintiff was a private individual, regarding the truth of the statement.  ABC, Inc. v. Shanks, 1 S.W.3d 230, 234 (Tex.App. B Corpus Christi 1999, pet=n den=d); Provencio v. Paradigm Media, Inc., 44 S.W.3d 677, 680-81 (Tex.App. B El Paso 2001, no pet=n).  To satisfy the third element, the plaintiff must show that the allegedly defamatory publication was Aof and concerning@ it. It is not necessary that the plaintiff be named in the publication.  Newspapers, Inc. v. Matthews, 339 S.W.2d 890, 894 (Tex.1960).  A publication is Aof and concerning@ the plaintiff if persons who knew and were acquainted with the plaintiff understood from viewing the publication that the allegedly defamatory matter referred to the plaintiff.  Newspapers, Inc. v. Matthews, supra.  The issue depends on whether persons who knew or knew of the plaintiff could have reasonably understood that the publication referred to the plaintiff.  See Davis v. R.K.O. Radio Pictures, Inc., 191 F.2d 901, 904 (8th Cir. 1951).  Because the test is based on the reasonable understanding of the viewer of the publication, it is not necessary for the plaintiff to prove that the defendant intended to refer to the plaintiff.  See Ruzicka v. Conde Nast Publications, Inc., 999 F.2d 1319, 1322 (8th Cir. 1993); New England Tractor-Trailer Training of Connecticut, Inc. v. Globe Newspaper Company, 480 N.E.2d 1005, 1009 (Mass.1985).  The RESTATEMENT (SECOND) OF TORTS ' 564 (1977) provides:  AA defamatory communication is made concerning the person to whom its recipient correctly, or mistakenly but reasonably, understands that it was intended to refer.@

    Thus, the Aof and concerning@ issue is whether persons viewing the Hard Copy segment who knew of Sweepstakes Clearinghouse could reasonably have understood that the segment referred to Sweepstakes Clearinghouse.[3]  We view the summary judgment evidence in the light most favorable to Allied to make this determination.  In the introduction to the segment, a Hard Copy anchor stated that AHard Copy goes undercover to expose the great sweepstakes scam.@  The Hard Copy Ascam@ sweepstakes was similar to actual sweepstakes contests in which checks are delivered to the winners at their homes. During the segment, Whitlock told two of the Awinners@ that he was with ASweepstakes Clearing House@ and showed all three Awinners@ $10, 000 ASweepstakes Clearing House@ checks.  After the Awinners@ gave him their $250 checks payable to the I.R.S., Whitlock informed them that he was doing a national consumer awareness show for Hard Copy.  Whitlock stated that Athis is a con that=s perpetrated all over the country from coast to coast.@ Whitlock testified that he wanted the Hard Copy Ascam@ to be Aclose to the real scams that would take place in the real world.@  A Hard Copy anchor referred to the Ascam@ as a Anationwide scam.@  The segment did not indicate that ASweepstakes Clearing House@ was a fictional company.

    The summary judgment evidence established that Allied has been using the name Sweepstakes Clearinghouse since 1984. Sweepstakes Clearinghouse sends millions of mailings a year to consumers attempting to sell various products.  It also conducts various direct mail sweepstakes contests offering contestants chances to win cash and merchandise. Many of the mailed items include the Sweepstakes Clearinghouse name:  sweepstakes entry forms, envelopes, credit vouchers, award checks, and merchandise shipment materials.  One of its sweepstakes contests is similar to the sweepstakes Ascam@ depicted on the Hard Copy segment.  About once a year for the last ten years, Sweepstakes Clearinghouse has conducted a sweepstakes contest with a grand prize of $10,000.  Sweepstakes Clearinghouse has awarded the $10,000 grand prizes by personally delivering $10,000 checks with the Sweepstakes Clearinghouse name on them to the winners at their homes.


     The above summary judgment evidence established that Hard Copy=s fictional company name, ASweepstakes Clearing House,@ was identical to that of the real company, Sweepstakes Clearinghouse.  Hard Copy used the name in connection with a depiction of a sweepstakes Ascam.@ Sweepstakes Clearinghouse is actually in the business of conducting sweepstakes contests, one of which is very similar to Hard Copy=s Ascam@ sweepstakes.  Hard Copy did not indicate to its viewers that ASweepstakes Clearing House@ was a fictional company.  Given that Hard Copy used an identical company name and used the name in connection with the type of business conducted by the actual company, we find that Hard Copy=s viewers who knew of Sweepstakes Clearinghouse through receiving mailings from it could have reasonably understood that the Hard Copy segment referred to it.  As such, summary judgment was not proper on the Aof and concerning@ issue.      Paramount argues that, because the segment was Aan obvious work of fiction,@ no viewer could have reasonably understood that it referred to Sweepstakes Clearinghouse.  Paramount relies on a number of authorities to support its contention.  See Middlebrooks v. Curtis Publishing Company, supra at 143; Clare v. Farrell, 70 F. Supp. 276 (D. Minn. 1947); Aguilar v. Universal City Studios, Inc., 174 Cal. App. 3d 384, 219 Cal. Rptr. 891 (1985). The Middlebrooks court explained that Anames of characters portrayed in...short stories...and other obvious works of fiction are normally understood by all reasonable men as not intended to depict or refer to any actual person.@

    This case is distinguishable.   While Paramount intended to use a fictional company name and did depict a Ascam@ as opposed to an actual sweepstakes contest,  these facts do not make the segment an Aobvious work of fiction.@ Paramount considered Hard Copy to be a news show.  Hard Copy identified the segment as an Aundercover@ report about a Anationwide scam.@  Whitlock testified that the segment was a Anews report on a particular type of scam.@ These statements do not describe a work of fiction.  They describe a news report about an actual problem: sweepstakes scams.  Viewed in its entirety, the segment was not a fictional work.

    Additionally, the many similarities between the fictional ASweepstakes Clearing House@ depicted in the segment and Sweepstakes Clearinghouse distinguish this case from Paramount=s authorities.  Paramount ignores the similarities in arguing that A[b]ecause the only similarity here is the incidental use of the name Sweepstakes Clearinghouse any conclusion that the fictional broadcast portrayed Allied is per se unreasonable.@  The name was not the only similarity.  The segment used ASweepstakes Clearing House@ in connection with the very type of business that Sweepstakes Clearinghouse conducted, sweepstakes contests.  Additionally, Hard Copy=s Ascam@ was similar to an actual sweepstakes contest conducted by Sweepstakes Clearinghouse in which a check was hand-delivered to the winner at the winner=s home.  Even if the segment was considered to be fiction, Hard Copy=s viewers could have reasonably concluded that the segment referred to Sweepstakes Clearinghouse.


    Allied presented deposition testimony of a Hard Copy viewer who understood that the segment referred to Sweepstakes Clearinghouse.  When the viewer heard the name ASweepstakes Clearing House@ in the segment, he remembered receiving a letter from Sweepstakes Clearinghouse the day before.  He looked through his trash and found the letter. He thought the segment showed Sweepstakes Clearinghouse committing a fraudulent activity.  He filed a complaint with the police against Sweepstakes Clearinghouse.  Paramount argues that this viewer=s understanding was Aunreasonable@; however, the similarities between Hard Copy=s ASweepstakes Clearing House@ and the actual Sweepstakes Clearinghouse defeat Paramount=s argument.            

    Allied also presented evidence showing that Sweepstakes Clearinghouse=s customer response rates to its mailings declined and its profits declined after the Hard Copy broadcasts.  This evidence was relevant to the issue of whether ordinary viewers understood that the segment referred to Sweepstakes Clearinghouse.  Viewing this evidence in the light most favorable to Allied, it supports Allied=s claim that at least some of Hard Copy=s viewers understood that the segment referred to Sweepstakes Clearinghouse. 

    Paramount asserted that it was entitled to summary judgment, even if the segment was Aof and concerning@ Allied, because the segment was a Afictional@ work and Paramount did not intend to refer to Allied in the segment.  This argument fails for two reasons.  First, the segment was not fictional.  Second, the plaintiff in a defamation case is not required to prove that the defendant intended to refer to it.  Rather, an allegedly defamatory publication is Aof and concerning@ a plaintiff B even in cases involving fictional works B if persons who knew or knew of the plaintiff could reasonably have understood that the fictional character was a portrayal of the plaintiff.  See Middlebrooks v. Curtis Publishing Company, supra at 142; Fetler v. Houghton Mifflin Company, supra at 651; Davis v. R.K.O. Radio Pictures, Inc., supra at 904.                            


    Paramount also asserted that it was entitled to summary judgment, even if the segment was Aof and concerning@ Allied, because the segment did not defame Allied.  Whether a publication is capable of a defamatory meaning is initially a question of law for the court.  Turner v. KTRK Television, Inc., 38 S.W.3d 103, 114 (Tex.2000)(citing Musser v. Smith Protective Services, Inc., 723 S.W.2d 653, 655 (Tex.1987)).  To determine this issue, the trial court construes the allegedly defamatory publication as a whole in light of surrounding circumstances based upon how a person of ordinary intelligence would perceive the publication.  Turner v. KTRK Television, Inc., supra; Carr v. Brasher, supra at 570; Musser v. Smith Protective Services, Inc., supra.  If the publication is ambiguous or of doubtful import, the jury must determine the publication=s meaning and the effect the publication has on an ordinary reader.  If a defamatory meaning may exist, then the publication is considered ambiguous, and the court must allow the jury to determine whether an ordinary reader would perceive the statement as defamatory. Golden Bear Distributing Systems of Texas, Inc. v. Chase Revel, Inc., 708 F.2d 944, 948 (5th Cir. 1983)(applying Texas law); Musser v. Smith Protective Services, Inc., supra.  Thus, if a publication is capable of two interpretations, one of which is defamatory, the trial court is required to submit the publication to the jury.  Golden Bear Distributing Systems of Texas, Inc. v. Chase Revel, Inc., supra at 948.

    Therefore, the issue is whether the Hard Copy segment was reasonably capable of a defamatory meaning.  The Hard Copy segment used Sweepstakes Clearinghouse=s name in connection with a sweepstakes Ascam.@ Sweepstakes Clearinghouse actually conducted sweepstakes contests, one with many similarities to the Ascam@ depicted in the segment.  While Paramount asserts that the segment was not defamatory because it only commented about con-men Awho adopt the trappings of legitimate sweepstakes companies as a means of perpetrating fraud,@ the segment did not indicate B by statements or otherwise B that ASweepstakes Clearing House@ was a legitimate company.  Nor did the segment clearly indicate B by statements or otherwise B that it was intended only as a comment about con men or that it was not intended as a negative comment about ASweepstakes Clearing House.@  Paramount relies on a statement in the segment that Athe con-artist outfits a van to look like the prize van everyone sees on the TV commercials for those legitimate sweepstakes.@  This statement was accompanied by video of a van with the Publishers Clearing House name on it.  However, the segment did not associate any other sweepstakes company, by name or otherwise, with Alegitimate sweepstakes.@

    Paramount=s interpretation of the segment is not the only possible interpretation. One reasonable interpretation of the segment is that Sweepstakes Clearinghouse was a sham company that Acon men@ created for the purposes of engaging in sweepstakes scams.  As such, ordinary viewers of the segment could reasonably perceive that Sweepstakes Clearinghouse was engaging in a fraudulent activity B a sweepstakes scam.  As set forth above, Allied presented evidence that a viewer did perceive that Sweepstakes Clearinghouse was engaging in the scam. Statements that would ordinarily tend to injure a plaintiff=s business reputation, resulting in financial injury, are defamatory.  Granada Biosciences, Inc. v. Forbes, Inc., 49 S.W.3d 610, 616 (Tex.App. B Houston [14th Dist.] 2001, pet=n den=d). Statements charging a sweepstakes company with engaging in sweepstakes fraud would ordinarily tend to injure the company=s business reputation and result in financial injury to it.  The segment is reasonably capable of a defamatory meaning.

    The trial court erred in granting summary judgment on Allied=s defamation claim.[4]  Because the trial court granted summary judgment on Allied=s other claims on the ground that Allied=s defamation claim failed, the trial court erred in granting summary judgment on the other claims.  We sustain Allied=s first and second issues. 

    Paramount raised an additional ground for summary judgment in its reply brief to Allied=s response to the motion for summary judgment.  Paramount asserted that the Dallas Court of Appeals decided the Aof and concerning@ issue against Allied in the earlier appeal and that, therefore, the Alaw of the case@ precluded Allied=s claim that the segment was Aof and concerning@ Sweepstakes Clearinghouse.  The Alaw of the case@ doctrine provides that questions of law decided in an appeal to a court of last resort govern that case throughout its subsequent stages.  Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex.1986); Russell v. City of Bryan, 919 S.W.2d 698, 703-04 (Tex.App. - Houston [14th Dist.] 1996, writ den=d). 

    The issue in the first appeal was whether Allied was a public figure for the purpose of its defamation claim.  Allied Marketing Group, Inc. v. Paramount Pictures Corporation, supra at *2.  The Dallas Court of Appeals explained that, in defamation cases, if the plaintiff is a public official or a public figure, the plaintiff must establish a higher degree of fault to prove defamation.  The plaintiff must prove that the defendant acted with actual malice, that is, with knowledge that the defamatory publication was false or with reckless disregard of whether it was false or not.  Allied Marketing Group, Inc. v. Paramount Pictures Corporation, supra at *2.     


    Whether a party is a public figure is a matter of constitutional law for the court to decide.  Allied Marketing Group, Inc. v. Paramount Pictures Corporation, supra at *2. The court explained that there are two types of public figures: general purpose and limited purpose public figures. The court concluded that Allied was neither type of  public figure: AWe hold the summary judgment evidence established as a matter of law that Allied was neither a general purpose or limited purpose public figure.@  Allied Marketing Group, Inc. v. Paramount Pictures Corporation, supra at *3 B *4.  In support of its Alaw of the case@ argument, Paramount relies on statements that the Court made during its analysis of the third element of the test for determining whether a party is a limited purpose public figure: A[T]he segment had nothing to do with Allied and depicted a fictional door-to-door sweepstakes scam.@  Allied Marketing Group, Inc. v. Paramount Pictures Corporation, supra at *3.  The court made these statements in the context of determining that Paramount could not show that the segment was germane to Allied=s participation in a controversy, the third element of the limited purpose public figure test.  Because Paramount did not know that Allied existed, Paramount could not do a segment about Allied. Thus, from Paramount=s perspective, Athe segment had nothing to do about Allied.@ Because Athe segment depicted a fictional door-to-door sweepstakes scam,@ Paramount could not establish that it was germane to Allied=s participation in an actual controversy.  Thus, Paramount could not establish that Allied was a limited purpose public figure.  

    The court did not decide the Aof and concerning@ issue; the issue was not even before the court.  The  Aof and concerning@ issue and the third element of the limited purpose public figure test involve different inquiries.  The Aof and concerning@ inquiry is whether viewers of the publication understood that it referred to the plaintiff; the limited purpose public figure test does not take into consideration the understanding of the publication=s viewers. The court decided one issue in Allied=s earlier appeal:  that Allied was not a public figure.  The Alaw of the case@ does not prevent Allied=s claim that the segment was Aof and concerning@ Sweepstakes Clearinghouse.[5]

    We reverse the judgment of the trial court and remand the cause to the trial court for further  proceedings.        

     

    W. G. ARNOT, III

    CHIEF JUSTICE

    March 20, 2003

    Panel consists of: Arnot, C.J., and

    McCall, J., and McCloud, S.J.[6]


         [1]Allied also named Fox Television Stations, Inc., and NW Communications of Texas, Inc. d/b/a KDFW-TV (Channel 4) as defendants.  At some point, Allied also asserted claims against Peter Brennan.  Allied nonsuited these three defendants before the trial court granted Paramount=s motion for summary judgment.  

         [2]Because of our disposition of Allied=s first two issues, we need not address Allied=s third, fourth, and fifth issues.  TEX.R.APP.P. 47.1.   In its third, fourth, and fifth issues, Allied asserts that the trial court erred in considering new summary judgment grounds and evidence presented in Paramount=s reply brief, that the trial court erred by denying its motion for partial continuance of the summary judgment hearing, and that the trial court erred in allowing Paramount=s improper and inadmissible evidence into the record. 

         [3]Paramount contends that the entire segment was fiction.  We disagree for the reasons discussed below, but we note that the Aof and concerning@ test for fictional works is essentially the same.  The test is whether persons who knew or knew of the plaintiff could reasonably have understood that the fictional character was a portrayal of the plaintiff. See Middlebrooks v. Curtis Publishing Company, 413 F.2d 141, 142 (4th  Cir. 1969); Fetler v. Houghton Mifflin Company, 364 F.2d 650, 651 (2nd Cir. 1966); Davis v. R.K.O. Radio Pictures, Inc., supra at 904.

         [4]We note that Paramount objected to portions of Allied=s summary judgment evidence and that Allied objected to portions of Paramount=s summary judgment evidence.  The summary judgment evidence referred to in this opinion raised fact issues precluding summary judgment. Therefore, we do not address Paramount=s or Allied=s objections to any evidence that is not referred to in the opinion.  Allied and Paramount did not obtain rulings on their objections from the trial court.  Because it is not necessary for the disposition of this appeal, we do not address whether the parties waived their objections by failing to obtain a ruling.

         [5]Paramount also argues that the doctrine of judicial estoppel prevents Allied from claiming that the segment was Aof and concerning@ Sweepstakes Clearinghouse.  Paramount=s argument is based on the claim that Allied=s position in this appeal B that the segment is Aof and concerning@ Sweepstakes Clearinghouse B  is inconsistent with the position that Allied took in the first appeal.  However, Allied has never taken the position that the segment was not Aof and concerning@ Sweepstakes Clearinghouse.    

         [6]Austin McCloud, Retired Chief Justice, Court of Appeals, 11th District of Texas at Eastland sitting by assignment.