Copyright 1999 The New York Times Company
The New York Times
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October 21, 1999, Thursday, Late Edition - Final
Section A; Page 1; Column 4; National Desk
Appeals Court Rejects Damages Against ABC
in Food Lion
By FELICITY BARRINGER
A divided Federal appeals court yesterday threw out all but $2
of the damages that a jury had ordered ABC
News to pay to the
supermarket chain after it reported that the
grocery chain sold beef and other food that was unsanitary.
In the majority opinion, a panel of the United States Court of Appeals for the
Fourth Circuit in Richmond wrote that Food Lion's
win a multimillion-dollar fraud verdict because two ABC
employees had lied their way into jobs in Food Lion
was "an end-run" around First Amendment protections for journalists.
In the case, a Federal District Court jury in Greensboro, N.C., awarded the
supermarket chain $5.5 million in January 1997 after finding that ABC
had engaged in fraud, though that was later reduced to $315,000. The case had
been closely followed by news organizations that feared that plaintiffs could
win crippling damage awards without having to prove that the news reports in
question were false or malicious.
Specialists in media law said the 2
-to-1 court ruling
yesterday could blunt that line of legal attack by setting high Constitutional
hurdles for plaintiffs whose lawsuits focus on news gathering techniques.
The case was filed after the ABC
Live" in 1992 broadcast a report that Food Lion workers mixed out-of-date
beef along with new beef, bleached rank meat to remove its odor and redated
products. The report also included videotapes of the chain's workers secretly
made by ABC
employees who had obtained jobs with the chain.
The impact of the television report, which won a journalism award, was
devastating on the company: the value of its stock dropped roughly $1.3
billion in the week after the broadcast.
In its lawsuit, which had sought $2.47 billion in damages, Food Lion accused ABC
of conspiring with a hostile labor union to get jobs for the network's
When a Federal District Court struck down most of the $5.5 million in damages
awarded by the jury in the fraud suit, it did so on narrow grounds that
avoided First Amendment issues. The $315,000 damage award the district court
had left standing was struck down by the appeals court yesterday.
of the original damage award remained untouched by
the later rulings, including the jury's award of $1 to Food Lion because the
journalists trespassed on the supermarket chain's property and $1 because they
breached their legal duty of loyalty to their employer.
David Westin, the president of ABC
News who was the network's
general counsel when the lawsuit was filed -- applauded the ruling, which, he
said, "should help blunt" an "important and dangerous
shift." Instead of plaintiffs "challenging what we said, through
libel and defamation, they are trying to get around through the back door,
attacking the process we used to get" the information used in news
Mr. Westin and several specialists in media law said that the high hurdles
faced by libel plaintiffs have led plaintiffs to attack not the substance of
news reports, but the sometimes questionable way journalists gathered their
But in addressing such issues, Judge M. Blane Michael, author of the majority
opinion, wrote, "We are convinced that the media can do its important job
effectively without resort to the commission of run-of-the-mill" breaches
of the law. Judge Michael was joined by Judge Diana Gribbon Motz.
Floyd Abrams, a partner at the law firm of Cahill Gordon & Reindel who is
a well-known First Amendment specialist, said of the case yesterday:
"What people have tried to do is an end run around the First Amendment
protections that exist in libel law. This case is a quintessential example.
Food Lion didn't care at all that two
employees had false
information on their applications for employment. What they cared about was
said about them."
Food Lion is based in Salisbury, N.C., that is a subsidiary of the Belgian
company Etablissements Delhaize Freres et Cie "Le Lion." The
American unit has more than 1,100 stores in 14 states and has annual revenue
of about $10.2 billion. The company's stock fell 56.25 cents to $18.5625
Food Lion issued a statement through its lawyer, Richard L. Wyatt Jr., saying:
"We are disappointed that the Fourth Circuit did not affirm the decision
in Food Lion's favor in its entirety. However, the court did recognize that ABC's
manipulative illegal tactics caused unwarranted damage to our company and our
The statement continued, "This is a complex legal area, and our lawyers
will review the court's decision and advise us of our options."
which was acquired by The Walt Disney Company after the
lawsuit was filed, has 22,000 employees. Disney, with 117,000 employees
including those at ABC,
has annual revenue of $22.9 billion.
The district court had also held that under the applicable state laws in the
reporters had defrauded Food Lion by their
actions. This fraud finding, however, was overturned by yesterday's appellate
In a dissent, Judge Paul V. Niemeyer argued that the two ABC
journalists, Lynne Dale and Susan Barnett, "applied to Food Lion with the
secret intent to obtain sensational and damaging evidence to publish against
In addition, Judge Niemeyer wrote, "in seeking to 'uncover' practices,
employees baited fellow employees to say and do
things that they knew would undermine Food Lion's standing food-handling
practices." He parted with his two
colleagues by saying
that such actions gave the jury "ample evidence" to conclude that ABC
had committed common-law fraud.
One lawyer who filed briefs on Food Lion's behalf said yesterday that the
court's ruling erred in not relying on a different set of legal precedents.
"Food Lion's claim was that we get damages for the illegally obtained,
even staged videotape, which is a very live issue," he said.
But, as Food Lion's formal statement indicated, the lawyer said the company
needed time to decide if it would pursue this logic in an appeal, either to
the full circuit court or to the Supreme Court.
October 21, 1999