Steep Libel Claims Raise Concerns

By Garigliano, Jeff | Folio: the Magazine for Magazine Management, June 1, 1997 | Go to article overview

Steep Libel Claims Raise Concerns


Garigliano, Jeff, Folio: the Magazine for Magazine Management


The phrase "libel suit" is never something a publisher likes to hear, but a pair of recent cases indicate that the stakes may be getting a lot higher.

In March, The Wall Street Journal, published by Dow Jones, lost a $223 million judgment to MMAR, a defunct investment firm based in Houston. That same month, hedge-fund financier Julian Robertson took the first steps toward legal action against McGrawHill's Business Week over a 1996 profile he claims was libelous. Robertson hasn't filed suit yet, but he's asking for damages totaling $1 billion. And even though both cases are far from over, the amount of money involved points to a disturbing trend.

Hitting where it hurts

In the Journal case (see "Libel verdict could prove chilling," Folio:, May 1, page 18), the jury ruled that a 1993 story on MMAR included five statements published with either knowledge of falsity or with reckless disregard for the truth--the standard required for actual malice. Of the $223 million in damages, $23 million was compensatory and a jaw-dropping $200 million was punitive. Dow Jones' entire annual earnings for 1996 were $191 million.

One factor that may have swayed the jury is that MMAR went out of business a month after the Journal article ran, even though defense lawyers argued that the story simply documented problems already existing at the company. Dow Jones filed a post-trial motion asking for judicial review (a standard procedure). If that motion is overruled, a Dow Jones spokesman says, the company will appeal.

In the Business Week case, Robertson beat New York's one-year statute of limitations by registering a "summons with notice," a formal declaration that a suit will be filed later. Robertson is requesting $500 million in compensatory damages and $500 million in punitive. (A spokesman for Robertson calls the $1 billion amount "a nice round number.")

The summons claims that a 5,800-word cover story, "Fall of the Wizard," in the April 1, 1996, issue included statements that were "false and defamatory." Robertson's hedge fund (basically a massive mutual fund for high-stakes investors) performed worse than similar funds in 1994, and the Business Week article put the blame on Robertson.

"It is a story of bad choices, grave missteps in high-stakes currency and bond plays, and atrocious management," wrote author Gary Weiss. …

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