U.S. 2nd Circuit Court of Appeals
CHURCH OF SCIENTOLOG v TIME WARNER, INC.
January 12, 2001
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 1999
(Argued December 6, 1999 Decided )
Docket Nos. 98-9522(L), 99-7332(CON)
Church of Scientology International,
-- v. --
Time Warner, Inc., Time Inc. Magazine Company,
B e f o r e :
WALKER, Chief Judge, CABRANES and PARKER, Circuit Judges.
Appeal from orders of the United States District Court for the Southern District
of New York (Peter K. Leisure, District Judge) dismissing appellant's complaint.
BURT NEUBORNE, New York, NY, Eric M. Lieberman, Andrew J. Fields, Scott T.
Johnson, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, New York, NY,
FLOYD ABRAMS, Dean Ringel, Janet A. Beer, Cahill Gordon & Reindel, New
York, NY, Robin Bierstedt, Time Inc., New York, NY, for Defendant- Counter- Claimant-Appellee
JOHN M. WALKER, JR., Chief Judge:
Plaintiff-appellant Church of Scientology International ("CSI")
appeals from judgments of the district court for the Southern District of New
York (Peter K. Leisure, District Judge) dismissing appellant's libel complaint.
Because we find that the challenged statements were either not of and concerning
CSI or not published with actual malice, we affirm the judgments of the district
On May 6, 1991, Time magazine published a 10-page, 7500-word cover article
entitled "Scientology: The Cult of Greed" (the "Article").
The Article, written by defendant-appellee Richard Behar ("Behar"),
was highly critical of Scientology, which it described as "pos[ing] as a
religion" but being "really a ruthless global scam," and narrated
various instances of wrongdoing by a number of individual Scientologists. CSI
filed a complaint alleging libel against Behar and defendants-appellees Time Inc.
Magazine Co. and its parent company Time Warner, Inc. (collectively, "Time").
The complaint alleged as false and defamatory the following statements from the
Paragraph 40 of the Complaint
1. "[T]he church . . . survives by intimidating members and critics in
a Mafia-like manner."
2. "`Scientology is quite likely the most ruthless, the most classically
terroristic . . . cult the country has ever seen.'"
3. "Those who criticize the church - journalists, doctors, lawyers and
even judges - often find themselves . . . framed for fictional crimes, beaten
up or threatened with death."
Paragraph 45 of the Complaint
4. "Occasionally a Scientologist's business antics land him in jail.
Last August a former devotee named Steven Fishman began serving a five-year prison
term in Florida. His crime: stealing blank stock confirmation slips from his employer,
a major brokerage house, to use as proof that he owned stock entitling him to
join dozens of successful class-action lawsuits. Fishman made roughly $1 million
this way from 1983 to 1988 and spent as much as 30% of the loot on Scientology
books and tapes."
"Scientology denies any tie to the Fishman scam, a claim strongly disputed
by both Fishman and his longtime psychiatrist, Uwe Geertz, a prominent Florida
hypnotist. Both men claim that when arrested, Fishman was ordered by the church
to kill Geertz and then do an `EOC,' or end of cycle, which is church jargon for
Paragraph 52 of the Complaint
5. "One source of funds for the Los Angeles-based church is the notorious,
self-regulated stock exchange in Vancouver, British Columbia, often called the
scam capital of the world."
6. "Baybak, 49, who runs a public relations company staffed with Scientologists,
apparently has no ethics problem with engineering a hostile takeover of a firm
he is hired to promote."
7. "`What these guys do is take over companies, hype the stock, sell their
shares, and then there's nothing left. . . .'"
". . . `They stole this man's property.'"
Paragraph 58 of the Complaint
8. "THE LOTTICKS LOST THEIR SON, Noah, who jumped from a Manhattan hotel
clutching $171, virtually the only money he had not yet turned over to Scientology.
His parents blame the church and would like to sue but are frightened by the organization's
reputation for ruthlessness."
9. "His death inspired his father Edward, a physician, to start his own
investigation of the church. `We thought Scientology was something like Dale Carnegie,'
Lottick says. `I now believe it's a school for psychopaths. Their so-called therapies
are manipulations. They take the best and brightest people and destroy them.'"
10. "It was too late. `From Noah's friends at Dianetics' read the card
that accompanied a bouquet of flowers at Lottick's funeral. Yet no Scientology
staff members bothered to show up."
Paragraph 62 of the Complaint
11. "The next month the Rowes flew to Glendale, Calif., where they shuttled
daily from a local hotel to a Dianetics center. `We thought they were brilliant
people because they seemed to know so much about us,' recalls Dee. `Then we realized
our hotel room must have been bugged.' After bolting from the center, $23,000
poorer, the Rowes say, they were chased repeatedly by Scientologists on foot and
Paragraph 67 of the Complaint
12. "In a court filing, one of the cult's many entities - the Church of
Spiritual Technology - listed $503 million in income just for 1987."
In June of 1992, the defendants moved to dismiss the complaint on the grounds
that the statements, none of which mentioned CSI by name, were not of and concerning
CSI. On November 23, 1992, the district court granted the motion to dismiss in
part, finding that certain of the statements complained of could not be read as
referring to CSI. Church of Scientology Int'l v. Time Warner, Inc., 806 F.Supp.
1157 (S.D.N.Y. 1992) ("Time I"). Specifically, the court found that
parts of statement 4 and all of statements 6, 7, 11, and 12 could not reasonably
be considered to be of and concerning CSI. See id. at 1162-64. Defendants then
answered the complaint, and Behar asserted counterclaims against CSI for harassment
and violation of the Fair Credit Reporting Act, 15 U.S.C. § 1681. The parties
agreed to focus discovery on the issue of actual malice and to defer discovery
on the issue of truth and falsity.
After two and a half years of discovery, the district court granted summary
judgment to defendants as to all of the remaining statements, except for statement
5, on the grounds of lack of actual malice. Church of Scientology Int'l v. Time
Warner, Inc., 903 F.Supp. 637, 642-44 (S.D.N.Y. 1995) ("Time II"). On
reconsideration, the district court granted summary judgment to defendants on
statement 5, that the Vancouver Stock Exchange (the "VSE") was one source
of funds for the church (the "VSE statement"), based on the subsidiary
meaning doctrine, and dismissed the complaint. Church of Scientology Int'l v.
Time Warner, Inc., 932 F. Supp. 589, 595 (S.D.N.Y. 1996) ("Time III").
CSI then moved for an order modifying the district court's opinion in Time III,
arguing that it was now stating a claim for nominal damages, for which it did
not need to prove actual malice. The district court declined to address the merits
of the claim because it found CSI's motion to be a procedurally defective motion
for reargument. Church of Scientology Int'l v. Time Warner, Inc., No. 92 Civ.
3024, 1997 WL 538912, at *2 (S.D.N.Y. Aug. 27, 1997) ("Time IV").
On September 9, 1997, CSI moved for leave to amend the complaint to assert
a claim for nominal damages premised on a finding that the disputed statements
were demonstrably false. The district court denied the motion, holding that allowing
CSI to amend its complaint five years after it brought the action, and after summary
judgment had been granted against it, would be unduly prejudicial to the defendants.
Church of Scientology Int'l v. Time Warner, Inc., 1998 WL 575194, at *3 (S.D.N.Y.
Sept. 9, 1999) ("Time V"). The district court also held that amendment
would be futile, since a public figure claiming even nominal damages is still
required to demonstrate actual malice under New York Times Co. v. Sullivan, 376
U.S. 254, 297-98 (1964). See Time V, 1998 WL 575194, at *4-5. Although Behar's
counterclaims were still pending, the parties agreed that these claims would be
dismissed without prejudice, on the understanding that they could be refiled should
the complaint be reinstated. CSI moved for the district court to enter a final
judgment dismissing its complaint. The court granted the motion, Church of Scientology
Int'l v. Time Warner, Inc., No. 92 Civ. 3024, 1999 WL 126450, at *2 (S.D.N.Y.
Mar. 9, 1999), and this appeal followed.
On appeal, CSI challenges the district court's rulings in Time I through Time
V on the grounds that the district court (1) improperly ruled that portions of
the Article's allegedly defamatory statements were not of and concerning CSI,
(2) improperly disregarded CSI's evidence that the statements were made with purposeful
avoidance of the truth, (3) committed plain error in dismissing the VSE statement
under the subsidiary meaning doctrine, and (4) erred in refusing to permit CSI
to pursue a claim for nominal damages premised on a finding of falsity. CSI has
not appealed the district court's decision with respect to statements 11 and 12.
Libel, a method of defamation expressed in writing or print, is a common law
cause of action and applies separate standards to plaintiffs who are private individuals
and those who are public figures. See Celle v. Filipino Reporter Enters., Inc.,
209 F.3d 163, 176 (2d Cir. 2000). CSI concedes that it is a public figure; therefore
to prevail it must show that the statements it complains of were (1) of and concerning
CSI, (2) likely to be understood as defamatory by the ordinary person, (3) false,
and (4) published with actual malice, that is, either knowledge of falsity or
reckless disregard of the truth. See id. In contrast, a private plaintiff need
only prove that false and defamatory statements of and concerning the plaintiff
were made with gross negligence. See Karaduman v. Newsday, Inc., 51 N.Y.2d 531,
Of these inquiries, the first two should ordinarily be resolved at the pleading
stage, while resolution of the falsity and actual malice inquiries typically requires
discovery. In this case, we hold that CSI has failed to establish actual malice
as to the statements identified in paragraphs 40, 45, and 58 of the Complaint,
and as a result, CSI's claims based on the remaining statements, contained in
paragraph 52, are barred by the subsidiary meaning doctrine. Accordingly, we do
not reach the question whether any of these statements is "of and concerning"
Under New York Times, a public figure plaintiff must prove that an allegedly
libelous statement was made with actual malice, that is, made "with knowledge
that it was false or with reckless disregard of whether it was false or not."
New York Times, 376 U.S. at 280. This showing must be made by clear and convincing
evidence. See Celle, 209 F.3d at 183. Despite its name, the actual malice standard
does not measure malice in the sense of ill will or animosity, but instead the
speaker's subjective doubts about the truth of the publication. See Masson v.
New Yorker Magazine, Inc., 501 U.S. 496, 510 (1991) ("Actual malice under
the New York Times standard should not be confused with the concept of malice
as an evil intent or a motive arising from spite or ill will."). If it cannot
be shown that the defendant knew that the statements were false, a plaintiff must
demonstrate that the defendant made the statements with reckless disregard of
whether they were true or false. The reckless conduct needed to show actual malice
"is not measured by whether a reasonably prudent man would have published,
or would have investigated before publishing," St. Amant v. Thompson, 390
U.S. 727, 731 (1968), but by whether there is sufficient evidence "to permit
the conclusion that the defendant in fact entertained serious doubts as to the
truth of his publication," id.
The St. Amant Court found the following factors to be relevant to a showing
that the defendant harbored actual malice: (1) whether a story is fabricated or
is based wholly on an unverified, anonymous source, (2) whether the defendant's
allegations are so inherently improbable that only a reckless person would have
put them in circulation, or (3) whether there are obvious reasons to doubt the
veracity of the informant or the accuracy of his reports. See id. at 732.
CSI argues that Behar had a negative view of Scientology, and that his bias
pervaded his investigation and caused him to publish false and defamatory statements
about CSI. The district court found that the evidence could not support such a
claim. The district court found that Behar's alleged bias would be relevant to
show a purposeful avoidance of the truth if it were coupled with evidence of an
extreme departure from standard investigative techniques. The district court concluded,
however, that "plaintiff has failed to demonstrate the correlative circumstance
of inadequate investigation to make its evidence of bias probative of actual malice,
rather than probative of lack thereof," Time II, 903 F. Supp. at 641, noting
also that the "speaker's belief in his statements, even his exaggerations,
enhances, rather than diminishes, the likelihood that they are protected,"
id. We believe that the district court properly applied the actual malice standard,
and turn to the statements themselves.
The "Intimidation" Statements. The district court found that Behar
had relied on (1) "affidavits from former high-ranking Scientologists, newspaper
and periodical articles, interviews and personal experience, and published court
opinions" to support statement 1 (mafia-like intimidation), (2) the judgment
of Cynthia Kisser, an executive director of an organization dedicated to the study
of cults, which was likely to be given credence by Behar in view of her knowledge
and experience, for statement 2 ("classically terroristic"), and (3)
Behar's personal experience and research to support statement 3 (retaliation against
journalists, lawyers, doctors and judges). Id. at 642-43. In view of the evidence
in the record of Behar's extensive research, we agree with the district court's
conclusion that no reasonable jury could find that defendants either knew or entertained
serious doubts that these statements were false.
The Fishman Statements. The part of the Fishman statement that pertained to
Fishman's stock scam (paragraph 45, statement 4) was not published with actual
malice. Behar interviewed Steven Fishman, Robert Dondero, the Assistant United
States Attorney that prosecuted Fishman for stock fraud, and Marc Nurik, the attorney
that represented Fishman. As the district court observed, Behar relied on these
interviews. See id. at 644. He had no reason to have serious doubts about the
truth of the information given him by the prosecuting attorney, the defense attorney,
and the defendant in the case.
Nor were the murder-suicide allegations published with actual malice. Behar
interviewed Fishman's psychiatrist, Uwe Geertz, and Vicki Aznaran, a former high-ranking
Scientologist. CSI argues that Behar had evidence that Fishman's claims that
the church had ordered him to kill Dr. Geertz and commit suicide were false since
Fishman had previously tried to frame the church with similar charges by staging
a phony death threat 18 months earlier. While this does raise questions about
whether Fishman's account was reliable, the evidence in the record shows that
Behar had considerable corroboration of Fishman's account, including the testimony
of Dr. Geertz that he had reported the death threat referred to in the Article
to the FBI, and Dr. Geertz's testimony in Fishman's criminal trial. In addition,
Behar had reason to discount the relevance of the earlier threat based on his
interview with Nurik, who told him that he believed Fishman had been manipulated
into staging the fake death threat by Scientologists; Dr. Geertz's appraisal of
the two threats; and Behar's own awareness of similarly convoluted plots to frame
others. In any event, the Article does not present Fishman's claim as undisputed
fact, but rather makes clear that Scientology denies the truth of Fishman and
Dr. Geertz's charges. In view of the extensive research Behar conducted, and the
fact that the death threat was accurately reported as an allegation, we agree
with the district court that no reasonable jury could find that Behar had published
the statements about the stock scam or the murder-suicide allegation with purposeful
avoidance of the truth.
The Lottick Statements. The district court found that statements 8, 9, and
10 (concerning the Lotticks and the loss of their son Noah) could not be found
to have been published with actual malice because the Lotticks were not obviously
lacking in credibility, their statements were not inherently improbable, and Behar
had investigated the case thoroughly. See id. at 643. We agree with the district
court that CSI's complaints that Behar included some information and not other
information, for example, by not interviewing Noah Lottick's roommate, amount
to no more than "minor omissions in investigation, from which no inference
of purposeful avoidance of the truth could reasonably be drawn," id. Any
such omissions are insignificant when viewed against the backdrop of Behar's investigation
as a whole: he interviewed Noah Lottick's parents, his friends and teachers, reviewed
the police report of his death, and was twice refused an interview by the director
of the Dianetics Center in Hackensack, New Jersey, that Noah was attending.
The VSE Statements: Subsidiary Meaning. The district court ultimately dismissed
the VSE Statement based on the subsidiary meaning doctrine established by this
court in Herbert v. Lando, 781 F.2d 298 (2d Cir. 1986). See Time III, 932 F. Supp.
at 595. In Herbert, we held that when a "published view" of a plaintiff
is not actionable as libel, other statements made in the same publication are
not "actionable if they merely imply the same view, and are simply an outgrowth
of and subsidiary to those claims upon which it has been held that there can be
no recovery." Id. at 312. Relying on the Supreme Court's holding in Masson
v. New Yorker Magazine, Inc., 501 U.S. 496 (1991), that the related "incremental
harm" doctrine is not a creature of federal constitutional law, CSI argues
that (1) the subsidiary meaning doctrine can be applied here only if it is part
of the relevant body of state law, and (2) neither California nor New York law,
one of which presumably applies to this case, recognizes this doctrine. Because
the subsidiary meaning doctrine is merely a gloss on constitutional actual malice,
The incremental harm doctrine at issue in Masson reasons that when unchallenged
or non-actionable parts of a publication are damaging, an additional statement,
even if maliciously false, might be non-actionable because it causes no appreciable
additional harm. See Herbert, 781 F.2d at 310; Simmons Ford, Inc. v. Consumers
Union, 516 F. Supp. 742, 750 (S.D.N.Y. 1981) (holding that, in the context of
an article evaluating plaintiffs' new electrical car and rating it "Not Acceptable"
for a range of unchallenged reasons, a portion of the article wrongly implying
that the car did not meet federal safety standards "could not harm [plaintiffs']
reputations in any way beyond the harm already caused by the remainder of the
article."). In Masson, the Supreme Court
reject[ed] any suggestion that the incremental harm doctrine is compelled
as a matter of First Amendment protection for speech ... [because t]he question
of incremental harm does not bear upon whether a defendant has published a statement
with knowledge of falsity or reckless disregard of whether it was false or not.
Masson, 501 U.S. at 523.
By contrast with the incremental harm doctrine, the subsidiary meaning doctrine
does "bear upon" whether a defendant has acted with actual malice. In
Herbert, for example, this court held that nine of eleven allegedly libelous statements
were not actionable because they were not maliciously published; the published
statements were backed by evidence that was not known to be false, and as to the
reliability of which the defendants had not shown reckless disregard. See Herbert,
781 F.2d at 305-07. Because the defendants' overall "view" of the plaintiff
rested on such evidence, we held that they "could not be said to have had
actual malice in publishing [it]." Id. at 311. In light of this conclusion,
it would have been illogical to hold, based on other statements, that the plaintiffs
in fact had such actual malice. See id. (holding that recovery was barred as to
an "incorrect" statement in part because "given the amount of other
evidence supporting this view, the [defendants] did not publish this view with
actual malice"); id. at 312 (holding that recovery was barred as to another
statement because "[w]e have already held ... that the [defendants] did not
have actual malice in publishing their view"). To avoid that contradiction,
we enunciated the subsidiary meaning doctrine. It follows that the doctrine, as
articulated in Herbert and as relevant here, "bear[s] ... upon" whether
a "view" was published with actual malice. It is thus a question of
federal constitutional law, not state law, and it remains good law after Masson.2
Our holding in Herbert is still the law of this Circuit, and we therefore conclude
that the district court properly held that the VSE Statement was subsidiary in
meaning to the larger thrust of the Article, which asserted that "Scientology,
rather than being a bona fide religion, is in fact organized for the purpose of
making money by means legitimate and illegitimate." Time III, 932 F. Supp.
at 595. We believe that the import of statements 6 and 7, which were included
in the Article's VSE sidebar, is also subsidiary to the general message of the
Article, and therefore CSI's claims with respect to those statements were properly
We have considered CSI's remaining arguments and find them to be without merit.3
We find that the challenged statements in the Article were not published with
actual malice or were subsidiary in meaning to statements made without actual
malice. The judgments of the district court are affirmed, and the complaint is
To the extent that the Behar Article uses the term "Scientology,"
Chief Judge Walker is of the view that the term as used denotes a belief system,
or, as the Article puts it, a "cult," and that therefore references
to "Scientology" are not "of and concerning" the plaintiff
Church of Scientology International of Los Angeles, California. This is true as
surely as invective directed generally at Catholicism cannot be considered defamatory
of an individual Catholic or a particular parish church; such "group libels"
are not actionable by discrete members of the group. See National Nutritional
Foods Ass'n v. Whelan, 492 F. Supp. 374, 380 (S.D.N.Y. 1980); Brady v. Ottaway
Newspapers, Inc., 445 N.Y.S.2d 786, 788-92 (App. Div. 1981). Chief Judge Walker
also believes that the district court correctly concluded that the Article's references
to individual Scientologists could not be "of and concerning" CSI. See
AIDS Counseling & Testing Ctrs. v. Group W. Television, Inc., 903 F.2d 1000,
1005 (4th Cir. 1990) (holding that "[a]llegations of defamation by an organization
and its members are not interchangeable" (internal quotation marks omitted)).
We also note that both the incremental harm and subsidiary meaning doctrines
are distinct from the "libel-proof-plaintiff" doctrine. See, e.g., Cardillo
v. Doubleday & Co., 518 F.2d 638, 639 (2d Cir. 1975) (dismissing action by
convicted figure in organized crime who sued publisher for book that mentioned
his involvement in criminal enterprises; holding that plaintiff was "libel-proof":
"so unlikely by virtue of his life as a habitual criminal to be able to recover
anything other than nominal damages."). Because that doctrine is not before
us, we take no position on its continued vitality after Masson.
Among those other claims was CSI's claim for nominal damages. CSI's status
as a public figure means that it was required to demonstrate actual malice, whatever
remedy it sought.