Scientology libel lawsuit against TIME magazine dismissed.

In May 1991 a TIME cover article titled, "Scientology: The Cult of Greed," said the so-called religion is "really a ruthless global scam."

Author Richard Behar said wrote that Scientology posed as a religion that survived "by intimidating members and critics in a 'Mafia-like' manner."

The cult wasn't happy, harassed the author (unethical behavior was condoned and encouraged by Scientology founder L. Ron Hubbard), and filed a libel suit.

The lawsuit was dismissed. Scientology fought the dismissal, but the Supreme Court refused to consider reinstating the cult's lawsuit.

In our opinion, Scientology is a commercial enterprise that masquerades as a religion and often operates like a hate group.


         UNITED STATES COURT OF APPEALS

                      FOR THE SECOND CIRCUIT

                         August Term 1999

    (Argued December 6, 1999        Decided  January 12, 2001)

               Docket Nos. 98-9522(L), 99-7332(CON)

------------------------------------------------------x

                                        Church of Scientology International,

                                                                   Plaintiff-Counter-Defendant-Appellant,
 

 

               -- v. --
 

 

                                                       Richard Behar,

                    Defendant-Counter-Claimant-Appellee,

Time Warner, Inc., Time Inc. Magazine Company,

          Defendants-Appellees.

------------------------------------------------------x

               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.

     Affirmed.

                                                                      BURT NEUBORNE, New York, NY,

                                   Eric M. Lieberman, Andrew J.

                                   Fields, Scott T. Johnson,

                                   Rabinowitz, Boudin, Standard,

                                   Krinsky & Lieberman, New York,

                                   NY, for Plaintiff-Counter-

                                   Defendant-Appellant.

                                                                      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 and

                                   Defendant-Appellees.
 

 
 
 

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 court.

                           BACKGROUND

     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 Article:

                 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

suicide."

                 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 in cars."
 

 

                  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.

                           DISCUSSION

     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, 539 (1980).

     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"

CSI.

     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, we

disagree.

     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.

     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

dismissed.

     We have considered CSI's remaining arguments and find them

to be without merit.

                           CONCLUSION

     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 dismissed.


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