New York Federal Court Applies Plausibility Standard of Iqbal and Twombly to Allegations of Actual Malice in Defamation Cases

On August 1, 2013, Judge J. Paul Oetken of the Southern District of New York issued an opinion meticulously analyzing and applying the plausibility requirement from Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in the context of pleading the "actual malice" element of a defamation claim against a public figure.

The case, Biro v. Condé Nast, No. 11 Civ. 4442 (S.D.N.Y. Aug. 1, 2013), concerns a 2010 The New Yorker article written by one of the defendants, David Grann, and published or republished—in part or in paraphrase—by the other defendants. The article examines the field of art authentication and the putatively forensic art authenticator Peter Paul Biro, the plaintiff. Read as a whole, according to Judge Oetkin, the Grann article raises questions about Mr. Biro's practices and integrity, intimating that Mr. Biro may have forged fingerprints that he claims authenticate certain pieces of art as the works of well-known artists. The complaint does not allege that the statements of fact underlying such intimations are themselves false, only that they implicitly impugn his character. The court describes the article as "an even-handed product of an extensive degree of research," that reports facts from many different sources, includes interviews with Biro himself, and its style raises questions rather than making accusations or drawing firm conclusions.

The court took up Grann's and The New Yorker's motion for judgment on the pleadings and the republisher defendants' motions to dismiss as to plaintiff's defamation claims arising out of four passages from the Grann article. Resolving first that Mr. Biro is a limited purpose public figure, the court required that he plead and prove that the allegedly defamatory statements were published with "actual malice" which, as is well known, is "a term of art in the defamation context denoting deliberate or reckless falsification," the proof of which requires "sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication." Next, the court applied the rule from Iqbal and Twombly that "a plaintiff must state the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level." Put succinctly, the court found that Mr. Biro's pleadings failed to "nudge" his claims "across the line from conceivable to plausible" and thus granted the motion for judgment on the pleadings.

Application of Iqbal and Twombly to the actual malice element of a libel claim has not yet been precisely addressed by either the United States Supreme Court or the 2nd Circuit Court of Appeals. In Judge Oetken's view, however, given the difficulty of proving actual malice even after discovery and the requirement that it be proved by clear and convincing evidence, "Rule 12(b)(6) should play a particularly important role in testing the plausibility of a plaintiff's defamation claim." Judge Oetkin thus found Iqbal to be of "particular value" as a prophylactic against "settlement extortion" and the "unnecessary costs" that can "chill the exercise of constitutionally protected freedoms" of defamation defendants.

Although he had no guidance from the 2nd Circuit, decisions from the 1st and 4th Circuits applying Iqbal and Twombly to pleadings of actual malice—Schatz v. Republican State Leadership Comm., 669 F.3d 50 (1st Cir. 2012), and Mayfield v. Nat'l Ass'n of Stock Car Auto Racing, Inc., 674 F.3d 369 (4th Cir. 2012)—and other decisions from the Southern District of New York provided a road map for Judge Oetkin's ruling. These courts all rejected as insufficient conclusory allegations of actual malice, or use of "actual-malice buzzwords," and required that the plaintiffs allege specific facts supporting a conclusion that actual malice was present. Judge Oetken identified and followed a "road map" from the 1st Circuit to gage sufficient allegation of actual malice: "To begin, the court must strip away and discard the complaint's conclusory legal allegations. Next, the court must determine whether the remaining factual content permits the reasonable inference that the defendant is liable for the misconduct alleged." Shay v. Walters, 702 F.3d 76, 82-83 (1st Cir. 2012).

In reaching the conclusion that Mr. Biro had failed to "nudge" his claims against the republisher defendants "across the line from conceivable to plausible, Judge Oetkin found, inter alia:

• As to republisher defendant Paddy Johnson (of the art blog Art Fag City) who had previously published an article touting Biro's work, that given The New Yorker's sterling reputation and the nature of the Grann article, it was more plausible that the Grann article caused Johnson to reevaluate her opinion of Biro than that she knew or believed that her republication contained false content;
• As to republisher defendant Business Insider that the operative complaint shows that it did not act with actual malice based on its actions subsequent to filing of the lawsuit, including retraction and coverage of the suit; and
• As to republisher defendant Yale University Press, there was no allegation that this defendant even knew that the reference in its book to a "purported forensic expert" related to Mr. Biro.

As to the publisher defendants (i.e., Mr. Grann, The New Yorker and The New Yorker's publisher), the court found that the complaint contained five types of allegations purporting to establish actual malice: (1) they failed to investigate, (2) they relied on anonymous and biased sources, (3) they ignored Mr. Biro's successes, (4) they failed to retract and (5) Mr. Grann had defamatory propensities. The court found that none of Mr. Biro's allegations, singly or together, plausibly suggested that these defendants either knew their statements were false or made them recklessly in spite of serious doubts about their truth. Judge Oetkin analyzed the types of allegations as follows:

1. Failure to investigate. First, these were conclusory allegations. Second, failure to investigate is not evidence of actual malice unless there are obvious reasons to doubt the veracity of the statements. Mr. Biro did not allege any facts indicating such obvious reasons. To the contrary, the article "appeared to be the product of an enormous amount of careful and diligent research," which the complaint itself confirms.
2. Reliance on anonymous and biased sources. The article was based on many sources, and none of the four passages remaining in the suit come from an anonymous source. Allegations of bias as to one source were not relevant to Mr. Grann's state of mind because they are limited to a suit by Mr. Biro against the source for defamation in Canadian court after Mr. Grann's article was published.
3. Exclusion of Mr. Biro's successes. That a statement is one-sided has no tendency to prove that the publisher believed it to be false. Additionally, the article did not hide Mr. Biro's other impressive works or clientele.
4. Failure to retract. A defamation defendant's post-publication behavior is not enough to nudge allegations from possible to plausible. Additionally, the specific failure to retract allegations was not relevant to the four passages remaining in the lawsuit.
5. Mr. Grann's defamatory propensities. This allegation was based on a separate defamation action brought against Mr. Grann that was never adjudicated on the merits and thus was legally insufficient.

Judge Oetken concluded that Mr. Biro had not only failed to plausibly allege actual malice against Mr. Grann, The New Yorker and The New Yorker's publisher, the record contained evidence of the implausibility that they acted with actual malice in the form of Mr. Grann's article itself. Mr. Grann devoted a substantial portion of the article to his interviews of Mr. Biro and Mr. Biro's responses, including those relating to each of the four remaining allegedly defamatory passages, and it adopted a style of reporting that lays out evidence that may raise questions and allows the reader to evaluate that evidence, which style of reporting "is far from what might be expected of an author acting with actual malice."

In a footnote, the court addressed Mr. Biro's argument that the requirement that a defamation plaintiff plead specific facts prior to discovery "would mean that no public figure's defamation case against a media defendant could rarely if ever go forward." In response, Judge Oetken stated that "it is surely not the case th[at] no defamation plaintiffs will be able to plead actual malice under Iqbal." Judge Oetken did admit that this objection "undoubtedly gets to the very heart of the controversy surrounding the modern interpretation of Rule 12(b)(6)," but asserted that "the job of a district court is not to weigh in on such policy matters, but to faithfully apply the laws as construed by higher courts."

Although other courts in the Southern District of New York have dismissed pleadings of actual malice where the allegations were conclusory and failed to satisfy the Iqbaland Twombly plausibility standard, the Biro court did so with more depth of analysis than any of the others and should provide strong precedential value going forward.

This August 2013 decision follows an earlier decision issued in the case which granted in part and denied in part Mr. Grann, The New Yorker and The New Yorker's publisher's motion to dismiss (see 883 F. Supp. 2d 441). The 2012 decision reviewed some two dozen passages alleged to be defamatory and dismissed Mr. Biro's claims as to all but four of them. The 2012 opinion notably filled a precedential void of its own: Neither the New York Court of Appeals nor the 2nd Circuit had established a standard to be applied on a motion to dismiss a claim for defamation by implication—that is, a defamatory message premised on false suggestions and impressions arising from the inclusion of particular truthful statements and the omission of allegedly material facts. On this issue, Judge Oetken adopted a test from the 4^th Circuit case Chapin v. Knight-Ridder, Inc., 993 F. 2d 1087 (4th Cir. 1993), holding that "where a plaintiff asserts a defamation claim based not on any alleged falsity of the statements themselves, but on an alleged defamatory implication that could be derived from the unchallenged facts, the Court will require an 'especially rigorous showing' that (1) the language may be reasonably read to impart the false innuendo, and (2) the author intends or endorses the inference." Applying that test, Judge Oetkin dismissed claims for defamatory implication arising entirely from unchallenged facts, but retained claims based on underlying facts that Biro challenged.  

George Wukoson, who works in Davis Wright Tremaine's New York offices, focuses his practice on federal trademark, copyright, and anti-counterfeiting litigation, trademark prosecution, and trademark opposition and cancellation actions. He also counsels clients on issues involving brand management and enforcement, copyrights, domain name disputes, social and digital media, and intellectual property licensing.