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Hanks v. Wavy Broadcasting, LLC, No. 11-CV-00439, 2012 BL 29320 (E.D. Va. Feb. 8, 2012) The U.S. District Court for the Eastern District of Virginia dismissed with prejudice defamation claims brought by the owner of tax preparation firm featured in a television news company's televised and online reports about errors and "unscrupulous" practices sometimes committed in last-minute tax return preparation. Among other things, the court found that the defendants' references to unscrupulous behavior did not directly refer to the plaintiff, that the statements constituted non-actionable opinion, and that the plaintiff had failed to plead facts establishing actual malice on the part of the defendants, as required by controlling jurisprudence.
Defendants' News Broadcast and Accompanying ArticleAs explained by the court, plaintiff Timothy B. Hanks is a professional tax preparer and President of a tax preparation service called Reliable Tax. Hanks sued defendants Lin Television Corporation and its subsidiary, defendant Wavy Broadcasting, LLC. Lin owns and operates two television stations. According to Hanks, on April 14. 2011, the defendants broadcast a television news video segment and published on Wavy's website an accompanying article about avoiding problems associated with last minute tax filing. Hanks claimed that in previews of the program, in the news segment, and in the online article, the defendants made a variety of statements which collectively defamed him. The television broadcasts purportedly warned of the "risk of working with unscrupulous preparers" and stated that the news segment would "show . . . how to avoid unscrupulous tax preparers." Hanks at 2. The online article, entitled "Avoiding last minute tax preparer errors—Do it yourself or visit a tax preparer you trust," stated that, "if you're one of the many who have waited until the last minute to file, you could run the risk of working with unscrupulous preparers or even increasing your chances of mistakes." Id. at 2-3. Both the broadcast segment and the article recounted how a taxpayer named Kenneth Brown had his tax return prepared by a Portsmouth, Virginia company called Reliable Tax, and was later informed by the Internal Revenue Service that, due to an error on the return, he had underpaid his taxes. Brown claimed that Reliable Tax had made a typographical error by placing Brown's Social Security tax amount in the space on his tax return where it should have placed his federal income tax. In accordance with state law, Reliable Tax paid Brown $54 in interest, but Brown was unhappy that Reliable Tax did not refund the $400 he paid for preparation of the return. Hanks alleged that the defendants were liable to him for libel, libel per se, and libel per quod. He contended that the defendants' statements falsely implied that "the plaintiff was an 'unscrupulous tax preparer' who had unlawfully converted customers' income tax refund payments, or unlawfully withheld payments owed to customers, or fraudulently filed false tax returns for customers." Id. The defendants moved to dismiss the complaint for failure to state claims upon which relief may be granted.
The "Of or Concerning" TestIn order for a statement to be actionable as defamation under Virginia law, "a libel plaintiff must show that the alleged libel was published 'of or concerning' him." Gazette, Inc. v. Harris, 325 S.E. 2d 713, 738 (Va. 1985)(citations omitted). Although the publication need not mention the plaintiff by name, it must have been "intended to refer to him" and made in a manner that "would be so understood by persons reading it who knew him." Id. In addition, "[i]f defamatory words are used broadly with respect to a general class of persons, and there is nothing that points, or by colloquium or innuendo can be made to apply, to a particular member thereof, such member has no right of action." Ewell v. Boutwell, 121 S.E. 912, 914 (Va. 1924). Moreover, a corporation "is itself the only person entitled to recover for injuries to its business, profits, or property. Its stockholders have no standing to sue in their own right for an injury to the corporation on the ground that the injury caused a depreciation in the value of their stock." Landmark Communications, Inc. v. Macione, 334 S.E. 2d 587, 589 (Va. 1985). The court in the instant case observed that the words quoted in the complaint contained "no direct or indirect reference to plaintiff." Hanks at 15. All of the references of which Hanks complained were to Reliable Tax, and not to Hanks himself. According to the court, "absolutely no reasonable person would infer that the language used" by the defendants suggested that the defendants "intended to or did endorse an inference" that Hanks was unscrupulous, that he unlawfully converted tax refund payments, that he unlawfully withheld payments due to customers, or that he fraudulently filed false tax returns. Id. at 15. Although the beginning of the newscast used the word "unscrupulous" generally to refer to tax preparers, the court pointed out that it "use[d] the word as part of a disjunctive phrase," which warned of two distinct risks: the risk of working with unscrupulous tax preparers and the risk of error. Id. at 13. The court found that the defendants' statements only attributed error—not unscrupulous behavior—to Reliable Tax. Accordingly, the court held that Hanks failed to allege adequately that the defendants published defamatory statements of or concerning him. Defendants' Statements Were Constitutionally Protected Opinions The court also found that Hanks could not recover on his defamation claims because the statements of which he complained constituted opinions protected by the First Amendment to the U.S. Constitution. The court explained that courts in the Fourth Circuit apply the following four factors to determine whether a statement constitutes non-actionable opinion: (1) the words chosen by the author or speaker; (2) whether the statement in question "is capable of being objectively characterized as true or false;" (3) the context of the writing or speech in which the allegedly defamatory statement is made; and (4) "the broader social context into which the statement fits." Hanks at 16. If the "words cannot be described as true or false, they are not actionable." Id. Nevertheless, even if a statement is objectively verifiable, it will still be considered an opinion "if it is clear from any of the three remaining . . . factors, individually or in conjunction, that a reasonable reader would recognize its weakly substantiated or subjective character—and discount it accordingly." Biospherics, Inc. v. Forbes, Inc., 151 F.3d 180, 184 (4th Cir. 1998). The court opined that "simple reason applied by a viewer or listener of [the defendants'] statements would erase any inkling of a notion that they are defamatory either directly or indirectly." Hanks at 17. The court cited several Virginia judicial decisions for the proposition "that characterizations of a business's performance or a professional character are generally considered to be expressions of opinion and are thus protected speech." Id. at 18. "Unscrupulous" Is Not Defamatory The court determined that even if the defendants had stated that Hanks was "unscrupulous," such a statement would not have been actionable as defamation. Hanks at 19. Defamatory words must be viewed in light of their "plain and natural meaning," consonant with the meaning an audience would understand them, and "according to the sense in which they appear to have been used." Carwile v. Richmond Newspapers, Inc., 82 S.E.2d 588, 591-92 (Va. 1954). The court consulted dictionaries which, among other things, defined "unscrupulous" to mean "devoid of scruples; oblivious to or contemptuous of what is right or honorable." Id. (quoting The American Heritage Dictionary of the English Language (3d ed. 1992)). In light of this meaning, the court acknowledged that to call a person unscrupulous "is an unflattering characterization." Id. Carwile v. Richmond Newspapers, Inc., 82 S.E. 2d 588, 591 (Va. 1954). The court cited several decisions in which courts held that general imputations of unethical or disreputable character are not actionable. See, e.g., Phantom Touring v. Affiliated Publications, 953 F. 2d 724, 728, 730-31 (1st Cir. 1992); Lauderback v. American Broadcasting Companies, Inc., 741 F. 2d 193, 195-96 (8th Cir. 1984); Wait v. Beck's North America, Inc., 241 F. Supp. 2d 172, 183 (N.D. N.Y. 2003). The court agreed with those earlier decisions that such statements are essentially matters of opinion. Moreover, in the context of the defendants' news story—about the need for individuals to avoid last-minute tax preparation—the court found that the use of the word unscrupulous "was a broad, unfocused, and wholly subjective content." Hanks at 20-21. Therefore, the court concluded that the complaint did not adequately allege the publication by the defendants of a defamatory statement. Actual Malice A plaintiff who prevails in an action for libel per se is presumed to have suffered damages. However, under Virginia law, "where a private individual alleges defamation by a news media defendant involving a matter of public concern, presumed damages cannot be awarded in the absence of actual malice." WKLA-TV v. Levin, 564 S.E. 2d 383, 391-92 (Va. 2002). Actual malice means that "the defendant knew the publication to be false or evidence reckless disregard for the truth." New York Times v. Sullivan, 376 U.S. 254, 280 (1964). Conclusory allegations regarding a defendant's intent do not suffice to state a cognizable claim. Zhang v. Regan, 2011 BL 99439 (E.D. Va. Apr. 14, 2011). In the instant case, the court found that Hanks failed adequately to allege actual malice. Although the complaint recited the New York Times formula, it omitted any factual allegations from which actual malice could be inferred. For these reasons, the court dismissed Hanks's libel and libel per se claims. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.
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