Court Revives La Costa Spa’s Penthouse Suit

A state appellate court Wednesday reinstated a 10-year-old libel case by Morris B. (Moe) Dalitz and Allard Roen, two officials of the La Costa resort, against Penthouse magazine.

The two men, along with owners Mervyn Adelson, Irwin Molasky and five corporations, sued the magazine for $522 million over a March, 1975, article headlined “La Costa: The Hundred-Million-Dollar Resort with Criminal Clientele.”

The article stated that the spa was developed by Dalitz and the other three men with questionable loans from the Teamsters Union’s $1.5-billion Central States Pension Fund and turned into a “watering hole” and playground for organized crime.

In 1982, a Compton Superior Court jury absolved Penthouse and its publisher, Robert Guccione, of all charges of libel against the corporations and Adelson and Molasky. The plaintiffs appealed and were granted a new trial, which has never been conducted.

The case by Dalitz and Roen, however, had been dismissed April 5, 1976, by now-retired Los Angeles Superior Court Judge Thomas W. LeSage on grounds that the two men were public figures who had failed to prove the article was written with malice.

Under U.S. Supreme Court case law governing libel suits, public figures “may recover for injury to reputation only on clear and convincing proof that the defamatory falsehood was made with knowledge of its falsity or with reckless disregard for the truth.”

In its 50-page ruling Wednesday, written by Justice Edwin F. Beach with the concurrence of Justices Donald N. Gates and Lester William Roth, the 2nd District Court of Appeal said the “shoe box” of clippings presented to LeSage at the pretrial stage were hearsay and failed to prove that the two were public figures.

In reversing LeSage’s summary judgment in Penthouse’s favor, the court indicated that the two men might yet be judged public figures after a complete trial.

“While we grant that these voluminous documents are indicative of a substantial amount of publicity,” Beach wrote, “we are nonetheless bound by the rules of evidence to discard any of the statements in the articles and reports if offered for their truth.”

Penthouse lawyers had handed LeSage more than 200 exhibits, including clippings from the Los Angeles Times, the New York Times, the Wall Street Journal and a dozen other major newspapers, plus articles and pictures from a score of national magazines dating back to the 1930s.

The material outlined the history of organized crime in this country and related repeatedly that Dalitz, 85, was described by the Kefauver crime committee in the 1950s as a gambler, racketeer and associate of organized crime figures, and that Roen, 63, was a one-time partner of Dalitz in Las Vegas gambling casinos and was convicted of fraud in a $5-million stock swindle.

The appellate court specifically said that Roen’s conviction failed to make him a public figure, and indicated that neither of the two men had ever sought to become a public figure.

“As to the individual activities of these two . . . ,” Beach wrote, “lacking is direct primary evidence, apart from the single securities violation of one of them, that they sought publicity or acted in a way calculated or destined to knowingly bring them publicity and notoriety as engaged in controversy or as criminals, crooks, gangsters or even merely ‘big shots.’ ”

The appellate court upheld retired Los Angeles Superior Court Judge George M. Dell’s dismissal of Penthouse’s countersuit for libel against Dalitz and Roen over statements they made at a 1975 press conference. Dell had ended the countersuit as a sanction or punishment against Penthouse because the writers of the article, Jeff Gerth and Lowell Bergman, refused to disclose confidential sources.

“The law implies the newsperson has made an agreement with the source that he will honor the privacy and confidentiality of the source,” Beach wrote. “It is not unreasonable to interpret that agreement as carrying the added implication that the newsperson is willing to himself forgo bringing an action which would compromise or jeopardize the privacy of the source.”

The identity of the sources was important to Dalitz’s and Roen’s defense against the countersuit, the justice stated, so Penthouse either had to disclose the sources or abandon its countersuit.