Each Side to Pay Own Costs : Penthouse, La Costa Settle 10-Year Suit Out of Court
A $522-million libel suit filed over a 1975 Penthouse magazine article alleging organized crime ties to the exclusive La Costa resort has been settled out of court, ending a decade of costly litigation.
According to the agreement reached between owners of La Costa, in Carlsbad, and Penthouse publisher Robert Guccione, each side will pay for its own legal costs, and that’s all. Costs are estimated to total more than $20 million.
In a lengthy letter that was to be filed in court Friday and was signed jointly by Guccione and La Costa’s owners, which explained the reasons for the settlement, each side concluded that “continued litigation will only be further torture and cause more expense to all parties.
“Accordingly, we have now reached a point where it appears that if the case were to continue through yet additional court proceedings, whoever would ultimately win would enjoy a Pyrrhic victory at best.”
The letter also exhibited none of the rancor of the long, bitter legal struggle. It lauded La Costa resort owners for their “commendable civic and philanthropic” endeavors while praising Guccione and Penthouse for their “personal and professional awards.”
Penthouse attorney Norman Roy Grutman of New York City said in an interview that the settlement, “which was the subject of prolonged negotiations,” was reached last month.
“What it comes down to is we don’t love each other, but after being at each other’s throat for so long . . . there’s nothing to gain by expending more time and expense on litigation. You just can’t litigate forever,” Grutman said.
The lawsuit was spawned by a 1975 article entitled “La Costa: The Hundred-Million Dollar Resort with Criminal Clientele.” In the story, free-lance writers Jeff Gerth and Lowell Bergman attempted to link the resort and its owners to organized crime, calling La Costa a meeting place for gangsters.
Part of the allegations were based on testimony before congressional committees and on a $57-million loan the resort received from the Teamsters Union’s Central States, Southeast and Southwest Area Pension Fund.
The resort’s owners, Merv Adelson, Irwin Molasky, Morris B. (Mo) Dalitz and Allard Roen, sued the magazine.
In 1976, the lawsuit was dismissed. However, it was reinstated and, after six years of legal maneuvering, during which Dalitz and Roen were dropped as plaintiffs, the case finally went to trial in Compton in 1982.
The jury, after a 5 1/2-month trial, cleared Penthouse of libel. But later the trial judge overturned the jury verdict. Then in September, 1985, the California Supreme Court upheld an appellate court ruling that Dalitz and Roen were not public figures and thus could rejoin the lawsuit without the added burden of having to prove that the article was written with malice.
Grutman said the Supreme Court’s ruling put the matter “back at Square One.”
“The appeals would have lasted several more years,” Grutman said. “People aren’t the same as they were 10 years ago . . . especially after having litigated as intensively as both sides have. There’s nothing to be gained by going on with the case.”
In the joint letter that was scheduled to be filed with the court Friday to settle the case, both sides took a conciliatory stance:
“Penthouse in the article . . . did not mean to imply nor did it intend for its readers to believe that Messrs. Adelson and Molasky are or were members of organized crime or criminals. In addition, Penthouse acknowledges that all of the individual plaintiffs, including Messrs. Dalitz and Roen, have been extremely active in commendable civic and philanthropic activities which have earned them recognition from many estimable people. Furthermore, Penthouse acknowledges that among plaintiffs’ successful business activities is the La Costa resort itself, one of the outstanding resort complexes of the world.”
For their part, the La Costa owners in the letter said they had learned “of the many personal and professional awards and distinctions that have been conferred upon Penthouse and . . . Guccione.”
Attorneys Louis Nizer of New York City and Irwin Buchalter of Los Angeles, who represented La Costa, were unavailable for comment.
Grutman said his firm’s legal fees for representing Penthouse will reach nearly $8 million. He estimated it cost La Costa $15 million to defend itself. Jennifer Wilson, the resort’s public relations director, said the resort won’t comment on its legal expenses.
Bergman, who along with fellow writer Gerth was dropped from the lawsuit several years ago, said of the settlement: “It sounds to me like the lawyers ended up making a lot of money. There was no purpose to the litigation at all.”
Bergman, who lives in San Francisco and is a producer for the CBS program “60 Minutes,” said he and Gerth were paid $1,500 each for the article.
Gerth, who today is a reporter for the New York Times based in Washington, said, “I don’t have anything to say, really. It’s ancient history.”
