Magazine Is Dropped From Libel Case : Court: Judge grants a retrial to psychoanalyst who says a writer for the New Yorker defamed him. But he rules that the publication was not at fault.

A federal judge on Thursday set the stage for a replay of one of the juiciest libel trials in recent history but dismissed a key defendant--the New Yorker magazine--from the case.

Capping weeks of speculation, U.S. District Judge Eugene F. Lynch granted psychoanalyst Jeffrey M. Masson a retrial of his lawsuit against writer Janet Malcolm, whom he accused of libeling him in a profile in the New Yorker in 1983.

But in a blow to Masson, the judge removed the magazine from the case, declaring that there was insufficient evidence that its editors did anything wrong. That move, experts said, eliminates the “deep pocket” defendant and could trim the amount of damages Masson might collect if he prevails in a new trial.

“We’re disappointed,” said Charles Morgan, Masson’s attorney, “but not too worried. Ms. Malcolm is covered by insurance and we’ll focus on that.”

Lynch’s ruling is the latest twist in Masson’s nine-year legal crusade, which was sparked by the two-part profile that cast him as an egomaniac preoccupied with sex. Filed in 1984, his lawsuit was twice dismissed but was ultimately reinstated by the U.S. Supreme Court, which limited its scope to five quotations the analyst claims he never said.

Masson, 52, finally got his turn before a jury earlier this year. After three weeks of titillating testimony, jurors ruled that Masson had been a victim of libel but deadlocked on the question of how much money--if any--he deserved. In a separate finding, the jury absolved the New Yorker of blame.

That unusual climax left the whole mess in the lap of Lynch, who faced the legal conundrum of deciding whether to order a whole new trial--as he did--or mandate that only the damages portion be replayed. Masson had sought $7.5 million in damages.

The other key question was whether to enforce the jury’s exoneration of the magazine. In deciding to do so, Lynch explained that his review of the evidence found that New Yorker editors “neither knew the quotations were false, nor acted with reckless disregard as to falsity.”

Under the ruling, Masson may appeal the dismissal of the magazine from the case--but only after his legal feud with Malcolm is resolved. Realistically, that means Masson would have to pursue a third trial to recover any damages from the magazine.

The New Yorker’s lawyers reacted with exuberance to the ruling, contending that it vindicates their fact-checking department and journalistic methods, which came under scrutiny during the trial.

“It’s clearly an endorsement of the New Yorker’s practices,” said attorney James Wagstaffe.

Malcolm’s lawyer, Gary Bostwick, was also in good spirits, because he too had asked the judge to grant a retrial: “Ideally, we wish the jury had come back and said she didn’t defame anybody, but that didn’t happen, so we’ll go at it again.”