Publisher of Wall Street Journal Loses Libel Suit Filed by Brokers
In what is believed to be the largest libel judgment in U.S. history, a federal jury on Thursday returned a $222.7-million verdict against Dow Jones & Co. for a Wall Street Journal article that was found to be false and defamatory.
The plaintiff, a now-defunct brokerage house known as Money Management Analytical Research, or MMAR, argued in U.S. District Court here that the 1993 story about its investment practices caused numerous customers to abandon the firm, which went out of business a month after the article’s publication.
The jury, which deliberated for about 12 hours at the end of the two-week trial, determined that the actual damages from the story were worth $22.7 million. But heeding MMAR’s plea to send a message that would “serve as an example to others,” the jury tacked on $200 million in punitive damages against Dow Jones, as well as $20,000 against reporter Laura Jereski.
“It’s the largest libel award ever, and it is fully justified by the evidence,” MMAR’s attorney, Kenneth M. Morris, told the Associated Press. “The jury, in the punitive award, awarded an amount they felt was necessary.”
Dow Jones said it would ask U.S. District Judge Ewing Werlein Jr. to throw out the award. “We were chronicling the difficulties of this company; we did not cause them,” the Wall Street Journal’s managing editor, Paul Steiger, said in a statement. “We are optimistic, based on applicable law, that it will not stand.”
That was also the consensus of many legal experts, who seemed stunned by the astronomical proportions of the judgment. The previous libel record was a $58-million verdict against the A.H. Belo Corp., publisher of the Dallas Morning News and owner of a local TV station, although that case was ultimately settled for an undisclosed sum.
“This is in a league of its own,” said Sandra Baron, executive director of the New York-based Libel Defense Resource Center, a nonprofit group that assists media organizations and their lawyers. “It’s so outrageous and so outside common-sense bounds that I suspect this is one that is not likely to stand up . . . regardless of what the Wall Street Journal may or may not have done.”
Peter Linzer, a First Amendment expert at the University of Houston, noted that as many as 70% of libel verdicts get overturned on appeal. Although he emphasized he was not familiar with the specifics of the case, he added: “I’d be prepared to bet the family farm that those numbers aren’t going to hold up.”
The story in question, a 1,350-word article, appeared on Oct. 21, 1993, under the headline, “Regulators Study Texas Securities Firm and Its Louisiana Pension Fund Trades.” Much of the report involves technical aspects of the brokerage industry and a type of bond sold by MMAR known as an “inverse floater.”
According to the article, MMAR came under investigation by the National Assn. of Securities Dealers and the Louisiana securities commissioner after the Louisiana State Employees Retirement System reported multimillion-dollar losses from a portfolio managed by the Houston-based firm. The investigation, according to the article, was based on allegations that MMAR had used “deceptive or fraudulent information to induce Louisiana’s pension fund to buy securities.”
Jurors determined that those allegations were false, along with four other statements, including the accusations that MMAR hid losses, kept its capital position too small, violated commission limits and once ran up $2 million in limousine bills in one year.
MMAR attorney Mark Harwell accused Jereski of setting out to do a “hatchet job” on the company and said Journal editors had not given her enough direction.
Dow Jones attorney David Donaldson defended Jereski, saying she had talked to more than 30 sources, including former employees of the company and National Assn. of Securities Dealers investigators, before the article was published.
Jereski did not comment.
“We’re extremely disappointed,” Donaldson said.
Dow Jones attorneys argued that MMAR closed not because of the article, but because it was sued by the Louisiana pension fund, once its biggest client, which wanted to recover $28.5 million in alleged secret profits MMAR had made off their dealings.
