Fraud Verdict for ABC’s Food Lion Story Reversed

A federal appeals court on Wednesday reversed a jury verdict that found ABC committed fraud in a hidden-camera expose alleging unsanitary conditions at Food Lion’s supermarkets.

The U.S. 4th Circuit Court of Appeals threw out a $315,000 judgment against ABC over a 1992 “PrimeTime Live” story, an award that a judge had earlier reduced from $5.5 million.

The court, in a 2-1 ruling, found that Food Lion did not meet the legal standard for fraud under a North Carolina law because the chain could not prove it was injured when two reporters lied to get hired, secretly recorded store activities and quit weeks later.

While the grocery chain denied the accusations, it did not pursue claims of libel or slander. Instead it won a claim of fraud seeking damages for the costs of hiring and training the two employees.

The court reversed and said that the supermarket chain was not damaged by the reporters’ deception--though it upheld $1 in damages against each reporter for breaching their duty of loyalty to Food Lion.

“The enduring message of this opinion is that the press will be protected against enormous judgments based on the content of articles unless the companies suing can prove that the articles weren’t true,” said Floyd Abrams, a New York media lawyer. “This lawsuit was an attempted end run around the 1st Amendment.”

The appeals court also reversed the jury’s finding that ABC violated North Carolina’s Unfair and Deceptive Trade Practices Act, ruling that the law did not apply because the network and the supermarket chain were not in competition.

ABC said the ruling is a victory for investigative reporting. Food Lion said it would review its legal options.

Two ABC reporters used false resumes to get jobs at a Food Lion store, then secretly videotaped employees for a story on food-handling practices that accused the grocery chain of selling rat-gnawed cheese and rotting meat.

The report alleged that Food Lion employees ground out-of-date beef along with new beef, bleached rank meat to remove its odor and re-dated products not sold before their expiration date.

The jury that found ABC guilty of fraud awarded the supermarket chain $5.5 million in punitive damages, but that was cut to $315,000 by a federal judge.

Food Lion was also awarded $1,402 in compensatory damages for the cost of hiring the two ABC employees.

Both ABC and Food Lion had appealed.

The award stunned some because it appeared to open a new line of legal attack against the news media and hidden-camera journalism that did not center on the veracity of the story.

“This is a victory for the American tradition of investigative journalism,” said David Westin, ABC News president. “The court concluded that, despite Food Lion’s attempts to impugn our methods, no one at ABC News ever committed fraud or an unfair practice in investigating problems at various Food Lion stores.”

In dissent, Judge Paul V. Niemeyer wrote that there was ample evidence to support the jury’s finding of fraud.

Food Lion said it was disappointed. “This is a complicated legal area, and our lawyers will review the court’s decision and advise us of our options,” it said in a statement.