NEWSPAPERS FILE bankruptcy papers for many reasons, but, until this year, never because of a ruinous libel judgment awarded against the paper for a 12-year-old story that it never ran. But that is exactly what happened to the Alton Telegraph, a small-circulation Illinois daily, as a result of a bizarre train of events over which the paper's editors and owners had no control. Although libel and defamation lawsuits remain an occupational hazard for newspapers, spreading these days at an alarming rate, the $9.2 million dollar judgment against the Telegraph (whose net worth is $2.5 million)--unless reversed on appeal--may destroy that paper.
Briefly, the facts are these. A pair of Telegraph reporters received in 1969 unverified information that linked a local real estate developer to organized crime activities in the area. The reporters never used the material in a story, but eventually sent a memo outlining the charges to the regional head of a federal crime strike force. He, in turn, forwarded the document to Washington, where the Justice Department bucked it to the Federal Home Loan Bank Board. That agency began probing the financial institution at which the developer obtained his loans, a savings and loan company, which proceeded to cut off the man's credit, after which his various enterprises failed. The former developer managed to obtain a copy of the memo in 1975, sued, and, after a trial last year, received a jury award of $6.7 million to compensate for business losses plus punitive damages of $2.5 million. Pending the outcome of their appeal, the paper's owners have filed preliminary bankruptcy proceedings.
Although every libel case has its unique elements, both the size of the judgment against the Telegraph and that newspaper's indirect--indeed, circuitous --relationship to the developer's eventual business losses serve as an additional warning that juries in libel actions often lose all restraint. Nor does it appear to dissuade those now filing the veritable blizzard of libel and defamation actions across the country that the media have been winning over 9 out of every 10 of these cases.
Only recently have news organizations begun organizing nationally--as in the creation of a New York-based Libel Defense Resource Center--to pool information on libel actions. Unfortunately, the smaller papers and news organizations often do not have access to adequate financing (despite their libel insurance) to absorb either an elephantine judgment or the legal costs involved in defending against the growing number of lawsuits designed mainly to harass. At that point when the law of libel forces a vital local institution such as the Alton Telegraph to close its doors, even those who take delight in penalizing the press must face the realization that one less newspaper exists against which to vent their displeasure.