Case Title: Larry Shulman v. James Hunderfund

Citation: 

Docket Number: 

State: new-york

Court: New York Appellate Court

Date: 2009-03-26T00:00:00Z

Document:
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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 28  
Larry Shulman, 
            Respondent, 
        v. 
James Hunderfund, 
            Appellant, 
Tom Tornee,
            Defendant. 
Diane K. Farrell, for appellant.
Mark S. Yagerman, for respondent.
SMITH, J.:
In this action for libel by a public figure, the 
record does not clearly and convincingly show that the statements
in question were made with "actual malice," as required by New
York Times Co. v Sullivan (376 US 254 [1964]).  We therefore 
hold that plaintiff's complaint against defendant James
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Hunderfund must be dismissed.
I
In May of 1999, plaintiff, Larry Shulman, a member of
the Commack Board of Education, was a candidate for reelection.  
Hunderfund, the school superintendent, believed that Shulman
wanted him fired and was opposed to his candidacy.  On the eve of
the election, Hunderfund participated with others in preparing
and circulating an anonymous flyer attacking Shulman.  The flyer
made several accusations, said to be the result of "[a]n
investigation of Mr. Shulman's record" by "Concerned Citizens of
Commack."  Only the first of the accusations is now at issue.  In
a paragraph bearing the caption (in bold capital letters) "BROKE
THE LAW," the flyer said:
"Shulman flagrantly broke the law when he
awarded a lucrative food service contract to
one of his business associates.  Concerned
Citizens has verified the fact that Shulman
NEVER revealed his business relationship with
the food service company PRIOR to the
awarding of this contract.  Shulman's
disregard of ethical principles and conflict
of interest laws has cost the District
dearly."
After losing the election, Shulman sued Hunderfund and
another defendant for libel.  The jury found for the co-
defendant, but awarded $100,000 in punitive damages against
Hunderfund.  Supreme Court set aside the verdict for Shulman and
entered judgment in Hunderfund's favor; the Appellate Division
reversed and ordered that judgment be entered in accordance with
the verdict (Shulman v Hunderfund, 48 AD3d 449 [2d Dept 2008]). 
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We granted leave to appeal, and now reverse the Appellate
Division's order and reinstate so much of Supreme Court's
judgment as dismissed the complaint against Hunderfund.
II
Hunderfund argues that the statement that "Shulman
flagrantly broke the law" is a statement of opinion, and
therefore not actionable (see, e.g., Steinhilber v Alphonse, 68
NY2d 283 [1986]).  Shulman maintains that the statement was
presented as one of fact, noting that the flyer purported to be
the result of a careful investigation.  We find it unnecessary to
resolve this issue.  Even assuming that the statement is one of
fact, it cannot, under the circumstances of this case, support a
recovery for libel.
It is undisputed that Shulman, a public official
running for reelection, was a public figure and that this case is
governed by the rule of New York Times v Sullivan, which
interpreted the First Amendment to the United States Constitution
as embodying "the principle that debate on public issues should
be uninhibited, robust, and wide-open, and that it may well
include vehement, caustic and sometimes unpleasantly sharp
attacks on government and public officials" (376 US at 270).  The
Constitution, as interpreted in the New York Times case, bars
Shulman "from recovering damages for a defamatory falsehood
relating to his official conduct unless he proves that the
statement was made with 'actual malice' -- that is, with
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knowledge that it was false or with reckless disregard of whether
it was false or not" (id. at 279-280; see also Mahoney v
Adirondack Publ. Co., 71 NY2d 31, 35-36 [1987]).  Actual malice
must be proved by "clear and convincing evidence" (Bose Corp. v
Consumers Union of U.S., Inc., 466 US 485, 511 n 30 [1984]; see
also Freeman v Johnston, 84 NY2d 52, 56-57 [1994]).
Here, the jury found that Hunderfund's statement was
made with actual malice.  The Appellate Division upheld the
verdict on the ground that it was supported by "legally
sufficient evidence in the record" (48 AD3d at 450).  The
Appellate Division, however, applied the wrong standard.  The
usual deference paid by courts to jury verdicts is inapplicable
in cases subject to the New York Times v Sullivan rule.  The New
York Times Court said:
"In cases where [the] line [between protected
and unprotected speech] must be drawn, the
rule is that we examine for ourselves the
statements in issue and the circumstances
under which they were made to see whether
they are of a character which the principles
of the First Amendment, as adopted by the Due
Process Clause of the Fourteenth Amendment,
protect.  We must make an  independent
examination of the whole record, so as to
assure ourselves that the judgment does not
constitute a forbidden intrusion on the field
of free expression."
(Id. at 285 [citations, quotation marks and ellipsis omitted].)
Therefore, in a case like this we are not limited, as
we ordinarily are, to a review of legal issues (Mahoney, 71 NY2d
at 39).  "[W]e must scrutinize the evidence of actual malice for
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'convincing clarity'"(Prozeralik v Capital Cities Communications,
82 NY2d 466, 475 [1993][citations omitted]).  We find no such
clarity here.  The record does not convincingly show that
Hunderfund knew the statements in issue to be false or that he
made them with reckless disregard of whether they were false.
III
The incident on which Hunderfund's accusation that
Shulman "broke the law" was based occurred on July 2, 1998, some
ten months before the school board election.  On that date, the
school board decided to award a food service contract to a
company called Whitsons -- a contract that eventually went into
default, and thus proved costly to the district.  Shulman, as a
board member, argued vigorously in favor of the award to
Whitsons, and succeeded in persuading his colleagues on the board
to reverse a previous, unfavorable vote.
Shulman had a communications support business, and
Whitsons was a customer of that business -- a "small" one,
according to Shulman's uncontradicted testimony.  Shulman did not
mention the relationship to his colleagues at the July 2 meeting
because, he testified, it simply did not occur to him.  It did
occur to him a few days later, however, and he called the lawyer
for the school board, Eugene Barnosky, to ask if the relationship
was a problem.  At the next meeting, on July 14, Shulman
disclosed his relationship to the board, and Barnosky advised the
board that the relationship did not render the vote illegal.
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That assurance did not satisfy everyone.  Hunderfund --
who, as school superintendent, was present at school board
meetings -- testified that, having heard Barnosky's opinion, he
consulted his own lawyer, and got a "different" opinion.  Also,
the president of the board (who had been recused from the vote
because his wife worked for a competing bidder) raised objections
at the July 14 meeting and again at an August 20 meeting; and the
competing bidder submitted a letter to the August 20 meeting,
complaining that "one Board member" had a "direct or indirect"
financial interest with Whitsons, which had not been disclosed. 
A copy of the letter was sent to Hunderfund.
The July and August discussions of Shulman's alleged
conflict occurred at executive sessions of the Board.  The
subject was again discussed, this time at a public meeting, on
September 18.  At the September meeting, Barnosky defended
Shulman's conduct.  It is unclear from Barnosky's trial
testimony, however, whether he did so unequivocally.  Initially,
Barnosky answered "yes," to a question from Shulman's lawyer:
"You advised the Board and the public in September of 1998 that
there was no evidence of any wrongdoing by Mr. Shulman, correct?" 
Later, however, Barnosky explained that by "wrongdoing" he meant
"bid-rigging, fraud, influence peddling or anything like that." 
Barnosky also testified that he had said at the
September meeting that Shulman had complied with the standard of
disclosure imposed by the General Municipal Law.  But when asked
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if the same standard applied under the Commack Code of Ethics,
Barnosky replied: "No. I think the standard there is broader." 
The gist of Barnosky's testimony is that his September 18
statement to the public meeting did not exclude the possibility
that Shulman had committed an Ethics Code violation.
Whatever its tenor, Barnosky's statement did not end
the controversy.  The president of the board and another member
continued to assert during the months preceding the May 1999
school board elections that Shulman's non-disclosure violated, or
raised serious questions under, the Code of Ethics, and 
Hunderfund knew of those assertions.
The claim that Shulman had violated the Ethics Code was
a debatable one, but it was not obviously untenable.  A
distinction can be drawn, as Barnosky suggested in his testimony,
between the Code of Ethics and the General Municipal Law. 
General Municipal Law § 801 says that no municipal officer "shall
have an interest" (defined in General Municipal Law § 800 [3] as
"a direct or indirect pecuniary or material benefit") "in any
contract with the municipality."  The Code of Ethics requires a
member to disclose "any direct or indirect financial or other
private interest he/she has" in any "matter before the Board of
Education."  Though the requirements are similar, it could be
argued that Shulman's business relationship with Whitsons, while
not a "direct or indirect" interest in the contract between
Whitsons and the school board, was an "other private interest" in
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the "matter."
We do not need to decide the meaning of either the
General Municipal Law or the Code of Ethics.  It is entirely
possible that Shulman violated neither of them.  But we cannot
say it is proved, by clear and convincing evidence, that
Hunderfund knew Shulman's conduct to be lawful.  That was a
question on which Barnosky's advice left some room for doubt --
and, in any event, Hunderfund, who had his own lawyer, and who
heard and read views that seemed less favorable to Shulman than
Barnosky's, did not have to take that advice as gospel.  
Because the record does not clearly and convincingly
show that Hunderfund knew Shulman to be innocent, or that he had
no basis for thinking him guilty, of any legal transgression,
Shulman's case must fail.  If Shulman (in Hunderfund's mind) did
violate the law in connection with the Whitsons transaction, then
the paragraph challenged in this lawsuit was (in Hunderfund's
mind) substantially true.  
Concededly, Hunderfund could not have believed every
word in the statement "Shulman flagrantly broke the law when he
awarded a lucrative food service contract to one of his business
associates" to be literally true.  The adverb "flagrantly" was no
doubt a rhetorical extravagance; and Shulman did not award the
Whitsons contract himself -- he persuaded his fellow board
members to do so, and joined with them in doing it.  Also, there
may be a distinction (though there is no evidence Hunderfund was
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conscious of it) between the Commack Code of Ethics and "the
law."  But these details are unimportant to this case.  The
Constitution, which protects "vehement, caustic and sometimes
unpleasantly sharp attacks" in a political context, does not
insist on complete verbal precision.  
In this, the Constitution follows the common law of
libel which, as the United States Supreme Court has observed,
"overlooks minor inaccuracies and concentrates upon substantial
truth" (Masson v New Yorker Magazine, Inc., 501 US 496, 516
[1991]).  In Masson, the Supreme Court defined "actual malice" in
accordance with this "historical understanding" of libel law,
which "would absolve a defendant even if she cannot 'justify
every word of the alleged defamatory matter'" (id. at 516-517,
quoting B. Witkin, Summary of California Law § 495 [9th ed.
1988]).  It is understandable, of course, that Shulman did not
like Hunderfund's provocatively phrased, and anonymous, charges
against him. But so long as Hunderfund did not substantially
depart from what he believed to be the truth, the only remedy for
Shulman -- and for other public figures similarly situated -- is,
as Supreme Court said in its order setting aside the verdict in
this case, to develop a thicker skin.
Accordingly, the order of the Appellate Division should
be reversed, with costs, and so much of the judgment of Supreme
Court as dismissed the complaint against defendant Hunderfund
reinstated.      
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*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   * 
Order reversed, with costs, and complaint against defendant
Hunderfund dismissed.  Opinion by Judge Smith.  Judges Ciparick,
Graffeo, Read, Pigott and Jones concur.  Chief Judge Lippman took
no part.
Decided March 26, 2009