Opinion ID: 780232
Heading Depth: 2
Heading Rank: 2

Heading: Damages for State Law Claims

Text: 44 Fashion Boutique contends that the district court improperly limited the amount of damages it could recover on its New York law claims for slander and product disparagement. Plaintiff asserts that it should be able to recover for the loss of its entire business and that the district court's exclusion of its expert testimony, which valued the loss of the business in excess of $15 million, was an abuse of discretion. In addition, Fashion Boutique argues that the district court improperly instructed the jury regarding general damages for its slander claims.
45 Under New York law, slander and disparagement of goods constitute distinct causes of action. To recover for disparagement of goods, the plaintiff must show that the defendant published an oral, defamatory statement directed at the quality of a business's goods and must prove that the statements caused special damages. See Ruder & Finn Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 670-71, 439 N.Y.S.2d 858, 422 N.E.2d 518 (1981); Hogan v. Herald Co., 84 A.D.2d 470, 446 N.Y.S.2d 836, 843 (N.Y.App.Div.1982); see also El Meson Español v. NYM Corp., 521 F.2d 737, 740 (2d Cir.1975) (interpreting New York law). Where loss of customers constitutes the alleged special damages, the individuals who ceased to be customers, or who refused to purchase, must be named and the exact damages itemized. Drug Research Corp. v. Curtis Publ'g Co., 7 N.Y.2d 435, 441-42, 199 N.Y.S.2d 33, 166 N.E.2d 319 (1960). 46 In contrast to disparagement of goods, slander claims do not require specific itemization of damages. Where the statement constitutes slander per se, general damages to the reputation of the business are presumed. See Liberman v. Gelstein, 80 N.Y.2d 429, 435, 590 N.Y.S.2d 857, 605 N.E.2d 344 (1992). Actual damages, however, must be proven. See Orlowski v. Koroleski, 234 A.D.2d 436, 651 N.Y.S.2d 137 (N.Y.App.Div.1996) (limiting damages for slander per se to nominal amount because actual damages were not proven). The amount of general damages must be supported by competent evidence concerning the injury, although there need be no evidence which assigns an actual dollar value to the injury. Wolf Street Supermkts. v. McPartland, 108 A.D.2d 25, 487 N.Y.S.2d 442, 448 (N.Y.App.Div.1985) (quotations and citations omitted). Under New York law, false statements attacking the integrity or credit of a business constitute slander per se. See Ruder & Finn, 52 N.Y.2d at 670, 439 N.Y.S.2d 858, 422 N.E.2d 518. 47 Finally, a plaintiff may not recover damages from the original author for either product disparagement or slander arising from the republication of defamatory statements by a third party absent a showing that the original author was responsible for or ratified the republication. See Macy v. New York World-Telegram Corp., 2 N.Y.2d 416, 422-23, 161 N.Y.S.2d 55, 141 N.E.2d 566 (1957). Evidence of such republication is not admissible at trial, even to prove widespread dissemination of the defamatory statements. See id. at 422, 161 N.Y.S.2d 55, 141 N.E.2d 566.
48 Fashion Boutique asserts that it may recover for any losses causally connected to disparagement of goods or slander. Thus, according to plaintiff, the expert's testimony, estimating the value of that business in excess of $15 million, should have been admitted at trial because it was relevant to the jury's calculation of damages. 49 We review the district court's decision to admit or exclude expert testimony for an abuse of discretion. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999). A decision to exclude expert testimony is not an abuse of discretion unless it is manifestly erroneous. McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1042 (2d Cir.1995). The district court's gatekeeping function in evaluating expert testimony requires that it look to Federal Rule of Evidence 401 to determine whether the testimony is relevant; i.e., whether it `ha[s] any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.' Campbell ex rel Campbell v. Metro. Prop. & Cas. Ins. Co., 239 F.3d 179, 184 (2d Cir.2001) (quoting Fed.R.Evid. 401). 50 As the district court recognized, plaintiff's expert Dr. Frischberg was not qualified to make an assessment of the cause of the demise of the business. His expertise was limited to calculating the value of the business. In making his calculations, he assumed that a campaign of disparagement caused Fashion Boutique's sales to decline. However, as discussed above, no evidence of such a policy existed. See Fashion Boutique III, 75 F.Supp.2d at 237-38. Moreover, Fashion Boutique presented only one customer who heard defamatory statements directly from Fendi salespersons during the first year of the sales decline. The other twenty or so incidents that occurred later can hardly be blamed as the cause of the falling sales. To permit Fashion Boutique to present evidence of the value of the entire business in the absence of evidence of widespread dissemination would invite the jury to award damages based on speculation. See Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 521 (10th Cir.1987). Therefore, we agree with the district court that Dr. Frischberg's testimony assumed a causal connection that plaintiff failed to prove. 51 Fashion Boutique argues that the district court improperly disregarded the rumor evidence as proof of causation. However, under New York law, Fashion Boutique may not recover for damages resulting from republication through rumors, and thus such evidence was properly excluded. To the extent that Fashion Boutique argues that the rumors were evidence of initial publication, it has presented insufficient evidence linking the rumors to the defendants. Moreover, any argument on appeal that there was sufficient initial publication by Fendi personnel to cause the demise of the business is undercut by Fashion Boutique's concession below that initial publication was limited and that the gravamen of its injury was from representations spread via republication by other customers. 52 Moreover, in order to be relevant to a claim for product disparagement, the expert's testimony must be probative on the amount of damages plaintiff is allowed to recover. The expert's generalized findings about the value of the business make no attempt to itemize damages for named customers as required by New York law. Fashion Boutique ignores the New York requirement of itemized damages in its briefs and instead rests solely on Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256 (2d Cir.1995). In Securitron, we upheld a finding of damages for defamation based on an estimate of lost profits rather than an itemized list. See id. at 265. Securitron reviewed and upheld a jury award based on defamation aimed at the business integrity of the plaintiff, i.e., slander per se for which special damages need not be itemized, not product disparagement. See id. at 262; see also Ruder & Finn, 52 N.Y.2d at 670, 439 N.Y.S.2d 858, 422 N.E.2d 518 (distinguishing between proof requirements for damages arising out of product disparagement and defamation under New York law). Hence, Fashion Boutique's reliance on Securitron is misplaced.
53 Fashion Boutique's remaining claim is that the district court impermissibly restricted general damages for slander or slander per se to the plaintiff's business reputation in the mind of the person to whom the [slanderous] statement you are considering was made. This instruction limited general damages to the injury to Fashion Boutique's business reputation in the minds of three individual customers. Fashion Boutique contends that the instruction was erroneous and that the proper standard would have permitted the jury to award greater general damages based on evidence of widespread circulation of the statements. 54 At oral argument, counsel for Fashion Boutique conceded that it failed to object to the jury instructions on the general damages. Under Rule 51 of the Federal Rules of Civil Procedure, a party in a civil action must make specific objections to jury instructions before the jury retires to deliberate. See Fed.R.Civ.P. 51; see also Jarvis v. Ford Motor Co., 283 F.3d 33, 56-57 (2d Cir.2002). The failure to so object results in waiver, in which case this court may review the instruction for fundamental error only. See Jarvis, 283 F.3d at 62. Fundamental error is a more exacting standard than the plain error standard in the criminal context and must be so serious and flagrant that it goes to the very integrity of the trial. Shade v. Hous. Auth. of New Haven, 251 F.3d 307, 312 (2d Cir.2001). We find no error, much less fundamental error, in the jury instruction on general damages. 55 Although general damages are normally based on the extent of circulation of the defamation, the damages in this case were necessarily limited by New York's prohibition on recovery for injury due to republication of defamatory statements by third parties. See Macy, 2 N.Y.2d at 422-23, 161 N.Y.S.2d 55, 141 N.E.2d 566. Fashion Boutique concedes that it may not recover for republication of the statements, but claims that a jury could infer widespread circulation by Fendi based on the few allegedly slanderous statements it proved and the subsequent and sharp decline in its sales. 56 Our review of New York cases has not revealed any precedents that specifically address the apparent tension between the republication rule and a jury's general prerogative to consider the extent of circulation in evaluating damages. However, it is well-established that damages must be based on the extent of circulation based on initial publication and evidence of the circulation of the slander in republished form is inadmissible at trial. See id. at 422, 161 N.Y.S.2d 55, 141 N.E.2d 566. In every case relied on by plaintiff, the extent of circulation of the initial publication was known and the jury could reasonably infer the amount of general damages arising from that level of circulation. 57 Each slanderous statement relied on by Fashion Boutique was made only to an individual customer shopping at Fendi's Fifth Avenue store. Any further damage resulting from the particular comment could be attributed only to nonactionable republication by the customer, not Fendi. Therefore, as to each of these statements, the damages were properly limited to any harm resulting from the initial publication to the individual customer. Fashion Boutique urges this court to permit the jury to infer that other such comments were made on a wide scale basis. The only evidence that Fendi ever impugned the integrity of plaintiff's business, however, was limited to isolated instances over the course of years. 3 Fashion Boutique simply asserts that a jury could infer other instances of slander given the existence of a larger injury ... that was difficult to prove, but fails to present any competent evidence that would permit the jury to reasonably infer that other slanderous statements were made directly by Fendi or the amount of damages arising from them. 58 Without a showing of the degree of circulation of slanderous statements made directly by Fendi, or at least some method of distinguishing between losses due to republication and initial publication, the jury would be left to speculate about the damages attributable to Fendi and those arising from the actions of others. Thus, the jury instruction properly restricted the jurors' consideration of the harm caused by statements made by defendants. See Coastal Abstract Serv., 173 F.3d at 732-33, 736 (remanding state defamation case for new damages trial because damages could have been based on statements found non-actionable as a matter of law); Wolf Street Supermkts., 487 N.Y.S.2d at 449 (holding that jury should have been instructed that lost profits be apportioned according to the damage proximately linked to the libel, not to other non-actionable acts by defendant); cf. Macy, 2 N.Y.2d at 422-23, 161 N.Y.S.2d 55, 141 N.E.2d 566 (remanding for new trial based in part on prejudice arising from admission of evidence of republication by third party). We agree with the district court that the jury could not be left to presume widespread dissemination from proof of isolated incidents without running afoul of New York's republication rule. 59 We have carefully considered appellant's remaining arguments and find them to lack merit.