Court Opinion

ID: 9601640
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:48:20.364738+00
Date Added: 2024-06-11T12:44:31.323826
License: Public Domain

*535ROGERS, Circuit Judge,
concurring in part and dissenting in part.
The extension of First Amendment tort law principles to contract cases is unwarranted and entirely unprecedented, except for a lone bankruptcy court case. Therefore, while I agree with the judgment of the majority regarding Compuware’s defamation claim, I dissent from the majority’s conclusion that the First Amendment requires a showing of malice in order for Compuware to assert a common law breach-of-contract claim against Moody’s.
Tort law and contract law are fundamentally different in ways that prevent the imposition of First Amendment principles fashioned for tort law to cases sounding in contract. Tort law is effective government regulation in a way that contract law is not. Therefore limits on government power (here the First Amendment) are more appropriately applied in tort cases. Contract law in contrast at its essence enforces agreements; that is its fundamental distinction from tort law. E.g., E. Allan Farnsworth, 1 FaRnswokth on Contracts § 1.1 (“the law of contracts is confined to promises”); Uniform Commercial Code § 1-201(11) (a contract “results from the parties’ agreement”).1
Contracts can commit parties to take action even though the government may not be able to command the identical action because of constitutional limits on government power. Stated differently, constitutional freedoms can be contracted away in ways that the government cannot simply take them away. By entering into an employment contract, for instance, one can contract away the right to read the paper in the morning (by taking work as a morning watchman), or the right to solicit for a political party (by agreeing to be a judge). The Supreme Court only recently emphasized the ability of private schools to contract away speech freedoms in order to participate in an athletic league. See Tenn. Secondary Sch. Athletic Ass’n v. Brentwood Acad., — U.S.-, 127 S.Ct. 2489, 2496, 168 L.Ed.2d 166 (2007). In the context of the present case, in particular, one can contract to say good (or accurate) (or well-researched) things about the entity one contracts with.
Requiring a showing of actual malice to prevail on a contract claim, however, effectively destroys the ability of public figures to make this last type of contract. The malice requirement does so by inserting into each such contract the right to violate the contractual obligation as long as there is no malice.
What if public figure Doe pays a radio station to have its announcer say nice things about Doe’s automobile business? The announcer — through negligence, or incompetence (or honesty) — says Doe’s cars “don’t last long” instead of “don’t waste gas.” If malice is required for contract recovery, Doe does not even get his money back. That result cannot be constitutionally imposed, and it is hard to imagine that the Supreme Court would so hold. Yet this example fits into each of the factors listed by the majority as a limitation on its holding. Radio announcing is at the heart of protected speech, the contract action may be “grounded in negligence,” and the harm is reputational. (Although in response to this example the majority would limit its holding to contracts that do not require a specific result, it is not clear why *536the First Amendment should permit parties to require by contract that a particular result be reported, but to deprive parties of the ability to contract that a certain standard of care be exercised in making an investigation leading to a report. Freedom of contract is involved either way, and speech freedoms would seem restricted, if at all, more in the former than in the latter case.)
The fact that a contract requires “reasonable care” does not mean that a claim for breach of contract is the equivalent of a tort claim for negligence. The difference is the source of the obligation. In tort cases the obligation comes from a duty imposed by the government to act reasonably on pain of paying the costs of acting unreasonably. In contract cases the obligation comes from a voluntarily entered-into undertaking. The difference is important because a tort standard of care imposed by the government impinges on individual freedoms in a way that fairly directly implicates freedoms protected by the Bill of Rights. A contractual standard of care does not do so: one could contract to exercise any of various levels of care, not just the maximum that the government could impose under tort law. The standard of care contracted for may be higher than that imposed by tort law in the absence of contract. Contracting parties should not be precluded from entering into such contracts merely because the obligation is stated in terms that the tort law also uses.
This idea is reflected in Cohen v. Cowles Media Co., 501 U.S. 663, 111 S.Ct. 2513, 115 L.Ed.2d 586 (1991), in which the Supreme Court held that the First Amendment did not preclude the plaintiffs promissory estoppel claim where a reporter revealed the plaintiffs identity despite a promise not to do so. Just as Minnesota law in Cohen could require the reporter to keep his promise to keep Cohen’s identity a secret (though without the promise the First Amendment might not permit state sanction of the disclosure), Michigan law can require Moody’s to comply with its contractual promises to act carefully (though without the promises the First Amendment does not permit state sanction for false or misleading credit ratings, absent malice). “The parties themselves ... determine the scope of their legal obligations, and any restrictions that may be placed on the publication of truthful information are self-imposed.” Cohen, 501 U.S. at 671, 111 S.Ct. 2513. The idea is also consistent with Snepp v. United States, 444 U.S. 507, 100 S.Ct. 763, 62 L.Ed.2d 704 (1980), which held that an agreement by a former CIA employee not to publish information about the agency without prior clearance was enforceable, and which reasoned in part:
When Snepp accepted employment with the CIA, he voluntarily signed the agreement that expressly obligated him to submit any proposed publication for prior review. He does not claim that he executed this agreement under duress. Indeed, he voluntarily reaffirmed his obligation when he left the Agency.
444 U.S. at 510, 100 S.Ct. 763.
Nor does the reputational aspect of the contract damages justify extending the malice requirement to contract actions. Contracts may, after all, be intended to obtain a better reputation. One need only think of advertising contracts or client contracts entered into by public relations firms. Breach of such contracts may result in expectable reputational injury. There is no principled reason to deny recovery for such contract loss just because a noncontracting party, say an investigative news reporter, would not be liable for the same injury. In any event, in the instant case Compuware is not seeking *537damages for injury to its reputation, but seeks a rescission remedy and repayment of the contract price. That Compuware would be unlikely to sue in the face of a positive rating is beside the point when the question is the care with which Moody’s acted in performing a task it was paid to perform.
It is true that credit rating providers may be analogized to news reporters, whom we think of as acting at the core of First Amendment protection. But requiring malice to recover for breach of contract in this case elevates the protection Moody’s enjoys against breach of contract claims above what other contracting parties in the state of Michigan would enjoy. The fact that Moody’s is in the business of publishing does not eliminate any and all contractual obligations the company has towards those paying real money for its services. Under the majority’s reasoning, Moody’s is free to assign ratings based solely on any nonmalicious basis, and a customer would have no recourse against the company at all. Such freedom from contractual obligation is not provided generally to contracting parties. Moody’s and other credit rating agencies, on the other hand, can protect themselves from implied contractual obligations by expressly outlining their obligations when dealing with the companies they contract with.
It is also true that Moody’s relies on the implied term of the contract, imposed by state law, that the contract be performed in a skillful and workmanlike manner. Nash v. Sears, Roebuck & Co., 383 Mich. 136, 174 N.W.2d 818, 821 (1970). But for constitutional purposes this does not distinguish the case from any other contract action. The obligation is still and all taken entirely voluntarily. The parties could have explicitly contracted away that implied term, and of course the parties could have refrained from entering into the contract in the first place, knowing the implied term that state law puts into the contract.
At bottom, the majority’s underlying concern may be that Compuware contracted for no more than what it got. The record does indicate that Moody’s acted in conformance with its duties under the contract in preparing its rating. Moody’s analysts appear to have done what they were paid to do in taking all available information and analyzing the business and economic environment in which Compuware was operating. It is not incumbent upon a credit rating agency simply to take a client’s word for it when the client maintains that all is well in its business when ample evidence establishes otherwise. But that is not the basis for the district court’s summary judgment, and Compuware was not given the chance to respond to this argument below. The district court’s order to the parties was to brief the issue of actual malice and the order otherwise gave no indication that a lower standard could be applied to the breach of contract action. While ultimate relief against Moody’s appears unlikely, we are not in a position at this point to affirm on an alternative ground.
We should not throw out a weak contract case by means of a newly created legal doctrine that effectively makes unenforceable a wide swath of perfectly legitimate contracts. For these reasons I respectfully dissent from Parts IV, V, and VI of the majority opinion. I would reverse and remand the dismissal of the contract claim. I concur in Parts I, II, and III of the majority opinion.

. The introductory chapter of Professor Farnsworth’s treatise summarizes the value of freedom of contract:
From a utilitarian point of view, freedom to contract maximizes the welfare of the parties and therefore the good of society. From a libertarian point of view, it accords to individuals a sphere of influence in which they can act freely.
Farnsworth, supra, § 1.7 at 23.