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In a victory for The New York Times, the 3rd U.S. Circuit Court of Appeals has refused to grant a new trial in a “defamation by implication” libel suit brought by a Philadelphia pharmacy that accused the newspaper of harming its reputation by using an image of its Internet Web site to illustrate an article about illicit online drug sales. In the suit, plaintiff Franklin Prescriptions Inc. claimed that the use of its Internet site as a graphic to illustrate an article headlined “A Web Bazaar Turns Into a Pharmaceutical Free-for-All” implied that it, too, was guilty of illicit conduct — even though Franklin was never mentioned in the text of the article. After a week-long trial in March 2004, a jury answered six questions and sided with Franklin on the first five. Among its findings were that the article “contained a defamatory implication” about Franklin and that the Times had “acted intentionally, reckless or negligently.” But the answer to the sixth question handed victory to the Times and ended the case when the jury concluded that Franklin had not suffered any “actual harm that was substantially caused by the article.” On appeal, plaintiffs attorneys George Bochetto and David P. Heim of Bochetto & Lentz urged the court to order a new trial, arguing that U.S. District Judge Cynthia M. Rufe had failed to instruct the jury on the issues of “presumed damages” and “defamation per se.” Now the 3rd Circuit has ruled that the plaintiffs lawyers waived their right to complain about the first issue because they never lodged an objection on the record to Rufe’s jury instructions. The unanimous three-judge panel also concluded that the plaintiff’s second appellate issue had no merit since Rufe’s instructions included the correct legal concepts even if she had not used the exact words the plaintiff proposed. “The jury charge, while omitting the term ‘defamation per se,’ made clear that Franklin Prescriptions was not required to prove financial harm,” 3rd Circuit Chief Judge Anthony J. Scirica wrote in Franklin Prescriptions Inc. v. New York Times Co. Scirica, in an opinion joined by Circuit Judges Samuel A. Alito Jr. and Leonard I. Garth, found that Rufe’s jury instructions were “explicit that ‘actual injury can include impairment of reputation,’ that Franklin Prescriptions should be compensated for ‘all harm it suffered,’ and that the jury could compensate for ‘the actual harm to the plaintiff’s reputation.” As a result, Scirica said, “we see no error. The district court accurately charged that the jury could award compensation based on harm to reputation alone.” In the March 2004 trial, the newspaper’s lawyers — Elizabeth K. Ainslie, Carl A. Solano, Jennifer DuFault James and Harris Neal Feldman of Schnader Harrison Segal & Lewis — presented evidence that Franklin’s sales had actually increased in each of the months and years since the article’s publication. But the plaintiff’s lawyers argued that Franklin’s reputation had nonetheless been harmed, citing evidence that the number of visitors to its Web site had dropped, that it had suffered a decrease in customers outside of the Delaware Valley Region and that it had suffered a decrease in overnight shipping. MIXED VERDICT The jury’s verdict was mixed. Although it found that the newspaper had defamed Franklin and had done so “intentionally, recklessly or negligently,” it also found that the plaintiff was entitled to no money since it had not suffered any “actual harm.” In a motion for a new trial, plaintiff’s attorneys Bochetto and Heim argued that the verdict was “the result of juror confusion stemming from incomplete and inaccurate jury instructions as to the types of damages to which Franklin was entitled.” The motion said Rufe had erred by failing to instruct the jury charge on the concepts of “presumed damages” and “defamation per se” — issues the plaintiff’s lawyers said were “crucial” to its case. Rufe denied the motion, finding that her jury instructions were proper under Pennsylvania law. She also flatly rejected the plaintiff’s argument that her instructions misled the jury by failing to specify that Franklin had not been required to prove financial damages. Instead, Rufe concluded that the jury’s verdict in favor of the Times stemmed from the plaintiff’s failure to present any evidence on that issue. “Plaintiff simply did not present any evidence that would allow a jury to conclude that it was harmed,” Rufe wrote. “Plaintiff did not present the testimony of one doctor or potential customer who had even read the article, let alone read it and formed a negative opinion of Franklin as a result.” On appeal, Bochetto again focused on the two aspects of Rufe’s jury instructions that, he said, unfairly stacked the deck against the plaintiff and allowed the jury to award no damages despite its finding of defamation. But the 3rd Circuit rejected both of the plaintiff’s complaints about Rufe’s jury instructions. Most of the court’s 17-page decision is devoted to discussing Bochetto’s argument that the jury should have been instructed on the issue of “presumed damages.” Scirica found that Pennsylvania law is “unsettled on the availability of presumed damages,” but that the court didn’t need to predict Pennsylvania law on that point because the plaintiff’s lawyers had failed to lodge an on-the-record objection to Rufe’s decision not to include that issue in her jury instructions. Under Federal Rule of Civil Procedure 51(c)(1), Scirica noted, a party objecting to an instruction or the failure to give an instruction “must do so on the record, stating distinctly the matter objected to and the grounds of the objection.” Bochetto insisted that he had complied with the rule and had therefore preserved the objection by including it in his proposed jury charge and by raising it in a conference with Rufe in chambers. In 1998, Bochetto said, the 3rd Circuit held in Smith v. Borough of Wilkinsburg that such an objection is preserved. But Scirica found that the facts in Smith were different because, in that case, both sides and the trial judge had agreed that the issue was discussed in the in-chambers conference and that a “definitive ruling” was issued by the judge in chambers. “That is not the case here,” Scirica wrote. “Franklin Prescriptions’ alleged off-the-record objection is disputed by The New York Times. More importantly, it is flatly contradicted by the district court, which stated that Franklin Prescriptions’ ‘recollection of the March 18, 2004, conference is inaccurate.’” Scirica also found that, before giving the jury her instructions, Rufe provided a written copy to both sides and “explicitly invited” them to lodge exceptions for the record. Although the plaintiff’s lawyers lodged “certain objections” at that time, Scirica said, they “remained silent on the issue of presumed damages.” NO OBJECTION Scirica also found it was significant that the plaintiffs lawyers did not object to key aspects of the jury verdict form which instructed the jury that it could not award damages absent a showing of “actual harm.” And a recent change to Rule 51, Scirica said, showed that courts must always reject a lawyer’s claim that an objection to jury instructions was preserved in an off-the-record conference. The amendment, Scirica said, was designed “to forestall and resolve the very situation presented here — a dispute among the parties regarding off-the-record objections.” By “mandating on-the-record exceptions,” and imposing a penalty for failure to enter them, Scirica said, Rule 51 “serves the critical purpose of apprising the trial court of possible errors in the charge and affording the court and the parties an opportunity for correction before submission of the case to the jury.” Having concluded that the plaintiffs lawyers failed to preserve the objection, Scirica said, the appellate court’s review was limited to determining whether Rufe’s failure to include an instruction on presumed damages was “plain error.” Under that standard, Scirica said, the plaintiff failed. “Even assuming Pennsylvania allows presumed damages upon a showing of actual malice, Franklin Prescriptions initially failed to enter an on-the-record objection to the lack of a presumed damages instruction and then acceded to a verdict sheet that compelled the jury to return to the courtroom before addressing the issue of actual malice,” Scirica wrote. “Because Franklin Prescriptions failed to seek or obtain an antecedent jury finding of actual malice, we see no prejudice rising to the level of plain error,” Scirica wrote. Bochetto, in an interview, said he had not yet reviewed the court’s ruling, but that he was “terribly disappointed because I really thought we had grounds for appeal.”

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