In the largest libel judgment in American history, a jury ordered Dow Jones & Co. to pay $222.7-million Thursday to a bond firm that shut its doors weeks after a damaging article published by the Wall Street Journal.
After 12 hours of deliberation, the seven-member federal jury awarded the former owners and employees of MMAR Group of Houston $22.7-million in compensatory damages and $200-million in punitive damages. The author of the 1993 article, Laura Jereski, was ordered to pay $20,000.
"Obviously we're disappointed," said Jim George, the attorney representing Dow Jones. "The punitive damages are completely unfounded. I don't believe they can be supported as a matter of law. There's no evidence the reporter or the Wall Street Journal had any doubts about the truth of the story."
Kent Harwell, a lawyer for MMAR, or Money Management Analytical Research, called the magnitude of the award "powerful evidence of libel that never should have happened. They published false and defamatory statements. They painted MMAR as being engaged in criminal conduct."
Floyd Brown, a First Amendment lawyer in New York, said "the numbers are so stratospheric that, if they were to be sustained, they would lead to a sea change in the behavior of all journalists. No journalistic organization, no matter how wealthy, can survive judgments like this. If it was upheld even in part, lawyers would have to start giving far more restrictive advice than they do now."
George said the punitive damages were not "off the chart" because the bond firm went out of business. He attributed the punitive damages to the fact that the plaintiffs "played very hard on the theme that 94 people were laid off and put out on the street." He also said that journalists "are not among the most popular people in America. The messenger is often killed."
Journal managing editor Paul Steiger vowed to appeal, saying: "We were chronicling the difficulties of this company; we did not cause them."
The previous largest U.S. libel award against a news organization was a $58-million verdict in 1991 against Dallas station WFAA-TV in a suit by a former prosecutor. The case was later settled for an undisclosed amount.
"All the really gigantic libel awards have come out of Texas the last few years," said Jane Kirtley, executive director of the Reporters Committee for Freedom of the Press. "Maybe there's something in the water in Texas." She noted that about three-quarters of libel judgments against news organizations are overturned on appeal.
In recent months, juries have ordered ABC to pay $10-million to a Florida banker and $5.5-million to Food Lion. The supermarket chain's case involved fraud and trespassing, not libel.
Since the Supreme Court raised the legal hurdle for libel in 1964, the largest award upheld in federal court is a $3-million judgment for the Brown & Williamson tobacco firm against the CBS station in Chicago.
The Journal article said that MMAR's nickname was "Make Money and Run." It described a free-spending culture in which two owners and two associates spent $8,000 one night entertaining Japanese brokers in a Houston topless bar. The paper said MMAR mispriced securities in an effort to hide as much as $50-million in losses from its largest client, the Louisiana state pension fund.
After a two-week trial, the jury found that five of eight disputed statements were false and defamatory. These included assertions that the firm ran up $2-million in limousine bills in one year and was the subject of a complaint by the National Association of Securities Dealers (NASD).
Harwell said the company was "100-percent exonerated" by the NASD last year. But George cited the NASD issue as an example of what he called "mistakes in the details but not the substance." He said the NASD complaint reported by the Journal was in fact filed, but on a different date than the complaint cited by the paper.