BY BEN L. KAUFMAN
The Cincinnati Enquirer
A federal judge in Cincinnati has sharply rebuked Business Week for breaking the law to obtain a story.
However, U.S. District Judge Herman J. Weber said the story was so important that deliberate violations of the federal Fair Credit Reporting Act (FCRA) did not warrant punitive damages. His decision was the latest in a growing genre of litigation in which unhappy firms sue over newsgathering rather than the more familiar claim of defamation.
The case began in 1989 when a Business Week editor, Jeffrey Rothfeder, told his bosses that he wanted to do a story on FCRA compliance.
Mr. Rothfeder also made it clear that he intended to lie and break the law to test that compliance, Judge Weber said.
In 1989, Cincinnati's WDIA Corp., also known as National Credit Information Network, was the only firm buying information from the three major credit bureaus -- TRW, Equifax and TransUnion -- and reselling it online.
McGraw Hill, the publisher of Business Week, entered into a contract that entitled it to WDIA data and required McGraw-Hill to abide by FCRA.
Mr. Rothfeder assured WDIA that McGraw Hill had a legal use for the information: background checks on potential employees.
Mr. Rothfeder's Sept. 4, 1989, cover story did not name WDIA or individuals whose credit information he obtained from WDIA, including then-employed Vice President Dan Quayle.
WDIA sued for breach of contract and fraud.
McGraw-Hill said the First Amendment barred damages for an accurate story on a matter of public concern. Further, the defendants argued, the story did not identify or harm anyone and Business Week obtained individual permissions to use the data before the story was published.
"Both sides won something," defense attorney Floyd Abrams said Thursday after the verdict.
Judge Weber tried the case without a jury and said the defendants "deliberately and intentionally made misrepresentations and promises" to WIDA that they "had no intention of keeping."
Judge Weber also swept aside Mr. Abrams' First Amendment defense.
"Generally applicable laws do not offend the First Amendment just because their enforcement against the press has an incidental effect on news gathering," Judge Weber said. "There is no absolute immunity against civil or criminal liability when the press obtains information through unlawful means."
Damages against McGraw-Hill and Mr. Rothfeder "chills intrusive acts" rather than free expression, the judge continued, and "the First Amendment does not guarantee the press a constitutional right of special access to information not available to the public generally."
With that, he gave WDIA $7,499.95 for money spent repairing relations with the firm that provided the Quayle data. It also paid for a collection agency when McGraw-Hill didn't pay its bill.
It was less than WDIA asked but attorney Eric H. Kearney said the verdict "shows that the media cannot act illegally and without respect for contractual rights and then improperly raise the First Amendment . . . as a shield against liability."
Mr. Abrams said it was too soon to say whether he would appeal the breach of contract - fraud verdict and award.
Mr. Abrams was cheered by the rest of the verdict, calling it a "significant contribution to protection of the press."
First, Judge Weber said WDIA suffered no damage from publication of Mr. Rothfeder's accurate story, regardless of how the information was gathered.
"That's a significant and hopeful ruling," Mr. Abrams said.
Second, Judge Weber said punitive damages -- to deter anyone from doing the same thing -- were not justified:
Business Week used deception "to inform Congress and the general public about a matter of vital public interest and was done in such a way as to protect the identity of WDIA and the rights of consumers." Business Week and McGraw Hill "are committed to an enlightened philosophy that they will never again engage in similar conduct and will always publish the truth. The need to deter future conduct is not present."
Mr. Abrams said the judge's reasoning was "extremely important . . . The story did indeed serve the public interest."
However, Mr. Kearney's WDIA cocounsels drew differing inferences from the ruling:
John Cobey said Judge Weber's ruling suggests that punitives are unwarranted when federal law is broken to get a news story.
Denise C. Lee said that judge invites law-breaking by other reporters and that will further diminish "the stature of the news media."
Judge Weber also said WDIA was not blameless. Among other slipups, it "gave Rothfeder advice on how to avoid the requirements of federal law in obtaining credit reports."
Mr. Cobey and Ms. Lee said WDIA had not decided whether to appeal Judge Weber's ruling on punitive damages.
