Opinion
Civil No. 03-2439 (PAM/RLE).
July 10, 2004
MEMORANDUM AND ORDER
This matter is before the Court on Defendants' Motion for Summary Judgment. For the following reasons, the Motion is granted.
BACKGROUND
Plaintiff Aviation Charter, Inc. ("Aviation Charter") is an air charter services provider. Defendant Aviation Research Group/US ("ARGUS") is an aviation consultant, that sells information regarding safety ratings of air charter service providers to interested businesses and other consumers. On October 25, 2002, an Aviation Charter plane piloted by an Aviation Charter crew crashed outside Eveleth, Minnesota. All crew and passengers onboard were killed, including U.S. Senator Paul Wellstone. Following this crash, a reporter from the Minneapolis Star Tribune ("Star Tribune") contacted ARGUS and spoke with Defendant Joe Moeggenberg regarding the rating ARGUS gave Aviation Charter. The Star Tribune later published an article discussing the ARGUS rating, entitled "Wellstone charter firm got poor safety evaluation." This action arises out of the ARGUS rating of Aviation Charter and the statements made by Joe Moeggenberg to the Star Tribune about Aviation Charter and its ARGUS rating. Aviation Charter asserts three claims against Defendants: (1) defamation; (2) violation of the Lanham Act, 15 U.S.C. § 1125; and (3) violation of the Deceptive Trade Practices Act, Minn. Stat. § 325D.44(8).
A. The Rating System
ARGUS was founded in 1995 by Defendant Joe Moeggenberg. ARGUS initially provided aviation consulting services. ARGUS eventually merged with Aeroknowledge, a company that produced and sold aviation databases. Aeroknowledge president Mark Fischer became Vice President of ARGUS under the merger. Fisher developed a software program that compiled incident information from public files at the Federal Aviation Association ("FAA") and the National Transportation Safety Board ("NTSB") and then sorted the information by air charter carrier. This compilation of information by air carriers was called a Charter Evaluation and Qualifications Report ("CHEQ Report"). The CHEQ Report provided the basis for another software program that "scored" the data. This resulted in the ARGUS safety rating system ("CHEQ system"). The ARGUS safety rating system analyzes historical data and does not promote that such information should be utilized as predictive of future events.
In fact, ARGUS includes a consumer disclaimer in each report:
The data contained in this report has been obtained from the U.S. Federal Aviation Administration and the National Transportation Safety Board under the Freedom of Information Act, as well as through primary research techniques. The data contained in this report is of an advisory nature only. Although significant effort has been made to verify that the data is true and correct, [ARGUS] does not warrant that this data is complete or without errors. [ARGUS] does not warrant that this data is applicable or fit for a specific purpose. Any conclusions drawn from this data are done so at your own risk. [ARGUS] is not the official source of this data, so users are encouraged to verify the data through official sources prior to drawing any conclusions or basing decisions on this data. Neither [ARGUS] nor any agency thereof, nor Aeroknowledge, nor any of their employees or officers makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any information, apparatus product or process disclosed, or represents that its use would not infringe privately owned rights. In no event shall [ARGUS] be liable for any special indirect or consequential damages or any damages whatsoever resulting from the loss of use, data or profits, whether in an action or contract, negligence or other action, arising out of or in connection with the use or performance of this information.
(Heiberg Aff. ¶ 3 and Ex. B.)
ARGUS hired Dr. James Luxhoj of Rutgers University to review and comment on the CHEQ system. Dr. Luxhoj issued a written report, "A technical review of the ARGUS CHEQ scoring/grading method." (See Heiberg Aff. Ex. A.) Dr. Luxhoj's report addressed both the positive and negative aspects of the system, and made recommendations to ARGUS on how to improve the CHEQ system.
The CHEQ system itself is not complicated. After the CHEQ Report assembles incident information from the various databases, the software program assigns values to these incidents. An ARGUS analyst then evaluates this information according to specified guidelines, and adjusts the values as necessary. If the score is within one standard deviation higher than the median number, the carrier is given a "Silver" rating. The rating can be upgraded to "Gold" provided the carrier submits a list of all of its operating aircraft and pilots for ARGUS's evaluation, and this evaluation warrants the upgrade. A "Platinum" rating is given when a carrier allows and passes an onsite audit of their operations by ARGUS. The "Platinum" rating is the highest safety rating. If a particular carrier is more than one standard deviation higher than the median for similar-sized carriers, the carrier receives a "does not qualify" ("DNQ") safety rating. The DNQ rating is ARGUS's lowest rating.
ARGUS classifies aircraft carriers into three groups based on size: (1) Class 1 (1-3 aircraft); (2) Class 2 (4-9 aircraft); (3) Class 3 (10 to 49 aircraft); and (4) Class 4 (greater than 50 aircraft).
A CHEQ system report may be purchased for $249, and a yearly subscription is $5,000. ARGUS has rated about 850 operators who primarily operate turbine powered aircraft. (See Fisher Aff. ¶ 12.)
B. Star Tribune Article
On January 16, 2003, the Star Tribune published an article that publicized ARGUS's DNQ safety rating of Aviation Charter. The Star Tribune's interview with Defendant Joe Moeggenberg provided the basis for the article. Aviation Charter's Complaint specifically alleges seven defamatory statements that were printed in the Star Tribune article:
• [ARGUS] had, for more than a year before the October plane crash, warned ". . . its customers about safety concerns it had with Aviation Charter, Inc.;"
• Aviation Charter qualified for a DNQ rating, the "lowest of the company's four safety ratings;"
• Aviation Charter Inc.'s safety record was in the lowest 8 percent of the 875 air charter firms rated by [ARGUS];
• [ARGUS] had published a 77-page report on Aviation Charter that "shows a history of problems;"
• Aviation Charter Inc. had the poorest safety record of the nine Minnesota charter operators rated by [ARGUS];
• Aviation Charter drew 15 enforcement actions dating to 1991;
• Aviation Charter's record of enforcement actions was excessive compared to other companies.
(Compl. ¶ IX.)
DISCUSSION
A. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party.Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996). However, as the United States Supreme Court has stated, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank, 92 F.3d at 747. A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials, but must set forth specific facts in the record showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik v. Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
B. Defamation
A claim for defamation requires Aviation Charter to demonstrate that Defendants published a false statement of fact, of and concerning Aviation Charter, that damaged Aviation Charter's reputation and lowered Aviation Charter's estimation in the community. See Toney v. WCCO Television, Midwest Cable Satellite, Inc., 85 F.3d 383, 386 (8th Cir. 1996). Aviation Charter contends that both ARGUS's rating of Aviation Charter and the subsequent statements made to the Star Tribune are defamatory. Defendants contend that the rating is not actionable as a matter of law because it is an opinion. Defendants further assert that Aviation Charter's rating is true, and that Aviation Charter cannot prove that Defendants developed the rating with actual malice. Defendants similarly assert that the statements in the Star Tribune article are opinions, that are nonetheless true and not made with actual malice.
1. The Rating
a. Fact or Opinion
Generally, expressions of opinion are not considered defamatory. However, as the Supreme Court noted, expressions of opinion often embrace "an assertion of objective fact," and may thus be actionable. Milkovich v. Lorain Journal Co., 497 U.S. 1, 18 (1990). Whether a statement is an objective assertion of fact is a question of law for the Court. See McGrath v. TCF Bank Sav. FSB, 502 N.W.2d 801, 808 (Minn.Ct.App. 1993). Minnesota courts employ a four factor test to determine whether a particular statement is defamatory in nature: (1) the statement's precision and specificity; (2) the statement's verifiability; (3) the social and literary context in which the statement is made; and (4) the statement's public context. See McClure v. American Family Mut. Ins. Co., 29 F. Supp.2d 1046, 1055 (D. Minn. 1998) (Doty, J.) (citing Janklow v. Newsweek, Inc., 788 F.2d 1300, 1302-03 (8th Cir. 1986)). Essentially, a statement is not defamatory if it does not contain a "provably false factual connotation." Milkovich, 497 U.S. at 19.
The issue is whether ARGUS's DNQ rating of Aviation Charter is provable as false. By their nature, ratings are generally subjective and "cannot imply a provably false factual assertion." Wheeler v. Nebraska State Bar Assoc., 508 N.W.2d 917, 924 (Neb. 1993) (ratings of judges by local attorneys of character traits not provably false factual assertions). However, this underlying premise is not always true. As this Court noted, numerical ratings "tied to particular facts about . . . performance" are indeed verifiably false. Landers v. Nat'l R.R. Passenger Corp., File No. 00-2233, 2001 WL 1690061 at * 6 (D. Minn. Dec. 28, 2001) (Magnuson, J.) (determining that employer rating system used to evaluate employee performance was a verifiable opinion). In this case, ARGUS developed the CHEQ system in response to customer demands for a comparative system of charter aircraft safety. The basis for the CHEQ system was CHEQ Reports, which compiled historical factual data from various databases. (Heiberg Aff. Ex. D at 26 (Fisher Dep.).) Using this factual information, a scoring scheme was developed, analyzed and adopted. (Id. at 29, 33, 41.) The system was extensively researched. (Id. at 33-41.) To ensure defensibility of the CHEQ system, ARGUS solicited expert advice from Dr. Luxhoj, who statistically reviewed and analyzed the scoring system. (Id. 39-41.) Indeed, ARGUS sought to adopt and utilize "an objective rating system" that was sufficiently accurate to meet the demands of its customers and provide a comparative baseline for charter aircraft safety. (Id. at 33.) As ARGUS points out, most of its customers utilize this information in the course of "their due diligence on the safety of the air carrier operation prior to putting their employees on the plane." (Defs.' Mem. at 5.) These customers also pay significant fees to obtain this information. If ARGUS believed that this rating system was a legitimate means to provide its customers with a comparative analysis of charter aircraft safety, then ARGUS must have believed that its ratings were factually based and an accurate representation of historical aircraft charter safety. The Court concludes that ARGUS's safety rating of Aviation Charter is a provably false factual connotation, and thus defamatory in nature. See Milkovich, 497 U.S. at 19.
The existence of disclaiming language within the content of each safety rating only indicates that ARGUS does not intend that its safety ratings be utilized as predictive or indicative of future events. This disclaimer does not support any argument that the safety rating system was not based on historical factual data or that ARGUS considered it inaccurate.
b. Malice
A defamation action against a public figure requires Aviation Charter to demonstrate that Defendants made the allegedly false statements with malice. Malice requires Aviation Charter to demonstrate that Defendants acted "with knowledge that it was false or with reckless disregard of whether it was false or not." New York Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964). Malice requires proof by clear and convincing evidence.See id. Reckless disregard requires that Defendants made statements "while subjectively believing that the statement[s] [were] probably false." Chafoulias v. Peterson, 668 N.W.2d 642, 655 (Minn. 2003). This subjective awareness is demonstrated by "sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of [the statement]." Hirman v. Rogers, 257 N.W.2d 563, 566 (Minn. 1977) (quoting St. Amant v. Thompson, 390 U.S. 727, 731 (1968)).
The parties do not dispute that Aviation Charter is a public figure for purposes of this defamation claim.
Aviation Charter submits that Defendants acted with actual malice because it published Aviation Charter's safety rating with actual knowledge or reckless disregard of the fact that its safety rating system was false. Aviation Charter contends that ARGUS knew that it was improper to rely on the FAA and NTSB databases in developing a safety rating and that its methodology was likewise flawed. Aviation Charter further contends that ARGUS ignored the recommendations of its expert, Dr. Luxhoj, and implemented a system with which Dr. Luxhoj disagreed. Finally, Aviation Charter submits that ARGUS knew that Aviation Charter previously received a favorable audit, and nonetheless published a defamatory rating of Aviation Charter.
Aviation Charter disagrees with its ARGUS safety rating. Aviation Charter disagrees with the formula adopted by ARGUS to assess aircraft charter safety, and Aviation Charter disagrees with the overall accuracy of the ARGUS rating. Despite these disagreements, the Court cannot say that ARGUS acted maliciously in formulating its safety rating of Aviation Charter.
ARGUS relies on databases maintained and operated by the FAA and the NTSB. Although Dr. Luxhoj noted that the mere absence of accidents is not the only relevant factor to evaluate historical safety, the information gathered from FAA and NTSB databases nonetheless aides to provide a "relatively unambiguous metric of unfavorable safety events." (Heiberg Aff. Ex. A at 19.) After extensive research and investigation, a mathematical formula was created to provide a comparative analysis of aircraft charter safety. Although Aviation Charter may disagree with the mathematical formula adopted by ARGUS, this disagreement is not evidence of malice. ARGUS's failure to implement all of Dr. Luxhoj's recommendations also fails to support the assertion that ARGUS acted maliciously. The existence of a favorable audit in December 2002 does not refute Aviation Charter's rating, as the methodology adopted by ARGUS to rate aircraft charters evaluates a variety of factors, not just audit results. There is no evidence that supports the argument that ARGUS acted with actual malice or reckless disregard in formulating its safety ratings. Aviation Charter fails to submit a genuine issue of material fact that ARGUS acted with malice. Aviation Charter's defamation claim fails as a matter of law.
Aviation Charter also argues that ARGUS's safety rating system is false and that ARGUS is not entitled to qualified privilege. Because the absence of malice disposes of the entire defamation claim, the Court declines to evaluate the remainder of Aviation Charter's arguments.
2. Star Tribune Article
Aviation Charter contends that the statements made by Defendant Moeggenberg on behalf of ARGUS to the Star Tribune were also defamatory. Aviation Charter contends that each of the seven alleged statements were published with actual malice because ARGUS knew that its safety rating system was unreliable and flawed. Because the Court concluded that ARGUS did not act with actual malice or reckless disregard for the truth in evaluating Aviation Charter's safety rating, Aviation Charter's claims relating to the Star Tribune article likewise fail.
The Court notes that the allegedly defamatory statements contained in the Complaint completely mischaracterize the content of the Star Tribune article. Aviation Charter blatantly misquotes the language of the article.
C. The Lanham Act and the Minnesota Deceptive Trade Practices Act
Aviation Charter contends that ARGUS's rating of Aviation Charter and the statements made to the Star Tribune violate the Lanham Act, 15 U.S.C. § 1125, and Minnesota Deceptive Trade Practices Act ("DTPA"), Minn. Stat. § 325B.44. The analysis under both statutes is the same. See Group Health Plan, Inc. v. Philip Morris Inc., 68 F. Supp.2d 1064, 1069 (D. Minn. 1999) (Magnuson, J.). The first step requires that a false statement be made in commercial advertising or promotion. See id.
Four factors must exist for speech to constitute commercial advertising or promotion: (1) representations must be commercial speech; (2) representations must be made by a defendant who is in commercial competition with the plaintiff; (3) representations must be made to influence consumers to buy defendant's goods or services; and (4) representations must be sufficiently disseminated to the pertinent purchasing public to constitute advertising or promotion within the particular industry. See id. at 1069-70 (citing Gordon Breach Sci. Publishers S.A. v. Am. Inst. of Physics, 859 F. Supp. 1521, 1534-36 (S.D.N.Y. 1994)). Aviation Charter's claims fail the second prong of the commercial advertising test. ARGUS is not in competition with Aviation Charter. Therefore, the Court finds that ARGUS's safety rating of Aviation Charter and the statements made to the Star Tribune do not constitute commercial advertising or promotion. Aviation Charter's claims on this point fail.
CONCLUSION
Accordingly, based on all the files, records, and proceedings herein, IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment (Clerk Doc. No. 12) is GRANTED.