Case of the Day: Trout Point Lodge v. Handshoe
Posted on September 11, 2013
The case of the day is Trout Point Lodge, Ltd. v. Handshoe (5th Cir. 2013). It is, as far as I know, the first federal appellate decision to focus on the SPEECH Act in a major way. Readers may want to refer to overview post of the Act. In short, the Act creates a rule against recognition of foreign defamation judgments if the foreign law is less protective of freedom of speech than US law and if the plaintiff would not have prevailed had the action been brought in the United States.
Handshoe was a Mississippi blogger. The claim was that he had defamed Vaughan Perret, Charles Leary, and Trout Point Lodge, Ltd., all of Nova Scotia, by tying them to a Louisiana political scandal on his blog. Perret, Leary, and Trout Point sued in the Nova Scotia Supreme Court. They alleged that they Handshoe’s statements were “directly defamatory and were also defamatory by both true and false innuendo in that they would tend to lower the opinion or estimation of the plaintiffs in the eyes of others who read the defamatory publications as a series, or alternatively, in parts.” The plaintiffs alleged generically that the defamatory statements were false, but they did not, in their pleadings, make allegations to specifically refute any particular defamatory statement.
Handshoe defaulted in the Nova Scotia action, and the court held a hearing to assess damages. Perret and Leary testified. After the hearing, the court entered judgment for compensatory and punitive damages and also permanently enjoined Handshoe from writing about the plaintiffs. 1
Trout Point sought recognition and enforcement in the Circuit Court of Hancock County, Mississippi. Handshoe removed the case to the US District Court for the Southern District of Mississippi under 28 USC § 4103 and the parties cross-moved for summary judgment. The judge granted Handshoe’s motion, and Trout Point appealed.
The Fifth Circuit held that Nova Scotia’s law did not provide “at least as much protection for freedom of speech and press in that case as would be provided by the first amendment to the Constitution of the United States and by the constitution and law of the State in which the domestic court is located,” as the statute requires. This is an easy one. In Nova Scotia, the defendant has the burden to prove the truth of the defamatory statements as an affirmative defense; in the United States, as a general matter, the plaintiff has the burden to prove the falsity of the defamatory statements as part of the prima facie case. 2
The more difficult question was whether a Mississippi court would have found Handshoe liable. The district court had held that a Mississippi court would not have found Handshoe liable because Trout Point had failed to prove the falsity of the defamatory statements. On appeal, Trout Point pointed to the Nova Scotia default, which, in Canada, meant that Handshoe was deemed to have admitted the allegations of the complaint. Trout Point also pointed to the Nova Scotia court’s findings of fact entered after the assessment of damages hearing.
The Fifth Circuit’s approach was to say that a Mississippi court would not have entered a default judgment on the pleadings Trout Point had made, because Trout Point failed to allege sufficiently (for US law purposes) that the defamatory statements were false. This approach seems at least problematic to me, because it’s not clear whether the policy of the statute is to require US defendants to appear and defend in the foreign defamation case in order to claim the protection of the statute. See, e.g., Marissa Gerny, The SPEECH Act Defends the First Amendment: A Visible and Targeted Response to Libel Tourism, 36 Seton Hall Legis. J. 409, 437 (2012) (Under § 4104 of the statute, “If an American finds him or herself in the position of defending a defamation suit abroad, he or she can default on the suit and seek declaratory relief in the United States”). Indeed, one of the English libel cases that motivated enactment of the SPEECH Act, Khalid bin Mahfouz’s case against Rachel Ehrenfeld arising out of her book, Funding Evil: How Terrorism Is Financed—and How to Stop It, was a default judgment case. It doesn’t seem right to permit a foreign plaintiff, by adding allegations to its foreign complaint that would be sufficient to permit a US court to enter a default judgment, to avoid the SPEECH Act even though, if the US defendant defended the case at trial, the foreign plaintiff would not be required to prove the added allegations. On the other hand, the declaratory judgment provision of the statute, 28 USC § 4104, provides for a declaratory judgment action, in the US, but only by a person “against whom a foreign [defamation] judgment is entered,” not a person against whom a foreign defamation action is pending. Still, I think the better approach is to ask whether a US court would have entered a judgment against the defendant after a trial on the merits, not whether a US court would have entered a judgment for procedural reasons given the same circumstances as existed in the foreign case.