Appeals court upholds dismissal of $15 million libel lawsuit against Forbes

Tuesday, August 18, 1998

First Amendment protection extends to magazine opinion columns, according to a recent federal appeals court decision. The ruling upheld the dismissal of a $15 million libel lawsuit against Forbes magazine, self-billed as America's leading business magazine.

Biospherics Inc., which is based in Beltsville, Md., filed the suit in July 1997, claiming the magazine and reporter Caroline Waxler had defamed the company and its key product, a sugar substitute called D-tagatose.

A three-judge panel of the 4th U.S. Circuit Court of Appeals issued a ruling last week that said: “Any reasonable person … would recognize, based on the tenor, language and context of the article, that the challenged statements constitute a subjective view, not a statement of fact.”

The ruling upheld a U.S. District Court's dismissal of the suit, Biospherics Inc. v. Caroline Waxler and Forbes Inc., last fall.

Officials at Biospherics, a company offering food and medical innovations along with telecommunications and database management information systems, had claimed that the Forbes article was responsible for the decline in the company's stock price. The story had also undercut the company's attempt to raise additional capital for the planned expansion of its information services business, officials said.

Dr. Gilbert V. Levin, Biospherics' president, said that the Forbes article was supposedly based on the judgments of several analysts with whom Waxler spoke. “We challenged them to produce the names of the analysts, and they would not do that.

“The court said that this was apparently a matter of opinion and that [Forbes] was not accountable,” Levin said. “This is a difficult issue. I don't think that they should be permitted to lie.

“They never checked the story with us. 'And why not?' I asked. 'Because it was late in the day, and we had to meet a deadline,'” Levin claimed he was told.

Terrence O'Connor, an attorney for the business magazine, did not return phone calls.

In “Sweet-talkin' guys” (January 13, 1997), Waxler writes about Biospherics' “hype and hope for a natural, noncaloric sugar substitute — called Sugaree — that the company's been 'developing' for 15 years. BINC brags that the substance even slows aging. … Investors will sour on Biospherics when they realize that Sugaree isn't up to the company's claims. Even if the FDA okays BINC to produce Sugaree — a big if — its cost to consumers would be at best five times the price of sugar.”

Forbes spurned every opportunity we offered it to correct its errors,” stated a Biospherics press release issued in July 1997. “After months of frustration in seeking a nonlitigious solution, our responsibility to our shareholders leaves us no alternative but the courts.”

Mark Harwell, a Houston-based attorney representing Biospherics, said: “Forbes did not agree to print any type of retraction to the article, which they labeled a stock tip.

“Our position was that, although the article gives advice, it contained many factual statements that were false,” Harwell said. “I don't think the author acted as a responsible journalist should, and as a result the company was damaged tremendously.”

According to the lawsuit, Biospherics stock was trading at $6.62 on the day the issue reached newsstands, but by June 23 shares had declined 26 percent to $4.87.

“Journalism is only as good as the journalist involved,” Harwell said. “It's the same as the legal professional.”

Said Levin: “The state of journalism is pretty good. Everything gets reported on in considerable detail, but there is this lack of effort by reporters to get both sides' point of view.”

According to Harwell, a decision to appeal has not yet been made.