Franklin Prescriptions v. New York Times

Citation: Franklin Prescriptions, Inc. v. New York Times Co., 424 F.3d 336 (3d Cir. 2005)(full-text).

Factual Background
Franklin Prescriptions, Inc., is a small pharmacy in Philadelphia specializing in fertility medications. In 1996, the company began marketing its products on the Internet via an information-only website. The website allows Franklin Prescriptions' customers to survey available products and pricing, but does not enable the online purchase of prescription drugs. Franklin Prescriptions only accepts drug orders by way of mail, telephone, fax, or in person, and only then with a doctor's prescription.

On October 25, 2000, the New York Times published an article entitled, "A Web Bazaar Turns into a Pharmaceutical Free For All." The article addressed the risks of purchasing fertility drugs on the Internet. It described "unscrupulous" and "cloak and dagger" websites that process online orders for controlled drugs without prescriptions. Franklin Prescriptions was not mentioned in the text, but the article contained a graphic insert with an image of the Franklin Prescriptions website that identified Franklin Prescriptions by name. The insert was placed next to a side-bar labeled "Safety Tips for Buying E-Medicines" that warned readers to "avoid sites that fail or refuse to provide a United States address and phone number." Although Franklin Prescriptions' website did, in fact, list the company's address and telephone number, the partial image reproduced for the article omitted this information. Significantly, the published image also omitted part of the website that stated in bold-face language: "Must have doctor's prescription from a physician licensed in the United States to purchase Viagra."

Trial Court Proceedings
Franklin Prescriptions sued for defamation. The trial court denied the New York Times' motion for summary judgment, finding a genuine issue of material fact on whether the newspaper published the article with reckless disregard for its falsity. The case went to trial, and the jury found the article false and defamatory. But it awarded no damages, finding Franklin Prescriptions suffered no actual harm caused by the publication.

Before the jury was charged, Franklin Prescriptions submitted proposed jury instructions on presumed damages and defamation per se. Neither proposed instruction was given to the jury. The parties dispute whether Franklin Prescriptions objected to the lack of a presumed damages instruction. Franklin Prescriptions submits that it did so &mdash; off the record &mdash; at an in camera charging conference held in chambers. The New York Times disputes this contention, maintaining that the presumed damages instruction was not discussed at the charging conference.

The trial court held that Franklin Prescriptions failed to preserve its presumed damages objection under Federal Rule of Civil Procedure 51(c)(1), which provides that a party objecting to an instruction or the failure to give an instruction must do so on the record, stating distinctly the matter objected to and the grounds of the objection. Notwithstanding the plain language of Rule 51, Franklin Prescriptions contends it preserved its objection by submitting a formal request for a presumed damages charge and by pressing for that instruction during the in camera charging conference.

In denying the motion for a new trial, the trial court held that Franklin Prescriptions failed to object to the lack of a presumed damages instruction under Federal Rule of Civil Procedure 51(c)(1). Additionally, the trial court held that under Pennsylvania law, Franklin Prescriptions was not entitled to a jury instruction on presumed damages.

Appellate Court Proceedings
The appellate court’s review turns on whether Franklin Prescriptions properly objected to the relevant jury instruction.

Franklin Prescriptions cited Smith v. Borough of Wilkinsburg, where a party submitted a proposed jury instruction and later objected to its omission at an in camera charging conference. The appellate court found the objection preserved under Rule 51 because the trial court was fully apprised of the party's position, and it would serve no purpose to require counsel to have formally reasserted the objection after the charge had been given to the jury.

However, the appellate court held that Smith is unavailing in this case. The premise of Smith was that the trial court was fully apprised of the party's objection and nevertheless rejected it. Both the parties and the trial court in Smith agreed there had been an objection and a definitive ruling on the issue. This was not the case here. Franklin Prescriptions' alleged off-the-record objection is disputed by the New York Times. More importantly, it is flatly contradicted by the trial court, which stated that Franklin Prescriptions' "recollection of the March 18, 2004 conference is inaccurate as the trial court terminated the conference before addressing Plaintiff's presumed damages instruction." Unlike Smith, there is no consensus that the trial court was fully apprised of Franklin Prescriptions' objection and no indication of a definitive trial court ruling on the matter.

Furthermore, prior to charging the jury, the parties here were provided with a written draft of the court's proposed instructions and explicitly invited to lodge exceptions for the record. The record reveals no objection to the omission of a presumed damages instruction. Franklin Prescriptions entered certain objections to the charge but remained silent on the issue of presumed damages. Nor did Franklin Prescriptions object to the relevant aspects of the special verdict form, which instructed the jury that it could not award damages absent a showing of actual harm. The verdict form, like the proposed instructions, precluded an award of presumed damages. The appellate court held that Franklin Prescriptions' failure to object to either the court's instructions or the verdict sheet constitutes a failure to preserve its presumed damages objection.

However, the appellate court concluded that there is a more fundamental reason to reject Franklin Prescriptions' presumed damages challenge &mdash; the plain language of Federal Rule of Civil Procedure 51. The foregoing chain of events, and the factual dispute the parties continue to press on appeal, illustrates precisely the rationale behind the 2003 amendment of this rule. The amendment adding Rule 51(c)(1) took effect on December 1, 2003, and applies to pending proceedings as long as it is just and practicable. The amended rule provides, in clear terms, that parties must object to proposed jury instructions "on the record, stating distinctly the matter objected to and the grounds of the objection.” Here, Franklin did not object to the proposed jury instructions on the record.

The appellate court held that even assuming Pennsylvania allowed presumed damages upon a showing of ]]actual malice]], plaintiff agreed to a verdict sheet that compelled the jury to return to the courtroom before addressing the issue of actual malice. Because plaintiff failed to seek or obtain an jury finding of actual malice, the court found no prejudice rising to the level of plain error. Further, the trial court accurately charged that the jury could award compensation based on harm to reputation alone. While omitting the term "defamation per se," the jury charge made clear that plaintiff was not required to prove financial harm. Thus, the appellate court affirmed the trial court’s judgment.