AUSTIN, Texas, December 19, 2003—Ending 11 years of litigation, the Texas Supreme Court today rejected the remaining two of three lawsuits over a 1991 Forbes Magazine article brought by Houston businessman David G. Eller and two companies affiliated with his now-defunct Granada cattle-feeding and food organization.
In an 8-0 ruling, the court held the last two plaintiffs, Granada BioSciences Inc. and Granada Foods Corp. are to “take nothing” because they could not show actual malice on the part of the defendants, Forbes Inc., publisher of Forbes; and journalist William P. Barrett. The ruling reversed a Texas appeals court decision.
The decision ends two of the country’s oldest defamation cases, which ran so long that a Forbes/Barrett lawyer died during its prosecution.
The unsuccessful lawsuits stemmed from a November 11, 1991, article in Forbes by Barrett, then the magazine’s Southwest Bureau Chief and now Senior Editor. The two-page story profiled Eller's business empire, the lead entity of which was Houston-based Granada Corp.
Nearly a year after publication, three lawsuits challenging the story’s accuracy were filed by the same lawyer in state court, Harris County, Texas. One lawsuit was brought in the name of Eller, who had been chief executive of Granada Corp. and most of its affiliates, and his wife, Linda Eller, also an official within the Granada organization. A second lawsuit named as plaintiff Granada Biosciences Inc., while the third sought damages for Granada Foods Corp.
Forbes Inc. and Barrett were named as defendants in all three actions along with Cheryl Munke, whom the Eller/Granada pleadings identified as a former Granada employee and source for the story.
Most Granada entities did not sue
At the time the story appeared, Granada Biosciences and Granada Foods were both traded publicly on the American Stock Exchange. Granada Corp., privately held by the Eller family, did not sue, nor did any of dozens of other entities within the Granada organization.
Forbes and Barrett defended the article as true. In court filings they said the story merely reported the already serious problems besetting the Granada organization, was amply supported by extensive documentation, much of which was produced during pre-trial proceedings; and represented courageous journalism. Indeed, in its unanimous opinion, the Texas Supreme Court noted that the parent unit, Granada Corp., had been lauded two years earlier by The Wall Street Journal as one of the paper’s ``corporate stars of the future.’’
On the motion of Forbes and Barrett for summary judgment, a Houston trial judge dismissed all three cases in 1995 without requiring a trial. That was the same year that David Eller paid a $25,000 penalty to the U.S. Securities & Exchange Commission to settle civil charges he hid his own stock holdings in Granada Biosciences and Granada Foods. While not admitting the charges, Eller agreed in writing not to challenge the factual assertions.
According to court documents, Eller several times invoked his constitutional right against self incrimination when questioned under oath by a lawyer for Forbes and Barrett at a 1993 deposition. Eller refused to answer questions about Granada Foods‘ accounting treatment of a large fajita-meat sale in the fall of 1991.
In 1997 a three-judge Texas appellate court unanimously upheld the dismissal of the case brought by Eller and his wife, who had both claimed libel, slander, false light, invasion of privacy, and negligent and intentional infliction of emotional distress. The court noted that on appeal the Ellers, who are now divorced, did not challenge the story as false.
However, while affirming the dismissal of alleged source Munke as a party in all three cases, the court reversed the dismissal of Forbes Inc. and Barrett in the two corporate cases, citing a pleading technicality.
After the Texas Supreme Court declined to hear an appeal in 1998, Forbes Inc. and Barrett returned to the trial court with a new motion for summary judgment on the one cause of action in the two corporate cases, business disparagement. The motion and supporting papers cured the perceived procedural shortcoming, again argued the story was true and incorporated by reference the voluminous material already on file in favor of the story‘s accuracy.
The trial judge again dismissed the litigation, but a different Texas appeals court reversed on grounds factual issues remained. It was this decision that the Texas Supreme Court reversed today.
FORBES MAGAZINE WINS ALL 3 LAWSUITS FILED BY HOUSTON BUSINESSMAN DAVID ELLER AND TWO COMPANIES OF HIS GRANADA ORGANIZATION