Federal Court upholds $188 million Verdict in Defamation Case (NY)

Jose Cantu is an oil titan from Mexico, who made a dramatic rise from a laborer to an owner of oil refineries. Billy Flanigan, a businessman and President of a Bahamian corporation, obtained a judgment against a Mexican petroleum workers union. Despite never having met Cantu, Flanigan believed that Cantu had connections with the Mexican government that would assist in his efforts to collect the judgment, and Flanigan engaged in a course of conduct designed to pressure Cantu into either paying Flanigan the judgment, or using his influence to help Flanigan collect from the union.

Flanigan prepared an “amicus brief” that resembled a legal complaint, listing Cantu as a defendant and declaring that Flanigan sought monetary damages. The “amicus brief” stated that Cantu was the operations manager of a racketeering enterprise, and that he had laundered large sums of money. It further alleged that Cantu had participated in the bribery of government officials and that Cantu was present when Mexican President Zedillo was awarded a $350 million bribe. The “amicus brief” also alleged that Cantu was involved in drug cartels, that he headed the “Ramiro Garza crime family,” that he illegally smuggled oil into the United States, that he had conspired with Iraqi President Saddam Hussein to illegally circumvent sanctions against Iraq and that he was personally responsible for causing the price of gasoline to rise. Flanigan ultimately accused Cantu of having committed mail fraud, wire fraud, tampering, obstruction of commerce, unlawful travel, theft by conversion and extortion.

Flanigan provided details from his brief to a reporter from the popular and widely-circulated Mexican magazine Processo, and the magazine printed an article about Cantu. The story was featured on the front cover, and it repeated Flanigan’s allegations against Cantu. Due to the wide circulation of Processo magazine, Flanigan’s accusations were distributed throughout the world.

A potential business partner learned of the allegations contained in the Processo article and immediately cancelled a multi-million dollar contract, resulting in a personal loss to Cantu of roughly $35,000,000. Cantu also introduced evidence that the damage to his reputation had resulted in an inability to secure other multimillion dollar contracts. In addition to affecting Cantu’s personal and business relationships, the Processo article also prompted criminal investigations by the Mexican government and the United States Department of Justice – but Cantu was ultimately cleared of any potential wrongdoing.

Cantu filed suit in the Eastern District of New York, and a jury awarded him $38,000,000 in economic damages and $150,000,000 in non-economic damages to compensate Cantu for the harm to his reputation and the humiliation and mental anguish caused by Flanigan. In determining whether the judgment was excessive, the Court needed to determine whether the award deviated materially from reasonable compensation, using prior awards as not binding but instructive.

In calculating non-economic damages in a defamation case, including humiliation, mental suffering and damage to plaintiff’s reputation, a jury may properly consider a number of factors. In this case, the jury was instructed to consider: [1] the plaintiff’s standing in the community, [2] the nature of defendant’s statements made about the plaintiff, [3] the extent to which the statements were circulated, [4] the tendency of the statement to injure a person such as the plaintiff, and [5] all of the other facts and circumstances in the case.

The Court analyzed each of the above factors, and also considered the fact that Flanigan engaged in a deliberate course of conduct tantamount to attempted criminal extortion, and affirmed the judgment – perhaps the largest defamation judgment in US history. Whether Canto can ultimately collect on his judgment remains to be seen, but I certainly doubt he will create his own “amicus brief” to assist in his collection efforts.

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