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Appeals Court Backs Newspaper in Defamation Claim by Charter School Firm

A federal appeals court has ruled for the publisher of the Philadelphia Inquirer newspaper in a key battle in a defamation suit brought by a charter school management company.

A three-judge panel of the U.S. Court of Appeals for the 3rd Circuit, in Philadelphia, ruled unanimously on Thursday that Charter School Management Inc. and other plaintiffs are not entitled to a $1.8 million "administrative-expense" claim in the newspaper company's bankruptcy case. The claim was related to an underlying state defamation suit brought by the charter company against Philadelphia Newspapers LLC, the publisher of the Inquirer and the Philadelphia Daily News.

After the state defamation suit was filed, Philadelphia Newspapers in 2009 filed for bankruptcy protection. (Not for that reason alone, as the publisher has faced a tough economy and declining advertising environment.)

Charter School Management's defamation suit challenged some of the Inquirer's reporting and the way it was displayed on the newspaper's Web site. (For example, by locating stories about CSM on a Web collection page next to stories about other charter management firms that had engaged in questionable activity.)

The newspaper publisher's bankruptcy evidently bottled up CSM's state defamation suit. In an action filed under the bankruptcy proceeding, the charter company alleged that the Inquirer linked to the offending news articles and collections page after it filed for bankruptcy. Thus, the charter firm contended, this "republishing" of the articles entitled it to bring its claims as administrative expenses under the bankruptcy proceeding.

For the 3rd Circuit court, a key issue was whether the republishing of certain articles of charter schools supported Charter School Management's defamation claims.

In its July 26 decision in In Re: Philadelphia Newspapers LLC, the court said the question was whether the links and collections amounted to a republication. The court said that most other courts to address the issue in the Internet age have drawn a distinction between linking to an article, adding unrelated content, or making technical changes, which have not been considered republication; and adding substantive material to an allegedly defamatory article that was previously published, which would amount to republication.

"We agree with the distinction in these cases," the 3rd Circuit panel said. "The single publication rule advances the statute of limitations' policy of ensuring that defamation suits are brought within a specific time after the initial publication. Websites are constantly linked and updated. If each link or technical change were an act of republication, the statute of limitations would be retriggered endlessly and its effectiveness essentially eliminated."

The court rejected Charter School Management's claims for at least $1.8 million in administrative expenses.

Philadelphia Newspapers emerged from Chapter 11 bankruptcy in the fall of 2010 with its takeover by an entity called the Philadelphia Media Network. Earlier this year, ownership of the newspaper publisher changed hands again.

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