Police return Hallingby's seized Ferrari; he files a $5 million lawsuit against magazines whose advertisements described it as stolen

The December 2008 "Legal Files" reported that 1958 Ferrari 250 PF Cabriolet s/n 0799GT was seized by the Connecticut State Police from the garage of noted car collector and long-time SCMer Barney Hallingby. On October 2, 2009, the Connecticut Superior Court of Littlefield County ordered the Ferrari be returned to Hallingby, described in the order as the car's "rightful owner."

Hallingby, angered by the entire affair, has filed suit in the United States District Court for the Southern District of New York, alleging that he was defamed by Ferrari Market Letter (Roush Publications, Inc. and its publisher, Gerald L. Roush) and by Cavallino magazine (Cavallino, Inc. and its publisher, John W. Barnes Jr.). The suit seeks damages of at least $5 million.

The statements claimed to be defamatory were contained in two advertisements in the publications. The Ferrari Market Letter ad, titled "Stolen Ferrari" and identifying the car by year, model, color, and chassis number, read as follows:

"Please be informed that the above-mentioned Ferrari oldtimer with Chassis No. 0799 GT has been stolen on July 7, 1993, in Marbella, Spain, from a Swiss citizen. Please also take notice that this car is on the active list of the police and further legal action will follow. Investigations by Interpol are involved. This Ferrari car has last reported to be in the custody of a Ferrari collector in Sharon 06069, Connecticut, U.S.A."

The Cavallino ad was much the same, but referred only to a Ferrari collector "on the east coast of the USA." Both ads ended with contact information for a Swiss attorney who could provide further information.

What probably happened

As with any story that involves many people and has developed over 15 years, details are sketchy. But according to documents filed with the Court and informed sources, here is what likely happened.

The Ferrari was co-owned by two Swiss citizens. Under Swiss law, their ownership took the form of one being the "inside" owner and the other the "outside" owner. The outside owner is the one who holds legal title to the car and has the sole authority to deal with third parties with respect to the car, including the right to sell it. The inside owner's name does not appear on any of the car's paperwork or legal documentation. His ownership interest is entirely derivative from the outside owner-a "side deal."

Around 1993, this car was consigned by the outside owner to brokers in Marbella, Spain. The car was sold and apparently there were some disagreements about the sale. The outside owner filed suit in Spain, which ended with a determination that no criminal action had been involved. It is not clear who reported the car stolen in 1993, and the outside owner died at some time after the suit ended.

As a result of the ads, a "confidential source" identified Hallingby to the Connecticut State Police, who seized the Ferrari. After an investigation, including information provided by Hallingby's attorneys in Connecticut and Spain, the State's Attorney decided not to pursue charges, and the Ferrari was returned to Hallingby.

Ownership law

It seems certain that Swiss law will be applied to determine the ownership rights of the inside and outside owners and, most importantly, the authority of the outside owner. That is, whether or not he had the right to consign the car for sale. But beyond that, Swiss law should not apply any further.

It would seem that either Spanish or U.S. law could determine whether the person who purchased the Ferrari from the brokers would have acquired good title-Spanish, because the car was sold there, and U.S., because the car is here now. "Legal Files" is unfamiliar with Spanish law, but under U.S. law, the buyer should have acquired good title. Since the outside owner, who had either actual or apparent authority to do so, entrusted the car to an automobile dealer, the Uniform Commercial Code (UCC) would apply and the innocent purchaser would acquire good title. If there was something wrong with the sale, the Swiss owners could not recover the car, but would have legal recourse against the brokers.

So, if this is what really happened, and if either U.S. law is applied or Spanish law is similar to U.S. law, it would seem that Hallingby is the Ferrari's rightful owner.

Enter the magazines

Hallingby alleges that the ads published in the Ferrari Market Letter and Cavallino were defamatory because they accuse him of engaging in criminal and immoral conduct-receiving and retaining possession of stolen property. He further alleges that this car is so rare, and he is so well known in the collector car community due to the number of shows and magazines that he and the Ferrari have been featured in, including events sponsored by Cavallino, that it was clear he was the person referred to in the ads.

To be defamatory, statements must be untrue. Hallingby alleges that the main untrue statement was that the car was stolen. Obviously, that point will require a full determination of exactly what did happen in 1993.

Several other statements in the ads could be questioned-that the car is on the "active list" of the police, and that Interpol investigations "are involved." Those statements may have been true in 1993, but they may or may not have been true in 2008. And the last sentence referring to the car being "in the custody" of a collector carries an insinuation of something less than ownership.

Why sue the magazines?

"Legal Files" contacted David McCraw, an attorney in the legal department of the New York Times, to understand how the publications might be held liable for statements made by an advertiser. McCraw has not seen the lawsuit or the ads, but provided a quick tutorial on defamation law. According to McCraw, publications are generally responsible for their entire content. Thus, Ferrari Market Letter and Cavallino can generally be held liable if the content of their ads is found to be defamatory. But to be liable, they would have to have failed to meet applicable legal standards of care, which depend upon whether or not Hallingby is considered a "public figure."

If Hallingby is a public figure, the publications can be held liable only if they either acted with actual malice, which the courts construe to mean that they knew the statements were false, or they entertained serious doubts about their truthfulness. If Hallingby is not a public figure, then the publications can be held liable if they acted negligently-a far lower standard of care.

Movie stars, politicians, and the like are public figures. But more ordinary people can be "limited purpose" public figures in two ways. One is when they achieve prominence in a relevant community; say, Publisher Martin in the collector car community. The other is when they have become involved in a particular activity or controversy.

So what happens next?

"Legal Files" is not going to attempt to predict the result here. No doubt, Ferrari Market Letter and Cavallino will defend themselves capably. (We were unable to contact Ferrari Market Letter for comment, and Cavallino declined to comment because of the pending litigation). Great effort will go into the determination as to whether Hallingby is a public or a private figure. Also, great effort will go into analyzing whether or not the publications had sufficient reason to know that the ads contained untrue and defamatory statements, assuming, of course, that it is determined any of the statements were untrue and defamatory.

It all sounds very expensive.

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