The U.S. Eighth Circuit Court of Appeals on Monday overturned a jury's decision to award $1.8 million to former Minnesota Gov. Jesse Ventura in a 2014 defamation case.

A three-judge panel unanimously threw out the $1.35 million award to Ventura for "unjust enrichment," saying Minnesota law did not permit it. And in a 2-1 decision, it reversed the $500,000 award for defamation, remanding the case to the district court for a new trial on that question.

The decision was a victory for Taya Kyle, the widow of Navy SEAL Chris Kyle, who wrote the bestselling memoir "American Sniper" that Ventura said defamed him. It was also a win for national news organizations that had urged that the verdict be thrown out.

"If a person bringing a libel suit could collect not just for damages, but for unjust enrichment … the whole nature of libel law would have been changed in a very threatening way," said Floyd Abrams, a prominent First Amendment attorney in New York, who had filed an amicus brief on behalf of 33 news organizations.

The ruling was a serious blow to Ventura, the former professional wrestler who served as governor from 1999 to 2003.

A Ventura spokeswoman said Monday he was waiting to consult with his attorneys and would not comment at this time. His attorneys did not return phone calls. Taya Kyle could not be reached, and neither her attorneys nor "American Sniper" publisher HarperCollins would comment.

Ventura

Ventura's suit claimed that Kyle's memoir contained a false account of a fight in a California bar in 2006 in which Kyle claimed he punched a man named "Scruff Face" for disparaging the war in Iraq and saying the SEALs "deserve to lose a few." Kyle later identified the man as Ventura.

Ventura contended that the incident never happened and the passage ruined his reputation among Navy SEALs, whose reunions he routinely attended after serving with the SEALs during the Vietnam War.

Taya Kyle appealed the jury's verdict, which came after a three-week federal trial in St. Paul in July 2014. After six days of deliberations, the 10-member jury deadlocked. Not knowing which side the jury favored, U.S. District Judge Richard Kyle, no relation to Chris Kyle, won agreement from the attorneys on both sides to allow for the split decision. The verdict favored Ventura 8 to 2.

The appeals court found that the unjust enrichment claim was not applicable in Ventura's case.

To prevail, Ventura would have had to establish that he had at least a "preexisting contractual or quasi-contractual relationship with Kyle," the ruling said.

No such contract existed, said the court. "Ventura's unjust-enrichment claim is not allowed by Minnesota law."

In addition, the appellate court said, the "adequate remedy" for compensation in defamation cases was a defamation award for unjust enrichment. However, the appeals court majority also overturned the $500,000 defamation award. It hinged its reversal on a more technical argument, but one that was a centerpiece of the appeal filed by the attorneys for Taya Kyle and her late husband's estate.

The appellate court said that Ventura's attorney, David B. Olsen, was wrong to suggest at trial that any payouts by Taya Kyle — should the jury conclude Ventura was defamed — would be covered by insurance purchased by HarperCollins, the publisher of "American Sniper."

Olsen raised the insurance issue in questioning two employees of HarperCollins and during closing arguments.

The mention of insurance prejudiced the jury, the Eighth Circuit said. Jurors would be less hesitant to make a substantial defamation award if they were aware that Taya Kyle was covered by an insurance policy, the court said.

Olsen had argued in court and in his appeal that the publishing contract mentions the insurance policy and Taya Kyle's attorneys introduced the contract into evidence.

The Eighth Circuit stated, "We must conclude Ventura's counsel's closing remarks, in combination with the improper cross-examination of two witnesses about Kyle's insurance coverage, prevented Kyle from receiving a fair trial. The district court clearly abused its discretion in denying a new trial. … We remand the defamation claim for a new trial."

The decision was written by William J. Riley, chief judge of the Eighth Circuit, joined by Judge Bobby E. Shepherd.

In a partial dissent, Judge Lavenski Smith concurred with the majority's decision to reverse the unjust enrichment award but said the defamation award should be upheld.

Smith wrote that Olsen's statement and questions to witnesses about insurance were "harmless and nonprejudicial."

In addition, he wrote, there was only a passing reference to insurance during Olsen's hourlong closing argument.

Kyle

Wrote Smith, "The $500,000 in damages on the defamation claim is not an excessive verdict; as even the majority concedes, the verdict 'is probably not beyond the bounds of rationality.' "

Mark Anfinson, a local media attorney, called the appeals decision "a huge victory, not just for the media but for free speech generally."

"There had never been, so far as anyone knew, an award in a defamation case for unjust enrichment as well."

It is unclear what Ventura will do.

"It is going to be back to the drawing board as to whether Ventura wants to go through this again," said Jane Kirtley, professor of media ethics and law at the University of Minnesota School of Journalism and Mass Communications.

Leonard Niehoff, a University of Michigan law professor who wrote an amicus brief signed by First Amendment scholars, said, "As a practical matter, when cases go back for retrial, retrials do not happen for one reason or another, but it is still a reversal and a very important victory for the defendants."

Randy Furst • 612-673-4224 Twitter: @randyfurst