Dec 2 (Reuters) - Two sugar barons from the Dominican Republic can proceed with their defamation lawsuit against a film company over a documentary about the treatment of laborers on their plantations, a federal appeals court ruled on Friday.

But while the 1st Circuit Court of Appeals revived the lawsuit against film company Uncommon Productions LLC, it also ruled that the sugar executives would have to prove that the filmmakers released the film knowing it contained false information.

"The Price of Sugar", released in 2007, followed a Spanish priest in his efforts to organize migrant Haitian laborers on sugar plantations in the Dominican Republic. Narrated by Paul Newman, the film had limited screenings in several major cities.

Felipe and Juan Vicini Lluberes sued the filmmakers in 2007, accusing them of misrepresenting the working and living conditions on their family-owned plantations. The brothers took issue with the film's allegations that the Vicini family imprisoned and murdered laborers. They said the film's depictions of worker fear, suffering and malnutrition were false.

The strength of the Vicinis' defamation case turns on whether they are public figures or not. If they are public figures, the brothers must prove that the filmmakers knew their depictions were false. If they are private figures, the filmmakers could be liable for simply publishing information without verifying its truth.

The 1st Circuit agreed with the lower court in finding that the Vicinis were public figures under the circumstances.

"Both enjoyed access to the press and exploited it by orchestrating a PR blitz to garner public support and mute their critics," Judge Jeffrey Howard wrote for a unanimous three-judge panel. In doing so, the Vicinis assumed roles of prominence and the risk of public scrutiny.

The public figure finding is "very important," said the film company's lawyer, Thomas Curley, because the brothers now face a much higher standard to win their defamation suit. "It's a real protection for the media in dealing with public officials and public figures," he said.

During the litigation, a dispute arose over whether the filmmakers had to hand over a report prepared at the direction of their attorney to help secure insurance coverage for the film. The district court denied the Vicinis' request for the report, finding it was protected by the attorney-client privilege. But the 1st Circuit disagreed.

The appeals court sent the case back to the lower court to reconsider whether the attorney-client privilege applies to shield the report from disclosure. After that, the court can then determine whether the filmmakers knowingly published false information.

Joan Lukey, a Ropes & Gray lawyer for the Vicinis, said in an email that her clients were pleased that the case will resume but disappointed with the public figure finding. They are considering whether to appeal further, she said.

The case is Vicini Lluberes et al v. Uncommon Productions LLC et al, U.S. Court of Appeals for the 1st Circuit, No. 10-2082.

For the Vicinis: Joan Lukey and Maria Arlotto of Ropes & Gray.

For Uncommon Productions: Elizabeth Koch and Thomas Curley of Levine Sullivan Koch & Schulz; Jonathan Albano of Bingham McCutchen.

(Reporting by Terry Baynes)

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