Clark County Sch. Dist. v. Virtual Educ.

• Decision Date: 06 August 2009
• Docket Number: No. 50313.,50313.
• Citation: 213 P.3d 496
• Parties: CLARK COUNTY SCHOOL DISTRICT, a Nevada Political Subdivision, Appellant, v. VIRTUAL EDUCATION SOFTWARE, INC., a Nevada Corporation, Respondent.
• Court: Nevada Supreme Court

213 P.3d 496

CLARK COUNTY SCHOOL DISTRICT, a Nevada Political Subdivision, Appellant, v. VIRTUAL EDUCATION SOFTWARE, INC., a Nevada Corporation, Respondent.

No. 50313.

Supreme Court of Nevada.

August 6, 2009.

C.W. Hoffman Jr., General Counsel, and S. Scott Greenberg, Associate General Counsel, Las Vegas, for Appellant.

Jolley Urga Wirth Woodbury & Standish and L. Christopher Rose and William R. Urga, Las Vegas, for Respondent.

BEFORE HARDESTY, C.J., PARRAGUIRRE and DOUGLAS, JJ.

OPINION

By the Court, HARDESTY, C.J.

In this appeal, we consider two issues of first impression in a business defamation action. First, we consider whether the absolute privilege applies to defamatory communications made by a nonlawyer in anticipation of a judicial proceeding. Second, we consider whether allegedly defamatory statements made about a business's product provide a basis for defamation per se or for business disparagement.

We conclude that the absolute privilege affords parties to litigation the same protection from liability that exists for an attorney for defamatory statements made during, or in anticipation of, judicial proceedings. Additionally, we conclude that when allegedly defamatory statements concern a business's product and the plaintiff seeks to redress injury to economic interest, the claim is one for business disparagement, not defamation per se.

FACTS AND PROCEDURAL HISTORY

Appellant Clark County School District (CCSD) and Clark County Education Association (CCEA), the local teachers' union, are parties to a collective bargaining agreement, which sets the terms and conditions of employment for CCSD teachers. The agreement includes a provision for teachers to enhance their salaries by obtaining additional degrees, taking either upper-division, graduate-level courses or completing professional development courses offered by CCSD. However, educational courses that are not credit bearing toward a degree may be excluded from the courses eligible for salary enhancement. In addition, CCSD may deny credit for courses that it deems are of a "frivolous nature."

Respondent Virtual Education Software, Inc. (VESI), is a Nevada corporation that markets and sells computer-based instruction for educators and business professionals. VESI markets its distance-learning classes to various colleges and universities.

Until the fall of 2002, Chapman University (Chapman) and Southern Utah University (SUU) offered and administered VESI courses to CCSD teachers for salary enhancement. At that time, VESI had institutional agreements with Chapman and SUU, but VESI did not have a contractual relationship with CCSD.

Dr. George Ann Rice, the associate superintendent of CCSD's human resources department in 2002, had the responsibility for making the final determination as to whether a course complied with the collective bargaining agreement. Because of concerns regarding the academic rigor of VESI courses and their compliance with the collective bargaining agreement, Dr. Rice asked her administrative assistant to research and evaluate the VESI courses.

As a result, several teachers informed VESI's president that CCSD was researching VESI courses for eligibility for salary enhancement. Concerned about the evaluation, VESI attempted to contact CCSD and Dr. Rice and provided two VESI courses to CCSD. After reviewing VESI's courses, Dr. Rice's assistant noted several concerns with the academic quality of the courses. In addition, Dr. Rice's assistant was unable to confirm that VESI's courses were offered at the graduate level by either Chapman or SUU, or that the courses were credit bearing towards a degree. As a result, Dr. Rice determined that the courses did not comply with the requirements of the collective bargaining agreement between CCSD and CCEA for salary enhancement.

In October 2002, VESI learned that CCSD was denying salary enhancement for its courses. VESI wrote several e-mails to CCSD, essentially demanding that CCSD accept the courses "before legal means need to be pursued." On November 6, 2002, Dr. Rice sent a letter to VESI's president, with copies to other school administrators and CCSD counsel, explaining CCSD's decision to deny salary advancement credit for VESI courses. Dr. Rice stated, in pertinent part:

I have researched the VESI courses that you offer for graduate credit from the following universities: Chapman, University of Phoenix, and Southern Utah University. These courses are not credit bearing toward any degree offered by these universities. In addition, some of the courses can be completed in three to five hours and the tests can be successfully passed without reading the material, as evidenced by at least two of my employees. There is no safeguard to determine that the candidate is the one who actually takes the tests. The tests are largely consistent of factual information that can be memorized or copied as notes from the slides and do not require the analysis, synthesis and application levels usually required for graduate coursework.

VESI did not respond to Dr. Rice's letter. When teachers inquired about the status of VESI courses, CCSD explained that it would not accept VESI courses for salary enhancement.

Procedural history

VESI filed a complaint with the district court, alleging five causes of action against CCSD, including defamation. The district court dismissed all but VESI's defamation claims.¹ VESI based its claims for defamation on Dr. Rice's November 6, 2002, letter to VESI's president, and at least 12 communications to CCSD teachers, including e-mails sent by CCSD administrative staff.

CCSD filed two motions for summary judgment seeking to dismiss the defamation claims. In its first motion, CCSD argued, in part, that VESI could not prove the elements of defamation and also asserted that the alleged defamatory statements constituted business disparagement, not defamation per se. Although VESI opposed the motion, it did not specifically respond to CCSD's argument regarding business disparagement. The district court summarily denied the first motion, without addressing business disparagement. In its second motion for summary judgment, CCSD argued that VESI could not prove defamation as a matter of law because the statements were either not defamatory or were privileged. On the second motion, the district court found that none of CCSD's statements were privileged as a matter of law but limited VESI's defamation claims to the November 6, 2002, letter and five e-mail communications.

At trial, VESI presented its case-in-chief, offering evidence that it had suffered an economic downturn, but only tenuously indicated that any economic damages were proximately caused by CCSD's statements. Although CCSD cross-examined VESI's witnesses, CCSD rested without presenting additional witnesses, documents, or other evidence. The jury returned a special verdict form, finding that four of the six communications constituted defamation by CCSD. Specifically, the jury found that, in addition to Dr. Rice's November 6, 2002, letter, three e-mail communications to individual CCSD teachers were defamatory. All three e-mails were written by Dr. Rice's assistant to individual teachers. The first e-mail provided, in part:

This is not a new policy. The contract states that courses must be credit bearing towards a degree and courses such as those offered by VESI have only recently come to our attention as violating contract. Be wary of these 3rd party entities. If the university offering credit will not include them even as an elective in their program, there is something remiss with the course.

The second e-mail provided, in part:

Credit bearing toward a degree does NOT mean a particular individual must be in that degree program, only that the university offering it values the course enough to allow at least elective credit w/i their own university. VESI is a consulting agency and many of the courses have been deemed "[frivolous.]" None of the colleges sponsoring the courses offer degree credit for them so, yes, they should not be taken for salary growth.

The third e-mail communication provided:

Thank you for your recent letter to Dr. Rice regarding VESI courses. The 3 classes you have already taken ... will be allowed for salary growth ... but as they do not comply with the CCEA Negotiated agreement, please be sure any future courses are upper division or graduate credits and are listed in a degree program of the university offering the credit.

The jury awarded damages of $161,024 to VESI. The district court also found that VESI met its offer of judgment and was therefore entitled to an award of attorney fees. Thereafter, the district court awarded VESI prejudgment interest and attorney fees and entered judgment in VESI's favor in the total amount of $340,622.40. CCSD appeals.

DISCUSSION

We address two of CCSD's issues on appeal. First, CCSD contends that the district court erred by denying summary judgment as to Dr. Rice's November 6, 2002, letter to VESI, arguing that the letter was absolutely privileged. Second, CCSD argues that VESI could not rely on the defamation per se doctrine to excuse the need to show special damages. Specifically, CCSD maintains that VESI's defamation claim should have been alleged as a claim for business disparagement, which differs from a defamation per se claim because the former requires proof of malice and special damages whereas the latter requires a showing of negligence and presumes damages.

Because we conclude that the absolute privilege applies to nonlawyers in anticipation of judicial proceedings, we hold that Dr. Rice's November 6, 2002, letter was absolutely privileged. We also conclude that the elements of a claim for business disparagement should be distinguished from the elements of a claim for defamation per se.² After determining that VESI's claims involve business disparagement, we conclude that VESI could not rely on presumed damages and did not...