Medical Laboratory Manag. v. American Broadcasting

• Decision Date: 20 September 2002
• Docket Number: No. 00-15594.,00-15594.
• Citation: 306 F.3d 806
• Parties: MEDICAL LABORATORY MANAGEMENT CONSULTANTS, a corporation dba Consultants Medical Lab; John Devaraj, an individual; Carolyn Devaraj, an individual, Plaintiffs-Appellants, v. AMERICAN BROADCASTING COMPANIES, INC.; Diane Sawyer, an individual; Ira Rosen, an individual; Robbie Gordon, an individual; Mark Lukazsiewicz, [sic], an individual; David Shapinsky, an individual; Rhondi Charleston, an individual; Richard Wald, an individual; Phyllis E. McGrady, an individual; and Lori Garcia Cottrell, an individual, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

306 F.3d 806

MEDICAL LABORATORY MANAGEMENT CONSULTANTS, a corporation dba Consultants Medical Lab; John Devaraj, an individual; Carolyn Devaraj, an individual, Plaintiffs-Appellants, v. AMERICAN BROADCASTING COMPANIES, INC.; Diane Sawyer, an individual; Ira Rosen, an individual; Robbie Gordon, an individual; Mark Lukazsiewicz, [sic], an individual; David Shapinsky, an individual; Rhondi Charleston, an individual; Richard Wald, an individual; Phyllis E. McGrady, an individual; and Lori Garcia Cottrell, an individual, Defendants-Appellees.

No. 00-15594.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 12, 2002.

Filed September 20, 2002.

COPYRIGHT MATERIAL OMITTED

Neville L. Johnson, Brian A. Rishwain, Johnson & Rishwain, LLP, Los Angeles, CA, for the plaintiffs-appellants.

Andrew D. Hurwitz, Diane M. Johnsen, Osborn Maledon, P.A., Phoenix, AZ, for the defendants-appellees.

Appeal from the United States District Court for the District of Arizona, Roslyn O. Silver, District Judge, Presiding, D.C. No. CV-95-02494-ROS.

Before HUG, CUDAHY,^* and TASHIMA, Circuit Judges.

OPINION

HUG, Circuit Judge.

Medical Laboratory Management Consultants ("Medical Lab") and John Devaraj ("Devaraj"), a founder and owner of Medical Lab, (collectively "Plaintiffs") brought this action against American Broadcasting Companies ("ABC") and individuals allegedly involved in producing the segment Rush to Read for ABC's television program PrimeTime Live (collectively "Defendants"). The district court, exercising diversity jurisdiction under 28 U.S.C. § 1332, granted summary judgment in Defendants' favor on Devaraj's claim of intrusion upon his seclusion, Medical Lab's claims of trespass and tortious interference with contractual relations and prospective economic relations, and Plaintiffs' claims for punitive damages. Plaintiffs now appeal the district court's resolution of these claims. We have jurisdiction under 28 U.S.C. § 1291 over Plaintiffs' timely appeal of the district court's judgment, which the court entered pursuant to Federal Rule of Civil Procedure 54(b). For the reasons set forth below, we affirm.

FACTS AND PROCEDURAL BACKGROUND

This action arises out of the videotaping and broadcast of a television segment entitled Rush To Read for ABC's television program PrimeTime Live, which uses undercover, investigative journalists to present "inside" stories of a sensational nature. Rush To Read focused on medical laboratories that analyze women's pap smears, highlighting what it perceived to be the pressures that such laboratories place on cytotechnologists¹ to process pap smear slides quickly, and the resulting frequency of testing errors by such laboratories. The television segment reported the results of a study in which four laboratories, including Medical Lab, were each asked to analyze 623 pap smear slides. According to Rush To Read, Medical Lab, which was not singled out by name, but referred to only as a "lab in Arizona," failed to identify cervical cancer on several of the slides. The television segment stated that, when told of the study results, Devaraj, whom the segment did not name, but referred to only as the manager of the Arizona laboratory, said that "if mistakes were made it was an unusual circumstance, and he vowed not to take on such a large case load again." Rush To Read was 27 minutes in length, two minutes of which discussed Medical Lab as a "lab in Arizona," and 52 seconds of which used videotape taken inside Medical Lab. The videotape showed Devaraj seated, stating that the cytotechnologists that work at Medical Lab also work at other laboratories.

To obtain this content for Rush To Read, ABC producer Rhondi Charleston ("Charleston"), posing as a representative of a fictitious Michigan women's health clinic, contacted Medical Lab and arranged to have the 623 slides processed over a weekend. Another ABC producer, Robbie Gordon ("Gordon"), telephoned Devaraj to arrange a meeting at Medical Lab on the day that the slides were scheduled to arrive there. Gordon, who had no prior contact with Medical Lab, represented that she was a cytotechnologist from Georgia who wanted to start a pap smear laboratory. Gordon stated that she would be in Phoenix in a few weeks to visit friends or relatives, and asked whether she might visit Medical Lab to learn more about the pap smear testing industry. Devaraj asked Gordon a few questions, such as "Who are you?" and "Do you have enough funds available?," after which he agreed to schedule a meeting because he thought that she might be able to provide Medical Lab with some business.

On the day of the meeting, Gordon arrived with Jeff Cooke ("Cooke"), who claimed that he was a computer expert, but really was an undercover camera specialist, and with another ABC representative, who stated that she was an administrator or business manager.² With hidden cameras located in his wig, Cooke filmed the entire visit to Medical Lab.

The three ABC representatives entered Medical Lab through an unlocked door that led into a reception room. Devaraj invited them to, and they were escorted to, a conference room in Medical Lab's administrative offices. These offices adjoin the laboratory portion of Medical Lab, which is the portion open to the public that serves patients needing blood tests or other laboratory work done. The conference room had windowed French doors that were shut for the duration of the meeting. Devaraj testified that he typically used the conference room only for private conversation and meetings of a confidential nature. Devaraj and the three ABC representatives spoke generally about the pap smear testing industry, about Medical Lab, and about Gordon's supposed plans to open her own laboratory. Devaraj did not reveal any personal information about himself, and at no point did Devaraj request that any of the matters discussed be kept confidential. Devaraj then invited the ABC representatives on a tour of Medical Lab, an invitation that Devaraj occasionally made to prospective customers, physicians, and other authorized persons. Medical Lab employees were present for portions of the conversation during the tour.

Over the weekend that Medical Lab processed the 623 pap smear slides, ABC parked a van in the Medical Lab parking lot in order to videotape cytotechnologists as they entered and left the building. ABC stationed the van there to determine whether Medical Lab was complying with federal law, which bars cytotechnologists from reading more than 100 pap smears in eight hours, and prorates the 100-slide ceiling for shorter work days. See 42 C.F.R. § 493.1257(b).

After Rush To Read aired on May 19, 1994 and again on or about September 1, 1994, Devaraj, his wife, and Medical Lab filed suit in Arizona superior court against ABC, KTVK-TV, the Phoenix television station that showed Rush To Read, and several individuals, including Charleston and Gordon, that allegedly were involved in producing Rush To Read. Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., 931 F.Supp. 1487, 1490 (D.Ariz.1996) ("Med.Lab.I"). The defendants removed the action to federal court on the basis of diversity of citizenship, and moved to dismiss a number of the complaint's claims. Id. The district court dismissed all of the claims against KTVK-TV, the invasion of privacy claims asserted by Medical Lab and Devaraj's wife, as well as claims of public disclosure of private facts, conspiracy, intentional and negligent infliction of emotional distress, trade libel, and unfair business practices. Id. at 1491-94.

Devaraj and Medical Lab then filed a first amended complaint, alleging intrusion upon seclusion, fraud, tortious interference with contractual relations and prospective economic relations, trespass, defamation, false light invasion of privacy, and violation of the federal eavesdropping statute. Plaintiffs later voluntarily dismissed the defamation and false light invasion of privacy claims. Defendants moved for summary judgment on all of the remaining claims and on all punitive damages claims. Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., 30 F.Supp.2d 1182, 1186 (D.Ariz.1998) ("Med.Lab.II"). Plaintiffs cross-moved for partial summary judgment on the fraud claim. Id. at 1201. The district court granted Defendants' summary judgment motion on all claims but the fraud claim, which the court granted in part and denied in part. Id. at 1209. The court denied Plaintiffs' motion for partial summary judgment on the fraud claim. Id. Pursuant to Federal Rule of Civil Procedure 54(b), the district court entered final judgment for Defendants on all claims but the fraud claim. Plaintiffs subsequently dismissed their fraud claim voluntarily without prejudice. Plaintiffs now appeal the district court's grant of summary judgment on Devaraj's claim of intrusion upon his seclusion, Medical Lab's claims of trespass and tortious interference with contractual relations and prospective economic relations, and their claims for punitive damages.

ANALYSIS

We review de novo the district court's grant of summary judgment. Delta Savings Bank v. United States, 265 F.3d 1017, 1021 (9th Cir.2001). We must determine, viewing the evidence in the light most favorable to Plaintiffs, the nonmoving parties, whether any genuine issues of material fact exist, and whether the district court correctly applied the relevant substantive law. Id. Because this action was removed to federal district court under diversity jurisdiction, we apply the substantive law of Arizona, the forum state. Stanford Ranch, Inc. v. Md. Cas. Co., 89 F.3d 618, 624 (9th Cir.1996). We note initially that the Arizona courts have not yet had the opportunity to apply Arizona law to circumstances like those presented by this case. "When a decision turns on applicable state law and the state's highest court has not adjudicated the issue, a federal court must make a reasonable determination of the result the highest state court would reach...