Potomac Valve & Fitting Inc. v. Crawford Fitting Co.

• Citation: 829 F.2d 1280
• Decision Date: 24 September 1987
• Docket Number: No. 86-2666,86-2666
• Parties: POTOMAC VALVE & FITTING INC.; Raymond C. McGarvey, Plaintiffs-Appellants, v. CRAWFORD FITTING COMPANY; Dibert Valve & Fitting Company, Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1280

829 F.2d 1280

POTOMAC VALVE & FITTING INC.; Raymond C. McGarvey, Plaintiffs-Appellants, v. CRAWFORD FITTING COMPANY; Dibert Valve & Fitting Company, Inc., Defendants-Appellees.

No. 86-2666.

United States Court of Appeals, Fourth Circuit.

Argued May 6, 1987.

Decided Sept. 24, 1987.

Stephen A. Horvath, Alexandria, Va., for plaintiffs-appellants.

Rodney F. Page, Washington, D.C., and Gary B. Mims, Fairfax, Va., for defendants-appellees.

Before WINTER, Chief Judge, MURNAGHAN, Circuit Judge, and WISDOM, United States Senior Circuit

Judge for the Fifth Circuit sitting by designation.

WISDOM, Senior Circuit Judge:

This is a diversity suit for damages based upon theories of defamation, civil conspiracy, and violation of Virginia's "insulting words" statute. The district court entered summary judgment for the defendants, and the plaintiffs brought this appeal. Because we find that the principal statement at issue was a constitutionally protected expression of opinion, we affirm.

I.

The plaintiffs are Potomac Valve & Fitting Inc. (Potomac Valve) and its president and owner, Raymond McGarvey. The plaintiffs distribute "Bi-lok" brand tube fittings in Maryland and Virginia. The defendants are the Crawford Fitting Company (Crawford) and the Dibert Valve & Fitting Company (Dibert Valve). Crawford manufactures "Swagelok" brand tube fittings and Dibert Valve distributes Swagelok fittings in Virginia. Bi-lok and Swagelok are direct competitors in the Virginia tube fitting market.

In January 1985, Potomac Valve commissioned the Newport News Industrial Corporation (Newport News) to conduct a series of tests in response to customer concerns about whether the Bi-lok fitting was freely interchangeable with the older and more established Swagelok fitting. Mr. McGarvey, himself a former Swagelok distributor, instructed Newport News to use the "Swagelok General Test Program"--with some modifications. The parties disagree sharply about the importance of these modifications. ¹

On June 24, 1985, Newport News completed the tests and prepared a twenty-nine page report of its findings. Potomac Valve summarized this report in three pages and added a fourth page as a synopsis and cover sheet. The synopsis concluded that Bi-lok, Swagelok, and two lots of intermixed fittings all passed the various tests "with no significant differences". The synopsis and the test results were sent out to the customers and potential customers of Potomac Valve.

All this activity inevitably came to the attention of Samuel Dibert, the President of Dibert Valve. Dibert sent a copy of the synopsis to Crawford headquarters in Ohio. He then attempted to find out about the testing procedures used by Newport News, but officials at Newport News told him that this information was "privileged".

On August 26, 1985, Dibert wrote to one of his customers, the Badische Corp. of Williamsburg, Virginia, and declared that "[t]he test parameters for the recent test by Newport News Shipbuilding were set up by Bi-lok to give the best possible chance of success". ² Despite this letter, Badische eventually shifted its account from Swagelok to Bi-lok. ³

Shortly after Dibert mailed the test synopsis to Crawford he telephoned Mr. William Wilson, then Manager of Marketing and Technical Services at Crawford, and the following conversation ensued:

He called me and said, "Did you get it?," and I said, "Yes," and something to the effect of, "Are you going to do anything about it?," and I said, "I don't know, I've got more important things to do right now."

Wilson deposition at 37. On October 3, 1985, Crawford finally responded to the Bi-lok test with a two paragraph "article" in the Crawford Distributor Information Exchange. ⁴ The text of this critique was written by Wilson and sent to Crawford distributors across the country. Although the Distributor Information Exchange is marked "Personal and Confidential", Wilson testified in his deposition that he expected Crawford distributors to use it to brief their salesmen, and that ultimately the salesmen would convey the gist of what he had written to any customer who had questions about the test. In the last line of the article, Wilson concludes that "[t]his was a (purposely) very poor test designed to snow the customer".

According to the plaintiffs, Swagelok salesmen began to tell their customers that the Bi-lok test had been rigged. Although they quickly mailed out a two page reply to these accusations, the plaintiffs maintain that as a result of Crawford's conduct they have lost "substantial" business, as well as a distributorship for Cardinal Tubing.

In April 1986 the plaintiffs sued Crawford and Dibert Valve in the Eastern District of Virginia. ⁵ The plaintiffs allege that Crawford and Dibert Valve conspired to injure them in their reputation; they also maintain that both the August 26 letter to Badische and the Crawford Distributor Information Exchange constitute defamation and violate the Virginia statute that prohibits insulting words which "tend to violence and breach of the peace".

After discovery, the district court granted the defendants' motion for summary judgment on all counts. The court found that the Distributor Information Exchange, even if defamatory, was privileged as a communication between parties sharing a common business interest. ⁶ In the alternative, the district court ruled that the concluding sentence of the Distributor Information Exchange was a constitutionally-protected expression of opinion. ⁷ As the district court noted, either one of these alternative grounds for dismissing the defamation claim would apply to the Virginia "insulting words" statute as well. Finally, the court found no evidence of a conspiracy between Crawford and Dibert Valve. On appeal, the plaintiffs challenge the district court's judgment on all three counts.

II.

A. We begin with the civil conspiracy count. Virginia law provides treble damages for anyone who is injured in his "reputation, trade, business or profession" by the concerted and malicious acts of two or more other persons. ⁸ Although the statute refers to "any means whatever", Virginia courts have consistently ruled that to recover damages for conspiracy a plaintiff must show that the defendants have combined "to accomplish some criminal or unlawful purpose, or to accomplish some purpose, not in itself criminal or unlawful, by criminal or unlawful means". Hechler Chevrolet, Inc. v. General Motors, 230 Va. 396, 337 S.E.2d 744, 748 (1985). Thus, summary judgment against the plaintiffs on the conspiracy count must be affirmed unless the plaintiffs can point to specific facts showing that Crawford and Dibert Valve combined to use unlawful tactics to counteract the marketing effect of the Bi-lok test. See Celotex Corp. v. Catrett, 477 U.S. 317, ---, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265, 274 (1986).

We find no evidence that the defendants combined to use unlawful means to blacken the plaintiffs' reputation. It is true that Dibert spoke to Wilson over the telephone about the Bi-lok test. He may even have encouraged Wilson to prepare a response. But the only evidence in the record concerning this conversation is that it ended on an inconclusive note: Wilson told Dibert that he had "more important things to do". Moreover, as we hold below, the response that Crawford finally issued was not in fact unlawful.

There is no genuine issue in this case as to the existence of a civil conspiracy, even when the record is viewed in the light most favorable to the plaintiffs. Cf. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). We therefore affirm the entry of summary judgment against the plaintiffs on the conspiracy count.

B. We now turn briefly to the plaintiffs' "insulting words" claim. Virginia Code Sec. 8.01-45 creates a private cause of action against the use of words "which from their usual construction and common acceptance are construed as insults and tend to violence and breach of the peace".

Although application of this provision is no longer confined to its original purpose of preventing duels, it has been interpreted by Virginia courts to be virtually co-extensive with the common law action for defamation. ⁹ W.T. Grant Co. v. Owens, 149 Va. 906, 141 S.E. 860, 863 (1928); see also Carwile v. Richmond Newspapers, Inc., 196 Va. 1, 82 S.E.2d 588, 591 (1954); Mills v. Kingsport Times-News, 475 F.Supp. 1005, 1007 (W.D.Va.1979). For this reason we conclude that any constitutional limitations that apply to the plaintiffs' defamation action must necessarily apply to their "insulting words" claim as well. Put differently, we agree with the district court that in this case the defamation claim and the Sec. 8.01-45 claim must ineluctably "rise or fall together".

C. Finally, then, we address the plaintiffs' defamation claim. We are unable to accept the district court's first ruling that the record warrants summary judgment on the basis of the "common interest" privilege. William Wilson, the author of the Distributor Information Exchange, testified in his deposition that he fully expected the substance of his article to be passed along from the distributors to the salesmen--and eventually to the customers themselves. The plaintiffs presented some evidence that Swagelok salesmen were spreading the word that the Bi-lok test had been "purposely constructed to snow the customer". Letter of Don Chamberlain dated 10/29/85. If accepted by the court at trial, this evidence would severely undermine the "common interest" privilege. See Great Coastal Express, Inc. v. Ellington, 230 Va. 142, 334 S.E.2d 846, 853-54 (1985). ¹⁰ Because we hold that the privilege defense does not justify summary judgment in this case, we need not address the plaintiffs' contention that the defendants acted with malice.

We find, however, that the key statement in this case--that "[t]his was a (purposely) very poor test designed to snow the customer"--is,...