Alpine Industries v. Cowles Pub. Co.

• Decision Date: 21 November 2002
• Docket Number: No. 20855-9-III.,20855-9-III.
• Citation: 114 Wash. App. 371,114 Wn. App. 371,57 P.3d 1178
• Court: Washington Court of Appeals
• Parties: ALPINE INDUSTRIES, COMPUTERS, INC., a Washington corporation, and T. James C. Le, Appellants, v. COWLES PUBLISHING COMPANY, Respondent.

57 P.3d 1178

114 Wn. App. 371

114 Wash. App. 371

ALPINE INDUSTRIES, COMPUTERS, INC., a Washington corporation, and T. James C. Le, Appellants, v. COWLES PUBLISHING COMPANY, Respondent.

No. 20855-9-III.

Court of Appeals of Washington, Division 3, Panel Eight.

November 21, 2002.

Richard D. Wall, Attorney at Law, Spokane, WA, for Appellants.

Duane M. Swinton, Witherspoon, Kelley, Davenport & Toole, Spokane, WA, for Respondent.

BROWN, C.J.

Alpine Industries Computers, Inc. (Alpine) filed suit against Cowles Publishing Company (Cowles), contending certain statements in a Spokesman-Review story were defamatory. The trial court granted summary judgment in favor of Cowles and dismissed Alpine's claim. On appeal, Alpine mainly argues the fair reporting privilege did not protect Cowles. We disagree and conclude Alpine cannot establish the elements of defamation. Accordingly, we affirm.

FACTS

The Spokesman-Review newspaper, a Cowles publication, ran the following story on December 9, 2000:

Microsoft wins $250,000 judgment against Spokane businessman

By Tom Sowa

Staff writer

In the first case of its kind in Spokane, a federal judge Friday imposed a $250,000 judgment against a businessman for selling counterfeit copies of Microsoft software.

T. James Le, owner of Alpine Computers of Spokane, was ordered to pay that sum for illegal sales of Windows and Office software occurring after December 1998.

U.S. District Court Judge Alan A. McDonald entered the judgment after a one-day civil trial in Spokane last week.

Microsoft contended that Le had sold about 500 bogus copies of its software.

Le admitted selling counterfeit software, but insisted it was fewer than 500 copies. The trial only determined the amount of his liability.

The key issue was what happened after December 1998, when undercover buyers bought counterfeit copies of Office 97 and Windows 95 software from an Alpine store. Microsoft quickly sent Le a letter warning him to stop the sales.

The sales didn't end, however, as Le continued buying software from a supplier in Florida, according to John Nelson, the Spokane attorney representing Microsoft.

Under federal law, McDonald could have awarded damages amounting to several million dollars against Le.

McDonald instead ruled that a $250,000 award compensated Microsoft and effectively punished Le, who is 28. McDonald also awarded $69,021 in lawyers' fees for Microsoft.

Le has the option of appealing the judgment.

"We think this sends a message that distribution of counterfeit software won't be treated lightly in this district," said Nelson, a member of the Preston, Gates and Ellis firm, which deals with piracy cases across the county for Microsoft.

This is the piracy case in Eastern Washington in which Microsoft targeted a flagrant violator, Nelson said.

The case came to Microsoft's attention when other area software sellers noticed Alpine's low product prices. For instance, Alpine sold Office 97 for $99, rather than the $200 most vendors charged.

Le said during the trial he stopped selling

[Page Break and Sub Headline]

Microsoft: Le admitted he sold counterfeits

the Office 97 software after receiving a warning from Microsoft. But he continued selling copies of Windows 95 purchased from the same provider, a Florida company called The Yes Man.

Before the trial, Le signed an order acknowledging he had wrongly sold counterfeit software. But he insisted on going to trial to challenge Microsoft's claim that his actions were "willing disregard" for the law.

Le argued in the trial he stopped selling Office 97, but kept selling Windows 95 since the warning letter didn't mention that product by name.

McDonald didn't agree and declared that "Le's decision to continue buying Windows 95 from The Yes Man is consistent with what can only be characterized as an attitude of reckless, if not deliberate, disregard for the intellectual property rights of the plaintiff."

Le could not be reached for comment.

Clerk's Papers (CP) at 188 (emphasis added).

Alpine filed a defamation complaint against Cowles, contending the highlighted portions of the story were defamatory. Cowles moved for summary judgment.

The affidavit of Tom Sowa supported Cowles's summary judgment motion. Mr. Sowa stated that the primary source for his story was the District Court file on the Alpine case, including the memorandum opinion. Attachments to Mr. Sowa's affidavit included Microsoft's complaint against Alpine, a court order signed by Mr. Le that resolved the infringement claims in Microsoft's favor, and the District Court's memorandum order. Other sources for the story included a 1999 Spokesman-Review story on the Alpine case and conversations with Tom Nelson, Microsoft's attorney.

In his affidavit, Mr. Sowa related that when he learned that the District Court had filed a decision on the Alpine matter, he attempted to contact the parties involved, including Alpine. Neither Alpine nor its counsel returned Mr. Sowa's calls. Mr. Sowa wrote his story after reviewing the Alpine case file. The Spokesman-Review's business editor reviewed the story prior to publication, and in the normal course of business the story would have been reviewed by a copy editor. Mr. Sowa felt it was important to write the story in light of the 1999 reporting on the case.

Mr. Sowa indicated he intended to convey to the reader the result of the District Court ruling. Mr. Sowa felt the gist of his story was accurate and cited consistent portions of the District Court memorandum order.

Alpine responded to the summary judgment motion with a deposition of Mr. Sowa. In the deposition, Mr. Sowa recalled reviewing the District Court's memorandum decision before he spoke to Microsoft's attorney. Mr. Sowa remembered reviewing his previous article about Alpine. Mr. Sowa did not recall reviewing any other court documents in connection with the Alpine case. Mr. Sowa could not recall whether he researched copyright and trademark law before writing the article. Mr. Sowa remembered consulting several internet resources, including Microsoft's website.

In his deposition, Mr. Sowa consistently defended the accuracy of his news story. In connection with the statement regarding Mr. Le's stipulation, Mr. Sowa said that in hindsight he might have reworded it somewhat. He said it might have been clearer also to have included a reference to the unresolved willfulness matter in the sentence stating that the District Court "only determined the amount" of Alpine's liability. CP at 184.

The trial court granted Cowles' summary judgment motion and dismissed Alpine's claim with prejudice. The trial court reasoned the common law fair reporting privilege, as codified in RCW 9.58.050, applied because the challenged story was based on the District Court's memorandum decision. The trial court further reasoned no evidence showed Mr. Sowa and/or Cowles acted with knowledge of falsity or reckless disregard as to the truth of the story. The trial court also found the gist or sting of the story to be substantially true, and any minor inaccuracies contained in the story did not materially add to any purported damage Alpine suffered because of the story. And the trial court reasoned that Alpine offered no proof of damages and therefore failed to establish a prima facie case of defamation.

Alpine appealed.

ANALYSIS

The issue is whether the trial court erred as a matter of law in granting Cowles summary judgment dismissal when it ruled that Cowles was protected by the fair reporting privilege. This issue requires an examination of whether the key offensive statements are provably false, and if so, privileged. In order to adequately address Alpine's concerns we must also discuss the burden of proof and fault.

In reviewing a summary judgment, we engage in the same inquiry as the trial court. Huff v. Budbill, 141 Wash.2d 1, 7, 1 P.3d 1138 (2000). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Huff, 141 Wash.2d at 7, 1 P.3d 1138. "A material fact is one upon which the outcome of the litigation depends." Dien Tran v. State Farm Fire & Cas. Co., 136 Wash.2d 214, 223, 961 P.2d 358 (1998) (citing Ruff v. King County, 125 Wash.2d 697, 703, 887 P.2d 886 (1995)). We review all facts and reasonable inferences in the light most favorable to the nonmoving party. Huff, 141 Wash.2d at 7, 1 P.3d 1138. And de novo review applies to issues of law. Id.

To establish a prima facie defamation claim, the plaintiff must show (1) that the defendant's statement was false, (2) that the statement was unprivileged, (3) that the defendant was at fault, and (4) that the statement proximately caused damages. Caruso v. Local Union No. 690, 107 Wash.2d 524, 529, 730 P.2d 1299 (1987); Mark v. Seattle Times, 96 Wash.2d 473, 486, 635 P.2d 1081 (1981). To defeat a defense summary judgment motion in a defamation action, the plaintiff must raise a genuine issue of material fact as to all four elements of the claim. LaMon v. Butler, 112 Wash.2d 193, 197, 770 P.2d 1027 (1989); Mark, 96 Wash.2d at 486, 635 P.2d 1081; Wood v. Battleground Sch. Dist. No. I, 107 Wash.App. 550, 27 P.3d 1208 (2001). "The prima facie case must consist of specific, material facts, rather than conclusory statements, that would allow a jury to find that each element of defamation exists." LaMon, 112 Wash.2d at 197, 770 P.2d 1027 (citing Herron v. Tribune Publ'g Co., 108 Wash.2d 162, 170, 736 P.2d 249 (1987); Guntheroth v. Rodaway, 107 Wash.2d 170, 175, 727 P.2d 982 (1986)).

A defamation claim implicates highly complex issues, particularly when the plaintiff is a private figure. We first examine whether genuine issues of material fact exist as to falsity.

A. Falsity

At the outset, the defamation plaintiff must prove the offensive statement is "provably false." Schmalenberg v. Tacoma News, Inc., 87 Wash.App. 579, 590, 943 P.2d 350 (1997). One way a statement could be...