DIGITAL DESIGN v. INFORMATION BUILDERS

• Citation: 24 P.3d 834,2001 OK 21
• Decision Date: 27 February 2001
• Docket Number: No. 92,018.,92,018.
• Parties: DIGITAL DESIGN GROUP, INC., Plaintiff/Appellee/Cross-Appellant, v. INFORMATION BUILDERS, INC., Defendant/Appellant/Cross-Appellee, and The State of Oklahoma, ex rel., The Commissioners of the Land Office, Defendant.
• Court: Supreme Court of Oklahoma

24 P.3d 834

2001 OK 21

DIGITAL DESIGN GROUP, INC., Plaintiff/Appellee/Cross-Appellant, v. INFORMATION BUILDERS, INC., Defendant/Appellant/Cross-Appellee, and The State of Oklahoma, ex rel., The Commissioners of the Land Office, Defendant.

No. 92,018.

Supreme Court of Oklahoma.

February 27, 2001.

Gladys E. Cherry, John M. Rowntree, Jr., Stephen G. Solomon, Oklahoma City, OK, for Appellee/Cross-Appellant.

Clyde A. Muchmore, George W. Dahnke, Murry E. Abowitz, Oklahoma City, OK, for Appellant/Cross-Appellee.

KAUGER, J.:

¶ 1 Two issues are presented on certiorari: 1) whether the discovery rule applies to a libel claim;¹ and 2) whether the evidence was sufficient to support a claim for contract damages. We hold that the discovery rule is applicable to the libel claim, and that when facts about the injury's discovery are disputed, the question of when the plaintiff knew or should have known is a fact question for the jury to decide. However, submission of the contract claim to the jury resulted in prejudicial error because of the probability that the jurors were misled by its interjection with the claim for libel damages.

FACTS

¶ 2 In the late 1980's, the Oklahoma Commissioners of the Land Office (Commissioners), contacted the appellee/cross-appellant, Digital Design Group (Digital), about designing and implementing a mineral management computer system for the state of Oklahoma. Digital is a Colorado based computer engineering firm which designed systems for the land offices of Colorado and North Dakota. In May of 1990, the Commissioners executed a contract with Digital in the amount of $380,000.00 to design and develop a computer software system to manage Oklahoma's mineral interests.

¶ 3 The contract required the use of FOCUS, a computer software database management system developed and licensed by the appellant/cross-appellee, Information Builders, Inc. (Information Builders). In a letter dated June 1, 1990, the Commissioners notified Information Builders that it would be using FOCUS, and that a peer review of Digital's system designs would be needed and coordinated between Digital, the Commissioners and Information Builders. The Commissioners/Digital contract also provided that: 1) the Commissioners were responsible for obtaining the license to use FOCUS; 2) Digital would pay Information Builders for peer review services; and 3) the Commissioners would reimburse Digital for payments made to Information Builders, not to exceed a total of $7,500.00.

¶ 4 On September 5, 1990, Information Builders wrote to Digital agreeing to review Digital's preliminary database design. Information Builders estimated that it would take eight to twelve hours to review the design, and "identify all issues, if any, that require additional research, clarification or documentation." The cost quoted for the review was $75.00 per hour plus transportation and out-of-pocket expenses. At Information Builders' request, Digital's president signed and returned the original letter to authorize Information Builders to begin the peer review.

¶ 5 Representatives from Digital and Information Builders met on September 6, 1990, to begin a review of the preliminary database design. On September 17, 1990, Digital forwarded Information Builders a revised database design. Digital continued to work on the system from September 1990 through December 1990. During that period, Information Builders's involvement was minimal.

¶ 6 The Commissioners' Management Information Systems director (computer director) served as the Commissioners' project administrator. The Commissioners also formed a steering committee to oversee the project. The steering committee and Digital agreed that the system should be designed in phases. From the outset of the project, the computer director expressed concern with Digital's plan to design the system piece by piece rather than developing an overall design for the entire system before developing individual segments. The computer director continued to express concern with Digital's methodology, administration, and development of the system, insisting that the entire database should be designed first. The computer director's concerns were addressed during a December 10, 1990, meeting between the Commissioners' project steering committee, Digital, and Information Builders.

¶ 7 At the December 10th meeting, the steering committee confirmed that it favored the design of the system in phases. Information Builders agreed that this approach would work, but that it might require some retroactive changes to databases and codes as the databases were reviewed. The committee also decided that: Information Builders should resolve the differences; Information Builders' review responsibilities should be expanded; Digital's president and the Commissioners' computer director should work together to resolve their differences regarding the database structure if they could not reach agreement; Information Builders was to continue invoicing Digital for work performed; and Digital was to submit the invoices to the Commissioners for reimbursement. In order to facilitate the project management and improve communications between the parties, the Commissioners' secretary replaced the computer director as the Commissioners' project administrator.

¶ 8 However, in January 1991, the newly elected Governor of Oklahoma replaced the Commissioners' secretary, and the new acting secretary re-appointed the computer director to manage the project and supervise the contractor. On January 28, 1991, the computer director wrote to Information Builders expressing concern with Digital's design and development of the project. He directed Information Builders to stop any review which it may have been conducting for Digital, and he asked Information Builders to prepare a letter containing an evaluation of the current status of the project and possible alternatives.

¶ 9 On February 4 and 11, 1991, Information Builders responded to the computer director's request by two similar letters. Both letters commented on the history and status of the project and provided recommendations for the system. Information Builders offered: to assist in developing project management procedures; to review the system and database design and codes; and to "tune" the system for FOCUS. At the computer director's request, Information Builders expanded on the February 11th letter with another letter dated February 15, 1991. In this letter, Information Builders stated that Digital was "not following standard structured analysis and design methodologies while developing the system," and it recommended use of a detailed design document with a "structured walkthrough of the design" by Commissioners, Digital and Information Builders. The letters were addressed to the computer director. Information Builders did not provide copies of the letters to Digital or to anyone other than the computer director.

¶ 10 In a March 1, 1991, memorandum to Digital's president, the computer director expressed concern with the system design and poor communications. The memorandum also related that Information Builders had identified several concerns after reviewing Digital's programming, and that it would be documenting those concerns. The memorandum ordered Digital to stop development of all programing while continuing to work to resolve outstanding problems.

¶ 11 On March 11, 1991, in response to another Commissioners' request, Information Builders notified the Commissioners that it believed it could complete the system within the remaining budget of $350,000.00. The Commissioners' secretary notified Digital by letter dated March 22, 1991, that she intended to recommend to the Commissioners that Digital's contract be terminated. She also directed Digital to cease any further work on the project. The Commissioners terminated the contract at their next meeting.

¶ 12 On March 20, 1992, Digital sued the Commissioners and Information Builders, asserting claims for libel, slander, breach of contract, tortious interference with contract, and breach of fiduciary duty. Digital and the Commissioners settled prior to trial, but Digital proceeded to jury trial against Information Builders. During the trial, the slander claim was dismissed, and the trial judge allowed only the libel and breach of contract claims to be submitted to the jury. The jury returned a verdict against Information Builders awarding $968,161.00 in actual damages and $737,500.00 in punitive damages. The trial court entered judgment on the jury's verdict, and it denied Information Builders' alternative motions for judgment notwithstanding the verdict or motion for new trial. The trial court also denied Digital's motion for costs and prejudgment interest.

¶ 13 Information Builders appealed the jury verdict, and Digital counter-appealed from the trial court's denial of its motion for costs and prejudgment interest. The Court of Civil Appeals determined that Digital's libel claim was time-barred, and that Digital had failed to prove any damages with regard to its breach of contract claim. It reversed and remanded with instructions for the trial court to enter judgment in favor of Information Builders, and it also affirmed the trial court's denial of Digital's motion for costs and prejudgment interest. Digital filed a petition for certiorari which we granted on October 16, 2000.

I.

¶ 14 THE DISCOVERY RULE APPLIES TO THE LIBEL CLAIM.

¶ 15 In the trial court, Digital alleged that "Information Builders made false, unwarranted and malicious written statements to the effect that [Digital] was not competent and was not properly performing its duties under its contract with the Commissioners." Digital's libel claim was based on the letters Information Builders sent to the Commissioners' computer director in February of 1991. As an affirmative defense, Information Builders asserted that the libel claim was barred by the one year statute of limitations for...