Leonardini v. Shell Oil Co.

• Decision Date: 12 December 1989
• Docket Number: No. C,C
• Citation: 264 Cal.Rptr. 883,216 Cal.App.3d 547
• Court: California Court of Appeals Court of Appeals
• Parties: Raymond J. LEONARDINI, Plaintiff and Respondent, v. SHELL OIL COMPANY, Defendant and Appellant. iv. C000619.

Page 883

264 Cal.Rptr. 883

216 Cal.App.3d 547

Raymond J. LEONARDINI, Plaintiff and Respondent, v. SHELL OIL COMPANY, Defendant and Appellant.

No. Civ. C000619.

Court of Appeal, Third District, California.

Dec. 12, 1989.

Certified For Partial Publication. ^*

Review Denied March 29, 1990.

Sedgwick, Detert, Moran & Arnold, Stephen W. Jones, San Francisco, for defendant and appellant

Friedman, Collard & Poswall, John M. Poswall, Sacramento, for plaintiff and respondent.

SPARKS, Associate Justice.

In this malicious prosecution action we are called upon to resolve the clash between the claimed right to enjoin a trade libel and the constitutional right of free speech. The case had its genesis in an earlier but unsuccessful attempt to obtain an injunction against the publication of a report concerning the safety of plastic pipes for domestic water use. The published report was first filed in the record of the governmental agency conducting hearings on the question and was then later disseminated elsewhere. We resolve the conflict in favor of free speech.

The central question is whether the defendant, a manufacturer of pipe resin, had probable cause to file an earlier action against the plaintiff, an attorney for a pipe trade council. The underlying dispute between the parties arose out of documents relating to the safety of the proposed expanded use of plastic pipes for plumbing purposes. The prior action sought to enjoin an alleged trade libel that defendant's product contained a carcinogenic and to obtain a declaratory judgment that its product does not represent a danger to human health. The issue turns on whether, given the facts known to defendant, the prior action was legally tenable as a matter of law. We hold it was not because the constitutional guaranties of free speech prohibit a court from enjoining the dissemination of documents and information which formed part of the public debate on a matter of public health and safety. ¹

Defendant Shell Oil Company appeals from a judgment entered on a jury verdict in favor of plaintiff Raymond J. Leonardini awarding him compensatory damages in the amount of $197,000, and punitive damages in the amount of $5 million. Shell raises a number of objections to the judgment. It first argues that the trial court

erred by directing a verdict against it on the probable cause issue and this error mandates reversal. Shell next claims that the court's instruction on probable cause misstated the law and was prejudicial. Its third contention is that the trial court committed reversible error in admitting expert legal testimony on probable cause. The fourth contention is that it was reversible error to admit evidence on the toxicity of certain fittings. The last two contentions relate to damages. Shell asserts that the compensatory damage award was both grossly excessive and unsupported by the evidence. Finally, it argues that the $5 million punitive damage award was excessive as a matter of law. We resolve the probable cause issue in favor of plaintiff in the published portion of this opinion. In the unpublished part we consider the remaining contentions. Finding no reversible error there we shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

This case began in a high stakes, public clash over the use of polybutylene pipe in this state for drinking water. Shell sought approval of the unrestricted use of the pipe without any environmental impact report. Plaintiff advocated that the public officials charged with the responsibility for health and safety independently test the pipe system before exposing Californians to potential health risks. How that struggle was waged is the story of this lawsuit.

Plaintiff is an attorney. After becoming a member of the State Bar of California, he worked for a number of years in the Department of Consumer Affairs. Ultimately, he attained the position of assistant cabinet secretary of the State Department of Consumer Affairs. Eventually plaintiff left government service to start a private practice in Sacramento. During all relevant periods plaintiff had one primary client, the California Pipe Trades Council (Council). The Council is an organization of plumbers' and pipe fitters' unions. Representatives of the Council advised plaintiff that hearings were scheduled to commence concerning the unrestricted use of plastic pipe for plumbing, including drinking water. Among other things, plaintiff was retained by the Council to represent it in connection with those plastic pipe proposals. Plaintiff then undertook to familiarize himself with the health and safety issues affecting plumbers and pipe fitters. He asserted that his primary concern centered on health and safety issues, although he conceded that increased competition from plastic pipes could be an economic issue with plumbers and pipe fitters. As part of his preparation, plaintiff assembled information about the health problems related to the installation and use of plastic pipes.

During 1979 and 1980 the Commission on Housing and Community Development (Commission) was considering the expanded use of plastic piping for potable (drinking) water purposes. The Commission held public hearings, invited public comment and debate and maintained a public record of all the material submitted to it on the question. In addition to written comments, the Commission also took testimony from officials of public agencies and others interested in or concerned with the use of plastic pipes. The Commission also retained its own scientific consultant, Dr. Marc Lappe, who was the head of the State Hazard Alert System. The essential question before the Commission was whether the state of scientific information was such that plastic pipe could safely be approved for carrying drinking water or whether independent testing was required. Shell and other manufacturers of plastic pipes and their components, as well as various representatives of trade associations, were active participants in these hearings. Shell and other supporters of the use of plastic pipes submitted various studies and scientific tests which they asserted showed that the pipe was safe and additional testing unnecessary.

The primary forms of plastic pipe at issue were PVC (polyvinyl chloride), CPVC (chlorinated polyvinyl chloride), and polybutylene. Plastic pipes are petrochemically based and most of the manufacturers of plastic piping are petrochemical companies. Shell apparently does not make plastic piping itself; it is, however, the only manufacturer of the resin which is the sole ingredient During the Commission's review a study was commissioned at the James Montgomery Laboratory (Montgomery) to test PVC and CPVC piping for leaching of chemicals which could have potential health effects. Polybutylene was not the subject of the testing by that laboratory because the ingredients of the piping, as revealed by Shell, did not "ring an alarm" concerning possible health hazards. But Shell did not reveal to the state authorities that the polybutylene pipe system used an additional plastic, a polyacetal fitting with the trade name of Celcon, as a coupler. Mr. Steven Pregun, an organic chemist for Shell, in a letter to a customer, later described this coupling material as an "albatross" around the neck of the polybutylene pipe system. Shell's policy was that if the state did not discover any health problems with the system on its own and did not specifically ask for that information, Shell would not volunteer it.

of polybutylene pipe. Polybutylene pipe differs from PVC and CPVC pipe in that it is flexible and does not use chemical solvents for installation. Instead, it requires heat fusion or fittings for installation.

The Montgomery study revealed that potentially hazardous chemicals could be leached into water from PVC and CPVC pipes. These chemicals were believed to be from the solvents used in installation and possibly from plasticizers added during manufacturing. These dangerous chemicals had never been disclosed to the State of California by the manufacturers of PVC or CPVC. Quite the contrary, they had represented to the state that the pipes were completely safe.

In the spring of 1980, Assemblyman Lou Papan of the California Legislature sponsored a concurrent resolution asking the Commission to halt approval of plastic pipes until such time as the Toxic Substance Alert System had made findings of its own. In a response foreshadowing the suit against plaintiff, Shell told one of its representatives that "they have a battery of attorneys to handle people like that and that they'll turn it over to their legal department." Shell in fact responded by sending a letter to Assemblyman Papan threatening to take "appropriate legal action" against him if he did not desist from lumping polybutylene with other plastics.

As a result of the Montgomery study and other information, the Commission in November 1980, ordered the preparation of an Environmental Impact Report (EIR) on the proposal for increased usage of PVC and CPVC pipes. It did not, however, require an EIR on the use of polybutylene pipe at that time. In the meantime plaintiff made an independent investigation to determine what studies, if any, had been done on PVC and CPVC. He contacted the National Sanitation Foundation and discovered their results were based upon tests made in 1955, dealt with inorganic chemicals and did not employ current technology. He personally visited both the federal Food and Drug Administration (FDA) and the Department of Environmental Protection and learned they had no information on the subject.

Following the Commission's determination, plaintiff arranged for California Analytical Laboratories, Inc. (CAL), an independent laboratory, to perform tests on polybutylene pipe. The tests were commissioned and paid for by the Council. Plaintiff testified that he had representatives of the Council deliver some polybutylene pipe to CAL. CAL then...