Moe v. Wise

• Citation: 989 P.2d 1148,97 Wash.App. 950
• Decision Date: 19 November 1999
• Docket Number: No. 20050-3-II, No. 20837-7-II.
• Court: Court of Appeals of Washington
• Parties: Howard I. MOE and Margaret R. Moe, husband and wife, Appellants, v. Joseph E. WISE and "Jane Doe" Wise, husband and wife, Defendants, Arnold B. Robbins and "Jane Doe" Robbins, husband and wife, Respondents and Cross Appellants.

989 P.2d 1148

97 Wash.App. 950

Howard I. MOE and Margaret R. Moe, husband and wife, Appellants, v. Joseph E. WISE and "Jane Doe" Wise, husband and wife, Defendants, Arnold B. Robbins and "Jane Doe" Robbins, husband and wife, Respondents and Cross Appellants.

Nos. 20050-3-II, 20837-7-II.

Court of Appeals of Washington, Division 2.

November 19, 1999.

Thomas A. Brown, Brown Lewis Janhunen & Spencer, and Susan L. Solan, Aberdeen, for Appellants.

Thomas J. West, Thompson Krilich, et al, Heidi N. Imhof, Thompson Krilick Laporte Tucci & West, Tacoma, for Respondents.

SEINFELD, J.

Howard Moe appeals the trial court's dismissal of his defamation action against defendant Arnold Robbins, the attorney for a business in Chapter 11. The trial court held that the "common interest" qualified privilege protected Robbins's allegedly defamatory communication about Moe's role in the business's financial losses. The trial court further found no abuse of that privilege. Holding that a Chapter 11 bankruptcy debtor and its creditors share a common interest in determining the cause of the subject business's financial failure, we uphold the ruling regarding privilege and affirm the dismissal. But we remand for recalculation of terms imposed because of Robbins's request for a continuance.

FACTS

Moe sold his long-time business, Little Hoquiam Boat Shop, to R.O.I., Inc. (ROI), in 1988. ROI renamed the company Hoquiam Boat Shop, Inc., but retained Moe, pursuant to the sale agreement, as an employee/consultant.

Joseph Wise became the chief executive officer of Hoquiam Boat in September 1990. Because of Hoquiam Boat's poor financial health, in late 1990 Michael Daspin, the head of ROI, hired attorney Robbins to prepare and file a Chapter 11 petition. Robbins filed that action in December 1990.

According to Robbins, Daspin also asked him to sue Moe for allegedly misrepresenting the business's profit margin at the time the sale. After Robbins spoke to ROI's accountant and reviewed his files, he believed the allegation of misrepresentation was true.

Shortly after filing bankruptcy, Wise sent a letter to trade creditors, hull owners (owners of boats under construction), and a newspaper reporter. The letter, which sought support in federal court for cancellation of the company's boat contracts, blamed Moe for Hoquiam Boat's bankruptcy. Specifically, the letter alleged that Moe had misrepresented Hoquiam Boat's projected profit margin as 30 percent and had permitted the company to enter into new boat manufacturing contracts at below cost prices. The letter also stated:

The beneficiaries of Hoquiam Boat Shop's activities over the past two years are Moe and those that have taken delivery of completed boats at below cost prices without the owner's awareness, and those with boats in varying degrees of completion who would have us continue performing on sub-standard contracts. Those that are hurt are the skilled men and women of Hoquiam Boat Shop, and their families, whose reward for producing the best quality fishing boat available is lay-off and the unemployment line. Additionally, the trade creditors of Hoquiam Boat Shop have also sufferred [sic]. Their reward for being a loyal supplier of equipment and components, under unsecured conditions, has been late payments and broken promises.

....

I regret that the past effects of what the stockholders have advised me to be a failure on the part of the former owner to advise the purchasers of contracts taken at sub-standard margins, caused these steps to be taken.

Wise claimed that he and Daspin co-authored the letter with Robbins and that he had asked Robbins to investigate the allegations about Moe. But Robbins claimed that he had never talked to Daspin and that when he saw the letter, he advised Wise not to send it. However, when Wise advised Robbins that Daspin had ordered the letter sent, Robbins agreed to edit it, and he subsequently made a number of deletions and changes. Robbins testified that he had tried to "tone down" the letter because he thought the allegations against Moe would fail to accomplish the "underlying objective," which was to enlist the trade creditors' support for the reorganization plan. Robbins did not insist that Wise remove the allegations against Moe because he did not think such revisions were within the ambit of his authority.

Moe responded to the letter by filing a defamation suit against Wise in January 1991 and by filing an amended complaint in October 1992 that included Robbins as a co-defendant. In June 1994, the court assigned an October 10, 1995, trial date. Robbins filed his answer in April 1995. In August, Wise answered the amended complaint and filed a cross-claim against Robbins for attorney malpractice. At about the same time, Moe disclosed over 100 new witnesses for trial.

The next month, Wise and Robbins both moved for a continuance. The trial court granted the continuance, but assessed $5,000 in terms against Wise and against Robbins, telling counsel: "You can make your checks out to the Grays Harbor County Food Bank. We're going to pay the poor." But the trial court's written order does not reference the food bank; the order merely directs counsel to make payment to the registry of the court.

At trial, Moe testified that the allegations in the letter were untrue and hurtful. He said that hull owners had contacted him after receiving the letter to express their disgust and unhappiness with him. And hull owners and trade creditors testified that the letter caused them to wonder whether Moe was responsible for the bankruptcy; they said it was a factor in not asking Moe to do future work.

When Moe re-acquired Hoquiam Boat in 1991, he had difficulty re-establishing the business. He asserted that the defamation made it difficult for him to retain existing contracts, obtain financing, and win new customers. But he also acknowledged that other factors, such as restarting the company from bankruptcy, the general downward trend in the fishing industry, and changing government regulations, affected profits. Relying upon past experience, Moe attributed at least 25 percent of his lost profits, which his accountant estimated to be $3,985,754, to the defamation.

At the close of the plaintiff's case, Robbins moved for dismissal. He argued that (1) he was protected by a common interest qualified privilege, and (2) he could not be liable because he did not provide the defamatory material contained in the letter. The trial court granted Robbins's motion, reasoning that (1) Robbins had acted under a qualified privilege, and (2) there was no showing that Robbins had abused the privilege.

The trial proceeded without Robbins. The jury found Wise liable and awarded Moe damages of $1,333,000.¹

Moe appeals Robbins's dismissal. He argues that (1) the trial court erred in finding Robbins protected by a qualified privilege; and (2) if we remand the case, the doctrine of estoppel should prevent Robbins from contesting the amount of damages. Robbins cross-appeals, arguing that: (1) he did not utter a defamatory statement and, if he did, it caused Moe no harm; (2) there was insufficient evidence to place the issue of lost profits before the jury when the trial proceeded against Wise; and (3) the trial court erred in assessing $5,000 in terms against him.²

DISCUSSION

I. Qualified Privilege

A trial court should grant a motion for a directed verdict if, as a matter of law, no evidence or reasonable inferences exist to sustain a verdict for the nonmoving party. Bender v. City of Seattle, 99 Wash.2d 582, 587, 664 P.2d 492 (1983). We review the evidence in the light most favorable to the nonmoving party. Bender, 99 Wash.2d at 587, 664 P.2d 492.

A defamation plaintiff must prove (1) falsity, (2) an unprivileged communication, (3) fault, and (4) damages. Caruso v. Local Union No. 690, 107 Wash.2d 524, 529, 730 P.2d 1299 (1987); Bender, 99 Wash.2d at 599, 664 P.2d 492. The type of fault and the quantum of evidence that the plaintiff must prove turns on whether plaintiff is a public official or a private individual. Bender, 99 Wash.2d at 599, 664 P.2d 492. A public figure plaintiff must show by clear and convincing evidence that the defendant published the defamatory matter with actual malice: with knowledge of the matter's falsity or made with reckless disregard of its falsity. New York Times Co. v. Sullivan, 376 U.S. 254, 285-86, 84 S.Ct. 710, 11 L.Ed.2d 686, 95 A.L.R.2d 1412 (1964); Margoles v. Hubbart, 111 Wash.2d 195, 199-200, 760 P.2d 324 (1988). By contrast, a private defamation plaintiff such as Moe need only establish negligence by a preponderance of the evidence. See Bender, 99 Wash.2d at 599,

664 P.2d 492; Haueter v. Cowles Publ'g Co., 61 Wash.App. 572, 580-81, 811 P.2d 231 (1991).

Here, the evidence was sufficient to establish elements one, falsity, and four, damages. At issue is whether the communication was privileged, and if so, whether Robbins lost the privilege through abuse.

1. The Applicability of a Qualified Privilege

There is a qualified privilege to make an otherwise defamatory statement under numerous circumstances. See generally RESTATEMENT (SECOND) OF TORTS §§ 593-597 (1977). The existence of the privilege is a matter of law for the court to decide. RESTATEMENT, supra, § 619(1); Liberty Bank of Seattle, Inc. v. Henderson, 75 Wash.App. 546, 563, 878 P.2d 1259 (1994); Demopolis v. Peoples Nat'l Bank, 59 Wash.App. 105, 110, 796 P.2d 426 (1990).

Here, the trial court applied the "common interest" qualified privilege. The common interest privilege applies when the declarant and the recipient have a common interest in the subject matter of the communication. See Ward v. Painters' Local Union No. 300, 41 Wash.2d 859, 865-66, 252 P.2d 253 (1953) (members of union discussing officers and members).

The rule is based on the fact that one is entitled to learn from his associates what is being done in a matter in which he has an interest in common with

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