Scott Fetzer Co. v. Williamson

• Decision Date: 29 November 1996
• Docket Number: Nos. 95-2966 and 95-3100,s. 95-2966 and 95-3100
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: SCOTT FETZER COMPANY, Kirby Company Division, Appellant/Cross-Appellee, v. Stan WILLIAMSON, doing business as The Vacuum Doctor, Appellee/Cross-Appellant.

Page 549

101 F.3d 549

SCOTT FETZER COMPANY, Kirby Company Division, Appellant/Cross-Appellee, v. Stan WILLIAMSON, doing business as The Vacuum Doctor,

Appellee/Cross-Appellant.

Nos. 95-2966 and 95-3100.

United States Court of Appeals,

Eighth Circuit.

Submitted June 12, 1996.

Decided Nov. 29, 1996.

David A. Kutik, Cleveland, OH, argued (Mark G. Schroeder, St. Paul, MN, on the brief), for Appellant/Cross-Appellee.

Paul Allan Sortland, Minneapolis, MN, argued, for Appellee/Cross-Appellant.

Before LOKEN, JOHN R. GIBSON, and HANSEN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

The Scott Fetzer Company and its Kirby Company Division appeal from a judgment of the district court ¹ on Stan Williamson's defamation claim against Kirby. Kirby argues that the defamatory statements made by its attorneys were absolutely privileged, that it cannot be liable for defamatory statements made by its distributor, that the district court erred in denying Kirby's motion for a new trial because Kirby had a qualified privilege to make its statements, and finally that the damage award was unreasonable and excessive. Williamson cross-appeals, arguing that the district court erred in setting aside his award for lost profits and that it abused its discretion in denying him his attorney's fees. We affirm.

Kirby manufactures vacuum cleaners under its trademark name of Kirby. Kirby tries to limit the distribution of its vacuum cleaners to sales to individual consumers through in-home demonstrations by Kirby-authorized distributors. Kirby will provide a warranty for a Kirby vacuum cleaner only when it is sold in this manner. To activate the factory warranty, Kirby requires the distributor to fill out a "gold card" in the name of the buyer. The gold card has the serial number of the vacuum cleaner and the name of the buyer. When the distributor sends the gold card to Kirby, Kirby registers the factory warranty for that vacuum cleaner in the name of the buyer on the gold card.

Stan Williamson does business as The Vacuum Doctor in Austin, Minnesota. His work consists of servicing and selling different makes of vacuum cleaners, including Kirby's. Williamson advertised new Kirby vacuum cleaners for sale.

The Kirby-authorized distributor in Austin, Mark Guentzel, complained to Kirby that Williamson was advertising new Kirby vacuum cleaners for sale when he was not a Kirby-authorized distributor. Kirby asked Guentzel to buy a new Kirby vacuum cleaner from Williamson, which Guentzel did by sending an employee, Carol Bakken, to Williamson's store. After receiving the vacuum cleaner, Guentzel sent it to Kirby.

Kirby had a gold card in its records for the Kirby vacuum cleaner that Williamson sold to Bakken. This gold card showed that Maria Guadalupe Estrada of Bell Gardens, California had bought this vacuum cleaner. The gold card also showed that a salesman for Mohammed Tai, a Kirby-authorized distributor in southern California, sold the vacuum cleaner to Estrada.

Estrada, however, never bought the Kirby vacuum cleaner covered by the gold card and sold by Williamson. A salesman attempted to sell Estrada a Kirby vacuum cleaner, but she refused because it was too expensive.

Tai had seven people working for him selling Kirby vacuum cleaners. To give his sales people an incentive to sell, Tai had sales contests offering prizes to the person who sold the most Kirby vacuum cleaners. Even though Tai knew that Kirby required him to sell its vacuum cleaners to individual consumers through in-home demonstrations, Tai also knew that his salespeople would sometimes sell new Kirby vacuum cleaners to wholesalers at low prices just to win his sales contests. Tai had no way of knowing who bought the new Kirby vacuum cleaner which Williamson later sold to Bakken in Minnesota.

Williamson received the Kirby vacuum cleaner he sold to Bakken from Robert Katzer. Katzer is a wholesaler of vacuum cleaners, including Kirby's, in southern California. Katzer bought the vacuum cleaner he sold to Williamson from Rashid Fahimi, another vacuum cleaner wholesaler in southern California. When Katzer bought the vacuum cleaner from Fahimi, it was new and still in its factory packaging. The Kirby vacuum cleaner was still in this condition when Katzer sent it to Williamson for sale to Bakken.

Besides asking Guentzel to buy a vacuum cleaner from Williamson, Kirby also had its attorneys send three letters to Williamson. The third letter from Kirby's attorneys stated that Williamson had sold as "new" a used Kirby vacuum cleaner. One of Kirby's attorneys sent a copy of this letter to two newspapers in which Williamson advertised.

After getting no response from Williamson to its letters, Kirby brought this action to enjoin some aspects of Williamson's advertising of Kirby vacuum cleaners as violations of the Lanham Act, 15 U.S.C. §§ 1051-1127 (1994), and various Minnesota laws. Williamson counterclaimed, arguing that Kirby had defamed him and violated the Minnesota Deceptive Trade Practices Act, Minn.Stat. §§ 325D.43 to 325D.48 (1994), and the Minnesota Consumer Fraud Act, Minn.Stat. §§ 325F.68 to 325F.70 (1994 & Supp.1995). The district court granted Kirby a preliminary injunction against certain aspects of Williamson's advertising mentioning Kirby. The district court decided Kirby's equitable claims, while a jury decided Williamson's claims.

After trial the district court ruled against Kirby on all of its claims, while the jury found that Kirby had defamed Williamson and violated the Minnesota Deceptive Trade Practices Act and the Minnesota Consumer Fraud Act. The jury also found that Kirby's defamation of Williamson had caused Williamson $90,000 in damages and that Kirby's violation of Minnesota law had cost Williamson $5,000 in lost profits. After trial the district court set aside the jury's finding that Williamson lost $5,000 in profits because Williamson failed to present sufficient evidence to support that finding. The district court also declined to award Williamson, as the prevailing party, his attorney's fees under the Lanham Act, the Minnesota Deceptive Trade Practices Act, and the Minnesota Consumer Fraud Act. Kirby appeals the jury's finding that it defamed Williamson, while Williamson cross-appeals the district court's setting aside of the award of lost profits and its denial of an award of attorney's fees.

I.

A.

Kirby argues that the district court should have granted Kirby judgment as a matter of law on Williamson's defamation claim because all of Kirby's statements concerning Williamson are absolutely privileged. ²

We review de novo a district court's decision on whether to grant a party's motion for judgment as a matter of law. Keenan v. Computer Assocs. Int'l, Inc., 13 F.3d 1266, 1268 (8th Cir.1994). In determining whether a party is entitled to judgment as a matter of law, we view the evidence in the light most favorable to the jury's verdict and must not engage in weighing evidence or considering questions of credibility. Id. at 1268-69. Judgment as a matter of law is appropriate only when all of the evidence points one way and is susceptible of no reasonable inference sustaining the jury's verdict. Id. at 1269. If any of Kirby's defamatory statements are not absolutely privileged, Kirby will not be entitled to judgment as a matter of law, as there will be evidence to support the jury's verdict that Kirby defamed Williamson.

Minnesota law governs Williamson's defamation claim against Kirby. Whether a statement is absolutely privileged is a question of law which we review de novo. Kittler v. Eckberg, Lammers, Briggs, Wolff & Vierling, 535 N.W.2d 653, 655 (Minn.Ct.App.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1850, 134 L.Ed.2d 950 (1996). An attorney is absolutely privileged to make defamatory statements as long as those statements are a part of the preparation for or the conduct of a judicial proceeding. Matthis v. Kennedy, 243 Minn. 219, 67 N.W.2d 413, 417-19 (1954); Kittler, 535 N.W.2d at 655. An attorney is not absolutely privileged to make defamatory statements to the news media when the news media is unconnected with a proposed judicial proceeding. Asay v. Hallmark Cards, Inc., 594 F.2d 692, 697-98 (8th Cir.1979) (applying Iowa law); Kleier Advertising, Inc. v. Premier Pontiac, Inc., 921 F.2d 1036, 1043-44 (10th Cir.1990) (applying Oklahoma law).

Kirby argues that its attorneys were absolutely privileged to send to the newspapers a copy of their third letter to Williamson because the copy was a communication preliminary to a proposed judicial proceeding. Kirby contends that it planned to sue Williamson over his advertising in the newspapers and that the newspapers, as publishers of his advertisements, were potential defendants in this proposed lawsuit. Kirby concludes that its attorneys sent the copy to the newspapers in an attempt to resolve the legal dispute between Kirby and Williamson and the newspapers.

The district court rejected Kirby's arguments on absolute privilege because Kirby did not contend, nor was there any evidence, that the newspapers were potential parties to Kirby's lawsuit against Williamson. We affirm the district court's order and reject Kirby's argument because there is no evidence that Kirby ever intended to sue the newspapers. Kirby's only contact with the newspapers was mailing them copies of its letters to Williamson. Those letters were directed exclusively at Williamson and his conduct, and threatened legal action only against Williamson. This record is insufficient for us to conclude that Kirby was considering bringing legal action against the newspapers, and that the mailing of the copies was part of its preparation for a lawsuit against the newspapers. Cf. Kittler, 535 N.W.2d at 656.

The evidence that Kirby cites to support its argument is: (1) that the newspapers were potentially liable to Kirby because they published Williamson's advertisements; (2) that Kirby sent copies only to the two newspapers...