Varian Medical Systems, Inc. v. Delfino

• Decision Date: 13 November 2003
• Docket Number: No. H024214,H024214
• Citation: 6 Cal.Rptr.3d 325,113 Cal.App.4th 273
• Court: California Court of Appeals Court of Appeals
• Parties: VARIAN MEDICAL SYSTEMS, INC., et al., Plaintiffs and Respondents, v. Michelangelo DELFINO et al., Defendants and Appellants.

6 Cal.Rptr.3d 325

113 Cal.App.4th 273

VARIAN MEDICAL SYSTEMS, INC., et al., Plaintiffs and Respondents, v. Michelangelo DELFINO et al., Defendants and Appellants.

No. H024214

Court of Appeal, Sixth District

November 13, 2003

As Modified on Denial of Rehearing December 12, 2003

Review Granted March 3, 2004.

Orrick, Herrington & Sutcliffe, Lynne C. Hermle, Matthew H. Poppe, Menlo Park, Law Offices of Gerald Z. Marer, Gerald Z. Marer, San Jose, Farella, Braun & Martel, Douglas R. Young, San Francisco, Pillsbury Winthrop, Renee A. Jansen, Palo Alto, for Plaintiffs/Appellants Varian Medical Systems, Inc., et al.

Horvitz & Levy, Jon B. Eisenberg, Oakland, Jeremy B. Rosen, Law Offices of Randall M. Widmann, Randall M. Widmann, Palo Alto, for Defendant/Appellant Mary Day.

Horvitz & Levy, Jon B. Eisenberg, Oakland, Jeremy B. Rosen, Glynn P. Falcon, Palo Alto, for Defendant/Appellant Michelangelo Delfino.

PREMO, Acting P.J.

Defendants Michelangelo Delfino and Mary Day used Internet bulletin boards to post numerous derogatory messages about their former employer, Varian Associates, Inc. (Varian) and two Varian executives. Varian and the two executives sued. Defendants treated the lawsuit as a challenge to their constitutional right to free speech and responded with a flood of spiteful messages posted on hundreds of Internet bulletin boards. By the time of trial defendants had posted over 13,000 messages and vowed to continue posting until they died.

Defendants' position at trial was that their postings contained only truth, opinion, or hyperbole. They stressed their belief that they were constitutionally entitled to publish the offending messages and that large corporate plaintiffs ought not be permitted to stifle free speech by filing suit against them. The jury was not persuaded. Defendants were found liable for defamation, invasion of privacy, breach of contract, and conspiracy. The trial court determined that in view of defendants' promise to post until they died an injunction was necessary to prevent future injury. The judgment gives plaintiffs $775,000 in damages and a broad injunction.

On appeal we are asked to consider whether the fact that defendants' messages appeared on Internet bulletin boards affects the character of the offending messages for purposes of defamation law. Specifically, defendants argue that typical Internet hyperbole cannot be considered defamatory. Defendants also argue that to the extent speech on the Internet may be defamatory it must be designated as slander, which requires proof of special damages, rather than libel, for which damages are presumed. We reject these and defendants' other challenges to the damages portion of the judgment. We do find merit in defendants' argument that the portion of the injunction prohibiting future speech is an impermissible prior restraint under both the state and federal constitutions. Accordingly, we shall modify the judgment striking the invalid portions of the injunction and as modified, affirm.

I. FACTUAL BACKGROUND

Plaintiffs Varian Medical Systems, Inc. (VMS) and Varian Semiconductor Equipment Associates, Inc. (VSEA)¹ are publicly traded companies that manufacture technological equipment for medical and other markets. Plaintiff George Zdasiuk is a vice president of VMS and plaintiff Susan B. Felch is the director of a VSEA research center. Defendant Delfino was employed by Varian as a senior engineer. Zdasiuk fired him in October 1998 for complaints that he was disruptive and harassing to Felch and other co-workers. Defendant Day resigned in sympathy two months later.

Immediately after Delfino lost his job he began a campaign of posting derogatory messages about plaintiffs on Internet bulletin boards.² He posted some of his first messages on the Yahoo! finance board for Varian. With rare exceptions, the messages on the Yahoo! board that were posted by persons other than defendants concerned the price of the stock and related issues such as, "My broker sees Varian dropping to 35 before the breakup ...," and "Does anybody know how much the profit sharing is this year."

Some of Delfino's messages were similar to those posted by others. Some were much more caustic. He maligned Varian products. He accused Felch of being "a manipulative liar" or "a neurotic hallucinator." He charged Zdasiuk with being mentally ill. He claimed both executives were incompetent and accused them of being chronic liars. Many of his messages contained sexual implications. One early message implied that Felch had attained her position by having sex with a supervisor: "building 7, looks like a ghost town, with the IIS manager Sue Felch doing as much as she has ever done.... I'll bet you big money that Dick had nothing to say about her and her so-called operation in Palo Alto. The only thing that makes any sense, and I'm gropping, [sic] is there is a dress with a stain on it somewhere .... find the dress and you might make money!!!"

After plaintiffs filed this lawsuit the torrent of messages began in earnest. Defendants accused plaintiffs of trying to chill their right to free speech and responded to the perceived infringement by accelerating the publication of their remarks and intensifying their viciousness. They even published their own website dedicated to an ongoing narrative of the case.

Many of the messages in the new flood of postings were variations on Delfino's original themes. There were messages denigrating Varian products and Varian executives, messages implying sexual improprieties, messages referring to Felch and Zdasiuk as incompetent, and messages accusing them of harassment and discrimination. One message accused Felch of stalking Day.

The progress of the lawsuit itself provided a rich source of material. Defendants typically distorted actual facts or statements or simply took statements out of context to make their meaning derogatory. For example, Megan Gray, an attorney for a third party, filed a motion in this action during the discovery phase. In her papers Gray referred to the portion of the complaint that quoted defendants' message about the "dress with a stain." She wrote: "For example, Defendants often posted messages implying, if not outright stating that Plaintiff Felch is a female executive who acquired semen stains on her clothes from oral sex with a supervisor, which was supposedly the reason she still had a job, etc." Defendants took a portion of that quote and posted numerous messages like these: "`Felch is a female executive who acquired semen stains on her clothes from oral sex with a supervisor ...' was stated by Megan Gray the famous LA lawyer." "And Megan E. Gray, the famous lawyer, seems to think the bitch even has a semen stained dress from having oral sex with a supervisor."

"Bathroom" postings were another recurring theme. Before Delfino lost his job Felch had complained that on hundreds of occasions he passed the window to her office and made hand gestures, mimicking her telephone conversations. Varian's director of human resources installed a video camera in Felch's office to try to capture Delfino's gestures on tape. The camera remained in place for a few weeks. Defendants first learned of the video camera during discovery in this case. It happens that Felch's office had windows on its hallway side. Employee restrooms were located across the hall from her office. It also happens that "Take Your Child to Work Day" may have taken place during the few weeks the video camera was operating. Putting these facts together, defendants began posting messages such as these: "Wow! [¶] Unbelievable testimony about children who used a Varian bathroom videotaped with a hidden camera" and "Bill, you may have said it best when you suggested prison time and stiff fines for those despicable individuals responsible for secretly videotaping unsuspecting employees and visitors going to the bathroom at Varian." Defendants admitted posting more than 300 messages on this topic alone.

Plaintiffs denied the truth of all the derogatory messages. Felch and Zdasiuk also testified that they were disturbed by the messages and felt threatened by them. Zdasiuk was particularly frightened by Delfino's statement that Delfino was the "worst nightmare" of anyone who would be so foolish as to go out of their way to annoy him.

II. PROCEDURAl Summary

Plaintiffs filed this lawsuit in February 1999.³ Defendants mounted a vigorous defense. The matter moved from superior court to federal court, then back to superior court. Upon remand to superior court defendants filed special motions to strike the complaint as a strategic lawsuit against public participation (the anti-SLAPP motions) (Code Civ. Proc., § 425.16). The trial court denied those motions and defendants appealed. Defendants were unsuccessful in having the matter stayed while their appeal was pending and the case went to trial in the late fall of 2001.

The jury found defendants liable for defamation (libel), invasion of privacy (appropriation of name), breach of contract,⁴ and conspiracy and determined as to each tort that defendants had acted with malice, fraud or oppression. The jury awarded plaintiffs $425,000 in presumed or general damages and $350,000 in punitive damages. No special damages were awarded on any cause of action.

Basing its ruling on the evidence adduced at trial, the trial court ordered a permanent injunction, which we shall discuss in more detail below.

Judgment was entered and we dismissed as moot defendants' appeal from the denial of their anti-SLAPP motions. Defendants timely filed notice of appeal from the judgment and from the trial court's denial of their motion for judgment notwithstanding the verdict. We have stayed enforcement of both the damages and the injunctive portions of the judgment and granted plaintiffs' request for calendar preference. We deferred ruling upon defendants' post-judgment motion for adjudication of contempt as to plaintiffs, ordering it to...