Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill, Inc.

• Decision Date: 27 June 2014
• Docket Number: No. 12–0522.,12–0522.
• Citation: 57 Tex. Sup. Ct. J. 531,434 S.W.3d 142
• Parties: WASTE MANAGEMENT OF TEXAS, INC., Petitioner, v. TEXAS DISPOSAL SYSTEMS LANDFILL, INC., Respondent.
• Court: Texas Supreme Court

434 S.W.3d 142

57 Tex. Sup. Ct. J. 531

WASTE MANAGEMENT OF TEXAS, INC., Petitioner,

v.TEXAS DISPOSAL SYSTEMS LANDFILL, INC., Respondent.

No. 12–0522.

Supreme Court of Texas.

Argued Dec. 3, 2013.

Decided May 9, 2014.

Rehearing Denied June 27, 2014.

Marc A. Fuller, Thomas S. Leatherbury, Vinson & Elkins LLP, R. Kent Piacenti Dallas, TX, for Amicus Curiae.

Amy J. Schumacher, Roach & Newton, L.L.P., Thomas R. Phillips, Baker Botts LLP, Austin, Daniel William Davis, Robert M. ‘Randy’ Roach Jr., Roach & Newton, L.L.P., Thomas M. Gregor, William W. Ogden, Ogden Gibson Broocks Longoria & Hall, LLP, Houston, Mollie Cohn Lambert, Cohn & Lambert, Cleveland, TX, for Petitioner.

James Alan Hemphill, John J. ‘Mike’ McKetta III, Graves Dougherty Hearon & Moody, P.C., Austin, TX, for Respondent.

Justice WILLETT delivered the opinion of the Court.

When the debate is lost, slander becomes the tool of the loser.¹

This defamation case specifically concerns libel (defamation in written form), but Socrates' perception of slander (defamation in spoken form) applies with no less force.

In 1995, Waste Management of Texas, Inc. (WMT) and Texas Disposal Systems Landfill, Inc. (TDS) competed for waste-disposal and landfill-services contracts with the cities of Austin and San Antonio. Fearing it was losing the bidding debate, WMT anonymously published a community “Action Alert” claiming that TDS's landfills were less environmentally sensitive than they actually were.

The right to speak freely is, of course, an enumerated right enshrined in both the Texas ² and Federal ³ constitutions. But free speech is not absolute ⁴ and does not insulate defamation.

Today's case distills to this question: To what degree is WMT liable for libel? To answer that question, we consider three separate inquiries: ⁵

1. Can a corporation even suffer reputation damages?

2. If so, are those damages economic or non-economic damages for purposes of the statutory cap on exemplary damages?

3. Does the evidence support the damages awarded by the jury?

The amici curiae ⁶ see this case as an overdue opportunity to scrap the traditional distinction between per se and per quod defamation, ⁷ citing many commentators ⁸ and jurisdictions ⁹ that lament the labels' needless opacity.¹⁰ Amici believe eliminating the distinction would harmonize Texas defamation law and its application. But we need not consider these broader issues to decide today's case.¹¹

We hold that a corporation may suffer reputation damages, and that such damages are noneconomic in nature. Also, while the evidence in this case is sufficient to support the award of remediation costs, the evidence is not sufficient to support the award of reputation damages. Finally, we agree that TDS is entitled to exemplary damages, but the amount, along with allowable pre-and post-judgment interest, must be recalculated. Accordingly, we affirm in part and reverse in part the court of appeals' judgment and remand to the court of appeals for further proceedings.

I. Background

In May 1995, TDS and the City of San Antonio began negotiating a contract for TDS to assume operations of San Antonio's Starcrest Transfer Station. The contract would have allowed TDS to haul San Antonio's waste from the Starcrest Station to TDS's landfill, starting in 1997. In 1996, the San Antonio City Council passed an ordinance authorizing the city manager to negotiate and execute a contract in accordance with the proposed agreement between San Antonio and TDS, which was attached and incorporated into the ordinance. But the parties had not yet executed a final contract by 1997—the originally proposed start date.

Concurrently with the San Antonio negotiations in 1996, the City of Austin issued a request for proposals, seeking bids from waste-disposal and landfill-services companies. TDS and WMT submitted bids and were selected to proceed to Phase II of the bidding process.

In early 1997, WMT anonymously published a community “Action Alert” memorandum, which was distributed to environmental and community leaders in Austin, including several Austin City Council members. WMT had hired a consultant, Don Martin, to draft the document. Martin gathered information from several WMT officials, who then approved, as TDS alleged, the document for publication. Martin sent the document to an Austin environmental advocate who then faxed it to a designated group of recipients. Martin focused the Alert on TDS's proposal with San Antonio regarding Starcrest Station.

The Alert effectively claimed that TDS's landfill was less environmentally sensitive than it actually was and as compared to other area landfills. Specifically, the Alert claimed that TDS's landfill in Travis County (1) had received an exception to federal environmental rules, (2) was operating without a fully synthetic liner, and (3) did not have a leachate collection system to prevent water that had come into contact with waste from contaminating groundwater. The Alert closed by urging readers to contact San Antonio city officials, Travis County officials, and the San Antonio Express News with any concerns.

TDS sued WMT in late 1997 for defamation, tortious interference with an existing or prospective contract, and business disparagement. TDS alleged that the Alert caused economic damages by delaying the execution of the San Antonio and Austin waste disposal contracts.¹² TDS sought compensatory and punitive damages and injunctive relief.

After TDS filed suit, WMT published a number of communications concerning TDS and its business. WMT sent a memorandum to the San Antonio Public Works Department, questioning whether the zoning ordinance of the Starcrest Station even permitted TDS to operate the Station. WMT also anonymously issued a memorandum to the San Antonio City Council and the Texas Natural Resource Conservation Commission contending that TDS's proposed contract would result in multiple permit violations. Finally, WMT issued a press release claiming TDS had “inspired” a protest demonstration and providing reasons why TDS should not be selected for the Austin contract. TDS amended its original petition to include these publications that post-dated the original Action Alert.¹³ TDS later added antitrust claims against WMT for its “attempt to monopolize.”

The trial court considered motions for summary judgment and dismissed all of TDS's claims except for defamation.¹⁴

At trial, TDS requested an instruction on defamation per se and the related issue of presumed damages, but the trial court declined to charge the jury on either. The jury found that WMT's statements were false and that TDS had shown by clear and convincing evidence that WMT knew of their falsity or had serious doubts about their truth. The jury thus made an affirmative finding on actual malice, but it determined that TDS had suffered no actual damages as a result of the publication. The trial court entered a take-nothing judgment against TDS, which TDS appealed.

In a first appeal,¹⁵ the court of appeals reversed, holding that the trial court erred by refusing to include a question about defamation per se in the charge. The court of appeals held that the trial court erred because there were underlying facts regarding whether the meaning and effect of WMT's words tended to affect TDS injuriously in its business. The court of appeals remanded the case for a new trial.

In the second trial, the trial court charged the jury on defamation per se and gave related instructions on presumed damages. The jury returned a verdict in favor of TDS, awarding it $450,592.03 for reasonable and necessary expenses, $0 for lost profits, $5 million for injury to reputation, and $20 million as exemplary damages based on the jury's finding that WMT published the defamatory statements with malice. The trial court applied the statutory cap to the jury's award of exemplary damages, treating the $5 million award for injury to reputation as non-economic damages,and rendered an exemplary damage award of $1,651,184.06. WMT appealed the trial court's judgment, and the court of appeals affirmed.¹⁶

The parties filed cross-petitions in this Court. In one issue, TDS contends the trial court erred by categorizing its reputation damages as non-economic damages for purposes of the statutory cap on exemplary damages. In ten issues, WMT asserts evidentiary and procedural defects. We first consider whether a for-profit corporation may recover for injury to reputation.

II. A Corporation May Recover Reputation Damages

WMT makes three arguments regarding reputation damages:

1. Corporations cannot suffer such damages.

2. Even if they could, reputational harm is a non-economic injury.

3. Here, the evidence was legally insufficient to sustain the jury's award of $5 million.

WMT argues in its brief that corporations cannot suffer reputation damages because corporations are not people. But WMT's position has not been entirely consistent. At oral argument WMT urged that corporations can never suffer reputation damages, but its Response Brief concedes that corporations may suffer some types of reputation damages: “lost profits, rehabilitative expenses, and diminished value of the corporation—are the only damages a corporate entity's reputation can sustain.” In any event, we discern WMT's contention to be that defamation per se is an inherently personal tort, and that it was designed to address harm that only natural persons may suffer, such as mental anguish, sleeplessness, or embarrassment. We have never adopted such an interpretation. On the contrary, it is well settled that corporations, like people, have reputations and may recover for harm inflicted on them.¹⁷

Our 1943 decision in Bell Publishing Co. v. Garrett Engineering Co. concerned similar facts. In that case, the corporate plaintiff, Garrett, sued an individual, Dr. Gober, and Bell Publishing Company for publishing an allegedly libelous article.¹⁸ The events leading up to the publication involved the City of...