Blog Home

May 3, 2016

J-M Manufacturing Co. Inc., v. Phillips & Cohen LLP, (2016) 247 Cal.App.4th 87

Posted by: jab | Share | Comments Off on J-M Manufacturing Co. Inc., v. Phillips & Cohen LLP, (2016) 247 Cal.App.4th 87

Download Publication

The Second District holds a press release reporting a trial result is privileged under C.C. §47(d), a fair and true report of an official proceeding. 

J-M, a manufacturer of PVC pipes used in underground water systems, was sued by Phillips & Cohen’s clients for false claim act violations.  J-M represented its pipes met industry standards established by the American Water Works Association (AWWA) and the Underwriters Laboratories (UL) for long-term strength and durability.  Phillips & Cohen alleged J-M falsely claimed all its pipes met the standards and were manufactured in a substantially identical manner to a pipe originally determined to comply with the standards.   Phillips & Cohen introduced evidence J-M had altered its manufacturing process to meet increased production goals and paid employee bonuses to achieve these goals. Phillips & Cohen emphasized this was not a products liability case and it did not need to show the pipes had failed.  The jury agreed J-M falsely represented uniform compliance with the industry standards.

After this phase of the trial Phillips & Cohen issued a press release stating a jury found J-M manufactured and sold substandard plastic pipe used in water and sewer systems which could expose it to potentially billions of dollars in damages.  The release explained the trial was bifurcated between liability and damages.  J-M responded with a complaint for defamation and trade libel alleging the press release was not a fair or accurate report of the proceedings. J-M specifically challenged the headline and three statements that the trial exposed J-M’s deliberate efforts to cut costs by using shoddy manufacturing practices to make weaker but more profitable pipe; that States and Water Districts spent $2.2 billion to buy J-M pipe during the relevant period, and now may recover a substantial portion of that cost plus the cost to replace the pipe, which will cost billions of dollars; and that J-M defrauded its customers for 10 years, cared only about the amount of pipe produced, deceived outside inspection agencies, ignored failing test results, and that the fraud verdict was based on ample evidence.

Phillips & Cohen unsuccessfully moved to strike J-M’s complaint under C.C.P. § 425.16, California’s anti-Strategic Lawsuit Again Public Participation (anti-SLAPP) statute.   Although the press release was a protected activity, the trial court agreed with J-M it was not a fair and true report of the jury’s special verdict.

The two pronged anti-SLAPP analysis first requires defendant make a threshold showing the plaintiff’s cause of action arises from the defendant’s free speech or petition activity.  If so, the burden shifts to the plaintiff to show, by admissible evidence, a probability of prevailing on the claim.

Civil Code § 47(d) is an absolute privilege for a fair and true report in, or a communication to, a public journal, of a judicial proceeding, or anything said in its course.  It applies regardless of the defendants’ motive for making the report.  The report must capture the substance, the gist, or the “sting” of the proceeding measured by the natural and probable effect of the report on the mind of the average reader.  The defendant is afforded some flexibility and literary license, and the privilege will apply even if there are slight inaccuracies in the details if they do not mislead the reader.  It codified a “bridge privilege” between the litigation privilege and the fair report privilege.

The court determines if a statement is entitled to the privilege.  Whether the statement is “fair and true” can be a matter of law if there is no dispute on what occurred in the underlying judicial proceeding or what was contained in the report; otherwise, it is determined by the trier of fact.

In evaluating the effect a publication has on the average reader, the challenged language must be viewed in context to determine whether, applying a “totality of the circumstances” test, it is reasonably susceptible to the defamatory meaning alleged by the plaintiff.  Defamation actions cannot be based on snippets taken out of context.

Because a defamatory statement must contain a provable falsehood, mere opinions are not actionable unless the published statement declares or implies a provably false assertion of fact. An opinion implying facts capable of being proved true or false is not actionable if the underlying factual bases are true.

Viewing the press release in context, the average reader would reasonably understand it described the substantial evidence detailing J-M’s decade-long policy of emphasizing production quotas over quality control, essentially unchallenged by J-M, and the specific findings of the jury that J-M knowingly misrepresented its pipe had been manufactured and tested to assure it had the strength and durability required by industry standards. J-M’s strained interpretation claiming the release inaccurately implied the jury had found specific items of pipe were defective and had failed was based on snippets taken out of context.  The press release covered four related, but distinct topics: the trial, the verdict, the legal consequences of the verdict, and the reaction of several government officials. J-M’s complaint that the press release went beyond a report of the trial failed to distinguish among those discrete aspects or to acknowledge it accurately discussed the evidence about J-M’s dishonesty.

The headline, which contained the word “faulty,” cannot be considered in isolation.  “Faulty” could suggest the pipes sold contained manufacturing flaws that made them unserviceable, but that inference was not reasonably supportable when the press release is read as a whole.  The press release succinctly and accurately summarized the jury’s findings, correctly stated that it focused on exemplar plaintiffs from a larger group, and that further proceedings would determine damages.  In context, was a reasonable characterization of the jury’s findings.

The alleged defamatory matter must only be substantially in accord with the judicial record to be entitled to the privilege.  Phillip’s press release was substantially correct in its pejorative descriptions of J-M’s noncompliant and misrepresented pipe.  The term “faulty” was well within the acceptable margin of flexibility and literary license.

The description of J-M’s potential exposure of “billions in damages,” was tempered by the clear statement that a further trial was necessary to make this determination, and that it was based on the attorney’s opinion, which is non-actionable.

The press release included statements from some government officials claiming J-M’s pipe had already failed.  While the republication of those statements would be actionable if they were false, J-M did not make that claim.  Further, no reasonable reader could conclude those comments purported to describe the jury’s verdict .

Comment: The fair reporting privilege is another tool in the arsenal to defeat claims of non-clients based on attorney conduct, in this case out-of-court advocacy and self-promotion.

Tags: ,
Categories: Legal Updates

Comments are closed.