The “celebratory” news release issued 2½ years ago by the law firm representing government entities in the whistleblower trial against plastic pipe producer J-M Manufacturing Co. may have been self-promoting “puffery” but it “falls comfortably within the permissible degree” of literary license.
That's what a panel of judges in the Second Appellate District of the Court of Appeals of the State of California ruled on May 2 about the news release put out by Phillips & Cohen LLP the day after their clients won a unanimous jury verdict in the first phase of the False Claims Act trial.
In a 2-1 decision, the judges said the November 2013 press release was “absolutely privileged” under California's civil code.
J-M, which now does business as JM Eagle, had sued the law firm for defamation and trade libel, saying it grossly misrepresented the jury's findings about its PVC pipe products used in 26 projects in California, Nevada and Virginia.
North America's largest plastic pipe manufacturer took issue with three sections of the news release and the headline, the latter of which stated the Los Angeles-based company “faces billions in damages after jury finds JM liable for making and selling faulty water pipe systems.”
The use of words like “faulty,” “substandard,” “weak” and “shoddy” were “neither a fair nor accurate report of the proceedings,” J-M argued.
A lower court judge agreed with the manufacturer, noting the jury found J-M violated the False Claims Act, which isn't the same as making and selling faulty product.
“Rather, the jury found that [J-M] made false representations of uniform compliance” with industry standards for strength and durability, the lower court judge said.
JM Eagle lawyers had said in court documents that simply meant the pipe extruder did not achieve absolute manufacturing perfection, which is why it and most businesses offer product warranties.
However, a majority of the appellate panel said the description of non-compliant pipe as “faulty” or “substandard” falls within the acceptable margin of literary license.
“In sum, Phillips & Cohen may be guilty of self-promotion and puffery; but its description of the evidence at trial and the jury's special verdict in the November 15, 2013 press release falls comfortably within the permissible degree of flexibility and literary license afforded communications to the media concerning judicial proceedings,” the majority opinion says.
The dissenting appellate panel member, Judge Stanley Blumenfeld, however, said “troubling statements” in the release were being minimized.
“The literary license doctrine did not permit Phillips & Cohen to falsely insinuate that the jury had found J-M's pipes to be defective,” he wrote. “This important doctrine provides breathing space for freedom of expression, but it does not operate to smother protections afforded by the defamation laws.”
Defamation laws protect against an intentional publication of a false statement that injures reputation while trade libel laws protect against the intentional disparagement of the quality of a business's services or products.
Blumenfeld also said the 2013 trial had a very narrow scope at the repeated urging of Phillips & Cohen.
“In proving that J-M falsely certified compliance with the industry standards, the plaintiffs did not produce evidence that any of their pipes failed to comply with those standards,” he said in a footnote of his dissenting opinion.
“On the contrary, they acknowledged that they could not do so because their pipes were buried underground and unavailable for strength testing. Instead, the plaintiffs sought to prove that the certifications were false by focusing on J-M's warranties about uniform compliance in the manufacturing and testing processes.”
Blumenfeld issued a 15-page dissenting opinion that says Phillips & Cohen distorted the jury findings and sought refuge in the literary license doctrine.
The 20-page majority opinion ends with the judges remanding the case back to Judge Elizabeth Allen White of the Superior Court of Los Angeles with directions to dismiss J-M's complaint and determine the attorney fees and costs to be awarded to Phillips & Cohen as the prevailing party.
Meanwhile, the dissenting judge said another price will be paid because the law firm “strayed far” from the limited reach of literary license.
“Granting a license to Phillips & Cohen in these circumstances comes at a considerable cost, the weakening of the protections afforded by the defamation laws,” Blumenfeld wrote.
