OLee v. Compuware Corp.

Filed 4/2/07 OLee v. Compuware Corp. CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

Introduction

Defendants Compuware Corporation (Compuware) and W. Alan Cantrell (Cantrell) appeal and plaintiffs Mary McCarthy OLee (McCarthy)^[1]and Aidan OLee (OLee) cross-appeal from a judgment following jury verdicts in favor of plaintiffs in their action for libel against defendants. The jury awarded OLee $550,000 and McCarthy $600,000 in compensatory damages and $5 million each in punitive damages. The trial court found the punitive damages award exceeded its constitutional maximum and reduced the punitive damages award to $1.65 million to OLee and $1.8 million McCarthy (three times the compensatory damages verdict).

Defendants contend that the evidence was insufficient to support the jurys finding of actual malice to defeat the common interest privilege; that the evidence of malice, oppression or fraud was insufficient to support any punitive damages award; and that the reduced punitive damages award was unconstitutionally excessive. On their cross-appeal, plaintiffs contend that the jurys punitive damages award of $5 million to each plaintiff was constitutional and that the trial court erred in reducing the award. We shall affirm the judgment.

Statement of Facts

Compuware, a software company headquartered in Michigan, provides temporary information technology (IT) staffing services on a contract basis. In August 1999, Compuware purchased DPRC, another IT staffing company, to increase Compuwares West Coast presence. DPRC had purchased IT staffing company Ridge Consulting in October 1998. Ridge was a preferred vendor of IT staffing services to Charles Schwab & Co. (Schwab). After acquiring DPRC, Compuware entered a master services agreement as a preferred vendor of Schwab as Compuware Corporation dba RIDGE Consultants. Schwabs preferred vendor program was a staffing program whereby preferred vendors, such as Compuware, hired contractors for work assignments at Schwab. Elaine Taylor, a consultant to Schwab, had built and managed the Schwab preferred vendor program. In conjunction with counsel for Schwab, Taylor drafted the preferred vendor contract between Schwab and Compuware. Pursuant to the contract, Compuware was required to use the Ridge dba in supplying services to Schwab. Because the number of preferred vendors was very small and new suppliers were not being added to the list, the dba designation was required in cases where a preferred vendor had been acquired by another company, to ensure that Schwab managers understood that there was continuity in the program and that a new supplier had not been added, and also to allow time for a transition process from the acquired preferred vendor to the acquiring company. The Schwab account was a $10 to $12 million account, the largest account in Compuwares San Francisco office, comprising 70 percent of that offices revenue. Because of persistent back office billing issues, Schwab had twice put Compuware on quality review, which could possibly lead to termination of their business agreement.

OLee was working at DPRC when it was acquired by Compuware in 1999. She became a Compuware employee and continued working as the account manager responsible for the Schwab preferred vendor program. She managed the account from Compuwares San Francisco office. OLee coordinated day-to-day sales with Schwab. She had no responsibility for generating bills or invoices to Schwab. Invoices were generated from Compuwares corporate offices in Michigan onto a Schwab spreadsheet. Although not technically part of her job, OLee reviewed invoices for mistakes and notified Compuwares corporate office of any changes that needed to be made. Corrected invoices would be returned to OLee who would submit them to Schwabs accounts payable via email. The Schwab spreadsheet invoices identified the vendor name as Ridge Consultants pursuant to the Schwab-Compuware contract. OLee had no responsibility for payments or collections. Schwab had a single point of contact rule pursuant to the contract, therefore invoices were sent from OLees email directly to Schwabs accounts payable. The Schwab preferred vendor program required that OLee have Ridge in the name of her email address and her business cards as an identifier because Compuware was doing business as Ridge Consultants and Schwab hiring managers receiving emails from OLee needed to be able to identify the vendor she was representing. Her email account was created and maintained by Compuwares corporate IT department.

OLee was a top producer at Compuware. In her last year at Compuware, OLees compensation totaled $360,000, based mostly upon commissions for consultants placed by Compuware at Schwab. Her salary was determined on a base plus commission formula (based upon hourly billings by consultants placed at Schwab) as it had been under the DPRC compensation plan. The calculation of her compensation was done by financial analysts at Compuware. Her compensation plan had been grandfathered in when Compuware acquired DPRC. The Compuware compensation plan differed from the DPRC plan. Although the Compuware base salary was higher (around $60,000), Compuware commissions were smaller and, unlike the DPRC plan, there was a cap on commissions. Two employees remained on the DPRC compensation plan in March of 2001, OLee and a Southern California sales representative, Rebecca Bailey.

McCarthy was OLees stepmother. McCarthy began working at Compuware in May 2000. McCarthy was recruited by Mary Ellen Weaver, the then-western region vice president of Compuwares professional services division, and Tom Vadnais, the then-executive vice president of Compuwares professional services division, to take over Weavers position. The fact that McCarthy was OLees stepmother was fully disclosed to both Weaver and Vadnais during the interview process. In fact, Weaver had asked OLee whether her stepmother would be interested in the position before recruiting McCarthy and she obtained McCarthys phone number from OLee. McCarthy was based in Compuwares Oakland office. Her responsibilities as Compuwares western regional vice president included oversight of IT staffing in six western branches, including San Francisco. Neither OLee nor McCarthy ever created invoices or managed billing for the Schwab account. Both McCarthy and OLee were at will employees of Compuware.

In January 2001, Compuwares professional services division came under the control of defendant Cantrell, who replaced Vadnais. McCarthy reported directly to him and met with him on several occasions in the first quarter of 2001.

In early November 2000, Taylor informed all preferred vendors that any unreported, unpaid invoices for contractor expenses before July 2000, would need to be submitted to Schwab before November 30th or Schwab would consider them forgiven. Compuware did not locate any unpaid invoices until January 2001, when Cathy Moder, OLees assistant, learned that a $267,000 invoice had been submitted, but had never been paid. Compuware resubmitted the $267,000 invoice. Schwab paid the invoice, but advised Compuware that Schwab believed the debt should have been forgiven. Compuware returned the check. At that point and persistently thereafter, Schwab requested that Compuware provide it with a written release or statement saying that Compuware was not going to pursue the money.

In January 2001, when Cantrell became Compuwares senior vice president of professional services, he had been instructed by Compuwares chairman and chief executive officer (CEO) to focus on integration of all the various business entities that comprised the professional services division and also to make sure we did business one way and under the name of Compuware. Cantrell directed McCarthy to have the West Coast region adopt Compuwares business model and conduct business exclusively under the Compuware name. McCarthy believed the transition should be slower. Cantrell testified that he wanted to establish a relationship at the executive level with Schwab and that he directed McCarthy to do so. In January 2001, when Cantrell learned of the outstanding receivable on the Schwab account, he wanted to meet with Schwab executives to resolve the dispute and to establish a relationship with executives at Schwab.

McCarthy testified that there was lots of tension in the relationship between her and Cantrell, and that they did not communicate well. McCarthy recommended to Laura Fournier, Compuwares chief financial officer (CFO), that Compuware should generate and sign the release that Schwab had requested and that Compuware should write off the debt, as the Schwab account was at risk. Fournier agreed and said she would talk with Cantrell. Meanwhile, Compuware conducted an audit of its outstanding receivables to the Schwab account. Ann Horn, who handled billing for Compuwares accounting department, conducted the audit. In an email to Fournier and McCarthy, she recommended that Compuware write off $500,717.64 in outstanding receivables to Schwab over the previous two years. Horn requested direction as to another $50,589.35 in pending invoices. Although surprised at the amount of the receivable, McCarthy continued to believe it was in Compuwares best interest to write off the debt. Fournier agreed that the amount should be written off.

No one ever told McCarthy that invoices were missing or that Compuware could not verify the amount Schwab owed. Nor had anyone ever told OLee that Compuware was missing invoices or that Compuware was unable to come up with an exact amount outstanding on bills to Schwab. Fournier told McCarthy that the majority of difficulties in billing clients correctly were based on the migration of data from the DPRC Peoplesoft system through the Compuware system. These difficulties with migration from the DPRC system through the Compuware system were not limited to the Schwab account or to the San Francisco branch office.

In mid-March 2001, McCarthy fired the San Francisco branch manager and began searching for a replacement. In the interim, she volunteered to oversee the San Francisco operation. Consequently, she became OLees direct supervisor for the interim period. On March 29, 2001, McCarthy received an email from OLee regarding a number of issues, including OLees concern that she was being moved to the radically different standard Compuware compensation plan and had no idea what the potential salary range would be for her.

In March or early April 2001, McCarthy met with Cantrell where she advised writing off the Schwab receivable and requested a special compensation plan for the two DPRC legacy employees, OLee and Bailey, both top producers in the region and both managing significant accounts. McCarthy disagreed with Cantrells desire to decrease OLees compensation to the Compuware standard plan and suggested that a middle ground be found between the current high compensation under the legacy DPRC contract and Compuwares lower standard plan, urging that the base salary be increased, while instituting the Compuware commission and cap. She made the same request with respect to Rebecca Bailey. The conversation became very volatile and heated. McCarthy testified that Cantrell stated he had just learned that OLee was McCarthys stepdaughter and asked why McCarthy had not brought that to his attention before and whether the request for compensation consideration had anything to do with that fact. McCarthy testified she did not tell Cantrell about the relationship because it never occurred to [her] that he didnt know. Cantrell testified he was shocked to learn after their conversation that McCarthy was OLees stepmotheralthough the fact was known to most of those who worked with plaintiffs, including Cantrells predecessor Vadnais, Compuwares CFO Fournier, and Compuwares head of human resources.

After that conversation, Cantrell determined to fire McCarthy and OLee. Cantrell gathered a team from the corporate headquarters in Michigan (including three other executives and an assistant from human resources), to travel to California to assist him with the terminations, which were carried out on April 5, 2001. Cantrell gathered the entire professional services staff into a conference room with the blinds closed and kept them there while the plaintiffs were being fired. He then announced to the group that plaintiffs had been terminated. Cantrell testified this was standard procedure. However, this was not standard Compuware procedure, according to McCarthy. In her experience, when a regional manager had been terminated, he was flown to Michigan and the termination took place at corporate headquarters.

After firing OLee and McCarthy, Cantrell saw Ridge Consulting letterhead in OLees desk drawer.

After the terminations, Compuware asked for a meeting with Schwab. On or about April 12, 2001, McCarthys replacement and other executive members of the team that had participated in the terminations met with Taylor, Donna Davis (Schwabs director of strategic staffing), and Dana Aspillera (manager of Schwabs contingent workforce program) at Schwab offices. Cantrell was not present. Schwab wanted to resolve the $267,000 debt question; Compuware did not wish to discuss that issue, but rather wished to discuss expansion of the business relationship between Schwab and Compuware. The Compuware representatives did not mention any missing invoices or any accounting discrepancy at that meeting. Cantrell testified that Compuwares representatives had reported that it was an ugly meeting, with Taylor upset at OLees termination and advising that pursuit of the $267,000 receivable would put the business relationship in jeopardy.

Nearly three weeks after firing McCarthy and OLee, on April 24, 2001, Cantrell drafted and sent a letter to Dawn Lepore, Schwabs vice chairman, executive vice president and chief information officer (CIO), on Compuwares corporate headquarters letterhead. The letter states:

I am writing to ask for your assistance and guidance in resolving a difficult situation that exists between our companies.

For several years, Compuware has provided IT staff supplementation services to Schwab. Our business relationship began in August 1999 when Compuware acquired DPRC Corporation. Prior to this DPRC had been providing services through, Ridge Consulting, a company it acquired in October 1998.

Over the past year and one half, our regional Vice President Mary McCarthy and local Account Manager Aiden [sic] OLee, coordinated day-to-day sales and administrative activities with Elaine Taylor, a contractor that managed preferred vendors on your behalf.

I began to investigate our relationship with Charles Schwab when I learned of a large outstanding accounts receivable balance, which was not being paid. Here is what I learned:

  Ms. Taylor insisted and McCarthy and OLee consented to continue to operate as if Ridge Consulting still existed.

  Compuware invoices were retyped on Ridge Consulting letterhead to make it appear that Ridge was performing the work.

  Ms. Taylor believes that Compuware is owed approximately $267,000.

  Compuware has no way to verify the amount owed since McCarthy and OLee created Ridge invoices that we cannot audit.

  Ms. Taylor has stated that our business relationship will be terminated if we insist on collecting the amounts we are owed.

  OLee was paid exorbitant amounts of commissions based on business at Schwab that we cannot verify.

  OLee had an undisclosed personal relationship with McCarthy.

  Ms. Taylor has shown a reluctance to work with any Compuware manager other than OLee.

Compuware prides itself in providing the highest quality IT professional services to all customers while maintaining a positive, collaborative, mutually beneficial business relationship. Based on my findings, I had no choice but to terminate both Ms. McCarthy and OLee.

I would appreciate your consideration in two areas:

1.  Reconciling invoices, time sheets and monies owed to determine exactly how much work was done, monies invoiced, monies paid by Schwab and collected by Compuware to see if fraud occurred.

2.  Arranging a meeting between you and I so that we may establish a business relationship so that both companies can benefit in the future.

We believe that we have resolved our local issues and look forward to a very productive relationship with Schwab. Compuware values our long-standing business relationship and would like to further that relationship with immediate resolution of these concerns. I will call you within the next week so that we can discuss these issues.

The letter was copied to the following Schwab executives: David Pottruck, president and co-CEO; Andy Rich, executive vice president human resources; Kristen Hunsaker, vice president tech staffing; and Donna Davis, director strategic staffing programs. It was also copied to Elaine Taylor at Schwab and Compuware president, Joseph Nathan. The letter and copies were not marked confidential and were opened in the Schwab mail room as was Schwabs standard practice, before distribution to the recipients.

In writing the letter, Cantrell chose his words very carefully. He understood it was important to be accurate, and that by signing his name he was confirming the contents of the letter were correct. Before the letter was sent, it was reviewed and approved by Nathan, and Compuwares chairman of the board, Peter Carmanos. Neither suggested any changes.

Cantrell sent a copy of the letter to independent contractor Taylor. However, he did not send a copy to McCarthy or OLee. At least eight other people at Schwab saw or heard about the letter, not including legal counsel. Several others at Compuware had seen the letter or heard about it. In addition to Carmanos and Nathan, the letter was seen by at least Ken Baldwin, Carisue Benh, Jim Scully, Ann Horn, and Cantrells secretary. At least one recruiter at Compuware, Tom Lingenfelter, heard about the letter. Eventually, plaintiffs saw the letter, as did Henry OLee (McCarthys husband and OLees father) and James Abbotts, OLees then fianc.

Schwab responded sharply to Cantrells April 24th letter and understood its defamatory content. In a letter response, Kristen Hunsaker, Schwab vice president for technology staffing, stated in relevant part: Your letter outlines a number of concerns raised regarding the relationship between Schwab and Compuware and its predecessors, including a reference to a concern about fraudulent activity. It is unclear from your letter to whom your implication of fraud is addressed. . . . Although this letter will not respond to all of the specifics in your letter, because of the seriousness of your implication regarding fraud I feel compelled to provide you with some basic facts that clearly establish that Schwab was engaged in no such activity. Some of the basic facts were that Taylor had not insisted and McCarthy and OLee had not consented to continue to operate as if Ridge Consulting still existed. The continuance of the relationship with the Ridge name was agreed to by Compuware and Schwab and was required by the contract between them. Compuware invoices had not been retyped on Ridge Consulting letterhead to make it appear that Ridge was performing the work as it was not possible to do so, because Schwab did not accept invoices on the vendors letterhead, but required that preferred vendors submit invoices electronically to Schwabs accounts payable department on a Schwab form. Taylor had not shown a reluctance to work with any Compuware manager other than OLee.

Compuware and Schwab entered a period of negotiations regarding the outstanding invoices. By September, Compuware and Schwab had reached a negotiated settlement whereby Schwab paid Compuware $325,000. Schwab required a retraction and clarification of several specific allegations of the April 24th letter regarding Schwab and Taylor.

On September 25, 2001, Cantrell wrote a letter to Schwab on behalf of Compuware, essentially retracting all statements relating to Taylor and Schwab only. Defendants did not correct or retract any of the allegations made about plaintiffs, despite having evidence that the previous allegations were not true.

Plaintiffs were substantially injured by the April 24th letter. McCarthy and OLee each testified that they were devastated and humiliated by the letter. It caused them to feel helpless, to cry frequently and they suffered loss of sleep, distress, anxiety, and a loss of confidence at a time when they were extremely vulnerable. Each testified she had been much more affected by the letter implicating them in fraud, than by the loss of her job. Neither challenged Compuwares right to fire them.

OLee found a new job within three months of her termination and in October 2001, she moved to Modis, a Compuware competitor and Schwab preferred vendor. She was hired to handle the Schwab account and would not have been hired if she could not work with Schwab. However, she testified that the letter affected her approach to her career even after her employment by Modis on the Schwab account. She felt the letter had destroyed her confidence in her dealings with Schwab. She did not feel comfortable selling high cost consultant solutions to Schwab at an executive level for fear these executives would recall the letter. She was afraid to call upon top Schwab executives. She was uncertain that she could ever do more than sell at a manager level. McCarthy was hired in August 2001 as an executive director at Intelemark, an IT staffing company, to be in charge of five branches in the Western region. At the time of trial, she was working for a different company as a regional sales director. McCarthy and OLee explained that Compuwares written accusation of professional misconduct was like an unexploded landmine in their future career paths. They can never know exactly how much their reputations in the IT staffing community have already been damaged by these allegations, and they fear that these accusations will re-emerge to cause harm in the future.

Procedural History

This action was filed in April 2002. Plaintiffs did not challenge their terminations, but did seek damages for defamation and for intentional affliction of emotional distress. The defamation cause of action came to trial on June 22, 2005. The defendants stipulated to the instructions given to the jury. On July 6, 2005, the jury reached its verdict, finding defendants libeled plaintiffs with malice. In special verdicts, the jury found that one or more of the statements might be reasonably understood by people to whom they were made to be libel; that defendants, in making one or more of the libelous statements about plaintiffs, acted with hatred or ill will toward plaintiffs, or without a good faith belief in the truth of the statement or statements; that the libel was a substantial factor in causing harm to McCarthy and to OLee; and that plaintiffs had proved by clear and convincing evidence that defendants acted with malice, oppression or fraud in libeling plaintiffs. The jury awarded McCarthy actual damages of $100,000 plus presumed damages of $500,000, and OLee actual damages of $50,000 and presumed damages of $500,000.

On July 7, 2005, the punitive damages phase of the trial was held. The parties stipulated that Compuwares net worth was $1.5 billion and Alan Cantrells net worth was $2.1 million. During deliberations, the jury asked one question: Do the awarded damages have to be in money, i.e., can we require an apology? The parties stipulated and the court instructed the jury that the answers were yes, damages have to be in money, and no, they could not require an apology. The jury returned a punitive damages award against Compuware of $5 million to McCarthy and $5 million to OLee. Plaintiffs counsel had not asked the jury for a specific award of punitive damages against Cantrell individually and no punitive damages were awarded against him. Judgment was entered on July 18, 2005. Pursuant to stipulation, the court stayed enforcement of the judgment until its ruling upon defendants motions for judgment notwithstanding the verdict (JNOV) and for a new trial.

Defendants moved for JNOV and for a new trial, arguing that the evidence was insufficient to support the verdicts and that the punitive damages award was excessive. On August 19, 2005, the trial court denied the motion for JNOV, finding that substantial evidence supported the jurys determinations of liability, causation, actual and presumed damages, and its findings that defendants acted with malice, oppression or fraud in libeling plaintiffs. The court also concluded that substantial evidence supported each of the jurys findings, other than the amount of punitive damages.

As to the defendants new trial motion, the trial court determined that the punitive damages awarded were excessive when measured by constitutional requirements. The court concluded that in the context of this case, the same 3-to-1 ratio represents the maximum constitutional award under both federal and state due process. The court therefore ordered an absolute reduction of the punitive damages to the sum of $1,800,000 million in favor of McCarthy and $1,650,000 million in favor of OLee.

The court stated that, but for its constitutional determination, it would have granted a new trial of the punitive damages issue on the ground that the punitive damages were excessive, subject to the condition that the motion for new trial would be denied as to McCarthy if she consented to reduction of the punitive damage award in her favor to $1,800,000, and as to OLee if she consented to reduction of the punitive damages award in her favor to $1,650,000. However, the court stated that it need not, and does not, issue such an order because of its concurrent determination that the constitutional maximum coincides with what otherwise would have been this Courts assessment of lawful and proper punitive damage awards.

This timely appeal and cross-appeal followed.

Discussion

I. Substantial evidence of actual malice

On appeal, defendants concede that substantial evidence supports the jurys finding that the April 24th letter libeled plaintiffs. However, defendants contend that there was not sufficient evidence of actual malice to defeat the common interest privilege of Civil Code section 47, subdivision (c).^[2]We disagree.

Section 45 defines libel as a false and unprivileged publication by writing, . . .which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.

Under section 47, subdivision (c), a published statement that is false and defamatory is, nevertheless, privileged where it is made without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent . . . . (See Agarwal v. Johnson (1979) 25 Cal.3d 932, 944 (Agarwal), disapproved on other grounds in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4; Glenn K. Jackson, Inc. v. Roe (2001) 273 F.3d 1192, 1201-1202.) The privilege is conditional. It may be defeated if the defendant abuses the privilege by excessive publication or the inclusion of immaterial matters which have no bearing upon the interest sought to be protected [citations] or if the . . . statements are actuated by malice. [Citation.] (Deaile v. General Telephone Co. of California(1974) 40 Cal.App.3d 841, 847 (Deaile); see  47, subd. (c); Noel v. River Hills Wilsons, Inc. (2003) 113 Cal.App.4th 1363, 1368-1369 (Noel).)

In finding that defendants, in making one or more of the libelous statements about plaintiffs, acted with hatred or ill will toward plaintiffs, or without a good faith belief in the truth of the statement or statements, the jury found that defendants acted with malice, rendering inapplicable the common interest privilege of section 47, subdivision (c). The malice referred to by the statute is actual malice or malice in fact, that is, a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person. [Citation.] The factual issue is whether the publication was so motivated. Thus the privilege is lost if the publication is motivated by hatred or ill will toward plaintiff [citations], or by any cause other than the desire to protect the interest for the protection of which the privilege is given. (Brewer v. SecondBaptistChurch [(1948)] 32 Cal.2d 791, 797; [citation]). (Agarwal, supra, 25 Cal.3d at pp. 944-945; see Noel, supra, 113 Cal.App.4th at p. 1370.)

Insofar as the common-interest privilege is concerned, malice is not inferred from the communication itself. ( 48.)  The malice necessary to defeat a qualified privilege is actual malice which is established by a showing that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiffs rights (citations). [Citations.] [Citations.] (Noel, supra, 113 Cal.App.4th at p. 1370.)  [M]ere negligence . . . in the sense of oversight or unintentional error, is not alone enough to constitute malice. It is only when the negligence amounts to a reckless or wanton disregard for the truth, so as to reasonably imply a willful disregard for or avoidance of accuracy, that malice is shown. [Citations.] (Id. at p. 1371.)

The question of defendants state of mind was one of fact for the jury to determine. (Deaile, supra, 40 Cal.App.3d at p. 847, citing Brewer v. SecondBaptistChurch, supra[, 32 Cal.2d at p. 799].)   [D]eterminations regarding motivation and intent depend on complicated inferences from the evidence and are therefore peculiarly within the province of the factfinder.  [Citation.] (Begnal v. Canfield & Associates, Inc. (2000) 78 Cal.App.4th 66, 77.) The record contains conflicting evidence as to whether Cantrell acted with actual malice. The jurys verdict can be sustained if the record contains any substantial evidence upon which the jury could make a finding that the communication was malicious. (Agarwal, supra, 25 Cal.3d at p. 945.)

The jury need not have believed Cantrells self-serving testimony that he acted in good faith, upon the information that he had and that he had no intention to vex, annoy or injure plaintiffs. (See Begnal v. Canfield & Associates, Inc., supra, 78 Cal.App.4th at p. 77; Suzuki Motor Corp. v. Consumer Union of U.S. (9th Cir. 2003) 330 F.3d 1110, 1134-1135 [ defendant in a defamation action . . . cannot . . . automatically insure a favorable verdict by testifying that he published with a belief that the statements were true; . . . we have yet to see a defendant who admits entertaining serious doubt about the authenticity of an article it published  [citations omitted].) The jury could believe on the evidence presented that Cantrell knew that some, if not all, of the defamatory allegations and implications of the letter were false and yet acted in complete disregard of plaintiffs rights.

The jury could conclude that Cantrell, as a top executive at Compuware, must have known of the billing procedures that made it impossible for plaintiffs to have created invoices to Schwab and that neither McCarthy nor OLee consented to continue to operate as if Ridge Consulting still existed, but that such operation, together with the single point of contact process, was required under the Schwab-Compuware contract as executives of both companies knew. Similarly, the jury could conclude that Cantrell must have known how OLees compensation was calculated and that she had nothing to do with the setting, calculation, or payment of her commissions; that McCarthy was not involved in the day-to-day operation of the Schwab account; and that McCarthy had not lobbied for OLee to be continued on the existing compensation plan, but had argued for a compromise plan for both DPRC legacy employees and that McCarthy had a business reason for doing soi.e., that they were top producers and she did not want to lose them. Cantrell certainly knew of the actual familial relationship between plaintiffs when he wrote the letter, yet carefully and thoughtfully chose words and crafted the letter to imply some type of salacious personal relationship between the two. In phrasing of the letter, Cantrell falsely claimed to have conducted an investigation and to have discovered certain findings.

Cantrell was not merely negligent or sloppy in investigating the facts and writing the letter. The letter was written 19 days after plaintiffs had been fired and after the ugly meeting with Schwab. Cantrell chose his words very carefully. The tone and content of the letter would lead the reader to believe, wrongly, that a thorough investigation had been conducted and that the asserted findings had been established.

Defendants argue that the April 24th letter is privileged because it was written in an effort to explain and resolve a financial dispute between Schwab and Compuware, and would have been written regardless of any ill will toward the plaintiffs. This reasoning is specious. There was no ongoing dispute with regard to McCarthy or OLee and no need to defame them to resolve the dispute with Schwab. Cantrell testified he had three purposes in writing the letter: to identify and resolve some business issuesspecifically determination of the amount Schwab owed Compuware; to establish a relationship at the executive level; and to make sure that nothing wrong had occurred. However, the jury could certainly determine, based on the evidence presented, that when he wrote the letter, Cantrell already knew with reasonable certainty the amount that Compuware believed it was owed by Schwab, and knew that OLee and McCarthy had not created invoices in the Ridge name, engaged in a side business, or in any other way defrauded Schwab or Compuware. The jury could determine that following the ugly meeting with Schwab and Schwabs concern over OLees termination, Cantrell decided to get Schwab executives attention at the highest level, by accusing McCarthy, OLee and Taylor of fraud. To the extent that some letter or written communication would have been written to resolve the financial dispute between Schwab and Compuware or to open a dialogue with top executives at Schwab, the April 24th letter goes far beyond what was needed to resolve that dispute or to open that dialogue when it accused plaintiffs of fraudulent behavior. The common interest privilege does not go beyond that which is reasonably necessary to further the interest. [I]nclusion of immaterial matter which have no bearing on the interest sought to be protected may defeat the privilege. (Deaile, supra, 40 Cal.App.3d at p. 846, citing Biggins v. Hanson (1967) 252 Cal.App.2d 16, 20.) By knowingly or recklessly communicating false information clearly intending to imply that Taylor and plaintiffs had committed fraud, Cantrell included in the letter matters which had no legitimate bearing upon the interests he claimed he wanted to further.

Furthermore, although financial motive cannot, by itself, prove actual malice, it nonetheless is a relevant factor bearing on the actual malice inquiry. [Citations.] (Suzuki Motor Corp. v. Consumer Union of U.S., supra, 330 F.3d at p. 1136 [substantial evidence of actual malice to warrant overturning of summary judgment where evidence of financial motive combined with evidence of test-rigging].)

Certainly a jury could conclude, based on this record, that Cantrell acted not merely negligently, but with at least conscious disregard of plaintiffs rights and with a willingness to vex, annoy or injure them.

II. Substantial evidence of malice supports award of punitive damages

A. Substantial evidence standard of review

In their appellants opening brief, defendants argue that there was no clear and convincing evidence of malice, oppression or fraud, implying that this is the standard guiding our review. While it is true that on appeal, we must inquire whether the record contains substantial evidence to support a determination by clear and convincing evidence  (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 891, quoting Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287), the practical effect of this is limited. As reiterated by the Sixth District Court of Appeal in finding substantial evidence of willful and malicious conduct on the part of the defendant in misappropriating the plaintiffs trade secret: On appeal, we must only find substantial evidence of the willful and malicious conduct. (Crail v. Blakely (1973) 8 Cal.3d 744, 750.) (Ajaxo, Inc. v. E*Trade Group, Inc. (2005) 135 Cal.App.4th 21, 67, fn. 46 (Ajaxo).) Defendants argue that Ajaxo is incorrect. However, the Ajaxo court quotes the standard as stated by our California Supreme Court in Crail v. Blakely, which explained: It is true that the trial court reasonably could have concluded that [the witnesss] testimony failed to satisfy the clear and convincing standard referred to above. That standard was adopted, however, for the edification and guidance of the trial court, and was not intended as a standard for appellate review. The sufficiency of evidence to establish a given fact, where the law requires proof of the fact to be clear and convincing, is primarily a question for the [trier of fact] to determine, and if there is substantial evidence to support its conclusion, the determination is not open to review on appeal. [Citations.] (Crail v. Blakely, supra, 8 Cal.3d at p. 750, fn. omitted.) Witkin has commented that as a result, on appeal from a judgment required to be based upon clear and convincing evidence, the clear and convincing test disappears . . . [and] the usual rule of conflicting evidence is applied, giving full effect to the respondents evidence, however slight, and disregarding the appellants evidence, however strong. (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal,  365, p. 415.)

B. Malice Under Section 3294

The basic elements of [punitive damages] claims are set forth in Civil Code section 3294. . . . [T]here must be proof of oppression, fraud, or malice. (Id., subd (a).)[^[3]] Moreover, the punishable acts which fall into these categories are strictly defined. Each involves intentional, willful, or conscious wrongdoing of a despicable or injur[ious] nature. (Id., subd. (c).)[^[4]] (College Hospital, supra, 8 Cal.4th at p. 721.)^[5]

 Malice is defined as conduct intended by the defendant to cause injury to the plaintiff, or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. ( . . .  3294, subd. (c)(1).) (College Hospital, supra, 8 Cal.4th at p. 725.) The italicized words were added by the Legislature in 1987. (Ibid.)^[6]

In defining malice for punitive damages, the Legislature described two elements disjunctively: The defendant must intend to cause injury to the plaintiff or the defendant must engage in despicable conduct with a willful and conscious disregard of the rights of the plaintiff. [Citation.] (George F. Hillenbrand, Inc. v. Insurance Co. of North America (2002) 104 Cal.App.4th 784, 817 (Hillenbrand), citing Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 330 (Mock); accord, College Hospital, supra, 8 Cal.4th at p. 725; BAJI No. 14.72.1.)

(1)  Despicable conduct. We turn to the issue of whether there is substantial evidence that defendants engaged in despicable conduct with a willful and conscious disregard of the rights of the plaintiffs.

 [A defendant] acts with conscious disregard of the rights of others when it is aware of the probable harmful consequences of its conduct and willfully and deliberately fails to avoid those consequences. ([Mock, supra, 4 Cal.App.4th at pp. 330-331.) (Hillenbrand, supra, 104 Cal.App.4th at p. 817; see Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 402.) The evidence, as discussed above, supported the jurys determination that Cantrell wrote the April 24th letter libeling plaintiffs with a willful and conscious disregard of the plaintiffs rights and of the likelihood of serious injury to their reputations. Although he claimed not to be thinking of plaintiffs when he drafted the two letters, both letters were about plaintiffs and Taylors alleged actions and the April 24th letter referenced plaintiffs directly and specifically many times. The jury could certainly find that Cantrell was aware of the injurious consequences to plaintiffs of his false and misleading accusations and that he, nevertheless, acted with a willful and deliberate failure to avoid them. (College Hospital, supra, 8 Cal.4th at p. 725.) The remaining question is whether substantial evidence supports the jurys necessary finding that defendants conduct was despicable. We are convinced that it does.

Used in its ordinary sense, the adjective despicable is a powerful term that refers to circumstances that are base, vile, or contemptible. (4 Oxford English Dict. (2d ed. 1989) p. 529.) (College Hospital, supra, 8 Cal.4th at p. 725.)    Despicable conduct is conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.  (Mock, supra, 4 Cal.App.4th at p. 331.) (Hillenbrand, supra, 104 Cal.App.4th at p. 817.)

Jurors, not appellate justices, hear the evidence and determine the facts. Properly instructed, they are the primary arbiters of acceptable behavior between [the parties.] It is they, with their collective understanding of the limits of what decent citizens ought to have to tolerate, who are charged with assessing the degree of reprehensibility and meting out an appropriate financial disincentive for untoward [conduct]. Their authority is not unbridled. However, our role in reviewing the jurys work is a deferential one. (Hillenbrand, supra, 104 Cal.App.4th at p. 816.)

Libel is an intentional tort. Because punitive damages are imposed for the sake of example and by way of punishing the defendant ( 3294, subd. (a)), they are typically awarded for intentional torts such as . . . defamation . . . . (See cases collected in 6 Witkin, Summary of Cal. Law [(9th ed. 1988)]Torts,  1349-1365, pp. 810-833.) (Lackner v. North, supra, 135 Cal.App.4th at p. 1212, italics added.)^[7] An argument could be made that most cases of libel involve despicable conduct based upon the importance of reputation interest injured:  Good name in man and woman, dear my Lord, [] Is the immediate jewel of their souls: [] Who steals my purse steals trash; tis something, nothing; [] Twas mine, tis his and has been slave to thousands; [] But he that filches from me my good name [] Robs me of that which not enriches him [] And makes me poor indeed.  (Botos v. Los Angeles County Bar Assn. (1984) 151 Cal.App.3d 1083, 1087, quoting William Shakespeare, Othello, Act III, scene 3, line 155.)

In Cloud v. Casey (1999) 76 Cal.App.4th 895, an employment discrimination case, the appellate court overturned a partial JNOV on the issue of punitive damages, agreeing with the plaintiff that the evidence of discriminatory intent and pretext which supported the finding of liability also provided a sufficient basis for the jury to find malice or oppression. (Id. at p. 911.) The court found that a jury could determine that intentional gender discrimination in denying the plaintiff a promotion, coupled with an attempt to hide the illegal reason for the discrimination with a false explanation, was despicable. (Id. at p. 912; see Lackner v. North, supra, 135 Cal.App.4th at p. 1212.)

In Hillenbrand, supra, 104 Cal.App.4th 784, the court held that an award of punitive damages against an insurer that had sued its own insured seeking declaratory relief on its duty to defend the insured in construction defect litigation, while simultaneously cross-complaining against the insured in the litigation was despicable where the insurer knew facts giving rise to the duty to defend. According to the appellate court:  The jury could reasonably have concluded that defendants true purpose in pursuing the duty to defend issue was to improperly further its own interests while recognizing that its conduct subjected plaintiffs to economic and emotional hardship. There was substantial evidence to support the jurys conclusion that the insurers conduct, including suing its insured in spite of its knowledge of facts giving rise to the duty to defend, was despicable. (Id. at p. 818.) The court rejected the insurers implication that protracted, aggressive litigation is an accepted component of modern business practices that, while annoying, aggravating, or frustrating, cannot be characterized as vile, base, contemptible, miserable, wretched or loathsome.  (Id. at p. 817.)

Similarly here, the jury could reasonably have concluded that Cantrell knew the statements he made in the April 24th letter and the implications that would be drawn about plaintiffs were false, and that he made the statements anyway, scapegoating plaintiffs in order to improperly further Compuwares own interests. The jury could also determine on the evidence that Cantrell recognized that his conduct would unjustly tar plaintiffs reputations and would be very likely to cause both emotional and economic hardship. The jury could find such conduct despicable. (See Hillenbrand, supra, 104 Cal.App.4th at p. 818 [insurer knew it was harming its insured whether it desired that result or not and protracted degradation of an honest and hard-working businessman, and the conscious indifference to his suffering, was despicable].) In other words, the jury is the barometer of despicability. (Id. at p. 819.)

Furthermore, Cantrells retraction of the allegations and implications of the April 24th letter as to Taylor, but not as to plaintiffs in his second letter to Schwab, provides additional evidence that his conduct was despicable. At that point, Cantrell had achieved the business purposes he had claimed to be pursuing in writing the first letter (settling the debt, achieving an executive level relationship, and assuring that there had been no fraud). Nevertheless, he did not retract his false accusations against plaintiffs.

(2)  Hatred, ill will and intent to injure. Plaintiffs also assert there was substantial evidence of malice sufficient to support punitive damages on the basis that defendants conduct was intended to cause injury to plaintiffs. ( 3294, subd. (c).) Evidence that Cantrell hated plaintiffs or sent the April 24th letter with the intent to cause them harm was slight. Evidence of the tense relationship between McCarthy and Cantrell and their communication problems does not rise to this level and the April 24th letter alone does not suffice. However, Cantrells failure to include plaintiffs in the later retraction or clarification letter, after having achieved his stated business purposes, provided some circumstantial evidence of actual ill will towards plaintiffs and an intent to cause injury to them.

III. Punitive damages

Defendants contend that even if some punitive damages were supported, the courts reduction of punitive damages in this case to three times the compensatory damages award (from $10 million to $3.45 million total punitive damages) still resulted in an unconstitutionally excessive amount. Plaintiffs, on the other hand, cross-appeal from the courts order reducing the jurys award of punitive damages, contending the jurys award must be reinstated. In a thorough, detailed opinion and order on defendants motions for new trial and JNOV, the trial court determined the punitive damages awarded here exceeded federal and state due process norms when measured against the three guideposts articulated by the United States Supreme Court in State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408 (State Farm) and as analyzed by the California Supreme Court in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159(Simon ) and Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191 (Johnson I). The three-factor weighing analysis expounded by the United States Supreme Court looks to the nature and effects of the defendants tortious conduct and the states treatment of comparable conduct in other contexts. As articulated in State Farm, the constitutional guideposts for reviewing courts are: (1) the degree of reprehensibility of the defendants misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. (State Farm, supra, 538 U.S. at p. 418; see BMW [of North America v. Gore (1996) 517 U.S. 559,] 575 [(BMW)].) (Simon, at pp. 1171-1172.)

In determining whether the punitive damages awards here are constitutionally excessive, we are to review the award de novo, making an independent assessment of the reprehensibility of the defendants conduct, the relationship between the award and the harm done to the plaintiff, and the relationship between the award and civil penalties authorized for comparable conduct. [Citations.] (Simon, supra, 35 Cal.4th at p. 1172.) However, findings of historical fact made in the trial court are still entitled to the ordinary measure of appellate deference. [Citations.] (Ibid.) Our job  is to police a range, not a point. [Citation.] (Id. at p. 1183.)

A. Degree of reprehensibility

The degree of reprehensibility of the defendants conduct is the most important guidepost in the analysis. (State Farm, supra, 538 U.S. at p. 419; BMW, supra, 517 U.S. at p. 575; Simon, supra, 35 Cal.4th at p. 1180.) In assessing the degree of reprehensibility, we are guided by State Farmssummary of subsidiary factual circumstances it determined were particularly relevant: whether the harm caused was physical as opposed to economic; whether the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; whether the target of the misconduct was financially vulnerable; whether the conduct involved repeated actions or was an isolated incident; and whether the harm was the result of intentional malice, trickery, or deceit, or mere accident. (State Farm, at p. 419; Simon, at p. 1180.)

The trial court assessed the reprehensibility of defendants misconduct as slightly lower than the norm when compared to the universe of cases warranting punitive damages under California law. [(Simon, supra, 35 Cal.4th at p. 1181.)] Summing the reprehensibility subfactors, the trial court found: (a) the harm was essentially economic (assessed at lower-than-neutral reprehensibility); (b) the effect on the health or safety of others was limited to plaintiffs emotional distress, based on the damage to plaintiffs business reputations, and there was no harm to any third person other than Taylor, whose name was cleared by the subsequent September 25th letter (assessed at lower-than-neutral reprehensibility); (c) plaintiffs were financially vulnerable at the time of the misconduct despite their high previous earnings, being unemployed and re-entering the job market around the time of the libel and the harm went to their reputations (assessed at higher-than-neutral reprehensibility); (d) the conduct, although involving two letters, was not repeated conduct within the meaning of the cases and arose out of a single and unique set of facts and circumstances (assessed at lower-than-neutral reprehensibility); and (e) the state of mind of the defendants (assessed at higher-than-neutral reprehensibility).

In analyzing this final reprehensibility subfactor, the court reasoned that [t]he evidence did not suggest that defendants took aim at plaintiffs. That is, defendants did not actively seek to injure plaintiffs. Rather, the higher-than-normal reprehensibility assessment of defendants state of mind was indicated by the jury findings supporting the subfactor of intentional malice, trickery or deceit. Defendants acted with hatred or ill will toward plaintiffs, or without a good faith belief in the truth of the libelous statement or statements. In combination with the finding of actual malice, the jury findings were sufficient to support punitive damages and the record supported defendants willingness to sacrifice plaintiffs rights by using them as scapegoats. The trial court agreed with the jury that the level of conscious, indeed knowing and willful, disregard of plaintiffs reputations was disturbingly high. According to the trial court, [e]ven given defendants myopic pursuit of their own interests, it was unnecessary and beyond the bounds of decency for defendants, in the context of the facts of this case, to libel plaintiffs as was done here. The court also recognized that the misconduct here was the filching from plaintiffs of their good namesthe immediate jewel of their souls. (Shakespeare, Othello, Act III, scene 3, line 155.) The court discounted the subfactor that the acts were not accidental, as Simon had recognized that factor was of little value in California where accidentally harmful conduct cannot provide the basis for assessing punitive damages. (Simon, supra, 35 Cal.4th at p. 1181.) The trial court also observed that the libel implicated intentional trickery or deceit upon one or more readers of the letter as part of the defendants pursuit of their own economic interests. However, we do not rely upon this last consideration in our independent assessment.^[8]

Tallying the five reprehensibility subfactors, the court concluded that two favored a higher-than-neutral assessment and three favored lower-than-neutral assessment of reprehensibility. Therefore the court concluded that the culpability of defendants conduct is slightly lower than the norm.

In conducting our independent review, we assess the reprehensibility factors somewhat differently. We view the first two factors, the nature of the harmwhether economic or physicaland whether defendants conduct evinced an indifference to or reckless disregard of the health or safety of others as essentially normal or neutral in the universe of cases warranting punitive damages under California law. (Simon, supra, 35 Cal.4th at p. 1181.) The nature of the harm in this case was harm to reputation. Although the trial court characterized this as damage to their business reputations, we believe that allegations of fraud, not to mention the somewhat titillating accusation of an undisclosed personal relationship between the plaintiffs, constituted not only an attack upon plaintiffs business reputations, but an attack upon their personal reputations as well, and the harm went well beyond mere economic harm. Although no substantial physical harm was suffered, plaintiffs testified to the level of emotional distress they suffered because of the libelworry, sleeplessness, loss of weight, crying jags, loss of confidence. This loss did not impact plaintiffs safety, but in a real sense it could be said to have impacted plaintiffs health and well being. (See Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 965 (Century Surety Co.) [bad faith denial of policy benefits caused emotional distress and indifference to plaintiffs health and peace of mind].) Consequently, we asses