XXSYS Technologies v. The State of California

Filed 10/24/06 XXSYS Technologies v. The State of California CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Richard E.L. Strauss, Judge. Reversed.

Plaintiff XXSYS Technologies, Inc. (XXSYS) appeals a judgment entered in favor of defendants the State of California and the California Department of Transportation (together Caltrans) after the court granted Caltrans's motion for summary judgment on XXSYS's claims for slander, defamation/trade libel and discrimination. XXSYS contends the court erred when it concluded the alleged statements were not defamatory per se and XXSYS was therefore required to prove special damages in connection with its defamation claims, and further erred when it concluded XXSYS's evidentiary showing of special damages was too speculative to withstand Caltrans's summary judgment motion. XXSYS also asserts the court erred when it found there were no triable issues of fact on its discrimination claim.^[1] We conclude, as the trial court belatedly concluded when it attempted (albeit ineffectively) to vacate its summary judgment ruling,^[2] that the alleged defamatory statements were reasonably susceptible to an interpretation that they were defamatory per se, which permits XXSYS to pursue its defamation claims without proof of special damages. We also conclude the trial court correctly ruled that triable issues of fact are present on the other grounds asserted by Caltrans in support of its summary judgment motion. We finally conclude the court erroneously entered summary adjudication in favor of Caltrans on XXSYS's discrimination cause of action. Accordingly, we reverse the judgment.

I

FACTUAL BACKGROUND^[3]

A. The Competing Businesses

XXSYS was in the business of researching and developing the design, manufacture and installation of technologies to be used to structurally strengthen bridge columns by retrofitting the columns using a composite casing system made of carbon filaments. XXSYS also developed a machine called the "Robo Wrapper," which robotically installed the seamless casings around the columns. Gloria Ma, a woman of Chinese extraction, was XXSYS's chief executive officer. Hexcell/Fyfe, a competitor of XXSYS, developed its own composite column casing system made of fiberglass. Ed Fyfe, head of Hexcell/Fyfe, is a Caucasian male.

B. The Facts Underlying the Discrimination Claim

The disparate treatments accorded to XXSYS and Hexcell/Fyfe by Caltrans in connection with their respective technologies formed the basis for XXSYS's gender discrimination claim. Before XXSYS could use its new retrofit technologies on Caltrans projects, Caltrans had to approve XXSYS's technology. Caltrans would not approve the new technology until XXSYS's system underwent numerous costly tests. XXSYS spent millions of dollars to perform the tests required to meet Caltrans conditions and obtain Caltrans's approval for the use of XXSYS's seamless composite casing technology. Finally, in April 1996, Caltrans formally approved XXSYS's seamless composite casing technology for specification and use on the bridge seismic retrofit program.

At about the same time, Caltrans approved Fyfe's composite retrofit systems that differed "drastically" from XXSYS's. In contrast to the requirements imposed on XXSYS, Caltrans did not require Fyfe's technologies to undergo the same stringent structural validation testing to which XXSYS's composite casing technology was subject.^[4]

C. The Facts Underlying the Defamation Claims

The Project Problems

Caltrans issued plans and specifications for retrofitting the Arroyo Seco Bridge and identified XXSYS's system as one of the pre-approved systems the contractor could select to wrap the bridge columns with casings. Fyfe's system was also listed as a prequalified system for wrapping the columns.

In December 1996, Caltrans entered into a contract with McCarthy Brothers Company to retrofit the Arroyo Seco Bridge. In April 1997 XXSYS subcontracted with McCarthy to perform the column wrapping using the prequalified system specified by Caltrans plans and specifications. However, even before April 1997, Caltrans had begun expressing concerns that, although Caltrans had previously tested XXSYS's system under other conditions and had listed it as a pre-approved system for the Arroyo Seco Bridge project, XXSYS's system had not been tested under the special conditions pertaining to that project and would require additional testing.

Although the results of the additional testing eventually suggested Caltrans had issued defective plans and specifications for the Arroyo Bridge retrofit, Caltrans nevertheless directed XXSYS to proceed with the column wrapping without modifying the original plans and specifications to account for the special conditions. XXSYS ultimately installed casings on 67 columns of the Arroyo Seco Bridge.

There were some problems with the casings installed by XXSYS.^[5] Two of the casings were "burnt" and had to be removed. Other casings also manifested problems, but experts concluded the problems with the remaining casings were minor and did not need to be removed "as long as the loose tows are bonded to the jacket and the voids are epoxy injected." XXSYS wanted to eliminate the voids by injecting an inert thickening agent (Cab-O-Sil), but Caltrans would not allow XXSYS to do so, even though Caltrans (when it later replaced XXSYS with Fyfe) allowed Fyfe to use Cab-O-Sil.

The Defamations

In two separate published articles, Caltrans made statements suggesting the problems with the Arroyo Seco Bridge project were caused by XXSYS and its new technology. A 1998 article in a trade journal, citing Caltrans among its sources, stated the composites jacketing retrofit of the Arroyo Seco Bridge project had been halted, XXSYS had "left the job site," and Caltrans had deleted this item from the job. It also suggested XXSYS's machine wrapping system had encountered problems that had required XXSYS to abandon the machine system and instead resort to hand wrapping portions of the columns.

In a later January 2000 article, Caltrans workers told the reporter "the technology wasn't working," and Caltrans's spokesperson (Jim Drago) stated that XXSYS's "system is approved in California and does have applications, but in this application it didn't work."

The Injury

The Arroyo Seco Bridge Project was critical to XXSYS's success. Caltrans owns the majority of bridges in California, and sets the standards for other transportation departments throughout the country. If the Arroyo Seco project had been perceived as a success, XXSYS anticipated it would obtain other contracts for wrapping bridge columns. Prior to the problems and public disparagement of XXSYS's seamless composite casing technology by Caltrans, XXSYS's stock price had reached as high as $5.58, and just prior to the 1998 article was trading at approximately $.625. After the defamatory comments, the stock price fell to as low as $.002. Caltrans's disparagement of XXSYS and its technology also caused XXSYS to lose contract revenue.

II

THE LITIGATION

A. The First Appeal

XXSYS's action against Caltrans included claims for slander, defamation, trade libel, and discrimination.^[6] The trial court sustained Caltrans's demurrer without leave to amend on these claims, holding (1) the statements contained in the 2000 article were not defamatory as a matter of law and (2) there was no statutory authority for a private remedy for the discrimination claim. This court reversed. (XXSYS Technologies, Inc. v. State of California (July 29, 2002, D037815) [nonpub. opn.] at p. 25, hereafter XXSYS I.) In addressing the slander and defamation claims, the XXSYS I court ruled the statements contained in the 2000 article were "reasonably susceptible to the defamatory interpretation" that something was wrong with XXSYS's technology and "[a]s thus disparaging the quality of XXSYS's product as well as tending to harm XXSYS's reputation and to cause XXSYS's business to lose profits, the alleged statement by Drago was adequate to support causes of action for slander and defamation/trade libel." (Id. at pp. 18-19.) This court also held XXSYS properly stated a private cause of action against Caltrans for racial and gender discrimination. (Id. at pp. 9-14.)

B. Proceedings on Remand

The Summary Judgment Motion

On remand from XXSYS I, Caltrans moved for summary judgment. On the defamation-based claims, Caltrans argued the undisputed material facts showed (1) XXSYS's inability to show special damages was fatal to these claims; (2) the statements were true and truth formed a complete defense to these claims; and (3) XXSYS could not show the defamatory statements were made by Caltrans personnel. On the discrimination claim, Caltrans argued XXSYS had no evidence it had been subjected to disparate treatment on account of Ma's gender or race. Finally, Caltrans argued XXSYS had no evidence to support its claim that it suffered compensable injury on any of the alleged claims.^[7]

XXSYS opposed the motion. XXSYS asserted the defamatory statements were per se defamatory, which permits XXSYS to pursue the claims without showing special damages were caused by the defamatory statements. XXSYS also argued the evidence raised triable issues of fact as to whether the statements were true and whether Caltrans personnel were the source of the statements. XXSYS finally asserted that summary judgment on the discrimination claim was improper because XXSYS had produced evidence of disparate treatment, thereby shifting the burden to Caltrans to produce evidence of Caltrans's nondiscriminatory motive for treating XXSYS differently from XXSYS's competitors, and Caltrans's summary judgment motion contained no facts or argument demonstrating its nondiscriminatory motive. XXSYS also asserted that, even if proof of damages was required, there was evidence XXSYS had been damaged by the defamatory publications and disparate treatment.

The trial court granted Caltrans's motion for summary judgment, concluding the statements were not defamatory per se and therefore XXSYS must establish special damages, and the evidence of special damages was too speculative to support a recovery on the defamation claims. On the discrimination claim, the court also ruled there was no evidence showing a causal link between the disparate treatment and the injuries identified by XXSYS.

The Postjudgment Motions

XXSYS filed motions for reconsideration, to vacate the judgment and for a new trial. XXSYS asserted the court granted summary judgment based on the erroneous conclusion the defamatory statements were not defamatory per se; because the statements were defamatory per se, it was error to require a showing of special damages caused by the defamation. XXSYS also asserted the court erroneously granted summary judgment on the discrimination claim because Caltrans had not asserted as grounds for summary judgment on that claim that XXSYS lacked evidence of a causal nexus between the disparate treatment and the injuries suffered by XXSYS, and XXSYS could have presented evidence sufficient to raise a triable issue of fact of causation had Caltrans raised that issue.

The court entered an order purporting to grant a new trial on the defamation claims. The court concluded it had erred when it characterized the defamatory statements as defamation per quod, requiring proof of special damages, rather than as defamation per se, and therefore any deficiency in the showing of special damages would not bar pursuit of those claims. However, the court reaffirmed its summary adjudication as to the discrimination claim on the basis of the lack of evidence of any causal link between the discriminatory treatment of XXSYS and the resulting losses suffered by XXSYS.

XXSYS timely appealed the judgment granting summary judgment in favor of Caltrans.^[8]

III

APPLICABLE STANDARDS

A. Standard of Review

The summary judgment procedure is to determine whether there is evidence requiring the fact-weighing procedure of a trial. " '[T]he trial court in ruling on a motion for summary judgment is merely to determine whether such issues of fact exist, and not to decide the merits of the issues themselves.' [Citation.] The trial judge determines whether triable issues of fact exist by reviewing the affidavits and evidence before him or her and the reasonable inferences which may be drawn from those facts." (Morgan v. Fuji Country USA, Inc. (1995) 34 Cal.App.4th 127, 131.) However, a material issue of fact may not be resolved based on inferences if contradicted by other inferences or evidence. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 856.)

To prevail on a motion for summary judgment, a defendant must show one or more elements of the plaintiff's cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o).) The evidence of the moving party is strictly construed and that of the opponent liberally construed, and any doubts as to the propriety of granting the motion are to be resolved in favor of the party opposing the motion. (Branco v. Kearny Moto Park, Inc. (1995) 37 Cal.App.4th 184, 189.) The trial court does not weigh the evidence and inferences, but instead merely determines whether a reasonable trier of fact could find in favor of the party opposing the motion, and must deny the motion when there is some evidence that, if believed, would support judgment in favor of the nonmoving party. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 139.) Consequently, summary judgment should be granted only when a moving party is entitled to judgment as a matter of law. (§ 437c, subd. (c).)

Because a motion for summary judgment raises only questions of law, we independently review the parties' supporting and opposing papers and apply the same standard as the trial court to determine whether there exists a triable issue of material fact. (City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 582; Southern Cal. Rapid Transit Dist. v. Superior Court (1994) 30 Cal.App.4th 713, 723.) In practical effect, we assume the role of a trial court and apply the same rules and standards that govern a trial court's determination of a motion for summary judgment. (Lopez v. University Partners (1997) 54 Cal.App.4th 1117, 1121-1122.)

IV

ANALYSIS OF THE DEFAMATION CLAIMS

A. Legal Standards

The parties agree that a plaintiff may pursue a defamation claim without showing special damages caused by the defamation if the statements are defamatory per se (see, e.g., Rodriguez v. North American Aviation, Inc. (1967) 252 Cal.App.2d 889, 894), but must prove special damages if the statements are defamatory per quod. (See, e.g., MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 549.) Because the trial court's order granting summary judgment on XXSYS's defamation claims was premised on the conclusion that the 1998 and 2000 statements were slanderous per quod, and that XXSYS was therefore required to (but purportedly could not) show special damages from the defamatory statements, we must determine whether this conclusion was correct.

A statement is defamatory when it tends "directly to injure [a person] in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits[.]" (Civ. Code, § 46, subd. 3.) Statements that contain such a charge directly are deemed libelous per se. A statement can also be libelous per se if it contains such a charge by implication from the language employed by the speaker and a listener could understand the defamatory meaning without the necessity of knowing extrinsic explanatory matter. (MacLeod v. Tribune Publishing Co., supra, 52 Cal.2d at pp. 548-550.) However, if the listener would not recognize the defamatory meaning without "knowledge of specific facts and circumstances, extrinsic to the publication, which are not matters of common knowledge rationally attributable to all reasonable persons" (Barnes-Hind, Inc. v. Superior Court (1986) 181 Cal.App.3d 377, 387), the matter is deemed defamatory per quod and requires pleading and proof of special damages. (Ibid.)

B. The Statements Were Susceptible to an Interpretation That Was Slanderous Per Se

XXSYS asserts that the statements made by Caltrans personnel in the January 2000 article were susceptible of being understood in a manner that is defamatory per se.^[9] The statements, which are reasonably susceptible to the interpretation that there was something flawed in XXSYS's technology that caused the technology to fail when applied to a bridge retrofitting project, can be understood as imputing to XXSYS a general disqualification to perform the work which XXSYS's "office or other occupation peculiarly requires" or by imputing an incapacity to perform a significant aspect of the type of work that XXSYS's business relies on for its profitability. These statements are reasonably susceptible to being understood in a manner that constitutes defamation per se.

XXSYS asserts the 1998 statements are also susceptible of being understood in a manner that is defamatory per se. The article, which stated the machine wrapping system encountered problems that had required XXSYS to resort to hand wrapping portions of the columns and that Caltrans halted the jacketing retrofit of the project and decided to entirely delete this item from the job, is susceptible to the interpretation that XXSYS's technology caused the retrofit of the bridge to fail. Moreover, the statement that XXSYS had "left the job site" also imputes to XXSYS a general disqualification to perform the work that its "office or other occupation peculiarly requires," because it is susceptible to the interpretation that XXSYS walked away from a construction project when problems arose rather than attempting to solve them. (See, e.g., Williams v. Daily Review, Inc. (1965) 236 Cal.App.2d 405, 411 [article implying contractor had delayed project by conduct "inconsistent with the due fulfillment of what they, by virtue of their employment, had undertaken" supports libel per se claim], overruled on other grounds by Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 732-733, fn. 18.)

Caltrans's arguments for characterizing the statements as defamatory per quod, as statements whose defamatory meaning cannot be understood without extrinsic explanatory information, are unpersuasive. As to the 1998 article, Caltrans asserts that because the 1998 article attributes no specific statement to Caltrans but instead generically attributes the information in the article to "[Caltrans] and other sources," it is necessary for XXSYS to prove extrinsic information showing Caltrans made the defamatory comments.^[10] However, Caltrans cites no pertinent authority holding that, where a statement is defamatory per se as one whose defamatory meaning can be understood without extrinsic explanatory information, it is nevertheless treated as defamatory per quod because of the necessity to show (by extrinsic evidence) who uttered the defamatory comments.^[11] Caltrans also cryptically suggests, citing Washer v. Bank of America (1943) 21 Cal.2d 822, 829, that because there is no evidence a reader of the 1998 article would understand the circumstances (or innuendo) surrounding the 1998 Article that would make the statements defamatory, we should characterize the statements as defamation per quod, requiring proof of special damages. However, statements are deemed defamation per quod when a listener could not recognize the defamatory meaning without knowledge of specific facts and circumstances, extrinsic to the publication, which are not matters of common knowledge; in those circumstances, the plaintiff must plead and prove the listener knew the specific facts (the innuendo) and prove special damages. A statement that XXSYS employed a technology incapable of accomplishing the task and then deserted the job site is capable of being understood in a defamatory sense without a special knowledge unavailable to ordinary persons. Moreover, the portion of Washer relied on by Caltrans merely stated that when statements are susceptible to two potential meanings, one of which is innocent and the other defamatory, the plaintiff must plead and prove that there were surrounding circumstances showing the reader understood the words in a defamatory meaning. (Ibid.) That aspect of Washer was criticized and disapproved of in MacLeod v. Tribune Publishing Co., supra, 52 Cal.2d 536, 548-552. Because Caltrans's innuendo argument appears to be premised on both a misunderstanding of applicable principles and a reliance on disapproved authority, we are not persuaded by that argument.

As to the 2000 article, Caltrans asserts it was defamation per quod because, although the statements did charge there was something wrong with XXSYS's technology and it was not working in the bridge retrofitting project for which it was selected, the listener would have to know extrinsic facts to understand the defamatory import of the charges. However, we conclude (as did the XXSYS I court, see XXSYS I, supra, at pp. 18-20) that statements asserting there was something wrong with XXSYS's technology that prevented it from working on the project for which it was designed and selected has a direct and natural tendency to harm XXSYS's reputation and to cause XXSYS to lose potential contracts from which it could profit, and a listener would understand the charge of professional incompetence from the face of the statements and without the need of a special knowledge of facts outside of the face of the publication.

Caltrans asserts the statements in the 2000 article are not per se defamatory because, under Western Broadcast Co. v. Times-Mirror Co. (1936) 14 Cal.App.2d 120, the statements are susceptible to an innocent (nondefamatory) interpretation, and do not assert professional incompetence, but instead merely describe a dispute between XXSYS and Caltrans and give Caltrans's version of the events. The Western Broadcast approach, which examined the overall tenor of the statements and disallowed a libel per se claim because the statements were reasonably susceptible to a nondefamatory interpretation, was adopted by Peabody v. Barnham (1942) 52 Cal.App.2d 581, 583-585 to preclude a claim of libel per se when a court determined the language had a possible innocent meaning in addition to a potentially defamatory meaning. However, the "possible innocent meaning" rule generally, and Peabody in particular, were disapproved in MacLeod v. Tribune Publishing Co., supra, 52 Cal.2d at p. 551. Under current law, the court's role is to decide only whether the language used is reasonably susceptible to both a defamatory and a nondefamatory interpretation, and if it is susceptible to both understandings, it is for the trier of fact to determine how the language was understood. (Id. at p. 551.) Thus, the fact the language was also susceptible to a benign interpretation does not preclude it from being defamatory per se; instead, the potential innocent construction only presents an issue of fact (which precludes summary judgment) on whether it was understood in its innocent or its defamatory meaning.

C. Summary Judgment Cannot be Affirmed on the Alternative Grounds Interposed by Caltrans

Caltrans appears to assert that, even if we conclude the statements were susceptible to a defamatory interpretation and therefore the court's order granting summary judgment on the special damages element was erroneous, we should nevertheless affirm the order granting summary judgment because (1) the statements contained in the 2000 article were true and therefore cannot support a claim for defamation and (2) there is no evidence raising a triable issue of fact on whether Caltrans was the source of the alleged defamatory statements contained in the 1998 article.

The truth of a statement will defeat a claim for defamation. (See, e.g., Campanelli v. Regents of University of California (1996) 44 Cal.App.4th 572, 581.) Caltrans asserts there is no triable issue of material fact that the statements in the 2000 article were true because XXSYS's system did not work on the Arroyo Seco Bridge project. However, an assessment of the defamatory meaning conveyed by a statement is " 'measured not so much by its effect when subjected to the critical analysis of a mind trained in the law, but by the natural and probable effect upon the mind of the average reader.' " (MacLeod v. Tribune Publishing Co., supra, 52 Cal.2d at p. 551.) The alleged defamatory publication is to be construed " ' "not only . . . with reference to the actual words used, but according to the sense and meaning under all the circumstances attending the publication which such language may fairly be presumed to have conveyed to those to whom it was published. So that in such cases the language is uniformly to be regarded with what has been its effect, actual or presumed, and its sense is to be arrived at with the help of the cause and the occasion of its publication. . . . [A] court is to place itself in the situation of the hearer or reader, and determine the sense or meaning of the language of the complaint for libelous publication according to its natural and popular construction." ' " (Id. at pp. 546-547.)

We conclude, as did the XXSYS I court (see XXSYS I, supra, at pp. 19-20), that the statements in the 2000 article are reasonably susceptible to the interpretation that Caltrans asserted the problems experienced on the Arroyo Seco Bridge project were attributable to some flaw or deficiency in XXSYS's technology that caused its system to not work, rather than being attributable to causes beyond XXSYS's responsibility. Accordingly, to prove the truth of "the gist or sting" of the statements (Campanelli v. Regents of University of California, supra, 44 Cal.App.4th at pp. 581-582), Caltrans would be required to show that XXSYS's system did not work on the project because of flaws in its technology rather than because of causes not attributable to XXSYS's technology or workmanship. At a minimum,^[12] there are triable issues of material fact whether the problems experienced during XXSYS's tenure were because its technology wasn't working or instead were attributable to Caltrans's flawed installation specifications or Caltrans's refusal to permit XXSYS to make field adjustments.

Caltrans also argues there is no evidence raising a triable issue of fact that any of the statements in the 1998 article, even if defamatory per se, were uttered by Caltrans personnel. However, XXSYS submitted evidence raising issues of fact on whether Caltrans was the source of the statements contained in the 1998 article. The article on its face attributes the information to "[Caltrans] and other sources." XXSYS's evidence also showed Caltrans officials were a source for the article (although the author of the article could not recall which portions of the article were derived from other sources), and both Drago and Mr. Roberts (head of Caltrans's new technology department) spoke with the author. Indeed, Drago testified he gathered information internally before calling the author to relay Caltrans's information to the author, and many of the statements in the article echoed statements contained in internal Caltrans documents or information internally discussed within Caltrans. We conclude, as did the trial court below, that the evidence and inferences (which must be viewed most favorably to XXSYS as the party opposing summary judgment) give rise to a triable issue of fact whether Caltrans was the source of the 1998 statements, thereby precluding summary judgment in favor of Caltrans on this ground.

D. Conclusion

We conclude the trial court's order granting summary judgment on the defamation claims was erroneous because XXSYS may maintain the action without proof of special damages, and there are triable issues of material fact on whether Caltrans was the source of the 1998 comments and whether the 2000 statements were true.

IV

THE DISCRIMINATION CLAIM

A. Background

Caltrans's motion sought summary adjudication of XXSYS's claim for racial and gender discrimination on the ground that "[t]here is no causal link between the alleged . . . discrimination . . . and the conduct of [Caltrans]." In clarification of this argument, Caltrans asserted its actions toward XXSYS were based on legitimate nondiscriminatory reasons (e.g. XXSYS's "poor workmanship and numerous defects identified in the casings"), which shifted the burden to XXSYS to produce "substantial responsive evidence" that Caltrans's actions were motivated by a discriminatory animus. (See, e.g., Martin v. Lockheed Missiles & Space Co. (1994) 29 Cal.App.4th 1718, 1735.) Caltrans argued that because XXSYS had no evidence of a discriminatory animus behind Caltrans's actions, and a claim for discrimination cannot be based on speculation (Cucuzza v. City of Santa Clara (2002) 104 Cal.App.4th 1031), the court should enter summary adjudication in Caltrans's favor on XXSYS's discrimination claim.

XXSYS opposed the motion, asserting that its evidence showed it had been subjected to disparate treatment: Caltrans had imposed harsher standards on XXSYS (both in the initial testing phase to qualify as an approved technology and thereafter in the performance standards used to gauge the acceptability of its work) than Caltrans imposed on a similarly situated company controlled by a white male. XXSYS argued that, under the burden shifting rules governing discrimination claims (see, e.g., Caldwell v. Paramount Unified School Dist. (1995) 41 Cal.App.4th 189, 195-197), this prima facie showing of discrimination operated to shift the burden to Caltrans to show legitimate, nondiscriminatory reasons for the disparate treatment. XXSYS asserted that, because Caltrans's motion contained no facts articulating a legitimate nondiscriminatory reason for applying harsher standards to XXSYS than Caltrans applied to XXSYS's competitors,^[13] and a fortiori Caltrans had not shown there was no triable issue of fact on whether the articulated nondiscriminatory reason was pretextual (see, e.g., Zaccagnini v. Chas. Levy Circulating Co. (7th Cir. 2003) 338 F.3d 672, 679; Reeves v. Sanderson Plumbing Products, Inc. (2000) 530 U.S. 133, 140), summary judgment was inappropriate on the discrimination claim.

The court granted summary adjudication on the grounds that there was no evidence showing a causal link between the discrimination and the damages claimed by XXSYS.^[14]

B. Legal Principles

A court may not grant summary judgment sua sponte or solely on the basis of argument. (Scheiding v. Dinwiddie Construction Co. (1999) 69 Cal.App.4th 64, 75.) Instead, a defendant seeking summary adjudication must present evidence demonstrating the element of the plaintiff's cause of action the defendant claims cannot be established (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 853-855), and a plaintiff opposing the summary judgment motion need not show triable issues of fact on issues not argued by the moving party in its motion. (Folberg v. Clara G. R. Kinney Co. (1980) 104 Cal.App.3d 136, 140.) Moreover, even though a court has the inherent power to grant summary judgment on a ground not explicitly tendered by the moving party, it may do so only when the parties' separate statements of material facts and supporting evidence demonstrate the absence of a triable issue of material fact on an element of the claim, and then only after the court has provided the opposing party with the opportunity to respond to the legal ground and to provide evidence raising a triable issue of material fact on the issue upon which the court intends to premise its ruling. (216 Sutter Bay Associates v. County of Sutter (1997) 58 Cal.App.4th 860, 879; Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 70.)

C. Analysis

On appeal, Caltrans argues summary judgment on the discrimination claim was proper because Caltrans showed it had a legitimate nondiscriminatory basis for its actions and, under the burden shifting approach, XXSYS was therefore obliged to submit substantive evidence raising a triable issue of fact that Caltrans's actions were animated by a discriminatory bias, and XXSYS did not satisfy that burden. However, Caltrans's separate statement of material facts in support of its summary judgment motion is devoid of any factual statement of (or evidentiary support for) a purported legitimate nondiscriminatory basis for Caltrans's actions, and the peremptory assertion in Caltrans's appellate brief of a purported legitimate nondiscriminatory basis is unaccompanied by any reference to the record below citing the evidence supporting that assertion. Because Caltrans's evidentiary showing was insufficient to shift the burden back to XXSYS, summary judgment cannot be affirmed on this ground.

Caltrans's appellate brief makes no effort to articulate how the basis for the trial court's order--that Caltrans's discrimination did not cause or contribute to XXSYS's injury--was supported by the evidentiary showing in the proceedings below. Instead, Caltrans reiterates its claim that XXSYS's injury is not compensable as a matter of law because XXSYS was a new business that lacked a history of profitability, and therefore a claim for lost profits is too speculative.^[15] However, a determination that Caltrans's discrimination did not cause or contribute to the failure of XXSYS's business (the basis for the ruling below) is distinct from a determination that, even if Caltrans's actions caused XXSYS's business to fail, XXSYS is nevertheless precluded from recovering any damages because of its lack of a profit history (a determination not made below).^[16]

Moreover, even assuming there may be problematic questions concerning damages, summary adjudication of the discrimination claim would nevertheless be improper to the extent XXSYS's discrimination cause of action, if established, would entitle it to the remedy of injunctive relief. (See generally DeCastro West Chodorow & Burns, Inc. v. Superior Court (1996) 47 Cal.App.4th 410, 422-423 [summary adjudication should be denied where one element of recovery unavailable but other elements remain potentially recoverable].) Here, Caltrans's motion did not mention, much less conclusively negate (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767), XXSYS's entitlement to injunctive relief as a remedy, and therefore the alleged absence of recoverable damages would not dispose of the entirety of XXSYS's discrimination claim. (See, e.g., Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1259-1260.) Caltrans argues this court on appeal should deem waived the potential remedy of injunctive relief because it was not raised below in opposition to the summary judgment motion.^[17] However, because Caltrans's motion did not attempt to negate XXSYS's request for injunctive relief, and "a plaintiff resisting a motion for summary judgment bears no burden to establish any element of his or her case unless and until the defendant presents evidence either affirmatively negating that element (proving its absence in fact), or affirmatively showing that the plaintiff does not possess and cannot acquire evidence to prove its existence" (Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95, 107), the absence of any discussion of that element cannot waive XXSYS's right to assert on appeal that summary judgment was improperly entered because of the potential availability of injunctive relief.

D. Conclusion

We conclude the trial court's order granting summary adjudication of the discrimination claim was error.

DISPOSITION

The judgment is reversed. XXSYS is entitled to recover its costs on appeal.

McDONALD, Acting P. J.

WE CONCUR:

AARON, J.

IRION, J.

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^[1] XXSYS also asserts the trial court erroneously denied its motion to tax certain costs. Because our reversal of the judgment vacates the award of costs, the costs issue is moot.

^[2] After the court entered judgment and Caltrans served a notice of entry of judgment, XXSYS moved for a new trial. Although the court purported to enter a September 20, 2004 order granting the motion, that order was entered 64 days after the notice of entry of judgment. Caltrans has filed a protective cross-appeal from the order granting the new trial, and XXSYS concedes the September 20, 2004 order was void because it was entered after expiration of the jurisdictional time limits imposed by Code of Civil Procedure section 660. Accordingly, we evaluate only the order granting summary judgment.

^[3] Our factual background, drawn from the papers filed in support of and opposition to the motion for summary judgment, is stated most favorably to XXSYS. (LPP Mortgage, Ltd. v. Bizar (2005) 126 Cal.App.4th 773, 775-776 [court must consider evidence and inferences most favorably to party opposing summary judgment].)

^[4] Caltrans's allegedly discriminatory actions in changing, lowering and eliminating the strict requirements for composite technologies other than XXSYS's placed XXSYS at a financially significant and unfair bidding disadvantage and allowed other contractors to bid lower than XXSYS and receive contracts. Caltrans also rejected XXSYS's work on the Arroyo Seco Bridge Project because XXSYS's product had actual Tg values in the range of 132 to 140 degrees (below the 150 degree minimum required by Caltrans) but Caltrans later accepted Fyfe's casings even though Fyfe's casings had actual Tg values in the range of 126 to 136 degrees. Caltrans also rejected XXSYS's work because of the existence of excessive voids even though it accepted Fyfe's casings, which had similar problems.

^[5] The parties do not on appeal distinguish the problems or alleged defects that afflicted the 9 "machine wrapped" casings (apparently using the Robo Wrapper system) from the alleged problems or defects in the 58 casings that were "hand wrapped."

^[6] XXSYS also pursued a contract claim in an arbitration proceeding under Public Contract Code section 10240 et seq. The arbitrator found Caltrans's specifications for the Arroyo Seco Bridge project were defective and misleading, and Caltrans knew or should have known XXSYS's machine wrapping system could not successfully be used under the particularized conditions of that job but nevertheless required XXSYS to proceed with the job according to the defective specifications rather than permitting the job to be modified by a change order.

^[7] Caltrans asserted a business can only recover the lost profits suffered from the tortious conduct of a defendant, but because XXSYS was a new business with no history of profitability it could not recover such profits without a reasonable degree of certainty that it would have earned profits. Caltrans argued that, although XXSYS could identify lost gross revenues, it could not show lost profits. Caltrans asserted that because neither lost revenues nor lost R&D expenditures can ever serve as the measure of damages for tortious injuries to a business, and any claim of lost profits would be conjectural, there was no evidence XXSYS had compensable damages.

^[8] Caltrans cross-appealed from the order granting a partial new trial. For the reasons described in footnote 2 ante, that order was void. Accordingly, in this appeal we assess only whether the original order granting summary judgment was proper.

^[9] Although we independently conclude the January 2000 statements were amenable to being understood in a manner that would constitute defamation per se, it appears that principles of law of the case would require the same holding. (See generally Searle v. Allstate Life Ins. Co. (1985) 38 Cal.3d 425, 434-435.) This court specifically and necessarily decided in XXSYS I that the January 2000 statements were "reasonably susceptible to the defamatory interpretation that something wrong with XXSYS's technology caused its product not to work on such project. As thus disparaging the quality of XXSYS's product as well as tending to harm XXSYS's reputation and to cause XXSYS's business to lose profits, the alleged statement by Drago was adequate to support causes of action for slander and defamation/trade libel." (XXSYS I, supra, at p. 19, italics added.) Caltrans provides no compelling argument for revisiting that determination.

^[10] Caltrans also appears to assert that, because proof of the defamation will require extrinsic evidence of the falsity of the statements, the 1998 statements are defamatory per quod, requiring proof of special damages. Certainly, there can be no recovery for defamation absent a false statement. (Seelig v. Infinity Broadcasting Corp. (2002) 97 Cal.App.4th 798, 809.) However, Caltrans cites no authority holding that extrinsic proof of the falsity of a statement is the type of extrinsic circumstance contemplated by the distinction between defamation per se and defamation per quod codified by Civil Code section 45a, and Caltrans's assertion would effectively eliminate that statutory distinction because proof of falsity would always involve proof of facts extrinsic to the statement.

^[11] Caltrans appears to separately argue that, even if the 1998 statements are defamatory per se, we may nevertheless affirm the order granting summary judgment on any claims rooted in those statements for the separate reason that XXSYS cannot show Caltrans was responsible for those statements. We reject that argument post at section III.C.

^[12] The arbitrator's ruling (see fn. 6), if entitled to collateral estoppel effect, suggests the system did not work because of Caltrans's errors rather than causes attributable to XXSYS's technology or workmanship. We need not decide whether the arbitrator's ruling has a collateral estoppel effect but note only that the arbitrator's ruling, in addition to XXSYS's other evidence, raises triable issues of fact on whether the gist or sting of Caltrans's statements were true.

^[13] Caltrans's separate statement of material facts in support of the motion for summary adjudication on the discrimination cause of action was silent on the reasons it applied standards to XXSYS that apparently differed from the standards it applied to Fyfe.

^[14] XXSYS moved for reconsideration, arguing that the alleged absence of a causal nexus between the discrimination and the damages was not a ground raised by Caltrans's motion for summary judgment, and XXSYS had therefore not been provided an opportunity to respond and submit evidence of causation, and XXSYS could provide evidence raising a triable issue of fact as to causation if provided the opportunity. Moreover, XXSYS argued the alleged absence of a causal nexus between the discrimination and XXSYS's damages would still not entitle Caltrans to summary judgment because XXSYS also sought injunctive relief against Caltrans, requiring that XXSYS be restored to Caltrans's approved bidding as an approved alternative technology for certain retrofit projects. The court's ineffective new trial order rejected XXSYS's request for a new trial on the discrimination claim.

^[15] Caltrans also asserts XXSYS did not show evidence of damages caused by the discrimination because the declaration submitted by XXSYS's damages expert did not mention discrimination damages. The absence of a discussion of such discrimination damages is understandable because Caltrans's motion did not seek summary judgment on the discrimination claims based on the absence of damages, and therefore XXSYS "had no reason to present such evidence. 'A party opposing a motion for summary judgment cannot be required to marshal facts in opposition to the motion which refute claims wholly unrelated to the issues raised by the moving papers.' [Quoting Webster v. Southern Cal. First Nat. Bank (1977) 68 Cal.App.3d 407, 416.]" (Folberg v. Clara G. R. Kinney Co., supra, 104 Cal.App.3d at p.141.)

^[16] The trial court below did conclude that proof of special damages (in the form of lost profits) caused by a defamation required proof that specific customers were lost as the result of the defamation (see Erlich v. Etner (1964) 224 Cal.App.2d 69, 73-74), and there was insufficient evidence to demonstrate that XXSYS incurred such losses as the result of customers refusing to deal with XXSYS after hearing the defamatory comments. However, Caltrans cites no authority holding that, when a business without a profit history is destroyed as the result of discrimination, the defendant is not liable for whatever value the business had apart from its potential profits. It appears the lost value of a business is a component of damages distinct from profits lost as a result of the tort (see Resort Video, Ltd. v. Laser Video, Inc. (1995) 35 Cal.App.4th 1679, 1697-1701 [suggesting lost profits and lost value of a business are recoverable components of damage for a tortious injury to a business]), and there was some evidence that XXSYS's business diminished in value following Caltrans's alleged discriminatory conduct. California recognizes "a plaintiff cannot receive both the fair market value of its business plus damages for loss of future profits" (California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 61 [italics added]), but this implicit recognition that it may recover one or the other measure of damages (also recognized in other jurisdictions--see, e.g., Diplomat Electric, Inc. v. Westinghouse Electric Sup. Co. (5th Cir. 1970) 430 F.2d 38, 48-49) undermines Caltrans's claim that XXSYS's lack of compensable lost profits is fatal to any recovery.

^[17] Caltrans also argues we may not consider the potential availability of injunctive relief on appeal because the complaint did not properly plead the elements necessary to entitle XXSYS to injunctive relief. However, even if we were to accept Caltrans's argument that its motion for summary judgment could properly be treated as a demurrer to the complaint, XXSYS would be entitled to leave to amend to allege any absent elements.