MARANATHA CORRECTIONS v. DEPARTMENT OF CORRECTIONS

Filed 1/11/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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Story Continues from Part I ..

B. Section 425.16(e)(3)

The defamation causes of action based on public disclosure of the Woodford letter were also subject to a special motion to strike because the letter qualifies as a written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest. ( 425.16, subd. (e)(3).)

Under its plain meaning, a public forum is not limited to a physical setting, but also includes other forms of public communication. (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 476.) A local newspaper that is a vehicle for public discussion constitutes a forum for public communication. (Annette F., supra, 119 Cal.App.4th at p. 1161.)

Director Woodfords assertions of misappropriation were connected to an issue of public interest. Maranatha received a lucrative contract with the State to operate a correctional facility. The Woodford letter terminated that contract based, in substantial part, on the improper withholding of monies rightfully belonging to the State. The Legislature has made clear that the governments business is the peoples business and that Californias citizens have a right to full disclosure of all information which affects the public fisc. (See Gov. Code,  6250 [access to information concerning the conduct of the peoples business is a fundamental and necessary right of every person in this state].) Thus, it cannot be doubted that the assertion by a state agency that a private contractor wrongfully withheld $1.6 million in taxpayer funds is a matter of concern and interest to the public.

For all of the above reasons, we conclude that the first three causes of action fell within the protection of section 425.16 and were properly the subject of a special motion to strike.

III. Probability of Prevailing on the Merits

The second half of our inquiry is to decide whether plaintiffs showed a probability that they will prevail on their defamation-related claims.

The trial court found that plaintiffs could not prevail, because the release of the Woodford letter was protected by the absolute privilege for acts in the proper discharge of an official duty. (Civ. Code,  47, subd. (a).) We agree.

We initially observe that, although the State and the CDCR are named defendants, a public entity is not liable for any claim except as provided by statute or required by the state or federal Constitutions. (Gov. Code,  815; Lundeen Coatings Corp. v. Department of Water & Power (1991) 232 Cal.App.3d 816, 832.) A public entity may be liable for injury caused by acts or omissions of its employees in the course and scope of employment. (Gov. Code,  815.2.) Thus, the State and the CDCR can be held vicariously liable only if plaintiffs can prevail against former Director Woodford.

Enacted in 1872, Civil Code section 47, subdivision (a) confers privileged status upon any statement made by a public official in the course of discharging his [or her] official duties. (Royer v. Steinberg (1979) 90 Cal.App.3d 490, 500 (Royer).) As the court summarized in Royer: [T]he policy of protecting the free exercise of governmental decision-making mandates that the privilege of [Civil Code] section 47, subdivision 1 [(now subd. (a))] must be granted not only to high-level state executive officers, but also to all state and local officials who engage in the policy-making process. We therefore hold that the privilege . . . protects any statement by a public official, so long as it is made (a) while exercising policy-making functions, and (b) within the scope of his [or her] official duties. (Royer, at p. 501.)

Cases applying the doctrine are legion. We mention a few. In Barr v. Matteo (1959) 360 U.S. 564 [3 L.Ed.2d 1434], a scandal developed in the office of a federal agency concerning employees who had been permitted to take their accumulated terminal-leave payments and then be rehired as temporary employees. (Id. at pp. 565-566 [3 L.Ed.2d at p. 1438].) The affair received widespread publicity, prompting the acting director of the agency to suspend two of his subordinates and issue a press release implying that they were responsible for the misdeeds. (Id. at p. 567 [3 L.Ed.2d at p. 1439].) In a suit for libel by the two officials, the United States Supreme Court held that the directors statements were absolutely privileged. Noting that the director headed an important agency of government and that the agencys integrity had been severely challenged . . . and given wide publicity (id. at p. 574 [3 L.Ed.2d at p. 1443]), the court held that his response was an appropriate exercise of the discretion which an officer of that rank must possess if the public service is to function effectively (id. at p. 575 [3 L.Ed.2d at p. 1443]). Thus, the policy of protecting officials from lawsuits that might appreciably inhibit the fearless, vigorous, and effective administration of [governmental] policies took precedence (id. at p. 571 [3 L.Ed.2d at p. 1441]; see also id. at p. 576 [3 L.Ed.2d at p. 1444]).

In Saroyan v. Burkett (1962) 57 Cal.2d 706 (Saroyan), our Supreme Court followed the precedent of its federal counterpart to bar a defamation suit against the state superintendent of banks by an employee who alleged he was defamed by the superintendents statements to the press relating to the employees conduct as attorney for the state banking department. The Saroyan court declared: The Superintendent of Banks is the head of the State Banking Department, appointed by the Governor and holding office at his pleasure; he is a member of both the Board of Investment and the Governors Council. (Fin. Code,  210, 211.) Defendant was acting in the exercise of an executive function when he defended the policy of his department, and his statements were related to the defense of that policy. Accordingly defendant was protected by an absolute privilege. (Saroyan, at pp. 710-711.)

In Kilgore v. Younger (1982) 30 Cal.3d 770 (Kilgore), the state Attorney General called a press conference in which he released a report suggesting the plaintiff was involved in an illegal bookmaking operation. (Id. at pp. 774-778.) Even though the allegedly libelous assertions were made to the press, the California Supreme Court held they were absolutely privileged as within the proper scope of the Attorney Generals official duties. (Id. at p. 782.)

In Royer, members of the board of trustees of a school district passed a motion that was published in the official school district newspaper, accusing a former school superintendent of preparing and distributing forged election materials. (Royer, supra, 90 Cal.App.3d at pp. 496-497.) The Court of Appeal held these acts were absolutely privileged as communications made in the discharge of an official duty. (Id. at p. 501; see also Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1440-1443 (Morrow) [official duty privilege protected school district officials who published statement announcing the replacement of plaintiff high school principal and implying he was responsible for outbreaks of violence on campus].)

Director Woodford, as the chief executive officer of the CDCR, a statutorily created department of the executive branch, was a policymaking public official. She was appointed by the Governor and confirmed by the state Senate. In her declaration, Woodford stated that her decision to terminate Maranathas contract was made as the executive head of a Department of the State under the powers and authorities conferred on the Office to which I was duly appointed. Plaintiffs produced no evidence to contradict that statement.

Like the government officials in Barr, Saroyan and Kilgore, Woodford released the termination letter to the press in defense of a policy decision she made. (Saroyan, supra, 57 Cal.2d at pp. 710-711.) As Director of Corrections, Woodford had a duty to communicate with the press about matters of public concern. (Morrow, supra, 149 Cal.App.4th at p. 1431.) Because a public officials duty includes the duty to keep the public informed of his or her management of the public business, press releases, press conferences and other public statements by such officials are covered by the official duty privilege, although similar statements by private litigants are not covered by the litigation privilege. (Rothman v. Jackson (1996) 49 Cal.App.4th 1134, 1149, fn. 6, citing Kilgore, supra, 30 Cal.3d at pp. 779-780.)

Plaintiffs attempt to avert the tidal wave of authority against them by disregarding Woodfords role as author of the letter and claiming that CDCR employee Margot Bach was not exercising policymaking functions when she released the Woodford letter and answered questions from the press.

This is a bogus argument. Bach is not a party defendant. The FAC asserts no cause of action against her. Instead, plaintiffs allege that through CDCR spokespeople,including Margot Bach, Woodford, the CDCR and the State published their defamatory allegations of misappropriation. (Italics added.) The gravamen of the complaint is thus the publication by Woodford and the CDCR of the contents of the termination letter. Bachs news conference was simply one of the means by which defendants disseminated the alleged defamatory statements.

Plaintiffs repeatedly cite Sanborn v. Chronicle Pub. Co. (1976) 18 Cal.3d 406, which is inapposite. In Sanborn, a county clerk made statements to a local newspaper, asserting that the plaintiff attorney had done a real con job on him in persuading him to release attached funds improperly. (Id. at p. 410.) The California Supreme Court upheld a jury verdict for defamation, concluding that the clerk was not carrying out policymaking functions when he made the statements. (Id. at p. 413.) Likewise, in Neary v. Regents of University of California (1986) 185 Cal.App.3d 1136, the appellate court reversed a summary judgment because it was unclear (and therefore a triable issue of fact) whether a university vice chancellor was acting in a policymaking capacity when he released an internally generated confidential report that allegedly defamed the plaintiff. (Id. at pp. 1141-1143.)

Here, by contrast, Woodfords disclosure of the letter was in the course and scope of her decision to terminate a contract, based upon $1.6 million in revenue that she believed plaintiffs had wrongfully withheld from the State. The Woodford letter itself demonstrates that the allegedly defamatory assertions were the result of careful consideration of an important issue by a policymaking agency head of state government. Such an exercise of discretionary function is precisely the kind of activity that Civil Code section 47, subdivision (a) was designed to shelter from civil lawsuits. (See Kilgore, supra, 30 Cal.3d at pp. 781-782, citing Barr v. Mateo, supra, 360 U.S. at p. 571 [3 L.Ed.2d at p. 1441].)

Plaintiffs contend that the Woodford letter was not the proper exercise of an official duty because it contained allegations not only against Maranatha, but against Terry Moreland and the Moreland Family corporation, who were nonsignatories to the Victor Valley MCCF contract.

However, the Woodford letter is addressed to all three plaintiffs for good reason: It sets forth a detailed explanation, with supporting evidence, which led to Director Woodfords conclusion that Terry Moreland exerted full control over the Moreland financial empire and its entire family of close corporations, and that, for purposes of the contract dispute, there is no meaningful distinction between Maranatha, Moreland Corporation, and the Moreland Family, LLC, since they are all merely extensions of [Terry Moreland]. (Italics added.) Her opinion was corroborated by Morelands description, in deposition testimony, of the interlocking relationship among the entities, as well as his admission that he reported the ITRF as income on the tax returns of both Maranatha and the Moreland Family, LLC. Accordingly, Woodfords discretionary act of addressing the letter to Maranatha, the Moreland Family, LLC, and Terry Moreland personally, fell within the scope of her official duties.

Plaintiffs also argue that, unlike the Attorney General in Kilgore, the director of the CDCR has no official duty to investigate and prosecute criminal conduct, and therefore had no privilege to accuse them of the criminal act of misappropriation.

The argument does not impress us for two reasons: First, it strips out the word misappropriation from the context in which it appears. According to Merriam-Websters Dictionary of Law, to misappropriate means to appropriate wrongfullyor unlawfully (as by theft or embezzlement). (Merriam-Websters Dict. of Law (1996) [as of Jan. 11, 2008], italics added.)

The Woodford letter is written in the context of a contract dispute. A fair reading makes clear that in terminating the contract on grounds of misappropriation, Woodford was using the word in the first sense of the word, i.e., that Maranatha wrongfully appropriated funds that belonged to the CDCR, thereby breaching the Victor Valley MCCF agreement. We therefore disagree with plaintiffs that, by using the word misappropriation, Woodford was necessarily accusing Maranatha of committing a crime.

Second, even if plaintiffs imaginative gloss could be placed on the term misappropriation, publication of the Woodford letter would still be absolutely privileged. A decision to terminate a contract on account of criminal conduct is as equally an important function of the head of a state agency as contract termination for more mundane transgressions. Communications made in the course of an official duty do not lose their privileged status simply by virtue of the egregiousness of the conduct they target. (See Tutor-Saliba, supra, 136 Cal.App.4th at pp. 611-615 [city attorneys luncheon speech accusing the plaintiff of cheat[ing] legitimate minority contractors of their fair share of work, and a pattern of fraud and false claims, absolutely privileged as within the scope of his official duty; special motion to strike defamation suit properly granted].)

We conclude that public dissemination of Woodfords alleged defamatory statements was protected by the official acts privilege of Civil Code section 47, subdivision (a). Plaintiffs failed to show a probability of prevailing on the merits and thus the trial court properly granted defendants special motion to strike. (Morrow, supra, 149 Cal.App.4th at p. 1443.)

Our disposition makes it unnecessary to reach the defendants alternative arguments for affirming the order, e.g., that the causes of action were barred by the truth defense, other privileges, or the statutory immunity afforded to discretionary acts by government employees.^[1]

IV. Attorney Fees

Plaintiffs appeal of the order awarding attorney fees (C053913) is based solely on the merits of the appeal from the order granting the special motion to strike (C053293). Maranatha does not claim the amount of the fee award was excessive. Because we find no error in the order striking the defamation-related claims under the anti-SLAPP statute, the award of attorney fees must be affirmed as well. ( 425.16, subd. (c).)

Defendants are also entitled to an award of attorney fees on appeal. ( 425.16, subd. (c); Community Facilities Dist. No. 88-8 v. Harvill (1999) 74 Cal.App.4th 876, 883 [Statutory authorization for recovering attorney fees in the trial court necessarily includes attorney fees incurred on appeal unless the statute specifically provides otherwise].)

DISPOSITION

The orders appealed from are affirmed. Defendants shall recover costs. (Cal. Rules of Court, rule 8.278(a)(1).) The matter is remanded to the trial court to determine the proper amount of attorney fees to be awarded defendants on appeal. (CERTIFIED FOR PUBLICATION.)

BUTZ , J.

We concur:

SCOTLAND, P.J.

CANTIL-SAKAUYE , J.

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^[1] Since our decision does not depend on any evidence extraneous to the record below, we dismiss defendants motion for judicial notice of such documents and materials as moot.