BURDETTE v. CARRIER CORPORATION

Filed 1/17/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

Story continues from Part I ..

In Bay Cities Paving & Grading, Inc. v. Lawyers Mutual Ins. Co. (1993) 5 Cal.4th 854, the Supreme Court explained that more than one wrongful act may constitute a single cause of action. A contractor filed suit against its attorney because the attorneys failure to file a stop notice and failure to file a complaint to foreclose its mechanics lien resulted in the contractors inability to collect the amount it was owed on a construction project. (Id. at p. 857.) The contractor argued that each of the attorneys omissions was a separate claim or cause of action. The Supreme Court disagreed, explaining:

Bay Cities had a single injury and thus a single cause of action against its attorney.California has consistently applied the primary rights theory, under which the invasion of one primary right gives rise to a single cause of action. [Citations.] Bay Cities had one primary right - the right to be free of negligence by its attorney in connection with the particular debt collection for which he was retained. He allegedly breached that right in two ways, but it nevertheless remained a single right.

Similarly, [T]he cause of action is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. . . . Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. [Citation.] Bay Cities suffered a single injury as a result of its attorney's omissions - the inability to collect the amount owed to Bay Cities for its work on the construction project. (Id. at p. 860, fn. omitted.)

Defamation is an injury to reputation. (Shively v. Bozanich (2003) 31 Cal.4th 1230, 1242.) The primary right litigated in both the federal action and this action is the right to be free from injury to reputation. The single claim asserted in the federal action, based on the doctrine of respondeat superior, was that Carrier, through [its vice president of sales] and other unknown employees and agents, disseminated defamatory statements about Burdette, [o]n or about December of 1999 through the [date of the cross-claim, July 31, 2000] . . . . The claim is in the nature of a continuing course of action.^[1]

The allegations of the cross-claim and the complaint show the commonality of interest to be protected. Burdettes federal cross-claim was against named cross-defendants Carrier and Anthony Guzzi, Carriers vice president of sales. It also named 20 Roe defendants. Burdettes defamation claim alleged the defamatory statements were made by Guzzi and by Carrier through GUZZI and other unknown employees and agents . . . . The statements were made from December 1999 through the present. The defamatory statements alleged were that Burdette stole from Carrier, wrongfully took money from Carrier, and conspired with his superiors to wrongfully obtain money from Carrier, wrongfully paid kick-backs to his superiors in return for their assigning certain commissions to him, and that he was generally dishonest in his employment dealings with Carrier. Burdette alleged he suffered loss of reputation, shame, mortification, and hurt feelings as a result of the statements, and that he had been prevented from maximizing his employment potential.

The named defendants in this action are Carrier, Carnago, Fitzpatrick, Amy Coker Adams, and Chris Countryman.^[2] The complaint alleges each defendant is the agent and employee of the other, and that they acted within the course of such agency and employment. The statements are alleged to have been made by the named Carrier employees. The statements alleged are that Burdette improperly credited himself for sales commissions to which he was not entitled, stole from Carrier, conspired with his superiors to wrongfully obtain money, falsified expense reports, was dishonest in this employment dealings with Carrier, and was incompetent in his job. The complaint alleged Burdette suffered loss of reputation, shame, mortification, hurt feelings, and has been prevented from maximizing his employment potential.

As stated in Agarwal, supra, the significant factor in determining whether the cause of action in the two proceedings is the same is the harm suffered. (Agarwal, supra, 25 Cal.3d at p. 954.) As demonstrated by the allegations of damage in the two actions, Burdette alleged he suffered the same harm in both actions. The defamatory statements were about the same incident, Burdettes receipt of commissions to which Carrier claimed he was not entitled. Burdettes claim to recover for this harm was adjudicated in the federal action.

The defamatory statements Burdette alleges in this complaint (with the exception of the Fitzpatrick statement to Lotspeich) against Carrier were also alleged in the federal cross-claim, namely the statements of unknown employees made during the period covered by the cross-claim. That Burdette named several lower-level Carrier employees as defendants in this action, but not in the prior action, did not create more than one cause of action for purposes of res judicata. The gravamen of the single claim against Carrier was liability in respondeat superior for the statements made by Carriers employees in the relevant time period. The rule that each defamatory statement may constitute a separate cause of action is not applicable where a single cause of action is predicated upon multiple statements.

Section 63 of the Restatement of Judgments explains that a plaintiff may not maintain a subsequent action on the same cause of action, even though the plaintiff presents a different ground for relief in the second action, unless the defendants fraud or misrepresentation prevented the plaintiff from presenting such ground in the original action. Where an action is brought to recover damages for injury to the person or property of the plaintiff caused by the defendant, and the plaintiff in his complaint alleges certain negligent acts of the defendant, and at the trial he is unable to prove these negligent acts and a verdict and judgment are given for the defendant, the plaintiff is precluded from maintaining a subsequent action based upon the same injury, although in that action he alleges other acts of negligence. There is in such a case a single cause of action, based upon the primary right of the plaintiff to be free from injury to his person or property and a violation by the defendant of that right through his failure to use proper care. The plaintiff is not permitted to maintain successive actions for the same injury by alleging different acts of negligence on the part of the defendant. It is immaterial that in a subsequent action he alleges acts of negligence which he was not permitted to prove in the prior action because they were not alleged in his complaint in that action. (Panos v. Great Western Packing Co. (1943) 21 Cal.2d 636, 639, quoting Rest., Judgments, 65, com. b, p. 259.)

As an example, the Restatement poses the case of A, who sues his employer, B, alleging injury as the result of B supplying defective appliances. A verdict is rendered in Bs favor, after which A brings a second action against B for the same injury, alleging the negligence of Bs officers and employees in operating the appliances. In such case the first judgment is a bar to the second action. (Rest., Judgments,

63, com. b, illus. 4, pp. 260-261.)

Res judicata precludes Burdette from relitigating against Carrier any alleged defamatory statements made by Carrier employees prior to the filing of the cross-claim in the federal action. Any such statements were subsumed in the federal courts determination that no Carrier employee made an unprivileged defamatory statement as alleged in the cross-claim. B. Issue Preclusion

In this action, employees of Carrier were named as defendants who were alluded to only as unknown employees in the federal action. As noted above, the action against them is not barred by the doctrine of claim preclusion.

Semtek, supra, did not expressly determine if state or federal laws of issue preclusion apply to an issue decided by a federal court sitting in diversity when the issue is raised again in state court. However, the result under either the California or federal law of issue preclusion would be the same in this case.

Under California law, a party is collaterally estopped from relitigating an issue if: (1) the issue decided in a prior adjudication is identical with that presented in the action in question; and (2) there was a final judgment on the merits; and (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication. (Clemmer v. Hartford Insurance Co., supra, 22 Cal.3d at p. 874.) The federal law of issue preclusion adds the requirement that the resolution of the issue of law or fact must be essential to the judgment. (Monarch Life Ins. Co. v. Ropes & Gray (1st Cir. 1995) 65 F.3d 973, 978.) The doctrine of collateral estoppel applies on issues litigated even though some factual matters or legal arguments which could have been raised were not. (Lucas v. County of Los Angeles (1996) 47 Cal.App.4th 277, 286.)

1. Party or In Privity

Burdette was the cross-complainant in the federal action, and is the party against whom Carrier asserts the bar in this action. Both California and federal law allow the defensive use of issue preclusion by a party who was a stranger to the first action. (Bernhard v. Bank of America Nat. Trust & Savings Ass'n. (1942) 19 Cal.2d 807, 812-813; Green v. Ancora-Citronelle Corp. (9th Cir. 1978) 577 F.2d 1380, 1383-1384.)

2. Final Judgment on the Merits

As previously explained, the prior proceeding resulted in a final judgment on the merits when the federal trial court ruled that the statements tendered in the summary judgment proceeding were privileged pursuant to Civil Code section 47, subdivision (c),^[3]judgment was entered on the cross-claim, and no appeal was taken.

3. Issue Decided

Determining the issue foreclosed by the prior judgment is one of the most difficult problems in applying the rule of issue preclusion. (Rest. 2d Judgments, 27, com. c, p. 252.) In making this determination, we consider several factors: Is there a substantial overlap between the evidence or argument to be advanced in the second proceeding and that advanced in the first? Does the new evidence or argument involve application of the same rule of law as that involved in the prior proceeding? Could pretrial preparation and discovery relating to the matter presented in the first action reasonably be expected to have embraced the matter sought to be presented in the second? How closely related are the claims involved in the two proceedings? (Ibid.)

The issue in the prior action was whether Carrier, through unknown employees and agents made unprivileged defamatory statements during the period covered that harmed Burdettes reputation. This action differs in that the complaint now names the employees and agents who were previously unknown. We know that the employees named in this action were the same unknown employees alleged to have made defamatory statements in the prior action because Burdette requested a continuance of the summary judgment hearing in the prior action to allow the court to consider the deposition testimony of Carnago and Fitzpatrick, and particularly the fact that Carnago admit[ted] that she and numerous CARRIER employees, including other salespersons, and filing clerks, exchanged discussions regarding the fact that defendant/cross-complainant Burdette was allegedly a thief and had improperly taken sales credits from CARRIER.

As a practical matter, Carrier, a corporation, is incapable of committing slander, except through one of its employees. [A] corporation . . . may act only through its officers, agents, and employees. (Norman v. Department of Real Estate (1979) 93 Cal.App.3d 768, 774.) Thus, even without the inclusion of the unknown employees as roe defendants, the federal cross complaint necessarily included the claim that individual employees were responsible for the defamation.  Both actions alleged that employees of Carrier defamed Burdette, and both sought to hold Carrier responsible for the defamatory statements.

The pretrial preparation and discovery in the first action reasonably could have been expected to have embraced the matter Burdette seeks to present in this action.The claims against the various employees in this action were raised by the pleadings in the federal action. The federal action named Roe defendants, indicating Burdette would seek to hold unknown defamers liable when their identity was discovered. Additionally, the federal action alleged the defamatory statements were made by unknown employees of Carrier. In fact, the identity of the individuals named as defendants in this action were discovered in the prior action, but Burdette did not amend his cross-claim to add those employees as cross-defendants.

[T]he prior determination of an issue is conclusive in a subsequent suit between the same parties as to that issue and every matter which might have been urged to sustain or defeat its determination. [Citations.] [] . . . In other words, a party may not be permitted to introduce new or different evidence to relitigate a factual issue which was presented and determined in a former action. However, the particular legal or factual issue must have been presented and determined in the former action in order for the doctrine to apply. (Bleeck v. State Board of Optometry (1971) 18 Cal.App.3d 415, 428.)

This is a matter of pleading. [I]f [the issue] is actually raised by proper pleadings and treated as an issue in the cause, it is conclusively determined by the first judgment.(Sutphin, supra, 15 Cal.2d at p. 202.)

In a motion for summary judgment, the issues are framed by the pleadings and the other material offered by the parties on the motion. (Flint ex rel. Flint v. Kentucky Dept. of Corrections (6th Cir. 2001) 270 F.3d 340, 348; for California see FPI Development Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381-383.) The parties have not provided this court with all of the materials offered in the federal summary judgment. However, we know that the cross-claim alleged that, [o]n or about December of 1999 through the present, cross-defendant GUZZI and cross-defendant CARRIER CORPORATION, through GUZZI and other unknown employees and agents, disseminated information to others . . . . Carriers motion for summary judgment set forth facts in support of its defense that only Guzzi made statements to other management level employees about Burdette, and that these statements were either absolutely or qualifiedly privileged. In response to this, Burdette did not present evidence that someone other than Guzzi made defamatory statements, but argued Guzzis statements were not privileged because they either had no objective relationship to litigation or because they were made with malice.

4. Essential to the Judgment

The federal court ruled that any statements were privileged because they were made by Carrier management-level employees in the employment context and there was no evidence of malice. This brings us to the federal requirement that the issue be necessary to the judgment. In the federal case, the court necessarily found no evidence of defamation by Fitzpatrick or Carnago, because such statements were not made by management level employees in the employment context and were not privileged. The federal court found these were the only types of statements made by Carrier employees. Thus, one issue decided in the federal case was that no Carrier employee disseminated unprivileged defamatory statements about Burdette, [o]n or about December of 1999 through the [date of the cross complaint July 31, 2000] . . . . Burdette now seeks to relitigate this issue by presenting evidence that other employees not covered by a privilege also disseminated defamatory statements. However, the issue preclusion aspect of res judicata prevents him from doing so. [W]hen plaintiff elected to try his case on one theory of liability, he was barred from again trying it upon another ground. (Panos v. Great Western Packing Co., supra, 21 Cal.2d at p. 639.) Burdette, having tried his federal claim on the ground of a continuing course of defamations, cannot now piece off the individual defamatory statements as individual claims of defamation.

II

Statute of Limitations

As a preliminary matter, we reject Burdettes claim that defendants abandoned their statute of limitations defense when they pursued a theory that the defamation never happened and Burdette was actually a thief.

The defendants raised the defense of the statute of limitations on demurrer, in a summary judgment motion, in a motion for non-suit, and by way of a proposed jury instruction that was not given. Each time, the trial court ruled against defendants.

The statute of limitations defense was not inconsistent with the other defenses, and the issue having been raised numerous times below it has been preserved for appeal. (Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649.)

A. Statements More than One Year Before Complaint

The trial courts rationale, asserted by Burdette on appeal, was that Burdettes discovery in January 2002 of the statements made by Fitzpatrick and Carnago delayed the accrual of Burdettes cause of action against those defendants until the date of the discovery. Burdette also argues that his cause of action did not accrue until he suffered injury, and he alleged the defamation was ongoing.

In some cases, the accrual of a cause of action in tort is delayed until the plaintiff discovers, or should have discovered, the factual basis for the claim. (Shively v. Bozanich, supra, 31 Cal.4th at p. 1248.) The discovery rule has been applied in cases of libel where the defamatory statement is hidden from view and the plaintiff has no access to or cause to seek access to the statement, such as where a statement is hidden in a personnel file that cannot be inspected by the plaintiff. (Id. at p. 1249.)

The statements at issue here, made in casual conversation, do not appear to fall within the discovery exception. Our research revealed only one case, McNair v. Worldwide Church of God (1987) 197 Cal.App.3d 363, 379-380, in which the court associated a slanderous statement (as opposed to libel) with the discovery rule, and in that case the court merely assumed the discovery rule would apply to the slander in question without analysis.

However, assuming the discovery rule applies to cases of slander, we nevertheless conclude that under the discovery rule, Burdettes claim for the defamatory comments made prior to the commencement of his federal action accrued as of the time he filed the federal action. The discovery rule would delay the accrual of the cause of action not to the date Burdette found out about the statements Fitzpatrick and Carnago made about him, but to the date he discovered or should have discovered a factual basis for his defamation claim. (Shively v. Bozanich, supra, 31 Cal.4th at p. 1248.) This means, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her. [Citation.] (Bernson v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 932.) It is not necessary that the plaintiff know the exact manner in which the injuries were effected. (Ibid.)

Discovery of the cause of action for defamation must have occurred by the time Burdette filed the cross-claim in his federal action alleging that Carrier, through unknown employees and agents, disseminated information to others claiming that [Burdette] had stolen from [Carrier], had wrongfully taken money from [Carrier], and conspired with his superiors to wrongfully obtain money from [Carrier], had wrongfully paid kick-backs to his superiors in return for their assigning to him certain commissions and incentive payments and that [Burdette] was generally dishonest in his employment dealings with [Carrier].

The fact that a plaintiff does not know the identity of each and every defendant who has caused the harm, does not toll the running of the statute of limitations. (Bernson v. Browning-Ferris, Ind., supra, 7 Cal.4th at p. 932.) The identity of the defendant is not an element of the cause of action. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 399.) Once a plaintiff is aware of the injury, the limitations period is presumed to afford sufficient opportunity to discover the identity of all the defendants, and the limitations period is often extended by the filing of a Doe complaint. (Bernson v. Browning-Ferris, supra, 7 Cal.4th at p. 932.)

Accordingly, the statute of limitations is an alternative ground for our holding as to those defamatory statements made prior to the filing of the federal cross-claim on January. Burdette had discovered such causes of action as of the date the cross-claim was filed on July 31, 2000. Since the evidence presented indicated the defamatory statements discovered during the federal case actually occurred two to three years after Burdette started working for the Sacramento office in March 1997, those statements occurred prior to the filing of the cross-claim on July 31, 2000. Any action for recovery based on such statements is time-barred.

Burdettes arguments that his cause of action did not accrue until he suffered injury and he alleged ongoing defamation do not alter our conclusion. The type of slander alleged here was slander per se because it tended directly to injure plaintiff in respect to his business by imputing something that has a natural tendency to lessen its profits. (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 106-107.) Damages are presumed so that a cause of action is conclusively established from the false and unprivileged utterance constituting slander per se. (Clark v. McClurg (1932) 215 Cal. 279, 284.) Additionally, Burdette testified he became aware of the harm when he began working for Advanced Microtherm in the spring of 2000, before he filed his federal cross-claim in July of that year.

B. Statements Made Within One Year of the Complaint

The trial court allowed Burdette to present evidence of one defamatory statement that Burdette could not have raised in the federal action because it did not occur until after the trial in the federal case. This was the statement Fitzpatrick made to Lotspeich on July 23, 2002. Carrier argues this defamatory statement was not included within the scope of Burdettes complaint. We disagree.

The complaint alleged that on or after December of 1999 through the present, named defendants, including Fitzpatrick disseminated and published false and unprivileged statements. It alsoalleged the statute of limitations had not run on Burdettesclaims because he had no knowledge of the publications of said false information by these named individual defendants until on or about January 23, 2002 . . . .

The Fitzpatrick statement to Lotspeich did not occur until July 2002, and necessarily could not have been included in the allegations regarding late discovery. However, the allegations regarding discovery are directed to the statute of limitations, and did not limit the otherwise broad allegation that the complaint included all statements made until the filing of the complaint. Thus, the statement to Lotspeich, which occurred within one year of the filing of the complaint, was not barred by the statute of limitations.

III

Admission of Lotspeich Testimony

Carrier argues Lotspeichs testimony nevertheless should not have been allowed because Burdette did not disclose Lotspeich as a witness. Carrier made an Evidence Code section 402 motion after Burdette informed Carrier it intended to call Lotspeich as a witness. The trial court allowed Carrier to examine Lotspeich to discover his intended testimony. Following Lotspeichs testimony, Carrier objected, contending Lotspeichs name had not been disclosed in Burdettes interrogatory answers as a witness. The trial court treated Carriers motion as a motion to exclude Lotspeichs testimony, and denied it.

We will not disturb the trial courts determination that there has been no willful failure to disclose a witnesss identity unless it was arbitrary or lacking in evidentiary support. (Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 782; Rangel v. Graybar Electric (1977) 70 Cal.App.3d 943, 948.)

Even though Burdette did not include Lotspeichs name in his interrogatory response, he did give Lotspeichs name during his deposition as a person who heard defamatory statements. Carrier did not ask any follow up questions regarding Lotspeich. On this record the court did not abuse its discretion in allowing Lotspeich to testify.

IV

Prejudice

Reversal is required both because the jury may have based its verdict of liability on statements that were not actionable, and because of the prejudicial effect of the evidence admitted regarding claims that were barred by res judicata and the statute of limitations.^[4]

The only actionable statement is Fitzpatricks statement to Lotspeich, which occurred in July 2002. However, most of Burdettes evidence regarding damages related to the effect the rumors had on him before and during the time he worked for Advanced Microtherm. Burdette left Advanced Microtherm in 2000, well before the Fitzpatrick statement in 2002.

Burdette testified that he lost confidence when some of his customers confronted him about the incident with Carrier. His trial counsel argued this loss of confidence affected his ability as a salesman. The customers Burdette named were Steve Humeson, Clint Studebaker, Bob Gardener, and Bill Petty. The incidents occurred between March and September of 2000, before the actionable Fitzpatrick statement in 2002. Burdette also mentioned having to defend himself to people he worked for at Advanced Microtherm. These were Steve Thomas, John Karamanos, and Bill Carmody. Lotspeich testified the comments Fitzpatrick made to him had not negatively affected his relationship with Burdette, that he was not aware of any adverse action taken against Burdette as a result of the statements, and that he was not aware of any sales Burdette had lost because of the statements.

Burdette testified that he suffered from depression during the federal trial, but although he felt some anxiety, he felt no depression after he heard about the statement to Lotspeich. Since the Fitzpatrick statement could not have caused most of the damages that the trial court allowed into evidence, reversal is required.

Also, both compensatory and punitive damages were based in part upon evidence that was admitted regarding Guzzis comments around the time Burdette resigned. Burdettes attorney argued the jury could find malice and oppression from the statements of Guzzi, who said, among other things, that he would get the money from Burdette or Burdette would be fired, and that he (Guzzi) would ruin Burdette. These statements, having been made prior to the federal action, were conclusively determined to be privileged, and since they were also made before the only actionable statement to Lotspeich, they were irrelevant to the issue of malice in this case.

Also relevant to the punitive damage award, Burdettes attorney argued that Carrier ratified the defamation when it never reprimanded Carnago or Fitzpatrick for their statements. Since the statements of Carnago and Fitzpatrick prior to the Fitzpatrick statement are not actionable, Carrier cannot be punished for ratification of these statements.

DISPOSITION

The judgment is reversed. Defendants shall recover their costs on appeal.

BLEASE , J.

We concur:

SCOTLAND , P. J.

CANTIL-SAKAUYE , J.

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^[1] Atoral argument Burdettes attorney characterized the claimat issue here as a course of conduct that continued after the federal judgment was entered.

^[2] See footnote 1, supra.

^[3] Civil Code section 47, subdivision (c) makes privileged, a communication, 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, or (3) who is requested by the person interested to give the information.

^[4] Because we reverse the judgment, we do not consider Carriers additional arguments that there was insufficientevidence Carrier ratified Fitzpatricks statements, that the jury instructions and verdict forms regardingratification were erroneous, or that the litigation privilege protected the statements between Fitzpatrick and Carnago.