Cannon Computer Company v. Kenneth J. Douglas, Carl Norris, and Joseph L. Driscoll

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

JOSEPHINE LINKER HART, JUDGE

DIVISION I

CANNON COMPUTER COMPANY

APPELLANT

V.

KENNETH J. DOUGLAS, CARL NORRIS, and JOSEPH L. DRISCOLL

APPELLEES

CA00-890

March 28, 2001

APPEAL FROM THE SEBASTIAN COUNTY CIRCUIT COURT

[NO. CIV-97-904]

HONORABLE JAMES R. MARSCHEWSKI, CIRCUIT JUDGE

AFFIRMED

Appellant, Cannon Computer Company, ("CCC"), a Texas-based corporation, filed a complaint alleging that appellees, employees of United States Forgecraft Corporation ("Forgecraft"), made defamatory statements against CCC. The trial court granted appellees' motion for directed verdict, and CCC argues on appeal that (1) the court erred in finding that CCC's damages were speculative; (2) CCC did not present evidence of actual malice and was not entitled to punitive damages; and (3) CCC was a limited-purpose public figure and a qualified privilege existed. We conclude that CCC did not establish that, although published, the allegedly defamatory statement was either communicated to potential customers or had a detrimental effect on CCC's relationship with the potential customers, and, therefore, we conclude that any asserted damages were speculative. Thus, we affirm without addressing appellant's other arguments.

Appellees Kenneth J. Douglas and Joseph Driscoll are the owners and Carl Norris was an officer of Forgecraft, which at one time was a customer of CCC. In 1992, CCC received a judgment against Forgecraft for $265,123.67 and attorney's fees of $12,230. The parties, however, agreed to reduce the judgment to $217,000 plus interest payable in quarterly installments of $30,000 plus interest. It was agreed that if Forgecraft's payments were not made on time, the original judgment amount could be reinstated.

When Forgecraft failed to make timely payments, CCC obtained a reinstatement of the judgment for $100,335.35 (which was the amount of the original judgment less payments made). In an attempt to collect its judgment, CCC garnished Forgecraft's bank accounts, including its employee payroll account, and accounts receivable. Immediately thereafter, Forgecraft filed bankruptcy, and on the day of the bankruptcy filing Forgecraft issued a press release that was reported in the Southwest Times Record in Fort Smith, Arkansas, on May 15, 1993, and again on September 16, 1993. The press release announced the bankruptcy and stated in part that the filing of the bankruptcy was due to CCC's garnishment of Forgecraft's bank accounts and accounts receivable, that the garnishments jeopardized the jobs of Forgecraft's 115 employees, and that CCC was unwilling to negotiate.

On December 10, 1997, CCC filed a complaint in circuit court for defamation, alleging that the statements in the press release were false and damaged CCC's reputation. At the close of its case at trial, appellees moved for and obtained a directed verdict. The court found, among other things, that evidence of appellant's damages was speculative and granted appellees' motion for a directed verdict. Appellant challenges this ruling on appeal. We conclude that the directed verdict was proper.

Motions for directed verdict are treated as challenges to the sufficiency of the evidence. See, e.g., Ellis v. Price, 337 Ark. 542, 548, 990 S.W.2d 543, 547 (1999). When reviewing a challenge to the sufficiency of the evidence made by the defendant, the evidence is viewed in the light most favorable to the plaintiff. Id. at 548-49, 990 S.W.2d at 547.

The doctrine of presumed damages in a defamation per se case was abolished in United Ins. Co. of Am. v. Murphy, 331 Ark. 364, 961 S.W.2d 752 (1998), and all prior inconsistent decisions were overruled. "[A] plaintiff in a defamation case must prove reputational injury in order to recover damages." Murphy, 331 Ark. at 370, 961 S.W.2d at 756. "A plaintiff must prove that the defamatory statement(s) have been communicated to others and that the statements have detrimentally affected those relations." Ellis, 337 Ark. at 549-50, 990 S.W.2d at 547. While a plaintiff must establish actual damage to reputation, that showing of harm is slight. Id. at 549, 990 S.W.2d at 547.

The owner of CCC, Del Cannon, testified that the press release and subsequent press coverage hampered his ability to market the services of CCC to other customers. Cannon said he saw the first evidence of this during the first week of October 1993, when he was unsuccessful in signing a Dallas, Texas company, R.F. Monolithics. Cannon testified that during the first week of October 1993, he spoke with Gary Anderson, president of R.F. Monolithics, and the company was ready to sign a contract with CCC. Cannon testified, "We were about ready to get it in October of 1993 until the word got out on the streets in Dallas and a copy of that newspaper article." Cannon further testified that, in his opinion, CCC didnot get the contract because Anderson read the September 16, 1993, article. After he had conversations with Anderson during the first week of October 1993, he was unable to talk to him again. Cannon testified that appointments with Anderson set for the following week were canceled by Anderson's secretary. Cannon tried to call him on several occasions with no success.

Cannon testified that since May of 1993, he no longer had the ability to talk to others as he did before, when he was invited into companies. He also testified that companies do not want to work with a company that forced a customer into bankruptcy. Cannon further testified that since the press release publication, he had not signed up a five-year customer because nobody wanted to do business with a company that could possible sue them one day and force them into bankruptcy.

In this case, we cannot conclude that the trial court erred in granting appellees' motion for a directed verdict. Cannon's opinion that R.F. Monolithics would not do business with him and his conclusion that no other company would do business with him as a result of the allegedly defamatory statements did not amount to proof that the allegedly defamatory statements were communicated to potential customers and that CCC sustained damage to its reputation. Further, no other witness at trial presented testimony relevant to that proof. Thus, even considering the evidence in the light most favorable to CCC, we affirm the trial court's granting of appellees' motion for a directed verdict.

Appellant cites cases and argues that a plaintiff need not produce direct testimony from a third party who learned of the defamatory statement. In response, we simply notethat his testimony did not satisfy the two-fold requirement in Ellis that requires proof that the allegedly defamatory statement was communicated to others and that the statements have detrimentally affected those relations. Because CCC did not prove the elements of defamation and the consequent damages, it is unnecessary to address the remaining issues concerning punitive damages and the existence of a qualified privilege.1

Affirmed.

Pittman and Vaught, JJ., agree.

1 We note that this case was timely filed in circuit court because the lawsuit was first filed in federal district court within the three-year statute of limitation for libel, see Ark. Code Ann. § 16-56-105(5) (1987), and after the federal suit was involuntarily dismissed, the time for bringing the cause of action in the circuit court was extended for one year by the savings statute, see Ark. Code Ann. § 16-56-126 (1987).