Decision Do-Over

Heeding the maxim “If at first you don't succeed, try, try again,” Texas Disposal Systems (TD) decided it wouldn't take no for an answer. As a result, it's now got a shot at a sizable award of money damages, thanks to an about-face by a state appeals court.

TD owns and operates several landfills in Texas, and competes with Waste Management (WM) in providing hauling and landfill services in the Austin and San Antonio markets. In the mid-1990s, TD was actively pursuing waste disposal contracts with both cities.

Attempting to stymie TD's plans, WM distributed an “Action Alert” memo to community activists in Austin expressing concerns about the environmental soundness of TD's landfill and exhorting them to contact government officials in the two locales.

Although TD eventually won service contracts from both cities, the company sued WM, alleging antitrust, contract interference and business disparagement claims. After all claims except for the memo-related defamation charge were dismissed, the trial judge ruled that the Action Alert was defamatory.

For its part, the jury found that WM was guilty of actual malice by knowingly making false statements, but it also determined that publication of the memo caused zero actual damages. In addition, the jury saw no basis to award punitive damages. The Texas Court of Appeals upheld the verdict. [See “Smear Factor,” Waste Age, Sept. 2005, p. 14]

Convinced that the appeals court had gotten it wrong, TD's lawyers asked the appellate justices to reconsider the case. Courts seldom grant such requests, but when they do, it's often to make relatively small changes. This time, however, the appeals court effectively said that, despite two wrongs — one by the trial judge, the other by the appeals court itself — things could be made right. It scrapped its 2005 ruling and issued a new opinion, opening the door for TD to recover money damages from WM.

First, the appeals court confirmed the jury's finding that WM published the allegedly defamatory statements with actual malice. Based on the content of the memo and testimony by the WM consultants who created it, the appellate panel found over- whelming evidence that WM intended to create a false impression that TD was less environmentally responsible than WM.

The appeals court also agreed with TD that the trial judge was wrong in refusing to instruct the jury on the legal implications of statements that are deemed defamatory per se, that is, words so obviously hurtful to an entity's reputation (such as those charging an entity with illegal conduct) that a jury can assess damages without requiring proof that the plaintiff was harmed.

The appeals court remanded the case for a new trial on TD's defamation claims arising from the memo. “[H]ad the jury been properly instructed that certain damages may be presumed in light of finding defamation per se, the jury's consideration of damages would likely have been different,” the court concluded.

Presumably, TD will be entitled to some amount of general damages and possibly even punitive damages if, on remand, TD can fully engage the jury on the defamation and damages issues.

[Texas Disposal Systems Landfill v. Waste Management Holdings, No. 03-03-00631-CV (Tex.App.Dist.3, Dec. 29, 2006)]

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

The columnist is a Rockville, Md., attorney and serves as general counsel of the Solid Waste Association of North America.