Legal Lode: Defame and Fortune

Charles Dickens created Jarndyce vs. Jarndyce -- a legal dispute in his 1853 novel Bleak House. Slogging for generations preceding the action in the book, the case is a byword for interminable litigation. From the first chapter: “This . . . suit has, in course of time, become so complicated that no man alive knows what it means, . . . no two . . . lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises.” A “long procession of [judges] has come in and gone out” during that time, and still the suit “drags its weary length before the Court.”

Spanning the millennium, the waste industry’s own version of Jarndyce is a defamation case that began nearly 18 years ago when Texas Disposal Systems (TD) and Waste Management (WM) were competing head-to-head for hauling and landfill services contracts in the Austin and San Antonio markets. By mid-1995, San Antonio had decided to negotiate a contract with TD to operate the city’s transfer station. From there, TD would, starting in February 1997, haul the waste to its landfill.

Things were still up in the air when, on January 30, 1997, WM caused an anonymous one-page “Action Alert” to be distributed to environmental and community leaders in Austin, including several members of the Austin City Council. Addressing San Antonio’s plan to contract with TD, the memo warned about the increased traffic and environmental problems that would result, questioned the environmental integrity of the TD landfill, and urged recipients of the memo to contact public officials in San Antonio and Austin, as well as the San Antonio Express-News, about “your concerns.”

Although TD ended up with contracts from both cities, it sued WM in 1997 alleging disparagement of TD’s reputation to eliminate it as a competitor. The claims included defamation, tortious interference with a prospective contract, business disparagement, and antitrust violations.

The case droned on for years. After the claims were pared down, TD presented its defamation allegations to a jury, which in 2003 found that statements in the Action Alert were false and made with actual malice, but that TD had suffered no damages. In 2005, an appeals court upheld the verdict, but TD’s lawyers convinced the appellate panel to change its mind, scrap its ruling, and issue a new opinion that re-opened the door for TD to recover money damages from WM. As the appeals court (on second glance) saw it, the jury should have been directed to consider the defamatory statements, presuming that TD suffered some amount of damages, which the jurors could determine at their discretion.

On the next go-round, the district court giving the correct instructions, the jury awarded TD $450,000 for reasonable and necessary expenses, $0 for lost profits, $5 million for injury to its reputation by the defamatory statements, and $20 million as punitive damages based on the jurors’ finding that WM published the defamatory statements with malice. Applying a state law limit on punitive damages, the district court reduced the award to $1,650,000. Both sides appealed.

Brushing aside WM’s point-by-point recitation of what the company saw as serious errors by the trial court, the appellate panel ruled that the presiding judge properly instructed the jury whose verdict was supported by legally and factually sufficient evidence. For its part, TD argued that injury to its reputation amounted to economic damages, and thus the trial judge was wrong to reduce the jury’s punitive damage award. Not so, said the appellate panel. Injury to reputation is non-economic under Texas law, and the lower court correctly applied the cap.

Unless WM or TD convinces the state supreme court to hear the case, the saga may, at long last, be over.

[Waste Management of Texas, Inc. v. Texas Disposal Systems Landfill, Inc., No. 03-10-00826-CV, Tex.App.Dist.3, May 18, 2012]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

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