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Nos. 11-16284 and 11-16416

IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Brian Dawe and Flat Iron Mountain Associates, LLC, formerly known as Flat Iron Mountain Associates, a Partnership, Plaintiffs and Appellees/Cross-Appellants,
vs.

Corrections USA, California Correctional Peace Officers Association, Donald Joseph Baumann, and James Baiardi,
Defendants and Appellants/Cross-Appellees. On Appeal from the United States District Court Eastern District of California No. 2:07-cv-01790-LKK-EFB (CONSOLIDATED MASTER CASE) The Honorable Lawrence K. Karlton THIRD BRIEF ON CROSS-APPEAL: APPELLANTS’ REPLY BRIEF/CROSS-APPELLEES’ BRIEF OF CORRECTIONS USA, CALIFORNIA CORRECTIONAL PEACE OFFICERS ASSOCIATION, DONALD JOSEPH BAUMANN AND JAMES BAIARDI

MANATT, PHELPS & PHILLIPS, LLP
Michael M. Berger (Cal. Bar No. 43228) Thomas J. Umberg (Cal. Bar No. 94345) 11355 West Olympic Boulevard Los Angeles, CA 90064-1631 (310) 312-4000 • Fax (310) 312-4224 Attorneys for Appellants/Cross-Appellees Corrections USA, California Correctional Peace Officers Association, Donald Joseph Baumann, and James Baiardi

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TABLE OF CONTENTS Page I. II. III. IV. INTRODUCTION..................................................................... 1 THERE IS NO ISSUE REGARDING THE STANDARD OF REVIEW ............................................................................. 2 BRIEF FACTUAL RESPONSE ............................................... 5 ARGUMENT ............................................................................ 6 A. California’s Litigation Privilege Precludes Liability Based on the Allegedly Defamatory Communications................................................................ 6 B. C. Defendants Properly Preserved the Issue of Litigation Privilege for Appeal........................................ 15 CCPOA’s Statute of Limitations Defense to Harkins’ Defamation Claim Was Raised in the Pretrial Conference Order and Bars Harkins’ Recovery.......................................................................... 17 1. 2. 3. The Argument Was Firmly and Publicly Raised ................................................................. 17 Harkins’ Claim Does Not “Relate Back” ........... 23 There is No Evidence of Defamatory Conduct Within the Limitations Period, Much Less Any to Support the Jury’s Verdict ................................................................ 26

D. The District Court Erred by Changing the Ruling that Dawe was a Public Figure ........................................ 27 E. The Claims For Interference With Contractual Relations And Interference With Prospective Economic Advantage Were Barred By California Civil Code § 47................................................................ 32 Duplicative Recovery Is Self-Evident............................. 33 1. The Breach of Contract and Interference Claims by FIMA ................................................. 33

F.

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TABLE OF CONTENTS (continued) Page 2. The Breach of Contract and Defamation Claims by Dawe.................................................. 37

G. Plaintiffs Do Not Dispute that the Damage Award Against CUSA is Many Multiples of its Net Worth; As a Result, the Punitive Damage Against CUSA is Unconstitutional............................................................... 42 V. I. II. CONCLUSION OF APPELLANTS’ REPLY BRIEF ........... 43 INTRODUCTION................................................................... 44 ARGUMENT .......................................................................... 45 A. Harkins’ False Imprisonment .......................................... 45 B. The Court Properly Remitted the Punitive Damages Awards Against CCPOA................................................. 49 1. 2. 3. III. A 1:1 Ratio of Compensatory to Punitive Damages Is the Maximum Warranted Here ....... 49 At Most, Only One of the “Reprehensibility Factors” Applies ................................................ 54 The Punitive Damage Awards Greatly Exceeded CCPOA’s Entire Net Worth............... 62

CONCLUSION OF CROSS-APPELLEES’ BRIEF .............. 63

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TABLE OF AUTHORITIES Page CASES Abraham v. Lancaster Community Hosp., 217 Cal.App.3d 796 (1990) ........................................................... 15 Action Apartment Assn., Inc. v. City of Santa Monica, 41 Cal.4th 1232 (2007)................................................................ 4, 8 Adams v. Murakami, 54 Cal. 3d 105 (1991).................................................................... 62 Adler v. Federal Republic of Nigeria, 107 F.3d 720 (9th Cir. 1997)........................................................... 4 Amerigraphics, Inc. v. Mercury Casulaty Co., 182 Cal.App.4th 1538 (2010).................................................. 51, 59 Bains LLC v. Arco Products Co., 405 F.3d 764 (9th Cir. 2005)................................................... 46, 47 BMW of N. Am. v. Gore, 517 U.S. 559 (2006) ................................................................ 48, 50 Boerner v. Brown & Williamson Tobacco Co., 394 F. 3d 594 (8th Cir. 2005)........................................................ 61 California Correctional Peace Officers Association, et al., v. The State of California, et al., 189 Cal. App. 4th 849 (2010).......................................................... 7 Casumpang v. Int’l. Longshore & Warehouse Union, 411 F. Supp. 2d 1201 (D. Haw. 2005) ........................ 51, 57, 60, 62 Century Surety Co. v. Polisso, 139 Cal.App.4th 922 (2006).......................................................... 56 Childers v. San Jose Mercury Printing and Publishing Co., 105 Cal. 284 (1894)....................................................................... 39 Contemporary Services Corp. v. Staff Pro, 152 Cal.App.4th 1043 (2007).......................................................... 9 Copp v. Paxton, 45 Cal.App.4th 829 (1996)............................................................ 30 Diamond v. City of Taft, 215 F.3d 1052 (9th Cir. 2000)......................................................... 3

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TABLE OF AUTHORITIES (continued) Page Duff v. Engelberg, 237 Cal.App.2d 505 (1965) ........................................................... 36 Edwards v. Centus Real Estate Group., 53 Cal. App. 4th 15 (1997)............................................................ 16 Eldorado Stone, LLC v. Renaissance Stone, Inc., 2007 U.S. Dist. LEXIS 60885 (___ Dist. ___, 2007) ................... 63 Exxon Shipping v. Baker, 554 U.S. 471 (2008) ...................................................................... 51 Exxon Valdez v. Exxon Mobile, 490 F.3d 1066 (2007) .................................................................... 55 Gertz v. Robert Welch, 147 Cal.App.4th 13 (1974).......................................... 27, 29, 30, 31 Gomes v. Fried, 136 Cal.App.3d 924 (1982) ........................................................... 39 Healy v. Tuscany Hills Landscape & Recreation Corp., 137 Cal.App.4th 1 (2006)................................................................ 9 Herzog v. “A” Co., Inc., 138 Cal.App.3d 656 (1983) ........................................................... 10 Int’l Brotherhood of Elec. Workers v. Foust, 442 U.S. 42 (1979) .................................................................. 62, 63 Jet Source Charter v. Doherty, 148 Cal.App.4th 1 (2007).............................................................. 51 Johnson v. Ford Motor Co., 35 Cal. 4th 1191 (2005)........................................................... 58, 59 Jurinko v. Med. Protective Co., 305 F. App’x 13 (3d Cir. 2008)..................................................... 50 Law Co., Inc. v. Mohawk Constr. & Supply Co., Inc., 577 F.3d 1164 (10th Cir. 2009)......................................... 21, 22, 23 Louisiana-Pacific Corp. v. ASARCO, Inc., 5 F.3d 431 (9th Cir. 1993) ....................................................... 25, 26

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TABLE OF AUTHORITIES (continued) Page Mendez v. County of San Bernardino, 540 F.3d 1109 (9th Cir. 2008)....................................................... 53 Mendez-Matos v. Municipality of Guaynabo, 557 F.3d 36 (1st Cir. 2009) ..................................................... 50, 51 Morgan v. N.Y. Life Ins. Co., 559 F.3d 425 (6th Cir. 2009)......................................................... 50 Neville v. Chudacoff, 160 Cal.App.4th 1255 (2008).......................................................... 9 Noyes v. Kelly Servs., Inc. 2008 U.S. Dist. LEXIS 70287 (E.D. CA 2008) ...................... 50, 55 Obrey v. Johnson, 400 F. 3d 691 (9th Cir. 2005)........................................................ 17 Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991) .......................................................................... 50 Park v. Mobil Oil Guam, Inc., 2004 WL 2595897 (Guam Nov. 16, 2004) ................................... 59 Paulson v. City of San Diego, 294 F.3d 1124 (9th Cir. 2002)......................................................... 3 Planned Parenthood of Columbia/Williamette, Inc. v. Am. Coal. of Life Activists, 422 F.3d 949 (9th Cir. 2005).................................................. passim Rabkin v. Oregon Health Services Univ., 350 F.3d 967 (9th Cir. 2003)........................................................... 4 Roby v. McKesson Corporation, 47 Cal.4th 686 (2009).................................................................... 56 Rubin v. Green, 4 Cal. 4th 1187 (1993)................................................................... 12 Salve Regina Coll. v. Russell, 499 U.S. 225 (1991) ........................................................................ 4 Silberg v. Adamson, 50 Cal.3d 205 (1990)............................................................... 2, 8, 9

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TABLE OF AUTHORITIES (continued) Page Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal. 4th 1159 (2005)................................................................. 58 State Farm Mutual Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003) ............................................................... passim Susan A. v. County of Sonoma, 2 Cal.App.4th 88 (1991)...................................................... 3, 15, 16 Templeton Feed & Grain v. Ralston Purina Co., 69 Cal. 2d 461 (1968).................................................................... 34 Tolbert v. Page, 182 F.3d 677 (9th Cir. 1999)........................................................... 4 Trindade v. Superior Court of Contra Costa County 29 Cal.App.3d 857 (1973) ............................................................. 24 Waldbaum v. Fairchild Pubs., Inc., 627 F.2d 1287 (D.C. Dir. 1980) .................................................... 30 Walker v. Farmers Ins. Exch., 153 Cal. App. 4th 965 (2007)........................................................ 59 Wang & Wang LLP v. Banco Do Brasil, S.A., 2008 U.S. Dist. LEXIS 99158 (E. D. CA, November 25, 2008) *12....................................................................................... 25 Younger v. Soloman, 38 Cal.App.3d 289 (1974) ............................................................. 10 Youren v. Tintic School Dist., 343 F.3d 1296 (10th Cir. 2003)..................................................... 18 STATUTES Cal. Civ. Code § 47............................................................................. 32 Cal. Civ. Code § 47(2).......................................................................... 1 Cal. Civ. Code § 47(b)................................................................. passim Cal. Civ. Code § 1431.2(b)(1) ...................................................... 34, 35 Cal. Code Civ. Proc. § 48a (4)(b) ....................................................... 39

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TABLE OF AUTHORITIES (continued) Page OTHER AUTHORITIES 23 Cal Jur Damages § 74.................................................................... 34 RULES Federal Rule of Appellate Procedure 32(a)(5) ................................... 65 Federal Rule Appellate Procedure 32(a)(6)........................................ 65 Federal Rule of Appellate Procedure 32(a)(7)(B).............................. 65 Rule 15(c)(1)................................................................................. 24, 26

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I.

INTRODUCTION A major legal error permeated the proceedings below: the

district court refused to apply California Civil Code § 47, subd. (b). That statute precludes liability for the assertedly libelous statements that form the core of Plaintiffs’ case and the basis for their multimillion dollar judgment. It also renders irrelevant all of the Plaintiffs’ discussion about the Defendants’ motives and presumed nefarious intentions. The bottom line of California law is that statements made in the context of litigation — existing or forthcoming — are absolutely privileged, regardless of motive and regardless whether they might otherwise be tortious. As the California Supreme Court summarized it (in the course of disapproving a line of cases requiring statements to have been made in good faith in order to be immunized): “We conclude that the well-intentioned addition of the ‘interest of justice’ test must be rejected. [Overruling several Court of Appeal opinions.] A rule that an otherwise privileged communication is not privileged under section 47(2) unless made for the purpose of promoting the interest of justice is wholly inconsistent with the numerous cases in which fraudulent communications or perjured testimony have nonetheless been held privileged . . . . Finally, endorsement of the ‘interest of justice’ requirement would be tantamount to the exclusion of all tortious publications from the

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privilege, because tortious conduct is invariably inimical to the ‘interest of justice.’ Thus, the exception would subsume the rule.” (Silberg v. Adamson, 50 Cal.3d 205, 218 [1990]; emphasis added.) Plaintiffs’ brief is thus misfocused and diversionary. As the California Supreme Court has made clear, the privilege was meant to be employed precisely in situations where the plaintiff urges that the defendant’s actions would have been tortious absent the absolute privilege. As it is based on a precept contrary to settled California law, the judgment in this diversity action cannot stand. Likewise, Plaintiffs’ brief fails to demonstrate any proper legal basis for the windfall in duplicative damages they were awarded. These and the other legal errors addressed in the AOB and further below mandate reversal. II. THERE IS NO ISSUE REGARDING THE STANDARD OF REVIEW Plaintiffs have sought to manufacture an issue out of the standard of review. (Appellees’ Br., pp. 20-21.) There is no issue. As shown at AOB 5-6, Defendants have raised only legal issues, i.e., those where the district court made a legal ruling that critically turned the case in a manner that prejudiced Defendants. It might be said that some of the issues could be categorized as mixed questions of law and

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fact. No matter. The same de novo standard of review applies: “A mixed question of law and fact exists when there is no dispute as to the facts, the rule of law is undisputed, and the question is whether the facts satisfy the legal rule. [Citations.] Because there are no factual disputes in this case, we review the district court’s decision de novo.” (Diamond v. City of Taft, 215 F.3d 1052, 1055 [9th Cir. 2000].) This rule applies with respect to a central issue on this appeal, i.e., applicability of Civil Code § 47, subd. (b): “If there is no dispute as to the operative facts, the availability of the privilege is a matter of law . . . .” Susan A. v. County of Sonoma, 2 Cal.App.4th 88, 93 (1991). As shown below (and as described at length in the Defendants’ opening brief), the operative facts are not in dispute. Everyone knows who said what, when it was said, and to whom it was addressed. The law is clear that the privilege is absolute (AOB pp. 16-18) and that it is not lost even if the defendant acted in bad faith (Id.). The only question is whether the privilege applies, and that is an issue of law. Moreover, it is an issue of state law, in which case: “We review de novo the district court’s interpretation of state law. [Citation.] When interpreting state law, we are bound to follow the decisions of the state’s highest court. [Citation.]” (Paulson v. City of San Diego, 294 F.3d 1124, 1128 [9th Cir. 2002].) To the same effect:

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“We ‘review de novo a district court’s determination of state law.’ [Citation.] ‘When de novo review is compelled, no form of appellate deference is acceptable.’ [Citation.]” (Rabkin v. Oregon Health Services Univ., 350 F.3d 967, 970 [9th Cir. 2003]); quoting the Supreme Court’s decision in Salve Regina Coll. v. Russell, 499 U.S. 225, 231 [1991].) Plaintiffs state too broadly the rules derived from the three cases they cite. (Appellees’ Br., p. 21.) Action Apartment Assn., Inc. v. City of Santa Monica, 41 Cal.4th 1232, 1251 (2007) is the only one that deals with Civil Code § 47, subd. (b), and thus the only one dealing with facts subject to its absolute privilege. But Action does not apply here because no litigation was actually filed in that case. Thus, the issue revolved around whether the notice of eviction — which may have been sent in good faith contemplation of litigation — was actually so sent, as there was no follow-up litigation to verify the intention. In that case, said the court, factual inquiry was needed. The other two cases (Adler v. Federal Republic of Nigeria, 107 F.3d 720, 729 [9th Cir. 1997] and Tolbert v. Page, 182 F.3d 677, 681 [9th Cir. 1999]) involve situations far enough removed from this case as to make them unhelpful. In Adler, summary judgment declarations were in conflict, making review turn on resolution of the conflicts. In Tolbert, the court faced an issue that fell between a “positive legal

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standard” and a “simple historical fact” and had to decide how to review the trial court’s work. Authorities were in conflict and the determination turned on which court had the greater interest in, and focus on, the outcome. None of those cases involved the kind of uncontested facts and clearly defined law that are present here. There is no standard of review issue. It is merely a red herring Plaintiffs have employed to divert attention from the plain legal issues. III. BRIEF FACTUAL RESPONSE As expected, Plaintiffs devote substantial pages to discussing the factual background of this litigation. (Appellees’ Br., pp. 4-18.) As Defendants noted earlier, however (AOB, p. 7), such a discussion is largely irrelevant to the legal issues before this Court. The core facts — i.e., who said what, when, where, and to whom — are not disputed. The additional background supplied by Plaintiffs seems intended only to paint individual defendants as rough or uncouth, and cast the individual plaintiffs as persecuted martyrs. What led to this litigation was a serious disagreement between two factions of an organization, neither of which shied from confrontation and macho posturing. Plaintiffs, for example, quoted

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Defendant Jimenez using off-color language during a tense confrontation with Plaintiff Dawe (Appellees’ Br., p. 9), but they left out Dawe’s equally unsavory and combative response: “When I stood up to answer one of Jimenez’ questions he yelled ‘sit down and shut the fuck up, I haven’t even begun to get into your shit yet.’ To which I responded, ‘Who the fuck do you think you’re talking to?’” (Defendants’ Ex. 25U, p. 5 [4 ER 37, p. 886].) And this quoted language comes from a letter that Dawe sent to the California Attorney General. In short, there was plenty of ill will and strongly-held convictions on both sides, but none of that is relevant to the specific legal issues that need to be dealt with on this appeal. IV. ARGUMENT A. California’s Litigation Privilege Precludes Liability Based on the Allegedly Defamatory Communications

Defendants demonstrated that the four communications at issue were all privileged under Section 47, subd. (b) because they: (1) were made after litigation was filed or threatened; (2) were made either to other participants in the litigation or to other interested parties; and (3) bore “some relation” to the litigation. (AOB, pp. 21-31.) Plaintiffs acknowledge that this privilege must be liberally applied, and that the first, temporal, prong of the privilege is satisfied.

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(Appellees’ Br., pp. 23, 31.) As to the second prong — the audience of the communications — Plaintiffs raise a dispute only as to the September 30 communication, on the grounds that it was sent not only to CUSA members, but also was posted to the “Paco Villa website” and therefore was “open to any California correctional officer.” (Appellees’ Br., p. 27; see also p. 13.) There is no such distinction. CCPOA represents all California correctional officers, and CCPOA is in turn a member of CUSA.1 There is, therefore, no practical

difference between “CUSA members” and “all California correctional officers.” Hence, the posting to Paco Villa changed nothing. All recipients of this communication were interested CUSA members. Plaintiffs’ offhand comment that Defendants failed to show how CUSA members had “an abiding interest in any dispute” (Appellees’ Br., p. 27, n. 11) makes no sense. The dispute in litigation (actual or

See (California Correctional Peace Officers Association, et al., v. The State of California, et al., 189 Cal. App. 4th 849, 853-54 [2010] [“CCPOA is the exclusive recognized employee organization representing approximately 30,000 state employees in State Bargaining Unit Six (Unit Six).” “Unit Six is made up of employees in multiple correctional peace officer classifications who work for the California Department of Corrections and Rehabilitation (CDCR) and the California Department of Mental Health.”]; (5 ER 69, pp. 11511152).

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intended) involved the management of CUSA and the use of its members’ funds. Their interest is evident. As to the third prong, Plaintiffs assert that Defendants have inaccurately represented the relevant distinction as being between statements that are “connected with” litigation and those that are “extraneous.” But the cases Plaintiffs cite repeat that exact standard. (Appellees’ Br., p. 23, citing Silberg [which says, “The requirement that the communication be in furtherance of the objects of the litigation is, in essence, simply part of the requirement that the communication be connected with, or have some logical relation to, the action, i.e., that it not be extraneous to the action.” (50 Cal.3d at 22, emphasis added)], and Action, 41 Cal. 4th at 1251 [same].) Plaintiffs emphasize that the communication must also be “in furtherance of the objects of the litigation.” That is not in dispute. As shown in Defendants’ opening brief, the communications at issue here were all in furtherance of the objects of this litigation, namely, (1) to inform CUSA members about the dispute; and (2) to redress the misconduct by Dawe and the other Plaintiffs, and to prevent members from leaving CUSA to join Plaintiffs’ new competing organization. These are legitimate goals, recognized by the cases Defendants cited.

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(AOB, pp. 28-31, citing Healy v. Tuscany Hills Landscape & Recreation Corp., 137 Cal.App.4th 1, 5-6 [2006]; Contemporary Services Corp. v. Staff Pro, 152 Cal.App.4th 1043, 1055 [2007]; Neville v. Chudacoff, 160 Cal.App.4th 1255, 1267-1268 [2008].) The district court acknowledged that preventing the loss of members was the purpose of Defendants’ conduct. (1 SER 5, pp. 21:21-22:12 [“. . . the plaintiffs started a new organization and wanted to get as many of these people into the new organization as they could, and the defendants were in a position of trying to maintain their membership and not lose them.”].) But the district court failed to recognize and apply the law that says that is a legitimate “object of the litigation.” There is no basis for distinguishing between these communications and those found privileged in Neville (discussed at AOB, pp. 30-31). To the extent Plaintiffs, by slipping in the term “good faith” (Appellees’ Br., p. 23), seek to imply that the litigation privilege only applies to communications made in “good faith,” they are wrong. As set forth at AOB, pp. 17-18, the California Supreme Court has expressly rejected any such “good faith” requirement. (Silberg, 50 Cal.3d at 218.) Quite the contrary. The presence or absence of malice The Supplemental Excerpts of Record will be cited by volume, tab, and page.
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is irrelevant.

The Court of Appeal cases cited by Plaintiffs that

apparently imply the relevance of “good faith” (Herzog v. “A” Co., Inc., 138 Cal.App.3d 656, 662 fn. 2 [1983]; Younger v. Soloman, 38 Cal.App.3d 289, 301-302 [1974]) were both decided before Silberg and did not have the benefit of the Supreme Court’s rejection of any good faith requirement. Even the demonstrable presence of an

“improper objective” in making the statements in question does not defeat the privilege. That is why the Plaintiffs’ extensive discussion of background facts is beside the point and merely diverts attention from the core legal issue, i.e., whether the district court erred by not enforcing Civil Code § 47, subd. (b). Further, Herzog (Appellees’ Br., pp. 23-24) only requires a good faith intention to pursue litigation; i.e., threatening to bring a lawsuit when you have no intention or basis for doing so will not cloak that threat in privilege. This rule has no application here. There is no question that there was a good faith intention on both sides to proceed to litigation, as that is precisely what everyone did. Plaintiffs’ arguments as to the content of the communications also fail. Plaintiffs seek to minimize the gathering litigation storm by arguing that “passing” references to “litigation,” do not suffice to

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“sanitize” a whole communication. They attempt to equate statements accusing Dawe and Harkins of stealing CUSA’s membership list, misappropriating CUSA’s name, logo and equipment, and other employment malfeasance with the defamatory statements in the Nguyen case. Nguyen is inapposite. Nguyen involved a civil unfair competition lawsuit; in that context, a gratuitous reference to defendant’s “criminal record” of “assaulting his wife, shooting at unoccupied cars, and vandalism” was plainly extraneous to the

litigation and could not fit within Civil Code § 47, subd. (b). Here, by contrast, stealing the membership list, misappropriating CUSA’s name, logo and equipment, misuse of CUSA funds, and the rest of Defendants’ statements in these communications were the very basis for the claims in this lawsuit.3 (1 SER 6; 2 ER 12 [Defendants' claims included, in extensive detail, all these allegations; see, in particular, Defendants' original complaint, 1 SER 6, pp. 33-40, ¶¶ 23-57, and first amended complaint, 2 ER 12, pp. 286-295, ¶¶ 20-54)].) These

The only statement Plaintiffs reference that was not part of Defendants’ claims is that about Dawe “falling off the wagon.” Mr. Dawe specifically testified, however, that his defamation claim was not based on this statement. (1 SER 1, p. 2, Vol. 2, p. 351 [“Q: In your deposition . . . did you say that you were not bringing a defamation claim on the falling off the wagon statement? A: That's correct].)

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are not “extraneous matters” — these are allegations directly at issue in this case. (Id.) Plaintiffs’ unsupported assertion after a long quote from Nguyen — “And so it goes in this case” (Appellees’ Br., p. 26) — has no content and fails to tie the actual facts here to the obviously gratuitous comments in Nyugen. Plaintiffs also argue that the September 30 and January 3 communications are not privileged because their contents have nothing to do with “compelling the release of financial and associated records” — the relief sought in the then-pending writ of mandamus proceedings. This repeated argument (Appellees’ Br., pp. 25, 28), which was adopted by the district court (1 ER 8, p. 134), fails for two reasons. First, while Plaintiffs do not dispute that the privilege applies to statements made in or connected with anticipated litigation, as well as pending litigation (AOB, pp. 18-19, citing Rubin v. Green, 4 Cal. 4th 1187, 1195 [1993]), they ask the Court to ignore this principle. Plaintiffs myopically focus only on the writ proceedings filed by Defendants, and improperly ignore the larger litigation that was about to be filed by both sides. The trial court made the same mistake. The

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writ proceedings are not the only relevant proceedings.4 The entire litigation had unquestionably been threatened by September 30, and thus analysis of this issue must examine the nature of the entire dispute, which did encompass the allegations in the September 30 email. The record shows: • August 30, 2006: Loud informed CUSA that he had contacted a California employment lawyer and that he and Dawe could sue all who voted to suspend them (Defendants’ Ex. 10F [4 ER 51]); • September 7, 2006: Harkins informed CUSA’s Board that Dawe informed him that he was going to sue CUSA’s Board (Plaintiffs’ Ex. 589 [4 ER 39, p. 5]); • September 11, 2006: Dawe’s lawyer asked the California Attorney General to investigate the claims and allegations (Plaintiffs’ Ex. 250 [4 ER 36a]) contained in a lengthy letter authored by Dawe (Plaintiffs’ Ex. 251 [4 ER 37]) complaining about Defendants’ actions5;

Contrary to Plaintiffs’ suggestion, Defendants’ contention regarding litigation privilege has never been based solely on the petition for mandamus (Appellees’ br., p. 24, n. 10), but on the panoply of threatened and instigated suits by both sides (AOB, pp. 23-26). Plaintiffs argue hyper-technically that the October 3 email does not relate to any legal proceedings because Jimenez referred to the “DA” and there were no “proceedings involving a ‘DA’” in this case. (Appellees’ Br., p. 30.) Put in context, the October 3 email came on the heels of Dawe’s six-page letter to the Attorney General. Jimenez obviously is referencing that contact with state law enforcement and, understandably as a non-lawyer, was mistaken in the nuanced
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In addition, with respect to the January 3 communication, it predated only by days the filing of the other complaints: • January 5, 2007, this suit was filed by Plaintiffs in Wyoming (1 ER 9, p. 149); and • January 25, 2007, Defendants CUSA and Jimenez sued Dawe and others in California (1 ER 9, p. 149). Second, even if one did just focus on the writ proceedings, these communications still relate to the allegations in that proceeding. The only relief sought was obtaining books and records, but the petition included the same allegations relating to misconduct at the helm of CUSA. (4 ER 52, e.g., p. 940: “[Dawe/Harkins/Loud] have breached their fiduciary duties, committed malfeasance, converted corporate assets, defrauded the corporation, engaged in self-dealing and interested transactions. . . .”].) Finally, Plaintiffs assert that there is a fifth communication at issue, one which Defendants “ignored” by consigning its mention to a footnote. (Appellees’ Br., p. 30.) All that occurred is that Mr.

Baumann sent a copy of the writ petition to the press. That’s it. Plaintiffs did not claim that Baumann or any other Defendant made any defamatory comment to the press. Rather, their claim related differences between the “DA” and the “AG.”

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purely to the fact that Baumann transmitted a public document to the press. It is inexplicable why Plaintiffs persist with this argument. Abraham v. LCH, cited at AOB 21, is directly on point and holds that transmittal is privileged.6 Plaintiffs’ argument that Abraham dealt with the privilege of the press to publish allegations, is simply wrong. The allegation in Abraham was not against the press; it was against the opposing party, who transmitted its proposed complaint to the press. In other words, that is precisely the same allegation Plaintiffs make here. (Abraham v. Lancaster Community Hosp., 217

Cal.App.3d 796, 805 [1990] [“Abraham’s complaint alleges that . . . LCH allegedly ‘caused its allegations to be published in the local press.’”].) The court concluded that “it would defeat the purpose of section 47, subdivisions 2 and 4 to punish the transmittal of the privileged pleadings to the press.” (Id., at 823.) Sending the

mandamus petition to the press was privileged. B. Defendants Properly Preserved the Issue of Litigation Privilege for Appeal

Plaintiffs attempt to raise a procedural objection to the
6

Susan A., 2 Cal.App.4th at 93, relied on by Plaintiffs, is not to the contrary. That case dealt with commentary made to the press about pending litigation — not merely transmitting a copy of a public document to the press.

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application of the litigation privilege. This attempt is baseless. The facts here are not in conflict. Both sides agree as to what the

publications were and when, how, and in what manner they were distributed. As the facts of what was said and to whom were not in conflict, the issue was one of law: “If there is no dispute as to the operative facts, the availability of the privilege is a matter of law . . . .” Susan A., 2 Cal.App.4th at 93). As such, there was no need to tender a jury instruction, as contended by Plaintiffs. (Appellees’ Br., p. 35.) All the district court needed to do was to recognize that the publications — true, false, malintended, or otherwise — satisfied the standards of Civil Code § 47, subd. (b). As a matter of law, applicability of the statute was not for the jury to decide and, hence, no instruction was needed. Also, contrary to Plaintiffs’ assertion (Appellees’ Br., pp. 3334, n. 14), the motions in limine properly preserved this issue for appeal by urging exclusion of all evidence of defamatory statements. Edwards v. Centus Real Estate Group., 53 Cal. App. 4th 15, 27 (1997) is not to the contrary. The problem in Edwards is that the defendant sought to preclude all of plaintiff’s evidence, not merely defamatory matter protected by Civil Code § 47, subd. (b). When the trial court

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granted that motion, it eliminated plaintiff’s ability to go to trial on unrelated issues. Not so here. The motion here dealt only with statements dealing with defamation. All of them were cloaked by the privilege. 7 C. CCPOA’s Statute of Limitations Defense to Harkins’ Defamation Claim Was Raised in the Pretrial Conference Order and Bars Harkins’ Recovery

Plaintiffs persist in arguing that CCPOA’s statute of limitations defense was not included in the Pretrial Conference Order. They are wrong. They are able to make that argument only by selectively quoting from the trial court record. 1. The Argument Was Firmly and Publicly Raised

The argument was most assuredly raised. In fact, the district
7

Even if the Court determines that one or more, but less than all, of these communications are privileged, the case should be remanded. Each of these communications was proffered as a basis for defamation, and therefore each was “directly probative” as opposed to “merely or tangential or cumulative” to that claim and the resulting verdict. (Obrey v. Johnson, 400 F. 3d 691, 701-702 [9th Cir. 2005] [“We must determine whether the evidentiary error of which appellant complains has deprived him of the degree of certainty to which he is entitled. [Citation] We cannot conclude, based upon the facts of this case, that the erroneous exclusion of evidence directly probative of the defendant's discriminatory bias and pretext did not taint the jury's verdict. The evidence at issue was not merely tangential or cumulative; rather, it was directly probative of the central issues in dispute.”].) Plaintiffs have the burden of persuasion on this point. (Id.)

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court specifically ruled that the Pretrial Conference Order would be amended to include CCPOA’s then-pending Motion in Limine No. 13 (that dealt expressly with the issue of Harkins’ defamation claim against CCPOA being time-barred). (1 ER 7a, p. 11b.:8-12 [“the court will amend the pretrial order to reflect that defendants have answered Harkins’ fifth counterclaim8 and requested attorney fees, and the court substitutes the list of defendants’ motions in limine for defendants’ disputed evidentiary issues”].) Thus, Plaintiffs’ reliance on Youren v. Tintic School Dist., 343 F.3d 1296 (10th Cir. 2003) for the proposition that the Pretrial Order controls is inapposite. This defense was in the Pretrial Order. Plaintiffs discuss some of the procedural history surrounding the Pretrial Conference Order (Appellees’ Br., pp. 37-38), yet they fail to include the procedural facts relating to Defendants’ motions in limine, which are intertwined with that Order. Those relevant facts are undisputed and establish, without question, that Defendants’ statute of limitations defense was part of the Pretrial Conference Order:

The Answer also included the statute of limitations affirmative defense. (2 ER 11a, p.278e, Item No. 3.)

8

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On May 17, 2010, the district court issued its tentative Pretrial Conference Order. (1 AER 1-64.) On May 21, 2010, Defendants filed their Motion in Limine No. 13 challenging Harkins’ defamation claim on statute of limitations grounds, along with other motions in limine. (4 ER 28.) On June 14, 2010, the district court ruled that the Pretrial Conference Order would be amended to include it and other pending motions in limine. (1 ER 7a, p. 116:8-12.) On June 15, 2010, the district court issued the final Pretrial Conference Order. (1 ER 7.) Six days later, on June 21, 2010, the district court ruled on the motions in limine. (5 ER 83, p. 1266 [CM/ECF Doc. 377].) Thus, not only was CCPOA’s statute of limitations defense specifically framed by the Pretrial Conference Order, but also, Plaintiffs’ counsel had just briefed the matter in their opposition to CCPOA’s motion in limine a week before it was added to the Pretrial

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Conference Order. (4 ER 29.) There is simply no credible basis for Plaintiffs to assert that they needed to go “hunting through materials outside the pretrial order to determine which issues have been preserved for trial and which have not.” (Appellees’ Br., p. 42.) Additionally, as Plaintiffs acknowledge, the matter was argued during trial but before proceedings were completed. (Appellees’ Br., pp. 38-41.) Notably, while Plaintiffs quote from the October 6, 2010, hearing on Defendants’ motion for judgment as a matter of law (Appellees’ Br., pp. 40-41), and argue that Defendants’ arguments were “uncompelling,” they omit the end of the discussion and the trial court’s recognition that Defendants “may be right”: “Mr. Zipser: Your Honor, this references a motion in limine . . . on the statute of limitations. . . . And it was specifically added to the Pretrial Conference Order because of the timing of the motion in limine.” “The Court: Well, now I’m lost. I don’t know. The answer is that [it] will be taken under submission, it will go to the jury, and we’ll work it out post-trial. I don’t know. That’s news to me, but you may be right.” (2 AER 31, p. 403: 5-13.) Finally, Plaintiffs note that 29 items added to the Pretrial Conference Order replaced 52 previously listed items that did not reference the statute of limitation defense. (Appellees’ Br., p. 41.) So what? The very nature and purpose of the district court’s June 14,

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2010 Order (1 ER 7a) was that those items were replaced and superseded by the items included in the final Pretrial Conference Order. Accordingly, this is hardly a situation where “Defendants never teed this issue up as being one in which Plaintiffs would need to present evidence at trial,” as Plaintiffs assert. (Appellees’ Br., p. 42.) It was, to say the least, completely front and center. (Id.) Here again, Plaintiffs’ own cited authority undermines their argument. Plaintiffs cite Law Co., Inc. v. Mohawk Constr. & Supply Co., Inc., 577 F.3d 1164, 1171 (10th Cir. 2009) for the proposition that a district court’s interpretation of a pretrial order is reviewed for abuse of discretion. In that case, the court cautioned against the very result Plaintiffs’ urge herein: “Pretrial orders are to be ‘liberally construed to cover any of the legal or factual theories that might be embraced by their language. We have cautioned that a pretrial order is a procedural tool to facilitate the trial of a lawsuit on its merits and not to defeat it on a technicality.’ [Citation.] The primary purpose of pretrial orders is to avoid surprise.” (Id.) In Law, a general contractor sought a declaratory judgment that one of its subcontractors was barred from collecting delay damages under the parties’ subcontract. On summary judgment, the

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subcontractor argued that even if the “no damages for delay” provisions in the subcontract were valid, they did not apply for several reasons. The court refused to consider these arguments finding that they were not encompassed within the final pretrial order. The final pretrial order listed the following as a legal issue: “Does the Subcontract language prevent Mohawk from making any delay claims against Law or any other types of claims based on adjustment to the work schedule?” The subcontractor appealed. On appeal, the court concluded that the district court abused its discretion by refusing to consider Mohawk’s alternative arguments, finding that they fell within the scope of the pretrial order. “This was not a case in which Mohawk unfairly attempted to surprise Law with new factual allegations at trial or to inject a new claim or defense at the eleventh hour. Both parties and the court were fully aware that application of the ‘no damages for delay’ provisions would be the subject of summary judgment briefing, and each of Mohawk’s alternative arguments addressed that issue.” (Id.) Here, the statute of limitations defense having been alleged in CCPOA’s answer, argued before trial and at the time of the Pretrial Conference Order, and argued again during trial, there was no

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surprise. 2. Harkins’ Claim Does Not “Relate Back”

Plaintiffs argue that Harkins’ defamation claim against CCPOA relates back to his prior defamation counterclaim against CUSA and Baiardi. It does not. On July 9, 2007, Harkins filed an answer and counterclaims, including counterclaims of defamation against CUSA and Baiardi. Harkins did not include any counterclaims against CCPOA. On November 21, 2007, Harkins filed a First Amended Answer and Counterclaims against CUSA and Baiardi. (5 ER 83, p. 1239 [Ct Dock. No. 54].) Once again, Harkins did not include any

counterclaims against CCPOA. On June 4, 2009, CUSA filed an Answer, Cross-Complaint and Counterclaim to Plaintiffs’ Verified First Amended Complaint. (2 ER 11; 5 ER 83, p. 1251 [Ct. Dock. No. 189].) CUSA named Gary Harkins as a cross-defendant. (Id.) On June 29, 2009, Harkins filed an Answer, Counterclaims, and Crossclaims. (2 ER 14; 5 ER 83, p. 1251 [Ct. Dock. No. 197].) This time, Harkins’ Counterclaims asserted a claim for defamation against CUSA, Baiardi, and for the first time — almost two years after filing

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his original counterclaims — also asserted a defamation claim against CCPOA. (2 ER 14, p. 471.) Harkins’ June 29, 2009 defamation claim against CCPOA was a new claim against a new party. Accordingly, there is no relation back. (Trindade v. Superior Court of Contra Costa County [1973] 29 Cal.App.3d 857, 859. [“As to cross-actions against . . . new parties it has regularly been held that the statute of limitations is not tolled by the commencement of the plaintiff’s action”].) Harkins’ argument to support a relation back fails. Harkins tries to lay blame on his prior counsel who, his current counsel asserts, “mistakenly omitted CCPOA from Mr. Harkins’ original defamation claim.” (Appellees’ Br., p. 44.) The record citation which

purportedly supports this assertion does no such thing. It is no more than a citation to the earlier complaint that failed to sue CCPOA. There is no explanation of why.9 Even if that were the case — and there is no evidence that it was — such a “mistake” is not the sort that warrants relation back under Rule 15(c)(1). Rather, the “mistake” must be one of misnomer or misidentification of the intended Notably, Harkins’ current counsel who, for more than a year prior to his representation of Harkins had been counsel for other Plaintiffs in the action, and was long familiar with the claims and evidence — waited an additional seven months to correct the so-called mistake.
9

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defendant; it does not apply to a plaintiff who makes a conscious choice which defendants to sue and which not to sue. (LouisianaPacific Corp. v. ASARCO, Inc., 5 F.3d 431, 434 [9th Cir. 1993] [“. . . [plaintiff] knew [defendant] was the party for whose actions it sought indemnity. There was no mistake of identity, but rather a conscious choice of whom to sue.”]; Wang & Wang LLP v. Banco Do Brasil, S.A., 2008 U.S. Dist. LEXIS 99158, [E. D. CA, November 25, 2008] *12 [“Relation back was not meant to apply where plaintiff made an intentional choice not to sue a defendant. . . . Where a plaintiff is aware of defendant’s identity and potential liability, but has made a conscious choice to sue certain defendants but not others, then the required element of “mistake” is not present. . . .”] [internal citation omitted].) That is precisely what occurred here. Harkins intentionally elected to sue CUSA and Baiardi based on some or all of the same conduct for which he later sought to add CCPOA as a party defendant. Indeed, in his First Amended Answer to CUSA’s First Amended Complaint, Affirmative Defenses, Counterclaims, and Third-Party Complaint filed November 21, 2007 (1 AER 2), Harkins specifically based one of his defamation claims on the October 3, 2006, e-mail

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sent by Michael Jimenez (4 ER 42). (1 AER 2, p. 80, ¶ 99.) That email identifies Mr. Jimenez as “CCPOA State President.” Thus,

Harkins was fully aware of CCPOA and Mr. Jimenez at the time he chose not to sue CCPOA for alleged defamation. Accordingly, there is no “relation back” under Rule 15 (c)(1). (Louisiana-Pacific, 5 F.3d at 434.) 3. There is No Evidence of Defamatory Conduct Within the Limitations Period, Much Less Any to Support the Jury’s Verdict

Finally, Harkins argues that the record contains evidence of defamation of Harkins by CCPOA within the limitations period. The transcript portions Harkins cites, however, do not substantiate that assertion. (Appellees’ Br., p. 45.) Harkins points only to testimony by Dawe complaining generally about how his efforts to gain support for his new organizations have been hampered, which Harkins confirmed. The testimony does not mention any particular

communication by CCPOA, much less the date or the contents of the communication, to whom it went, and so on. The testimony certainly does not support Harkins’ claim for defamation against CCPOA. Similarly, there is no basis to believe Plaintiffs’ claim that Harkins “would have devoted significant energies at trial to eliciting

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specific evidence and testimony on defamatory conduct by CCPOA and its representatives coming within the one-year [limitations] period . . . .” (Appellees’ Br., p. 43.) Even if the limitations issue was not part of the Pretrial Conference Order, and even if it had not been argued over during the trial itself, there would have been no reason why Harkins, in seeking to prove and recover damages for CCPOA’s defamation, would have held back evidence of additional defamatory conduct — particularly any recent or continuing defamatory conduct. In any event, Harkins has not established, and cannot establish, that the statute of limitations issue was not properly raised in the Pretrial Conference Order. Harkins did not present any evidence of defamation by CCPOA after June 29, 2008, and any alleged defamation prior to that date is barred by the statute of limitations. D. The District Court Erred by Changing the Ruling that Dawe was a Public Figure

Plaintiffs do not dispute that a limited purpose public figure is one who “voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues.” (Gertz v. Robert Welch, 147 Cal.App.4th 13, 25 [1974].) Plaintiffs’ opposition is based primarily on the definition of the

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“public issue or controversy” here. Plaintiffs assert that the issue or controversy is Dawe’s alleged mismanagement and defrauding of CUSA. Then, having set up this straw man, Plaintiffs knock it down by arguing that this is an issue that Defendants manufactured themselves by taking the matter public and the law says that does not suffice. (Appellees’ Br., 47.) This argument misses the point entirely. The “public issues” here are the current issues in the corrections field, particularly prison privatization, working conditions, and safety. These are topics of wide concern; not just to the hundreds of thousands of correctional officers in the U.S., but also to those concerned with the financial and societal implications of the country’s ever-burgeoning prison population. All the rallies and legislative

interest in these topics demonstrates that they are beyond a doubt “public issues.” (AOB, 36-39.) Indeed, the trial court defined the issue exactly thusly. (1 ER 8, p. 137 [Dawe was “at least a limited public figure in that he has spoken at numerous events and was [a] well-known expert or advocate with respect to issues affecting correctional officers”] [emphasis added].) The trial court later changed its opinion that Dawe was a limited public figure — but not because the “issue or controversy” was not

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properly defined. Rather, the court believed that Dawe, in his trial testimony, had “deprecated his role” in that public controversy. And, to be sure, Dawe did try to do so. Plaintiffs are correct that Dawe did try to characterize his public activities as “infrequent.” The point is that it does not matter what he called it; calling black white does not actually turn black into white. Dawe could not and cannot change the abundant, specific evidence — detailed in the AOB (at pp. 36-39) — of his many attempts to “thrust himself into the public eye” and “influence resolution of these issues.” (Gilbert v. Sykes, 147 Cal.App.4th 13, 25 [2007].) Plaintiffs argue that Defendants’ description of all these activities is “overstated.” But Defendants’ “description” was nothing but a compilation of Dawe’s own testimony and written descriptions of himself. (AOB, pp. 36-39.) Dawe’s own biography — published on his new organization’s (ACOIN) website — claims broadly that he “is considered to be one of the leading experts on private prisons in the nation.” (4 ER 31, p. 829.) No matter what Dawe said at trial when it became prudent to minimize his stature in litigation, the specifics are still there, and they more than suffice to make him a limited public figure — particularly compared with other plaintiffs

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who have been held to be limited purpose public figures based on a far smaller scope of public activity. (AOB, pp. 39-40; e.g., Copp v. Paxton, 45 Cal.App.4th 829 [1996] [issuing flyers on earthquake safety in schools made plaintiff a limited public figure on that issue].) Plaintiffs next argue that the defamatory statements here have nothing to do with prison privatization or other “similar issues” on which Dawe is an expert. That focus is too narrow. Statements need only be “germane to the plaintiff’s participation in the controversy.” (Gilbert v. Sykes, 147 Cal.App.4th 13, 24 [2007]; emphasis added.) Once a person “places himself in the spotlight on a topic of public interest, his private words and conduct relating to that topic become fair game.” (Gilbert, 147 Cal.App.4th at 25.) The defamatory

statements at issue here accused Mr. Dawe of acting unethically at the helm of a national correctional officers’ association, and therefore call into question his fitness to represent the interests of correctional officers throughout the nation. The statements related specifically to Dawe’s conduct in the industry in which he held himself out as a “leading expert” and, as such, are “relevant to the public’s decision whether to listen to him” or trust him. (Waldbaum v. Fairchild Pubs., Inc., 627 F.2d 1287, 1298 [D.C. Dir. 1980.]) This situation cannot be

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distinguished from that in Gilbert, 147 Cal.App.4th at 25, where a plastic surgeon was an advocate of plastic surgery generally, and one of his patients created a website that, among other things, accused the surgeon of botching her surgery. Although the fact that the plaintiff personally may have been unskilled as a surgeon did not directly relate to whether plastic surgery generally is good or bad, the court found that these statements were sufficiently related to his status as an industry advocate for plastic surgery to make him a limited public figure. Likewise, Dawe promoted himself as a leading advocate for correctional officers, the head of a national organization whose primary purpose is the betterment of conditions for correctional officers. As the ACOIN website describes him: “He has been a featured speaker at rallies, protests and conventions throughout the country supporting correctional officers everywhere.” (4 ER 31, p. 829.) At the same time he was accused, much like Dr. Sykes, of misconduct in that very industry, of taking the dues paid by those very correctional officers and using them as his own personal bank account, and then covering it up. The negative assertions about Dawe were “germaine” to his participation in the public issues. The

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statements were directly related to his fitness as the national spokesman he touted himself to be. E. The Claims For Interference With Contractual Relations And Interference With Prospective Economic Advantage Were Barred By California Civil Code § 47 applies to

Plaintiffs do not dispute that Civil Code § 47

interference claims just as it does to defamation. Accordingly, the same principles discussed above apply here. The privileged

communications cannot provide the basis for these claims. (AOB, p. 41.) Defendants also demonstrated that, even setting aside the privilege, there was no evidentiary basis for the interference with contract verdict for FIMA because none of the relevant

communications occurred during the few weeks when the FIMA contract was in effect. (AOB, p. 42-43.) Plaintiffs respond that Defendants inaccurately stated that the contract was terminated on August 17, 2006, when in fact it was terminated on October 17, 2006. Defendants relied upon the district court’s statement of an August 17 termination date, and the citation was accurate (5 ER 68, pp. 11251126). It does appear, however, that the court was mistaken in that, as Plaintiffs state, the CUSA board resolution formally terminating the

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contract was dated October 17 (4 ER 54). But this does not change the analysis. By August 17, Dawe had already been suspended

without pay, and he was the only one who could perform the primary contract functions on behalf of FIMA. The suspension further Thus,

prohibited Dawe from using any CUSA assets. (4 ER 49.)

although the September 30 email occurred between Dawe’s suspension and the formal contract termination, by September 30, the contract was already dead for all practical purposes. Thus, there was no legal or factual basis for the award on interference with contract. F. Duplicative Recovery Is Self-Evident 1. The Breach of Contract and Interference Claims by FIMA

FIMA had a contract with CUSA under which it would receive $333,000 total over three years, payable at $111,000 per year. FIMA brought claims for both breach of this contract and interference with this contract. FIMA was awarded one year’s payment, $111,000, on the breach claim (pursuant to the contract’s severance provision). FIMA was also awarded the full three-year contract amount of $333,000 on the interference claim. Thus, FIMA received $444,000 for the loss of a $333,000 contract. As set forth in the AOB, this is an impermissible double recovery of $111,000.

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FIMA acknowledges that the $333,000 interference award is the “full value” of the contract (Appellees’ Br., p. 55), yet asserts that there is no duplication of damages here. FIMA argues that

Defendants “ignored” the fact that the interference claim is a tort claim and that, as such, damages other than the value of the contract — for “unforeseen expenses,” “mental suffering,” and “damage to reputation” — are recoverable. (Appellees’ Br., p. 56.) Defendants do not dispute that these other types of tort damages may be potentially recoverable on an interference claim. Rather, Defendants dispute that any such other tort damages were either sought or proved here. First, “[d]amages for mental suffering are not recoverable by a corporation. (23 Cal Jur Damages §74, citing Templeton Feed & Grain v. Ralston Purina Co., 69 Cal. 2d 461, 468 [1968].) Second, FIMA expressly did not seek any of these “other” damages. Jury Instruction 55, relating to the interference claims,

stated that “all accusing parties seek economic damages as to these claims.” (1 SER 7, p. 56; emphasis added.) “Economic damages” means “objectively verifiable monetary losses.” (Cal. Civ. Code § 1431.2[b][1].) By contrast, emotional distress, injury to reputation,

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and other subjective losses are “non-economic damages” — which FIMA did not seek. (Cal. Civ. Code § 1431.2[b][1].) The jury, therefore, could not have awarded damages for emotional distress, harm to reputation, or any other non-economic items. Third, as to “unforeseen expenses” or any other economic damages in excess of the contract amount, FIMA points to no evidence of any such damages. FIMA tries to characterize the

interference damages as somehow different from the contract damages because the interference award “reflect[ed] the jury’s attempt to make Flat Iron whole by returning it to the position it was in before Defendants’ interfering conduct.” (Appellees’ Br., p. 58.) This is empty rhetoric. The only “position” FIMA was in before the

interfering conduct was that it had a contract for $333,000. Returning it to that position would award the contract amount, nothing more. Indeed, Plaintiffs’ counsel specifically asked the jury to award $333,000 on the interference claim because that was the “damage figure that FIMA would have been entitled to under that contract.” (2 AER 31, p. 405:18-25 (emphasis added).) FIMA also tries to distinguish the cases cited by Defendants on the ground that those cases found impermissible duplication of

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damages not just because the recoveries were in the same amount, but also because there was no “distinct and independent” evidence of “separate items of compensable damages.” (Appellees’ Br., p. 57.) This is not a distinction. Here, too, FIMA had no such evidence of any such separate damages, and it cites to none now. FIMA cites Duff v. Engelberg, 237 Cal.App.2d 505 (1965), for the proposition that the Court should not merely “assume” that the damages awards are overlapping. (Appellees’ BR., p. 56.)

Defendants do not ask the Court to do any such thing. In Duff, there was no indication whatsoever (not even the dollar amount) that the two awards were for the same damages. Duff, 237 Cal.App.2d at 507. Here, there is every indication that the awards covered the same contract damages, and no evidence to the contrary. Accordingly, the conclusion that the jury awarded duplicative damages is not some baseless assumption; it is the only rational conclusion based on the evidence and instruction at trial, as well as the dollar amount of the award. The interference award, therefore, should be reduced by

$111,000, if not eliminated altogether under Civil Code § 47, subd. (b).

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2.

The Breach of Contract and Defamation Claims by Dawe

Plaintiffs essentially make the same argument as to Dawe’s $1,789,405 award for defamation. Plaintiffs do not dispute that this award precisely mirrors the defamation damages sought by Dawe, based on the report and testimony of Plaintiffs’ expert, Mark Cohen. Nor do they dispute that Mr. Cohen’s $1,789,405 damage calculation included $333,000 for the loss of the FIMA/CUSA contract. And they do not dispute that FIMA and Dawe cannot both recover that same $333,000 in contract damages. Rather, Plaintiffs ask the Court to defy reason and assume that the jury just happened, coincidentally, to pick the exact damages figure proffered by Cohen, but without adopting Cohen’s analysis of the damage elements that made up that figure. While Defendants do not disagree that a jury may in its discretion come up with its own damages number, that is clearly not what happened here. In this case, Plaintiffs put Cohen’s analysis before the jury, told the jury that these are the damages for defamation, and asked the jury to award that amount. (1 SER 3, pp. 11:4-12:16.) Plaintiffs then told the jurors that if they rejected the Cohen analysis, they could instead do their own analysis and come up with their own damage figure

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based on all the evidence, including that of reputational and emotional harms. (1 Ser 3, pp. 13:8-15:22) [“if you think Mr. Cohen just fell off the turnip truck, you can still conduct your own analysis and still come up with your own damage figure. I submit that Mr. Cohen was eminently credible and that you should rely on his testimony. But if you disagree with me, you should still make a damage award based on these legal principles.”].) Plaintiffs set up two distinct alternatives for the jury, and the jury chose the Cohen measure. In response, Plaintiffs first argue that Cohen’s measure of damages did not include any “general” damages for reputational harm and the like. This is false. Cohen’s $1,789,405 damages figure

included the loss of the three-year, $333,000, CUSA contract, plus pre-judgment interest. (4 ER 44, p. 916; 1 SER 2, p. 5:9-1410) The remainder of that $1,789,405 figure — over $1 million — consisted of a forecasted future loss of earnings, which was calculated based on the extent of the harm to Dawe’s reputation and loss of personal goodwill. (4 ER 44, p. 915; 1 SER 2, pp. 4:12-5:2; 5:15-6:4; 7:7-11;

10

Cohen used the net income from the contract amount, by subtracting the expenses from the income stream, and then adding pre-judgment interest. (1 SER 2, p. 8:11-16.)

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9:14-17.11) This future projection is not “special damages” (which a plaintiff must prove “precisely” that he already “has suffered”12), but rather an effort to quantify reputational harm and other subjective, non-verifiable damage from the defamation. That Cohen is an

economist and attempted to attach specific dollar figures to different quantities of reputational harm does not transform that element of general damages into special damages. Cohen’s analysis represented a
11

Cohen forecasted Dawe’s future loss of income based on two alternative “major assumptions.” (4 ER 44, pp. 911; 915-916; 920.) The first, “neutral” projection ($1,294,236) assumed that Dawe would not make any profit for the remainder of his working life. The second, “optimistic” projection ($154,201) assumed that Dawe would be back to his pre-defamation income level by 2014. (4 ER 44, pp. 909-920; 1 SER 2, pp. 4:12-5:2.) The difference between these two calculations hinged on whether Dawe’s “reputation in some sense would be restored.” (1 SER 2, pp. 4:15-5:2 [emphasis added]; see also, 1 SER 2, pp. 5:25-6:2.) Thus, both calculations included some level of future damages based on ongoing reputational harm. The jury chose the “neutral” figure and thereby compensated Dawe for a lifetime of reputational harm. See Code Civ. Proc. § 48a (4)(b); Gomes v. Fried, 136 Cal.App.3d 924, 939-40 (1982) (“general damages encompass the loss of reputation . . . in any context, including the plaintiff’s trade or business; “special damages must be pled and proved precisely”; special damages are defined as “pecuniary loss” as stated in Childers v. San Jose Mercury Printing and Publishing Co., 105 Cal. 284, 288289 (1894) [which stated: “Special damages as a branch of actual damages may be recovered when actual pecuniary loss has been sustained and is specially pleaded.” (emphasis added)]. Cohen’s future projections of reputational harm are by definition theoretical and have not yet been sustained. Nor were they, or any other item of defamation damages, specially pleaded. (2 ER 10.)
12

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full measure of defamation damages — general and special — which is why Plaintiffs presented it to the jury as such. Second and similarly, Plaintiffs assert that Defendants, in focusing on Plaintiffs’ expert report, “pay[] no heed to” the evidence of how widespread, inflammatory, and influential the defamation was, and the damaging effect of those communications. (Appellees’ Br., p. 60.) As set forth above, Mr. Cohen’s analysis did take account of these factors. If the damage from defamation had been minor or fleeting, Mr. Cohen could not have projected — as he did — that Dawe would never make another dime of profit during his lifetime. (4 ER 44, p. 915; 1 SER 2, p. 4:12-17.) Further, it was Plaintiffs who presented Cohen’s analysis as a complete measure of damages for defamation. Plaintiffs did not ask for $1,789,405, plus additional damages to account for loss of reputation and other general damages. Certainly, if Cohen’s damage figure encompassed only special damages, Plaintiffs would have done so. Instead, Plaintiffs asked the jury to award either Cohen’s damages amount, or come up with their own number based on all the evidence of harm from defamation. Lastly, Plaintiffs assert that there is no double recovery because contract damages were awarded to FIMA, and defamation damages

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were awarded to Dawe for “personal damage” that was separate from his “business interests.” This assertion assumes that the jury ignored Cohen’s calculations, which included contract damages and other harm to “business interests.” As set forth above, the trial proceedings offer no support for this assumption. Likewise, Plaintiffs state that they “advocated” for “separate awards” for breach of contract, interference, and defamation. It is unclear what exactly Plaintiffs are attempting to prove here, but their citation to the record only proves precisely what Defendants are arguing. Plaintiffs asked for the same contract damages over and over again.13 Plaintiffs got exactly what they asked for, and what they asked for included contract damages. Accordingly, the defamation award must be reduced by $333,000.

13

Plaintiffs cite to 2 AER 404-407, which is a portion of Plaintiffs’ counsel’s closing argument in which counsel argues that Plaintiffs are entitled to (1) $111,000, one year of the contract, for breach of contract (2 AER 31, p. 404:13-25); (2) $333,000, all three years of the contract, for breach of the implied covenant (2 AER 31, p. 405:1417); (3) on interference with contract, “again to the tune of a $333,000 damage figure that FIMA would have been entitled to under the contract” (2 AER 31, p. 405:18-25); and then, (4) for defamation, the “past economic loss” from Cohen’s report (2 AER 31, p. 407:4-11).

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G.

Plaintiffs Do Not Dispute that the Damage Award Against CUSA is Many Multiples of its Net Worth; As a Result, the Punitive Damage Against CUSA is Unconstitutional

Plaintiffs do not dispute that the jury’s compensatory damage award was nearly three times CUSA’s net worth, and that an additional $81,000 of punitive damages makes the total damages nearly four times that net worth. Instead, Plaintiffs argue that

Defendants did not make a “net worth” argument to the district court and that the punitive damages are not constitutionally infirm because they are approximately one-third of the compensatory damage award. Plaintiffs are wrong on both counts. First, Defendants did make this “net worth” argument to the district court. Defendants raised the issue in their motion for a new trial, argued the point during the January 18, 2011, hearing on Defendants’ post-trial motions, and then again as part of the subsequent briefing. (4 ER 61, p. 1022; 1/18/11, RT, p. 23:1-17; 1 SER 8.) Second, Plaintiffs’ reference to the ratio of the punitive damages to the compensatory damages misses the point. Inasmuch as the

compensatory damages alone were multiples of CUSA’s net worth, there is no deterrence or punishment purpose to be achieved from any

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punitive damage award. V. CONCLUSION OF APPELLANTS’ REPLY BRIEF Defendants’ opening brief showed with precision how the district court erred fundamentally — as a matter of law — when it refused to apply Civil Code § 47, subd. (b). Plaintiffs’ response was twofold: (1) attempting to divert attention away from the legal error by discussing facts made irrelevant by settled California law, and (2) refusing to acknowledge the scope of the litigation privilege as evolved by the California courts. Properly viewed, the district court’s error is clear, mandating reversal. Moreover, other errors — impacting either other aspects of the scope of defamation litigation (like statutes of limitation and public figure status), or other aspects of the litigation privilege (applying it to other torts that are part of this suit), or the proper scope of punitive damages — provide additional grounds for reversal. All told, the judgment in favor of the Plaintiffs warrants reversal. Most of this case never should have gone to trial in the first place.

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CROSS-APPELLEES’ BRIEF I. INTRODUCTION The jury awarded over $10 million in punitive damages. On Defendants’ motion for new trial, the trial court properly remitted five of the punitive damages awards to a constitutionally permissible and appropriate level, as follows: Cause Of Action Compensatory Damages Punitive Remitted Punitive Damages Damages (ratio to (ratio to compensatory) compensatory) $10,000 (5:1) $3,000,000 (3,000,000:1) $6,000 (3:1) $1 (1:1)

Harkins’ Claim for False Imprisonment Against CUSA FIMA’s Claim for Intentional Interference with Prospective Economic Relations Against CCPOA FIMA’s Claim for Interference with Contractual Relations Against CCPOA Dawe’s Claim for Defamation Against CCPOA Harkins’ Claim for Defamation Against CCPOA FIMA’s claim for Intentional Interference with

$2,000

$1

$333,000

$3,000,000 (9:1)

$333,000 (1:1) $1,639,405 (1:1) $315,000 (1:1) Not remitted; award stands at $25,000

$1,639,405

$3,000,000 (1.8:1) $1,000,000 (3.2:1) $25,000 (25,000:1*)

$315,000

$1

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Prospective Economic Relations Against CUSA

(*court calculated the ratio at 0.23:1, because it combined the $1 award here with FIMA’s $111,000 breach of contract award)

Plaintiffs now want it all back, even the 3,000,000:1 award. There is no basis to overturn the trial court’s decision on remittitur. II. ARGUMENT A. Harkins’ False Imprisonment

Plaintiffs argue that, in assessing the excessiveness of the punitive damages on Harkins’ false imprisonment claim against CUSA, the district court should not have looked at this claim in isolation. Rather, Plaintiffs assert, the court should have looked at Harkins’ combined compensatory awards against CUSA for breach of contract ($6,000), defamation ($28,000), and false imprisonment ($2,000), and compared that total ($36,000) to the combined punitive damages awards on those claims ($35,000). By re-jiggering the jury’s awards in this way, Plaintiffs propose that the $10,000 in false imprisonment punitive damages did not represent an excessive 5:1 ratio to compensatory damages, but instead was part of an acceptable overall ratio of about 1:1.

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The district court correctly and explicitly rejected this argument. The court relied on Bains LLC v. Arco Products Co., 405 F.3d 764 (9th Cir. 2005), which held that it could be appropriate to take contract damages into account when setting punitive damages on a tort claim that was “intertwined” with the contract claim. While Defendants would question how it is ever appropriate or logical to assess punitive damages with reference to a contract claim that does not support punitive damages, that disagreement is irrelevant here — because the district court correctly determined that Harkins’ false imprisonment claim was not intertwined with his other two claims against CUSA and hence had to be considered separately. Harkins’ breach of contract and defamation claims were both based on negative comments and conclusions made by CUSA about Harkins’ job performance as a CUSA employee. The false imprisonment claim, by contrast, was based on a separate, isolated event. In essence, CUSA believed that Harkins had possession of a CUSA laptop that he refused to relinquish to CUSA after his termination. Accordingly, two CUSA representatives stopped Mr. Harkins in a hotel lobby and asked to look in his luggage for the laptop. Mr. Harkins let them, they did not find the laptop, and Mr. Harkins left the hotel. (2 AER 21, pp.

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336-337.) That is the total basis of the claim. There can be no dispute that this was a discrete incident. Indeed, Plaintiffs do not appear to argue to the contrary. Instead, Plaintiffs seem to argue that, notwithstanding Bains, under Planned Parenthood of Columbia/Williamette, Inc. v. Am. Coal. of Life Activists, 422 F.3d 949, 962 (9th Cir. 2005), the trial court should have combined all of Harkins’ awards against CUSA for purposes of assessing the excessiveness of punitive damages. Plaintiffs assert that Planned Parenthood establishes a “default rule” that awards are to be compared on a “defendant-by-defendant basis,” rather than claim by claim. Planned Parenthood establishes no such rule. In Planned Parenthood, while the court did analyze the awards by comparing each plaintiff’s compensatory award to the punitive award against each defendant — that was because there was only one punitive damages claim against each defendant. (Planned

Parenthood at 952 [the other claim presented was RICO, for which treble damages were awarded, and which was not considered by the court in assessing whether punitive damages should be remitted].) The case, therefore, in no way stands for the proposition that a court should aggregate multiple awards between the same plaintiff and the

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same defendant. If anything, Planned Parenthood supports the opposite approach. Planned Parenthood rejected both sides’ arguments to

aggregate the awards in different ways, stating that to do so would have a “distorting effect.” (Id. at 961.) The court instead emphasized that the jury went to the trouble of making separate awards and, therefore, evaluating those awards separately “respects the jury’s verdict.” (Planned Parenthood, at 960-62.) Thus where, as here, the jury makes specific decisions and differentiates reprehensibility, whether by defendant or by claim or both, each of those decisions should be evaluated on its own merits. There is no reason to

artificially rearrange the jury’s determinations, nor do Plaintiffs offer one — other than to distort the awards in Plaintiffs’ favor. Evaluating the false imprisonment award separately, therefore, the trial court properly determined that the 5:1 ratio of punitive to compensatory damages was too high. (State Farm Mutual Auto Ins. Co. v. Campbell, 538 U.S. 408 [2003] [“an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety”]; BMW of N. Am. v. Gore, 517 U.S. 559, 581 [2006].) This was an extremely weak claim. Liability was

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questionable as the “imprisonment” occurred in a public hotel lobby where Harkins was free to leave, and Harkins testified to no harm other than, at most, feeling intimidated for a few minutes. (2 AER 21, pp. 338-339.) The jury awarded $2,000 in compensatory damages, which could only have been for emotional distress. As such, the compensatory award “already contain[ed] a punitive element.” (State Farm at 426.) Considering all of the circumstances, and taking into account CUSA’s very limited net worth (discussed above), the trial court’s remittitur to $6,000 (a 3:1 ratio) was generous. B. The Court Properly Remitted the Punitive Damages Awards Against CCPOA 1. A 1:1 Ratio of Compensatory to Punitive Damages Is the Maximum Warranted Here

Turning to the four awards against CCPOA — remitted by the trial court to a 1:1 ratio to compensatory damages — Plaintiffs first disingenuously claim that Defendants argued below that the “singledigit ratio” referenced in State Farm means a 1:1 ratio, as opposed to a 9:1 ratio. To the contrary, Defendants accurately set forth the law as enunciated by State Farm and other leading cases; i.e., that while awards exceeding a 9:1 ratio are automatically suspect, under the circumstances here and the guidelines established by the Supreme

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Court, no more than a 1:1 award was warranted on these claims. (4 ER 61, pp. 1022, 1026-1028; 5 ER 63, pp. 1090-1091.) The trial court likewise repeated these principles in its Order. (1 ER 2, pp. 78.) In State Farm, the Supreme Court stated that “few awards exceeding a single-digit ratio between punitive and compensatory damages . . . will satisfy due process.” 538 U.S. at 425. Indeed, a punitive damages award of four times the amount of compensatory damages “might be close to the line of constitutional impropriety.” (Id. [citing Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23-24 (1991), and Gore, 517 U.S. at 581].) More relevant here, the Supreme Court further stated that: “when compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” (Id.; emphasis added.) Each of the following also reduced punitive damages to levels at or near the amount of compensatory damages when the latter were substantial: Noyes v. Kelly Servs., Inc. 2008 U.S. Dist. LEXIS 70287, at *39 (E.D. CA 2008); Morgan v. N.Y. Life Ins. Co., 559 F.3d 425, 442-43 (6th Cir. 2009); Mendez-Matos v. Municipality of Guaynabo, 557 F.3d 36, 55 (1st Cir. 2009); Jurinko v. Med. Protective Co., 305

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F. App’x 13, 27-28 (3d Cir. 2008); Casumpang, 411 F. Supp. 2d at 1219-21; Jet Source Charter v. Doherty, 148 Cal.App.4th 1, 9-11 (2007). Here, on the interference with contract and two defamation claims against CCPOA, the jury awarded substantial compensatory damages — over $300,000 each on two of the claims, and $1,639,405 on the third. (See State Farm at 426 [“The compensatory award in this case was substantial; the Campbells were awarded $1 million for a year and a half of emotional distress. This was complete

compensation. The harm arose from a transaction in the economic realm, not from some physical assault or trauma]; Mendez-Matos, 557 F.3d 36, 55 [1st Cir. 2009] [compensatory award of $35,000 was substantial; 1:1 ratio appropriate].) Accordingly, the trial court

properly used the 1:1 punitive damages ratio as the benchmark in evaluating these awards. (See also Amerigraphics, Inc. v. Mercury Casualty Co., 182 Cal.App.4th 1538, 1563-1564 [2010] [“The Supreme Court in Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008) reviewed studies evaluating the median ratio of punitive to compensatory verdicts, which ‘put the median ratio for the entire gamut of circumstances at less than 1:1, meaning that the

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compensatory award exceeds the punitive award in most cases.’”] [Internal citation omitted; emphasis added].) As to the remaining claim, for interference with prospective economic advantage, the jury awarded a nominal $1 in compensatory damages and $3,000,000 in punitive damages. This punitive award is indefensible. Plaintiffs’ counsel acknowledged as much to the trial court (1 SER 5, p. 23:21-22 [“On the 3,000,000 to one, he’s right, I haven’t seen a case like that.”]), yet Plaintiffs nevertheless ask the Court to reinstate that award. Plaintiffs cite three California cases where punitive awards were upheld in the absence of compensatory damages. (Appellees’ Br., p. 72.) Setting aside that these cases predate, by decades, the analytical framework established by State Farm and Gore, these cases did not even involve the question of whether the punitive damages were unconstitutionally excessive, but rather, the question of whether punitive damages may be awarded at all in the absence of compensatory damages. Further, while State Farm and Gore posited that a higher ratio of punitive damages might comport with due process where a “particularly egregious act” results in a “small amount of damages,” or where “the monetary value of noneconomic harm might have been

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difficult to determine” — as, for example, in the civil rights cases that plaintiffs cited to the district court14 — that is not the case here. (State Farm, 538 U.S. at 425, citing Gore.) Here, we have a business tort. Economic damage is the very basis of a claim for interference with prospective economic advantage. The jury did not award $1 because the type of damages involved are intangible and unquantifiable. It awarded $1 because Plaintiffs did not prove any actual damages. To then awards thousands or millions in punitives violates the most basic governing principles laid out by the Supreme Court: that punitive damages must be “proportionate to the amount of harm to the plaintiff and to the general damages recovered.” (State Farm, supra, at 426.) There is no rational relationship between the total absence of actual damages and the punitives awarded by the jury on this claim.

14

E.g., Plaintiffs cited Mendez v. County of San Bernardino, 540 F.3d 1109 (9th Cir. 2008) ($2,000 punitive award upheld on $1 compensatory; “Constitutional torts such as Mendez’s are far more likely to present such scenarios”). Even if this case were relevant here, it supports only a very modest punitive award.

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2.

At Most, Only One of the “Reprehensibility Factors” Applies

As discussed below, the reprehensibility analysis required by State Farm also supports the court’s remittitur of these four awards to the 1:1 norm. a. The Harm was Economic, Not Physical

Plaintiffs concede that the first factor, physical harm, is absent from this case and does not weigh in their favor. (Appellees’ Br., p. 72.) b. This Case Has Nothing To Do with “Health And Safety” One cannot seriously contend that this second factor applies here. Plaintiffs strain to argue that perhaps “reputational harm” and “emotional suffering” satisfy this factor. (Appellees’ Br., 73.) They do not. Reputation has nothing to do with health and safety.

Plaintiffs’ obliquely argue that Defendants’ negative comments about Plaintiffs posed a threat to their health and safety because of the “industry” in which the parties worked. (Id.) It is unclear what Plaintiffs are trying to imply here about corrections or correctional officers. Whatever it is, it is entirely gratuitous, unsupported, and entitled to no consideration.

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As to emotional distress, that Defendants’ actions may have caused Plaintiffs15 to feel anger, sadness or other negative emotions does not satisfy this factor. If it did, the factor would be meaningless. (See, e.g., Noyes v. Kelly Services, Inc., 2008 U.S. Dist. LEXIS 70287, *32 [discrimination plaintiff subjected to repeated acts of intentional ethnic harassment; plaintiff “has not shown that a risk of emotional distress shows a reckless disregard of the health or safety of others.”].) Those cases finding this factor to apply demonstrate that it has no place here. (See, e.g., Planned Parenthood, 422 F. 3d at 958, [plaintiffs subjected to “true threats” of violence; law enforcement regarded defendants’ conduct as sufficiently dangerous that plaintiffs told “to purchase bullet proof vests, obtain protection, and take other protective measures.”]; Exxon Valdez v. Exxon Mobile, 490 F.3d 1066, 1086 [2007] [“When Exxon trusted an officer it knew was incompetent to command the Exxon Valdez through the treacherous waters of Prince William Sound, Exxon acted with reckless disregard for the health and safety of all those in the vicinity.”].) Plaintiffs cite

Any consideration of emotional distress applies only to Harkins’ and Dawe’s individual claims for defamation, not to FIMA’s claims. As discussed above (Section (E)(1)), corporations cannot suffer or claim emotional distress.

15

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nothing to the contrary. Indeed, they cite nothing at all on this point.16 c. The Financial Vulnerability Factor Does Not Apply Plaintiffs contend that the jury had “plenty of evidence from which to conclude that Plaintiffs were financially vulnerable, and that Defendants knew it” — but they cite to just one exhibit, a January 10, 2007 email exchange. These emails were written after Plaintiffs filed their complaint against Defendants, and demonstrates only

Defendants’ opinion that the litigation that Plaintiffs started may be too costly for them to pursue for long. Indeed, Plaintiffs themselves employed the same sort of litigation-related rhetoric. (See, e.g., 1 SER 9, p. 67, email from Dawe to Harkins: “Sounds to me like they
16

At the hearing on Defendants’ motion for new trial, and in posthearing supplemental briefing, Plaintiffs did cite two cases, Roby v. McKesson Corporation, 47 Cal.4th 686 (2009) and Century Surety Co. v. Polisso, 139 Cal.App.4th 922 (2006), arguing they stood for the proposition that the health and safety factor includes “any conduct that could reasonably be expected to disturb one’s emotional state.” To the extent Plaintiffs intend to advance this argument on appeal, they should have done so in their Cross-Appellants’ Opening Brief, rather than holding it strategically for reply. In any event, these cases do not support Plaintiffs’ expansive interpretation. If they did, the health and safety factor would be meaningless. Any tortious conduct can be expected to “disturb” the victim of it. Roby involved conduct that specifically targeted the plaintiff’s physical and mental impairments, and Century emphasized the physical harm suffered by the plaintiffs (e.g., heart palpitations, hair loss, post-traumatic stress disorder). Century at 964. There is nothing of the sort in this case.

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[CUSA] are having some financial difficulties, what a shame. As soon as we get the go ahead from our Attorneys we nail them to the wall with as many information requests as we can. . . . This will be over sooner than we thought. They are toast its [sic] only time

now. . . . They cannot handle another suit like this . . . CUSA can’t afford it.”) This evidence certainly does not establish that Defendants’ underlying conduct, in terminating Plaintiffs’ contracts and then trying to prevent them from taking members away from CUSA, was undertaken for the purpose of exploiting any financial vulnerability. (See Casumpang v. Int’l. Longshore & Warehouse Union, 411 F. Supp. 2d 1201 [D. Haw. 2005], 1206, 1219 [plaintiff former union member testified that, as a result of the union’s suspension and resulting litigation, he “had to work a second job” and “could not afford to make his mortgage payments”; court found that plaintiff “was not particularly vulnerable financially”].) factor should not weigh in Plaintiffs’ favor. d. The “Repeat Offender” Factor Does Not Apply Plaintiffs argue that, because this case involved more than one Accordingly, this

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specific act, there was a “pattern and practice” of misconduct. The “repeat offender” factor, however, is not concerned with how many discrete acts are involved in one dispute, or whether those acts all happened on one day or over a period of time. Rather, this factor applies where a defendant has engaged in similar misconduct, against the same or different parties, outside the context of the dispute at issue. The cases make this distinction over and over again. In Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal. 4th 1159 (2005), the court held: “. . . although [defendant’s] conduct could be characterized as more than a single isolated incident, as the evidence showed deceptive conduct ... spanning several weeks, the tortious act on which liability was based was a single false promise (or set of promises) made in the letter of intent, and no evidence indicated [defendant] had acted similarly towards other potential buyers. Unlike, for example, the defendant in our companion case of Johnson v. Ford Motor Co., 35 Cal. 4th 1191 (2005), [defendant] cannot be characterized as a repeat offender. (Id. at 1180; emphasis added.)” In Johnson v. Ford Motor Co., 35 Cal. 4th 1191, 1196 (2005), the court found that the defendant was “more reprehensible because it was part of a repeated corporate practice” of concealing car repair histories to purchasers, “rather than an isolated incident.” In reaching this conclusion, the California Supreme Court analyzed this subfactor

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in depth, particularly the U.S. Supreme Court’s BMW and Campbell decisions, and found that: “A defendant’s recidivism is relevant to the reprehensibility of its conduct. To the extent the evidence shows the defendant had a practice of engaging in, and profiting from, wrongful conduct similar to that which injured the plaintiff, such evidence may be considered on the question of how large a punitive damages award due process permits.” (Id. at 1213.) See also, Amerigraphics, supra, 182 Cal.App.4th at 1563 (“. . . the evidence showed several discrete acts of misconduct . . . [however] the conduct at issue ultimately involved only one insured and one claim. There was no evidence presented that [defendant] acted

similarly towards other insureds in similar circumstances.”); Walker v. Farmers Ins. Exch., 153 Cal. App. 4th 965, 975 (2007) (finding that insurer’s “persistent denial of a defense” failed to satisfy the “repeated actions” prong; “‘persistent’ is not the same as a repetition of the decision in other instances”); Park v. Mobil Oil Guam, Inc., 2004 WL 2595897, at *13 (Guam Nov. 16, 2004) (this factor was not implicated even though defendant’s wrongful acts “spanned several years” and injured plaintiff on separate occasions because those acts comprised a single course of conduct). Plaintiffs’ only response to this overwhelming authority is to

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assert that the factor should be applied differently in a defamation case because each publication is considered a separate act of defamation for statute of limitations purposes. (Appellees’ Br., pp. 74-75.) Plaintiffs cite no authority for the argument that the repeat offender factor should apply differently in defamation cases, nor does it make any sense to do so. Following Plaintiffs’ logic, any time there is more than one publication of a defamatory statement, the defendant would automatically become a “recidivist.” As set forth above, that is obviously not the intent of this factor. Accordingly, this subfactor does not support a finding of enhanced reprehensibility. e. The Finding of Malice Does Not Support Enhanced Punitive Damages. Defendants acknowledged that the jury found malice for defamation purposes. Even assuming that finding suffices to weight this one factor in favor of Plaintiffs, however, that does not suffice to support the punitive damages of the magnitude imposed here. (See Campbell, 538 U.S. at 419; Planned Parenthood, 422 F.3d at 959-60; Casumpang, 411 F. Supp. 2d at 1219 [After an assessment of all the Campbell factors, court concluded that only the malice factor weighed

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in favor of reprehensibility, and held that a one-to-one ratio between punitive and compensatory damages was appropriate].) Thus, contrary to Plaintiffs’ unsupported assessment of this as a case of “extreme reprehensibility,” the reprehensibility factors are in fact almost entirely absent. This was a garden-variety business

dispute — one where emotions ran high and the talk (by both sides) was macho-tough and colorful — but a business dispute all the same. Further, insofar as the purpose of the reprehensibility factors is to place particular conduct on a spectrum with other cases, the $10 million in punitive damages awarded by this jury dwarfs awards authorized in other cases where the conduct was far more reprehensible, both on an individual and a societal level. (See, e.g., Planned Parenthood, supra, 422 F. 3d at 958 [reducing punitive awards to just over $4.7 million in a case in which activists put up “WANTED” posters of doctors who provided abortions, creating a threat so serious that FBI warned plaintiffs to wear bullet-proof vests; some physicians whose names had appeared on prior posters had been killed]; Boerner v. Brown & Williamson Tobacco Co., 394 F. 3d 594, 602-603 [8th Cir. 2005] [reducing $15 million punitive award to $5

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million where defendant “actively misled consumers about the health risks associated with smoking,” leading to the decedent’s death].) 3. The Punitive Damage Awards Greatly Exceeded CCPOA’s Entire Net Worth In addition to the foregoing factors, the trial court also properly considered the net worth of CCPOA and the financial impact of the jury’s original $10 million punitive damages award. The deterrence purpose of punitive damages “is not served by financially destroying a defendant.” (Adams v. Murakami, 54 Cal. 3d 105, 112 [1991].)

Further, as specifically applicable here: “The Supreme Court has cautioned that punitive damages against unions should not ‘compromise[] the collective interests of union members in protecting limited funds.’ ...[L]arge punitive damage awards “could deplete union treasuries, thereby impairing the effectiveness of unions as collective bargaining agents.” (Casumpang v. Int’l Longshore & Warehouse Union, 411 F. Supp. 2d 1201, 1219 [D. Haw. 2005] [internal citations omitted], citing Int’l Brotherhood of Elec. Workers v. Foust, 442 U.S. 42, 50 [1979].) Likewise, “[I]t cannot be ignored that punitive damages may be employed to punish unpopular defendants. As we observed in the defamation context: ‘[Since] juries assess punitive damages in wholly unpredictable amounts bearing no necessary relation to the actual harm caused . . . they remain free to use their discretion selectively to punish expressions of unpopular

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views . . . .’ [¶] Community hostility toward unions, management, or minority views can thus find expression in punitive awards.” (Int’l Brotherhood, 442 U.S. at 51, n.14 [internal citations omitted].) CCPOA is a non-profit, mutual benefit union run on member dues, with an approximate net worth of $6.9 million, as of September 30, 2010 (before the verdict was rendered). (1 SER 33, pp. 17:1018:22.) Thus, the punitive damage award against CCPOA represented almost one-and-a-half times its net worth — obviously a financially devastating amount. The trial court’s remittitur is independently (Eldorado Stone, LLC v. Renaissance

justifiable on this ground.

Stone, Inc., 2007 U.S. Dist. LEXIS 60885, at *9 [___ Dist. ___, 2007] [punitive damages generally do not exceed ten percent of a defendant’s net worth.]; (1 ER 2, pp. 9-11).) In light of all the foregoing considerations, the district court’s remittitur of punitive damages on these four claims to a 1:1 ratio to compensatory damages was proper. III. CONCLUSION OF CROSS-APPELLEES’ BRIEF The reality here is that Plaintiffs managed to inflame the jury, which awarded substantial and duplicative compensatory damages and then vastly excessive punishment as a result. The district court

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accurately curbed the runaway jury as to the punitive damages. Plaintiffs’ cross-appeal demonstrates no basis for reversal of the district court’s reduction of punitive damages.

Dated: April 12, 2012

MANATT, PHELPS & PHILLIPS, LLP By: s/Michael M. Berger Attorneys for Defendants/Appellants Corrections USA, California Correctional Peace Officers Association, Donald Joseph Baumann, and James Baiardi

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CERTIFICATE OF COMPLIANCE I certify that this brief complies with the type-volume limitation of the Federal Rule of Appellate Procedure 32(a)(7)(B) and contains 13,251 words, exclusive of the corporate disclosure statement, the table of contents, the table of authorities, as counted by the 2003 Microsoft Word word-processing program used to generate this brief. I certify that this brief complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule Appellate Procedure 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using 2003 Microsoft Word word-processing program with a 14-point Times New Roman font.

Dated: April 12, 2012

MANATT, PHELPS & PHILLIPS, LLP By: s/Michael M. Berger Michael M. Berger Attorneys for Defendants/Appellants Corrections USA, California Correctional Peace Officers Association, Donald Joseph Baumann, and James Baiardi

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CERTIFICATE OF SERVICE
U.S. Court of Appeals Docket Nos. 11-16284 & 11-16416

I hereby certify that on April 12, 2012 I electronically filed THIRD BRIEF ON CROSS-APPEAL: APPELLANTS’ REPLY BRIEF/CROSS-APPELLEES’ BRIEF OF CORRECTIONS USA, CALIFORNIA CORRECTIONAL PEACE OFFICERS ASSOCIATION, DONALD JOSEPH BAUMANN AND JAMES BAIARDI with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system. I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system.

s/Bess Hubbard

301552162.9

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