Maison de France, Ltd. v. Mais Oui!, Inc., 126 Wash. App. 34 (Wash. 2005)

¶1 Two retailers of French housewares, C’est la Vie and Mais Oui!, and their owners and employees, sued Maison de France, another retailer of French housewares, alleging, among other claims, defamation. The trial court concluded that the publications at issue were substantially true in their stinging points. We conclude that some portions of one publication were materially false and defamatory per se. We affirm in part. We reverse in part and remand.

Appelwick, J.

FACTS

¶2 In September 1998, Blaise Bouchand (Bouchand) and his wife, Jasmine Bouchand, opened Maison de France, a retail shop in Bellevue that sells French furnishings and housewares.

¶3 Bouchand hired Nancee Rostad (Rostad) in 1997 to work at Maison de France as a buyer and liaison with French vendors. In late 1998, about three months after Maison de France opened, Bouchand fired Judith White (White), another Maison de France employee. The following week, Rostad submitted her letter of resignation to Bouchand.

¶4 Rostad, White, and Karen Lewis Smith (Smith) formed C’est la Vie, Inc. (C’est la Vie), which was incorporated in April 1999. C’est la Vie was not a retail store. Rather, Rostad, White, and Smith planned to hold “two shows” in a rented space each year, at which they would offer French housewares for sale. C’est la Vie stocked its first show in May 2000 with merchandise acquired from about 30 to 35 vendors. About eight of the vendors also supplied Maison de France with products. Rostad testified at trial that the Bouchands visited the May 2000 show to check C’est la Vie’s prices on merchandise. Although the May 2000 show grossed $30,000, after expenses C’est la Vie lost about $7,000 on it. Rostad testified that

products from a French vendor named Terre e Provence were some of the best-selling items at the May 2000 show.

¶5 C’est la Vie’s second sales event was planned for November 2000. To stock its second show, C’est la Vie placed orders with at least some of the same vendors that stocked its May 2000 show. C’est la Vie placed an order for the November show with Terre e Provence in June 2000. Rostad testified that Terre e Provence “told us that they were not going to do business with us.” The record does not indicate when Terre e Provence communicated its refusal to fill C’est la Vie’s order.

¶6 On or around September 8, 2000, Bouchand sent a letter to vendors in France who had been providing merchandise to Maison de France. The English translation of the September 8, 2000 letter states:

The record does not show which vendors, or precisely how many vendors, received the September 8th letter, but Bouchand testified that it was sent to approximately 150 vendors in France.

¶7 Rostad testified that she made the decision, “Right before” the November 2000 sales event, that she didn’t want to go forward with C’est la Vie, because it would not be profitable. “[Rostad] informed White of that before the second event, and [she] informed Karen Lewis Smith of that fact during the [November sales] event.” Rostad explained in a letter to White and Smith that one reason she resigned from C’est la Vie was that it “lacked money-making potential.” Rostad testified that her decision to leave C’est la Vie severely strained her relationships with White and Smith. The November 2000 sales event grossed approximately $40,000 with a loss of approximately $6,000. Smith sold her shares in C’est la Vie in November 2001. Rostad sold her shares in C’est la Vie to her husband, Richard Rostad, in September 2002.

|8 In December 2000, Molly Marking (Marking), who was interested in opening a retail shop selling French housewares and wine, incorporated Mais Oui!. Marking employed Rostad as buyer and visual merchandiser. Mais Oui! opened as a retail shop in Bellevue, about one block from Maison de France, in June 2001.

¶9 Mais Oui! purchased goods from approximately 125 French vendors. Six or seven of those vendors also sold products to Maison de France. Marking and Rostad traveled to France to attend a semiannual housewares show, Maison et Objet, to place orders for Mais Oui!. Marking testified that she first became aware of Bouchand’s September 8th letter to French vendors when she and Rostad attended the January 2001 Maison et Objet show.

f 10 Rostad testified that Crossings refused to fill a Mais Oui! order placed in April 2001. Although Marking testified that Mais Oui! had lost about $20,000 by not having Crossing food items, Rostad testified that Mais Oui! had found an alternative source for the products it desired, so

Mais Oui! was “no longer interested” in Crossings’products. Mais Oui! placed an order with Idex, another vendor, in early September 2001. Idex initially refused to fill the order, then agreed to fill it, but informed Mais Oui! that they would not fill any future orders. Mais Oui! never attempted to place orders with Idex after September 2001.

¶11 On or about April 22, 2001, Bouchand sent a letter to a number of vendors in France which had been providing Maison de France with merchandise. The English translation of the April 22, 2001 letter states:

these ex-employees have contacted. We have been informed that these ex-employees have stolen and copied the concept and the identity of Maison de France. Fortunately, Maison de France is a registered trademark in the United States, therefore we are the only owners. Thank God, the law protects us. We are doing all that is within our power to protect our trade name and our trademarked image. Fortunately, the ‘pseudo’ store Mais Oui! will without a doubt not open by virtue of the law of the State of Washington.

The record does not show which vendors, or how many vendors, received the April 22nd letter, or whether the recipients of the September 8th letter also received the April 22nd letter.

¶12 In May 2001, Maison de France filed a complaint in King County Superior Court against Mais Oui!, alleging intentional interference with contractual relations, misappropriation of trade secrets, breach of duty of loyalty, and violations of the Consumer Protection Act, chapter 19.86 RCW. Maison de France later voluntarily withdrew its charges, but not before the appellants filed counterclaims. The appellants’ counterclaims included allegations that the September 8th and April 22nd letters had defamed them.

¶13 After litigation had commenced, John Coe (Coe) an attorney representing Maison de France, sent a letter to the executive director of the French-American Chamber of

Commerce of the Pacific Northwest (Coe letter). Coe’s letter requested that the appellants be denied admission to the Chamber of Commerce. Rostad requested damages for “emotional, physical, relational, business loss, business expectations, attorney fees, lost cash, lost cash business, lost profits past, lost profits future, reputation personal past, reputation business past, reputation personal future, reputation business future, and nominal damages.”

¶14 Following a bench trial, the trial court concluded that the Coe letter “sets forth accurate information about the pending lawsuit between the parties that was available to the public in the records of the court,” and therefore did not defame the appellants. The trial court also dismissed the appellant’s defamation claims based on the September 8, 2000 and April 22, 2001 letters, concluding that “in their ‘stinging points’ Exhibit 11 and Exhibit 13 are substantially true .. ..” Finally, the trial court found that the appellants “failed to establish any economic damage, damage to reputation or emotional distress damages proximately caused by [the respondents’] conduct.” In its oral ruling, the trial court concluded:

ANALYSIS

I. Standard of Review

¶15 When “the trial court has weighed the evidence, our review is limited to determining whether substantial evidence supports the findings and, if so, whether the findings in turn support the trial court’s conclusions of law and judgment.” Ridgeview Props, v. Starbuck, 96 Wn.2d

716, 719, 638 P.2d 1231 (1982). Substantial evidence exists when the evidence is in “sufficient quantum to persuade a fair-minded person of the truth of the declared premise.” Ridgeview Props., 96 Wn.2d at 719. This court reviews questions of law de novo. Mountain Park Homeowners Ass’n. v. Tydings, 125 Wn.2d 337, 341, 883 P.2d 1383 (1994). Whether a given communication constitutes defamation per se may be either a question of law or a question of fact. “The imputation of a criminal offense involving moral turpitude has been held to be clearly libelous per se.” Caruso v. Local Union No. 690 of Int’l Bhd. of Teamsters, 100 Wn.2d 343, 353, 670 P.2d 240 (1983) (citing Ward v. Painters’ Local Union No. 300, 41 Wn.2d 859, 252 P.2d 253 (1953)). In the vague areas of public confidence, injury to business, etc.

Caruso, 100 Wn.2d at 354 (quoting Purvis v. Bremer’s, Inc., 54 Wn.2d 743, 752, 344 P.2d 705 (1959). “In all but extreme cases the jury should determine whether the article was libelous per se.” Caruso, 100 Wn.2d at 354 (citing Miller v. Argus Publ’g Co., 79 Wn.2d 816, 820 n.3, 821 n.4, 490 P.2d 101 (1971); Amsbury v. Cowles Publ’g Co., 76 Wn.2d 733, 740, 458 P.2d 882 (1969)).

II. Defamation

¶16 The appellants claim that the trial court erred in dismissing their defamation claims because the September 8, 2000 and April 22, 2001 letters which Bouchand sent to vendors in France, and the September 6, 2001 letter which Coe sent to the French-American Chamber of Commerce, constitute per se defamation.

¶17 A defamation plaintiff must prove four elements: (1) falsity, (2) an unprivileged communication, (3)

fault, and (4) damages. LaMon v. Butler, 112 Wn.2d 193, 197, 770 P.2d 1027, cert. denied, 493 U.S. 814 (1989). The court examines alleged libel under one of two standards. “The necessary degree of fault depends on whether the plaintiff is a private individual or a public figure or public official.” Caruso, 100 Wn.2d at 352. “When the defamed party is a public figure or public official, he or she must establish actual malice. If, on the other hand, the defamed party is a private figure, only negligence need be shown.” Demopolis v. Peoples Nat’l Bank of Wash., 59 Wn. App. 105, 108 n.1, 796 P.2d 426 (1990) (citing LaMon, 112 Wn.2d at 197). “The negligence standard is that the defendant knew or, in the exercise of reasonable care, should have known that the statement was false or would create a false impression in some material respect.” Vern Sims Ford, Inc. v. Hagel, 42 Wn. App. 675, 680, 713 P.2d 736 (1986) (citing Taskett v. KING Broad. Co., 86 Wn.2d 439, 445, 546 P.2d 81 (1976)). Actual malice is a heightened standard, and is “knowledge of the falsity or reckless disregard of the truth or falsity of the statement.” Vern Sims, 42 Wn. App. at 680-81 (citing Caruso, 100 Wn.2d at 354). The court added:

Vern Sims, 42 Wn. App. at 681 n.2.

¶18 The appellants argue that under either a negligence or actual malice standard, they were not obliged to prove damages at trial because the letters at issue constitute defamation per se, under which damages need not be proved. “A defamatory publication is libelous per se (actionable without proof of special damages) if it (1) exposes a living person to hatred, contempt, ridicule or obloquy, to deprive him of the benefit of public confidence or social intercourse, or (2) injures him in his business, trade,

profession or office.” Caruso, 100 Wn.2d at 353. A publication is also libelous per se if it imputes to the plaintiff criminal conduct involving moral turpitude. Ward v. Painters’Local Union No. 300, 41 Wn.2d 859, 863, 252 P.2d 253 (1953). Truth is an absolute defense to a per se defamatory statement.1 Ward, 41 Wn.2d at 862.

A. Falsity

1. The September 8, 2000 letter2

f 19 The appellants assert that the September 8th letter written by Bouchand was defamatory per se. They first argue that it was untrue that “Caroline Beaupere and Judith White and appellant Nancee Rostad were discharged for serious misconduct” as stated in the September 8th letter.

¶20 The trial court’s findings included the following:

The trial court concluded that the September 8th letter was “substantially true” in its “stinging points.”3

¶21 Nancee Rostad testified that she and Judith White met with Bouchand’s banker after Bouchand refused Rich Rostad’s offer to buy Maison de France. When Bouchand learned of Rostad and White’s visit with his banker, he informed them that “if any of his employees shared information about the company outside the company that they would be in trouble.” About two to three weeks later, Bouchand fired White. Rostad testified that she submitted her letter of resignation to Bouchand shortly after White was fired. Rostad’s testimony was sufficient for the trial court to infer that Rostad was “forced to resign due to misconduct.” The record also supports the trial court’s finding that Judith White had been fired from Maison de France.4 The trial court did not err when it concluded that the statement in the September 8th letter stating that White and Rostad had been fired or discharged for serious misconduct was substantially true.

¶22 The September 8th letter also included a second paragraph stating that C’est la Vie is “the object of an investigation by U.S. Customs, the FDA and the Seattle Police for multiple counts of fraud.”

f 23 At trial, Jasmine Bouchand testified that a customer complained to her about an expired date on a food product. She surmised that the customer had confused Maison de France with C’est la Vie because “Judith, merci” was interlineated on the customer’s receipt for the food item and Judith White was part of C’est la Vie. Jasmine Bouchand further testified that soon thereafter, she received a phone call from the Food and Drug Administration inquiring whether the expired food item had been purchased at

Maison de France. She testified that she had also received a phone call from the Seattle Police Department about the expired food item. Jasmine Bouchand further testified that she had no personal knowledge that C’est La Vie had been investigated by United States Customs, explaining only, “[W]e heard there was something going on. I don’t remember exactly what we heard. Someone told us.”

¶24 Finding of Fact 1.10 stated:

The trial court concluded that the September 8th letter was substantially true in its stinging points.

¶25 The record does not support the trial court’s conclusion regarding the second paragraph of the September 8th letter. At best, the evidence suggests that on a single occasion, the Seattle police and the FDA contacted Maison de France regarding a sale to one customer of one expired food item. This evidence does not constitute multiple counts of fraud, as alleged in the September 8th letter. Moreover, the trial court did not make a finding that the expired food product was sold by C’est la Vie. Nor does the record contain any evidence that the appellants were being investigated by the United States Customs Office. Accordingly, the trial court erred when it concluded that the September 8th letter was substantially true in its stinging points. Under Caruso and Ward, the accusations of fraud contained in the September 8th letter were defamatory per se because they falsely imputed criminal conduct to the appellants.

f26 The appellants also allege that the trial court erred in finding that the April 22nd letter was not defamatory per se.5

¶27 At trial, Rostad and Marking testified regarding their concern about their reputation in the French vendor community and of the importance of their attendance at the semiannual Maison et Objet show. Rostad testified that the letter had an adverse effect because “vendors refuse to sell to us because of this letter, and we have also had vendors contact us that [sic] were very upset with the information contained within this letter.” The evidence does not show, however, that the letter had any actual, adverse affect upon Mais Oufi’s business. The appellants include a transcription of a letter from a vendor, L’Atelier Du Vin, to Maison de France, stating “[o]f course, since you are currently our client, we will not do business with Mais Oui!.” But Rostad testified that Mais Oui! would not have given L’Atelier Du Vin its business anyway, because Mais Oui! had “found a company that produces a better product.” She also testified that Mais Oui! never tried to order from L’Atelier.

¶28 Similarly, another vendor, Alain Poujol, sent an e-mail to the Bouchands stating, “[w]e have received your letter of April 30th. Of course, since you are currently our client, we will not do business with Mais Oui!.” There is no evidence that Mais Oui! desired to place orders with L’Atelier, or that it did so and was refused. Moreover, the record suggests that Maison de France had exclusivity agreements with these two vendors.

f 29 The record shows that two of the vendors that Mais Oui! wished to use, Idex and Crossings, were vendors used by Maison de France and were likely the recipients of the April 22nd letter. Mais Oui! placed an order with Crossings in April 2001 which Crossings refused to fill. Rostad testified that Mais Oui! had found an alternative source for the products it desired and was “no longer interested” in Crossings’s products. Marking testified that Idex filled its September 2001 order, and that Mais Oui! never attempted to place any orders with Idex after that order was filled.

¶30 In contrast to the September 8th letter, the April 22nd letter lacks any allegation of criminal conduct. The letter misstates that Caroline Beaupere and Judith White worked for Mais Oui!, and misstates Mais Ouü’s street address, but these misstatements do not rise to the level of being defamatory. The letter also stated that the appellants had “been trying (using all available means) to obtain credit from our vendors including lying about their names and about the store for which they are working and their address.” Based on the evidence, the trial court properly found that “a [t] the time that Exhibit 14 was sent Defendants had a reasonable belief that Plaintiffs had taken the concept and identity of Maison de France and used it to develop the competing store.”

¶31 The appellants contend that the September 6, 2001 letter which Coe sent to the executive director of the French-American Chamber of Commerce constitutes defamation.

¶32 The Coe letter stated:

White, Nancee Rostad, Molly Marking, Caroline Beaupere, and their spouses. A true and correct copy of the Complaint filed with the King County Superior Court is attached hereto for your reference. This complaint accurately reflects Maison’s claims against all parties. In short, Maison alleges that the founders that created these entities to compete with Maison, were all former employees of Maison. These former employees had access to Maison’s confidential business plan, and without Maison’s knowledge or consent, used that plan, in violation of the trade secret laws, to open their own competing businesses. One of the business locations is less than two blocks away. While Maison acknowledges that competition is inevitable (and is aware that other stores also import similar items from France in the French Provincial style), Maison alleges that the ex-employees’ blatant theft of trade secrets developed by Maison is actionable under state law.

Chamber saw the letter or that any adverse consequences were experienced by Mais Oui! or the other Plaintiffs as a result of the letter.

In its oral findings, the trial court also relied upon Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 95 S. Ct. 1029, 43 L. Ed. 2d 328 (1975), concluding that “[n]o liability for defamation exists based solely on the accurate reporting of the materials from judicial proceedings open to the public for inspection.”

¶34 At trial, Marking testified that she was a member of the French-American Chamber of Commerce; the record thus supports the trial court’s evidentiary finding that the Coe letter did not deter the Chamber of Commerce from admitting Marking as a member. Cox is also applicable to this case. Quoting the Restatement (Second) of Torts, section 652D comment c, at 114 (Tent. Draft No. 13, Apr. 27, 1967), the Cox court stated:

Cox, 420 U.S. at 494. Because the Cox letter was written after the parties’ litigation began, and the facts it recites were public knowledge, the trial court did not err in concluding that the letter did not constitute defamation.

B. Damages

¶35 The trial court partially addressed the issue of damages, concluding that the appellants “failed to establish any economic damage, damage to reputation or emotional distress damages proximately caused by the Defendants’ conduct.” The record supports conclusion of law 2.5.3. C’est la Vie had never been a profitable business, it lost money on its first two shows, and had no plans for subsequent shows. The court had before it e-mails exchanged between White, Smith, and Rostad illustrating that the strife be

tween the three partners was largely responsible for C’est la Vie’s demise.6 Rostad testified that she knew C’est la Vie would be unable to survive following her resignation and departure because she was the only one of the three partners who possessed the skills and contacts with French vendors critical to the company’s survival. The court also found that “[a]t most, Terre e Provence, that particular vendor, did not sell their products to C[’est] l[a] V[ie], but there is no evidence that it was due to the conduct of the defendants.” We note that there was no evidence showing that Terre e Provence cancelled its order from [C’est la Vie] in response to Bouchand’s September 8th letter. The record contains sufficient evidence to support the trial court’s finding that the appellants sustained no actual damages as a result of the September 8th letter.

f 36 Likewise, the appellants fail to show that the April 22nd letter constituted defamation per se or otherwise. Even if the assertions in this letter were false, the appellants have not met their burden of showing that the allegations about their names and representations about where they worked caused injury or damage. The record does not support a finding that the April 22nd letter exposed the appellants to hatred, contempt, ridicule or obloquy, deprived them of the benefit of public confidence or social intercourse, or injured them in their business, trade, profession or office. Caruso, 100 Wn.2d at 353. The record supports the trial court’s conclusion that Mais Oui! sustained no actual damages as a result of the April 22nd letter. Therefore, we conclude that the trial court did not err in dismissing the appellants’ claim against the respondents based on the April 22nd letter.

¶37 The appellants urge this court to adopt Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 105 S. Ct. 2939, 86 L. Ed. 2d 593 (1985), under which damages may be presumed in libel per se cases where the

plaintiff is a private party and the issues are not of public concern, even in the absence of actual damages.

¶38 In Dun & Bradstreet, the Supreme Court narrowed the scope of Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974). In Gertz, the plaintiff was a public figure. The Supreme Court held that when defamation derives from negligence, not actual malice, a plaintiff may recover only for actual damages. Gertz, 418 U.S. 323. In contrast, the plaintiff in Dun & Bradstreet was a private figure and involved no issue of public concern. Dun & Bradstreet explained that, because the defendant in Gertz was a public figure, the interest in protecting expression found in the First Amendment was strong relative to the state’s interest in compensating private individuals for injury to their reputation. Dun & Bradstreet, 472 U.S. at 757. The balance of the two relative interests is altered when the plaintiff was a private individual, because “speech on matters of purely private concern is of less First Amendment concern.” Dun & Bradstreet, 472 U.S. at 759. Dun & Bradstreet held that when the defendant involved was not a public figure, “the state interest adequately supports awards of presumed and punitive damages — even absent a showing of‘actual malice.’ ” Dun & Bradstreet, 472 U.S. at 761.

¶39 Two Washington Court of Appeals cases have contemplated Dun & Bradstreet, but neither has expressly adopted its holding. In Vern Sims, the court found that the defendant’s actions constituted actual malice. Vern Sims, 42 Wn. App. at 680-81. The Vern Sims court observed that Dun & Bradstreet:

Vern Sims, 42 Wn. App. at 682.

¶40 In Story v. Shelter Bay Co., 52 Wn. App. 334, 343, 760 P.2d 368 (1988), the court explained that “[t]he lessened

protection Dun & Bradstreet affords communications made in private disputes has been recognized by Washington courts, but its holding on this issue has not been expressly adopted.” Story, 52 Wn. App. at 346. Story declined to adopt Dun & Bradstreet because the parties had not briefed the issue at trial or on appeal. Story, 52 Wn. App. at 347.

¶41 Our Supreme Court has not expressly adopted Dun & Bradstreet. However, based on Washington case law prior to Gertz, under which presumed damages were permitted when defamation per se had been shown,7 we believe that the Supreme Court will agree with our adoption of Dun & Bradstreet. We hold that under Dun & Bradstreet, where no matters of public concern are involved, presumed damages to a private plaintiff for defamation without proof of actual malice may be available.

¶42 In this case, the defendants’ statement in the September 8th letter alleging that the appellants were the “object of an investigation by United States Customs, the FDA and the Seattle Police for multiple counts of fraud” constituted defamation per se. Therefore, while the trial court has found no economic or other actual damages, a finding we do not disturb, it must address the question of presumed damages. The trial court’s discretion is to determine which presumed damages, either nominal or substantial, are awarded. We note that under no circumstances do our courts allow an award of punitive damages. Taskett v. KING Broad. Co., 86 Wn.2d at 447.

CONCLUSION

¶43 (1) The statements in the September 22nd letter alleging that the appellants were being investigated for multiple counts of fraud constitute defamation per se. (2) We thus reverse the trial court on that issue. (3) We affirm the trial court’s dismissal of the appellants’ other claims of defamation. (4) We remand for findings consistent with this

opinion, and for the trial court to exercise its discretion in the award of presumed damages.

¶44 Affirmed in part. Reversed in part and remanded.

Coleman and Kennedy, JJ., concur.