United States 5th Circuit Court of Appeals Reports
FIBER SYSTEMS INTERNATIONAL INC v. ROEHRS, 05-41213 (5th Cir. 11-22-2006) FIBER SYSTEMS INTERNATIONAL INC Plaintiff-Counter Defendant-Appellant-Cross-Appellee v. DANIEL ROEHRS; MICHAEL FLOWER; THOMAS HAZELTON; RICK HOBBS; KIERAN McGRATH; APPLIED OPTICAL SYSTEMS, INC., OPTECONN G.P., INC., AND OPTECONN, L.P., D/B/A OPTICAL CABLING SYSTEMS Defendants-Counter Claimants-Appellees-Cross-Appellants. No. 05-41213. United States Court of Appeals, Fifth Circuit. Filed November 22, 2006.
Appeals from the United States District Court for the
Eastern District of Texas, Sherman.
Before KING, GARWOOD, and JOLLY, Circuit Judges.
KING, Circuit Judge.
Fiber Systems International, Inc. appeals (1) the district
court’s entry of a take-nothing judgment on the company’s
claim for damages under the Computer Fraud and Abuse Act,
18 U.S.C. § 1030, (2) the district court’s grant of
partial summary judgment dismissing the company’s claim for
injunctive relief under the Act, and (3) the district
court’s denial of judgment as a matter of law and a new
trial on the defamation counterclaim raised by Daniel
Roehrs, Michael Flower, Thomas Hazelton, Rick Hobbs, and
Kieran McGrath (collectively, the “individual defendants”).
Defendants conditionally cross-appeal (1) the district
court’s grant of partial summary judgment dismissing
defendants’ counterclaim for defamation of Applied Optical
Systems, Inc., Opteconn G.P., Inc., and Opteconn, L.P.,
d/b/a Optical Cabling Systems (collectively, the “corporate
defendants”) and (2) the district court’s judgment as a
matter of law denying defendants’ claim that Fiber Systems
International defamed the individual defendants through
statements in e-mails and letters. For the reasons that
follow, we AFFIRM in part, REVERSE in part, VACATE in part,
and REMAND for further proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
The claims at issue in this appeal arose from the final
days of the struggle for control over Fiber Systems
International, Inc. (“FSI”), a company that manufactures
harsh-environment fiber-optic connectors for military use.
The principal opponents in this conflict are brothers
— Michael Roehrs, who was at that time part of the
group that had a majority ownership of FSI, and defendant
Daniel Roehrs, who was part of the minority group of
shareholders. Daniel Roehrs and the other individual
defendants, all of whom served as officers and directors of
FSI, initiated litigation in 2001 to determine ownership of
the company. The lawsuit settled in August 2003 with an
agreement allowing Michael Roehrs to buy out the minority
owners’ stake in the company. When the transaction closed
on December 8-9, 2003, the individual defendants’
employment was terminated and Michael Roehrs took control
as Executive Chairman.
In the 2004 suit on appeal here, FSI alleged that
defendants violated the Computer Fraud and Abuse Act
(“CFAA”), 18 U.S.C. § 1030, as they left the
company. Specifically, FSI asserted that during their
departure the defendants “knowingly and intentionally
accessed, deleted, downloaded, copied, took, and stole
FSI’s confidential business and proprietary information and
trade secrets, without authorization, from FSI’s
computers,” misappropriated and stole FSI’s computer
equipment, and used and disseminated the wrongfully
obtained information through the new companies that they
formed: Daniel Roehrs, Thomas Hazelton, and Michael Flower
through Applied Optical Systems, Inc. (“AOS”) and Rick
Hobbs and Kieran McGrath through Opteconn G.P., Inc.
(“Opteconn”) and Opteconn, L.P., d/b/a Optical Cabling
Systems (“OCS”). FSI sought damages and injunctive relief
under § 1030(a)(4), (a)(5), and (g) of the CFAA to
compensate for the cost of data recovery and to prevent the
defendants from continuing to use and disseminate FSI’s
trade secrets.
Defendants filed a defamation counterclaim alleging that
FSI falsely accused them of being thieves. They relied on
several documents in which FSI allegedly accused the
defendants of, inter alia, stealing its intellectual
property, as well as deposition testimony showing that FSI
accused the individual defendants of being thieves or
stealing FSI’s intellectual property.
Defendants later moved for partial summary judgment on
FSI’s claim for injunctive relief, arguing that FSI failed
to establish the prerequisites for such relief because
there was no evidence that any of the defendants were
currently accessing FSI’s computers or threatening access
in the future.[fn1] FSI moved for partial summary judgment
on the corporate defendants’ counterclaim, arguing that the
evidence was insufficient to show that the corporate
defendants were defamed. The district court granted both
motions.
In March 2005, the case proceeded to a jury trial on the
remaining claims. At the conclusion of the evidence, the
district court submitted FSI’s claims under §
1030(a)(4) and (a)(5) of the CFAA to the jury, but
submitted only three statements to the jury on defendants’
defamation counterclaim: a police report filed by FSI
alleging that defendants had committed theft and statements
made by FSI to two companies accusing defendants of being
thieves.
With regard to FSI’s claims, the jury found that none of
the individual defendants violated § 1030(a)(5) but
that three defendants — Daniel Roehrs, Thomas
Hazelton, and Rick Hobbs — violated §
1030(a)(4), entitling FSI to $36,000 in total damages.
However, the district court entered a take-nothing
judgment, holding that § 1030 does not create a
civil cause of action for violations of subsection (a)(4).
As to defendants’ counterclaims, the jury found that FSI
maliciously accused all five individual defendants of being
thieves in its statements to the two companies but that the
police report was not filed with actual malice. Based on the
two defamatory statements, the jury awarded the individual
defendants $100,000 each in compensatory damages and
$1,000,000 each in punitive damages. Because Texas law
places a cap on punitive damage awards, the district court
reduced the punitive damages to $200,000 for each
defendant.
After the jury verdict, FSI filed a renewed motion for
judgment as a matter of law and, in the alternative, for a
new trial. The district court denied this motion, and FSI
timely filed a notice of appeal.
II. DISCUSSION
In this appeal, FSI challenges the district court’s
holding that § 1030 of the CFAA does not create a
civil cause of action for subsection (a)(4), as well as the
court’s grant of summary judgment dismissing FSI’s CFAA
claims for injunctive relief. FSI also contends that the
district court erred in denying judgment as a matter of law
because the jury’s defamation verdict was based on evidence
that was never admitted for substantive use and the
statements allegedly made by FSI were nondefamatory.
Finally, FSI argues that the district court erred in
denying a new trial because the jury verdict contained
inconsistencies and the district court improperly admitted
evidence of nondefamatory statements, which prejudiced the
jury’s defamation findings.
Defendants conditionally cross-appeal the district court’s
grant of summary judgment dismissing the defamation claims
that were based on statements against the corporate
defendants, arguing that the statements should have been
submitted to the jury as substantive evidence of
defamation. Defendants also conditionally cross-appeal the
district court’s decision not to submit those statements to
the jury as additional instances in which FSI defamed the
individual defendants.[fn2]
In the analysis that follows, questions of law are reviewed
de novo. See Af-Cap, Inc. v. Republic of Congo, 462 F.3d
417, 423 (5th Cir. 2006).
A. FSI’s CFAA Claims
1. Civil Liability Under § 1030(a)(4)
Despite the jury’s finding that Daniel Roehrs, Thomas
Hazelton, and Rick Hobbs violated § 1030(a)(4) of
the CFAA, entitling FSI to damages totaling $36,000, the
district court held that the CFAA does not create a civil
cause of action for violations of § 1030(a)(4), and
it entered a take-nothing judgment on the claim. FSI
appeals, alleging that civil claims for violations of
§ 1030(a)(4) can be brought under § 1030(g)
and that the jury found the elements necessary for entry of
judgment on FSI’s behalf. We agree.
The CFAA criminalizes various fraudulent or damaging
activities related to the use of computers. Two of its
provisions were before the jury in this case. Section
1030(a)(4) prohibits the “knowing[] . . . access[of] a
protected computer without authorization,” with intent to
defraud, if “such conduct furthers the intended fraud and
[the violator] obtains anything of value.” 18 U.S.C.
§ 1030(a)(4). Section 1030(a)(5) punishes those who
cause damage to a protected computer, either through the
knowing transmission of a program, information, code, or
command, or through intentional, unauthorized computer
access.
Civil actions are authorized for some, but not all,
violations of § 1030’s substantive provisions.
Section 1030(g) provides:
Any person who suffers damage or loss by reason of a
violation of this section may maintain a civil action
against the violator to obtain compensatory damages and
injunctive relief or other equitable relief. A civil
action for a violation of this section may be brought only
if the conduct involves 1 of the factors set forth in
clause (i), (ii), (iii), (iv), or (v) of subsection
(a)(5)(B). . . .
Based on its reading of § 1030(g), the district court
held that the section does not create a civil action for
violations of § 1030(a)(4). Similarly, defendants
argue that the explicit terms of § 1030(g) only
authorize civil actions for violations of
1030(a)(5).
However, this interpretation is at odds with the language
of the statute, which plainly allows such an action to
proceed.[fn3] Section 1030(g) extends the ability to bring
a civil action to any person suffering damage or loss under
“this section,” which refers to § 1030 as a whole,
as subsection (g) does not proscribe any conduct itself.
And although § 1030(g) refers to subsection
(a)(5)(B), the statute does not limit civil suits to
violations of § 1030(a)(5). Indeed, if Congress
intended to limit civil actions in this manner, it could
have simply provided that civil actions may only be brought
for violations of subsection (a)(5).
Instead, the statute provides that a claim brought under
any of the subsections of § 1030 must involve one of
the factors listed in the numbered clauses of subsection
(a)(5)(B). These factors are:
(i) loss to 1 or more persons during any 1-year period
(and, for purposes of an investigation, prosecution, or
other proceeding brought by the United States only, loss
resulting from a related course of conduct affecting 1 or
more other protected computers) aggregating at least
$5,000 in value;
(ii) the modification or impairment, or potential
modification or impairment, of the medical examination,
diagnosis, treatment, or care of 1 or more individuals;
(iii) physical injury to any person;
(iv) a threat to public health or safety; or
(v) damage affecting a computer system used by or for a
government entity in furtherance of the administration of
justice, national defense, or national security. . . .
18 U.S.C. § 1030(a)(5)(B). Accordingly, a civil
action may be maintained under § 1030(a)(4) of the
CFAA if the violative conduct involves any one of these
factors.[fn4] Our interpretation is consistent with that of
other circuits that have addressed this question. See P.C.
Yonkers, Inc. v. Celebrations the Party & Seasonal
Superstore, LLC, 428 F.3d 504, 512 (3d Cir. 2005) (“We do
not read section 1030(g)’s language that the claim must
involve one or more of the numbered subsections of
subsection (a)(5)(B) as limiting relief to claims that are
entirely based only on subsection (a)(5), but, rather, as
requiring that claims brought under other sections must
meet, in addition, one of the five numbered (a)(5)(B)
`tests.'”); Theofel v. Farey-Jones, 359 F.3d 1066, 1078 n.
5 (9th Cir. 2004) (“[S]ubsection (g) applies to any
violation of `this section’ and, while the offense must
involve one of the five factors in (a)(5)(B), it need not
be one of the three offenses in (a)(5)(A).”).
Nonetheless, defendants argue that even if a civil cause
of action may be maintained under § 1030(a)(4) when
one of the § 1030(a)(5)(B) factors is established,
the jury instructions for FSI’s § 1030(a)(4) claim
do not mention any of those factors. Only the first factor
from § 1030(a)(5)(B) is at issue here, requiring
loss during any 1-year period that aggregates to at least
$5,000 in value.
We review jury instructions for abuse of discretion when
the instructions were properly objected to in the district
court. See United States v. Freeman, 434 F.3d 369, 377 (5th
Cir. 2005). But when the challenging party failed to
preserve the error below, the instructions are reviewed for
plain error. Positive Black Talk Inc. v. Cash Money Records
Inc., 394 F.3d 357, 368 (5th Cir. 2004). To avoid plain
error review, a specific objection must have been made on
the ground raised on appeal, rather than a general
objection to the instructions as a whole or an objection on
a different ground. See id.; United States v. Fuchs, No.
05-10426, 2006 WL 2949288, at *4 (5th Cir. Oct. 17, 2006).
Defendants objected to the § 1030(a)(4) instructions
on the ground that “there is no civil cause of action under
(a)(4) of the CFAA,” but did not object on the ground that
the jury was not instructed on the loss element, and
accordingly this challenge is subject to plain error
review.
“In reviewing jury instructions for plain error, we are
exceedingly deferential to the trial court.” Tompkins v.
Cyr, 202 F.3d 770, 784 (5th Cir. 2000). For defendants to
prevail under the plain error standard, they must show that
(1) an error occurred; (2) the error was plain, which means
clear or obvious; (3) the plain error affects substantial
rights; and (4) failing to correct the error would
seriously impact the fairness, integrity, or public
reputation of judicial proceedings. Septimus v. Univ. of
Houston, 399 F.3d 601, 607 (5th Cir. 2005).
In determining whether a particular jury instruction was
erroneous, we must consider the instructions as a whole.
Russell v. Plano Bank & Trust, 130 F.3d 715, 721 (5th Cir.
1997). Although the jury charge failed to specifically
instruct the jury to find one of the § 1030(a)(5)(B)
factors as a prerequisite to civil liability under §
1030(a)(4), the damages instruction required the jury to
determine the amount of loss caused by the CFAA violation.
Following this instruction, the jury found that the three
defendants’ violations of § 1030(a)(4) caused FSI
loss totaling $36,000, which far exceeds the $5,000 loss
requirement. Despite defendants’ argument that the “loss”
found in the damages instruction is somehow different from
the substantive element of “loss” within §
1030(a)(5)(B)(i), the damages instruction defined “loss”
exactly as defined in § 1030.[fn5] The damages
instruction also required the jury to find that the loss
was “proximately caused by the conduct” that violated
§ 1030(a)(4), which was more than enough to satisfy
the § 1030(g) requirement that the violative conduct
“involve” one of the § 1030(a)(5)(B) factors. And
even if this aspect of the instructions was erroneous, the
jury’s damages finding shows that no substantial rights
were affected, as the jury would have found the $5,000
minimum met if instructed properly.
Further, although the damages instruction erroneously
failed to require a finding that the $5,000 minimum loss
occurred during a one-year period, the time element was
inherent in the jury’s finding, demonstrating that no
substantial rights were affected. Of the damages alleged by
FSI, defendants only identify $26,000, incurred by the
efforts of a data recovery expert, as including some
charges that derived from more than a year after the time
of the CFAA violation. But § 1030(a)(5)(B)(i) does
not require that the loss only occur within a year of the
CFAA violation; rather, it requires that the loss aggregate
to $5,000 “during any 1-year period.” 18 U.S.C. §
1030(a)(5)(B)(i) (emphasis added). As defendants
acknowledge, the data recovery expert first became involved
in November 2004, and his $26,000 fee included work through
January 2005, all of which took place well within a
one-year span. Regardless, the jury found $36,000 in loss,
which at a minimum must have included $10,000 in loss
associated with FSI’s original data recovery efforts, all
of which took place within a one-year span itself.
Accordingly, the district court’s failure to instruct the
jury that it must find a loss of $5,000 during a one-year
period was inconsequential.
2. Injunctive Relief
FSI also appeals the district court’s summary judgment
dismissal of FSI’s claim for injunctive relief under the
CFAA. The district court held that injunctive relief was
unavailable to FSI because the CFAA only allows an
injunction to prevent ongoing or future unauthorized access
to FSI’s computers, neither of which is shown here. FSI
responds that it is threatened with present and future harm
from defendants’ possession and use of trade secrets stolen
by defendants through the acts that violated §
1030(a)(4) and that an injunction should be available under
the CFAA to remedy such a harm.
We need not address the question of whether an injunction
may issue against the use of the information obtained
through a past violation of § 1030(a)(4). Although
the jury found that defendants violated §
1030(a)(4), which required a finding that the defendants
obtained something of value through their unlawful computer
access, the jury also found that FSI falsely accused
defendants of being thieves. Thus, the value obtained by
defendants could not have included stolen trade secrets.
“[T]he scope of injunctive relief is dictated by the extent
of the violation established,” and an injunction must be
narrowly tailored to remedy the specific action
necessitating the injunction. John Doe #1 v. Veneman, 380
F.3d 807, 818 (5th Cir. 2004) (citing Califano v. Yamasaki,
442 U.S. 682, 702 (1979)); Valley v. Rapides Parish Sch.
Bd., 646 F.2d 925, 942 (5th Cir. May 1981). Because the
jury determined that defendants did not steal trade secrets
through the acts that violated § 1030(a)(4), the
requested injunction would be improper under the CFAA.[fn6]
B. FSI’s Motion for Judgment as a Matter of Law
FSI also appeals the district court’s denial of judgment as
a matter of law, arguing that the evidence upon which the
jury’s defamation verdict was based could not be considered
as substantive evidence of defamation. FSI further contends
that even if the evidence is considered substantively, it
was insufficient to support a claim of defamation per se.
We review a district court’s ruling on a motion for
judgment as a matter of law de novo. Delano-Pyle v.
Victoria County, 302 F.3d 567, 572 (5th Cir. 2002). Under
this standard, all evidence is viewed “in the light and
with all reasonable inferences most favorable to the party
opposed to the motion.” Id. (quoting Resolution Trust Corp.
v. Cramer, 6 F.3d 1102, 1109 (5th Cir. 1993)). This court
will not reverse the district court’s denial of the motion
“unless a party has been fully heard on an issue and there
is no legally sufficient basis for a reasonable jury to
find for that party on that issue.” Id. (quoting Ellis v.
Weasler Eng’g, Inc., 258 F.3d 326, 337 (5th Cir. 2001)).
1. Substantive Evidence
Under the Federal Rules of Civil Procedure, depositions may
be used to “contradict[] or impeach[] the testimony of
deponent as a witness, or for any other purpose permitted
by the Federal Rules of Evidence.” FED. R. CIV. P.
32(a)(1). One of these other purposes is the use of a
witness’s prior inconsistent statements from a deposition
as substantive evidence. FED. R. EVID. 801(d)(1)(A); Gower
v. Cohn, 643 F.2d 1146, 1153 n. 11 (5th Cir. May 1981).
Conceding that Michael Roehrs’s video deposition was
admissible under these rules for both substantive and
impeachment purposes, FSI contends that the defendants only
actually used the deposition to impeach Michael Roehrs
during cross-examination, not as substantive evidence.
According to FSI, this rendered the jury unable to consider
the deposition as evidence of defamation under Gower v.
Cohn, 643 F.2d at 1153 n. 11.
Gower recognized that “materials once admitted for
impeachment [do not necessarily] also become substantive
evidence” and held that the deposition evidence of prior
inconsistent statements in that case was only offered to
impeach. Id. at 1153 n. 11. However, Gower involved a
situation in which both the district judge and the offering
party clearly believed that the evidence was being used
only to impeach, and in which the relevant jury charge
“only instructed the jury that [the] statements could be
used as impeachment tools.” Id. Unlike Gower, the district
judge in this case believed that “defendants used the prior
inconsistent statements not merely to impeach, but also to
prove that FSI had in fact defamed them,” and the jury
instructions provided that “[i]n determining whether any
fact has been proved . . . [the jury] may, unless otherwise
instructed, consider the testimony of all witnesses,” which
includes a witness’s video deposition testimony.[fn7]
Because the deposition testimony was accepted as both
impeachment and substantive evidence by the district judge
and submitted to the jury for both purposes, FSI can only
challenge the propriety of that decision. Yet, as discussed
above, the testimony was admissible as substantive evidence
under Rule 801(d)(1)(A). Further, FSI failed to object to
the jury instructions or request an instruction limiting
the jury’s consideration of the testimony to impeachment
purposes. FSI had the burden of requesting such an
instruction, and its undisputed failure to do so renders
the jury instructions susceptible only to a challenge for
plain error. See FED. R.EVID. 105; Savoie v. Otto Candies,
Inc., 692 F.2d 363, 370 (5th Cir. 1982); United States v.
Booty, 621 F.2d 1291, 1298-99 (5th Cir. 1980). As the
deposition testimony was actually admissible for
substantive use, no plain error exists. See Booty, 621 F.2d
at 1299; United States v. Leslie, 542 F.2d 285, 289 (5th
Cir. 1976).
2. Defamation Per Se
Defamation is a false statement about a person, published
to a third party, without legal excuse, which damages the
person’s reputation. Moore v. Waldrop, 166 S.W.3d 380, 384
(Tex.App. — Waco 2005, no pet.). In a claim for
defamation per se, “[t]he words are so obviously hurtful
that they require no proof that they caused injury in order
for them to be actionable.”[fn8] Columbia Valley Reg’l Med.
Ctr. v. Bannert, 112 S.W.3d 193, 199 (Tex.App.-Corpus
Christi 2003, no pet.). “For a defamatory oral statement to
constitute slander per se, it must fall within one of four
categories: (1) imputation of a crime, (2) imputation of a
loathsome disease, (3) injury to a person’s office,
business, profession, or calling, and (4) imputation of
sexual misconduct.” Gray v. HEB Food Store N. 4, 941 S.W.2d
327, 329 (Tex.App.-Corpus Christi 1997, writ denied). The
first category, which is at issue here, is met by a
statement that “unambiguously and falsely imputes criminal
conduct to” a party. Id. FSI argues that its allegedly
defamatory statements did not unambiguously impute criminal
conduct and were not false.
The evidence of FSI’s defamatory remarks was provided by
the testimony of Michael Roehrs, who spoke of statements
that he made on FSI’s behalf to Neil Wilkin at Optical
Cable Corporation and statements that FSI employee Mike
Dabrowski made to Lockheed Martin. On cross-examination,
after Michael Roehrs was asked whether he had told Neil
Wilkin that the defendants were thieves or had stolen
property, Roehrs answered that he told Neil Wilkin “that
there has been misappropriation . . . of intellectual
property” but denied calling them thieves. Defendants’
counsel then played the following video deposition
testimony from Michael Roehrs:
Q. Any other customers or vendors you know of that Fiber
Systems has said to them the defendants [are] thieves or
have stolen property?
A. Ne[i]l Wilkin with Optical Cable Corporation.
Q. All right. Who told him that?
A. I did.
Also, after Michael Roehrs denied that Mike Dabrowski told
a Lockheed Martin employee that defendants were thieves,
defendants’ counsel played the following video deposition
testimony from Roehrs:
Q. Has FSI told anybody at Lockheed Martin that the
defendants are thieves?
A. I think Mike Dabrowski, moreover, has let them know
that there has been a misappropriation of intellectual
property.
Q. By these defendants?
A. Yes.
. . . .
Q. And he was authorized to make these comments by Fiber
Systems?
A. Absolutely.
FSI first argues that this testimony does not show
statements that are defamatory per se because they do not
impute a crime. FSI acknowledges the extensive precedent
holding that a false accusation of theft is defamatory per
se, but argues that the recent Texas Court of Appeals
decision in Moore v. Waldrop establishes that statements
like those made here are nondefamatory because they merely
involve terms of general disparagement.
Moore dealt with the defamatory nature of the statement,
“You don’t want to hire him, he’s a crook.” 166 S.W.3d at
383. The court held that standing alone, the word “crook”
was merely a term of general disparagement, and did not
impute a specific crime. Id. at 384; see also Billington v.
Houston Fire & Cas. Ins. Co., 226 S.W.2d 494, 496
(Tex.Civ.App.-Fort Worth 1950, no writ)) (holding that the
use of the words “liar” and “crook” were nondefamatory
because they were used only as opprobrious terms). The
district court here distinguished Moore by observing that
the word “crook” differs from “thief” because the latter
“much more directly imputes a crime than the word `crook,'”
and the court illustrated the point by quoting multiple,
nondefamatory dictionary definitions for the word “crook.”
FSI challenges this conclusion by pointing to an
alternative definition of “crook” as “a person who steals
or cheats, swindler or thief,” WEBSTER’S NEW WORLD
DICTIONARY 330 (3d college ed. 1991), and by quoting
several arcane, nondefamatory definitions of the word
“thief,” including its meanings as a “kind of wild bee said
to rob hives” and an “excrescence in the snuff of a
candle.” See 17 THE OXFORD ENGLISH DICTIONARY 934-35 (J.A.
Simpson & E.S.C. Weiner eds., 2d ed. 1989). Accordingly,
FSI argues that the word “crook” is no different than the
word “thief,” and the outcome here should be the same as in
Moore.
We need not resolve a battle of dictionary definitions in
this appeal. Texas case law firmly establishes that falsely
accusing someone of stealing or calling someone a “thief”
constitutes defamation per se. See, e.g., Bennett v.
Computer Assocs. Int’l, Inc., 932 S.W.2d 197, 200
(Tex.App.-Amarillo 1996, writ denied) (“One who falsely
imputes to another the crime of theft commits slander per
se. . . . Falsely calling someone a `crook’ or `thief’ or
falsely accusing him of stealing property falls within the
parameters of slander per se. . . .”); see also Glenn v.
Gidel, 496 S.W.2d 692, 697-98 (Tex.Civ.App. —
Amarillo 1973, no writ); Anderson v. Alcus, 42 S.W.2d 294,
296 (Tex.Civ.App.-Beaumont 1931, no writ). In contrast, as
recognized in Moore, Texas courts have determined that the
term “crook” does not inherently have the same defamatory
content. See, e.g., Moore, 166 S.W.3d at 384; Billington,
226 S.W.2d at 496; Arant v. Jaffe, 436 S.W.2d 169, 177-78
(Tex.Civ.App. — Dallas 1968, no writ). But when the
word “crook” is used in a context imputing theft, it is
also defamatory per se. See Bennett, 932 S.W.2d at 200
(holding that “[f]alsely calling someone a `crook'” was
defamatory per se where the defendant called the plaintiff
“a `thief’ and a `crook’ who had stolen . . . computer
software”).
While it is similarly possible that a false allegation of
theft could be made in a context that renders it
nondefamatory, such a situation is not presented here. To
affirm the district court’s decision, it is sufficient that
“the words used [were] reasonably capable of a defamatory
meaning.” Musser v. Smith Protective Servs., Inc., 723
S.W.2d 653, 654-55 (Tex. 1987). “In answering this
question, the court must construe [each] statement as a
whole in light of surrounding circumstances based upon how
a person of ordinary intelligence would perceive the
entire statement.”[fn9] Gray, 941 S.W.2d at 329. “The
surrounding circumstances are the setting in which the
alleged slanderous statement is spoken, consisting of the
context of the statement and the common meaning attached to
the statement.” Moore, 166 S.W.3d at 386. “Only when the
court determines the language is ambiguous or of doubtful
import should the jury then determine the statement’s
meaning and the effect the statement’s publication has on
an ordinary reader.” Musser, 723 S.W.2d at 655.
Here, deposition evidence showed that Michael Roehrs told
Neil Wilkin that defendants were thieves or had stolen
property,[fn10] which directly imputes specific crimes
under Texas law.[fn11] See TEX. PEN. CODE ANN. §
31.03 (Vernon 2005) (punishing theft of property); Id.
§ 31.05 (Vernon 2005) (punishing theft of trade
secrets); see also Gray, 941 S.W.2d at 329 (determining
that an accusation of shoplifting was slanderous per se
because shoplifting was punishable under the Texas Penal
Code). As the defamation cases discussed above illustrate,
the common meaning of FSI’s statements imputed the crime of
theft. And the surrounding circumstances present no factors
that would alter the meaning of the statements,
particularly considering the evidence in the light most
favorable to the defendants. In fact, Michael Roehrs
described in his live testimony that the statement to Neil
Wilkin was made in the context of a discussion about the
misappropriation of FSI’s property by defendants, which
supports the conclusion that the accusation of theft
imputed that crime.
Nonetheless, FSI argues that from the context of the
ongoing, heated controversy between FSI and the defendants,
no person of ordinary intelligence could believe that FSI’s
statements were anything more than rhetorical outbursts of
an angry and frustrated business owner, much less a real
accusation of theft. FSI relies on the Supreme Court’s
opinion in Greenbelt Co-Op Publishing Association v.
Bresler, 398 U.S. 6, 13-14 (1970), which held that an
accusation of blackmail during a heated city council debate
was mere rhetorical hyperbole because the word, in context,
clearly referred to the unreasonableness of legal
negotiating proposals discussed at the debate rather than
the actual crime of blackmail.[fn12] But unlike Greenbelt,
the circumstances here only bolster the conclusion that
Michael Roehrs was referring to the commission of a crime.
The accusation of theft, in context, did not refer to
activities readily identifiable to the listener as
innocuous, as in Greenbelt, but instead referred to the
defendants’ alleged misappropriation of FSI’s intellectual
property. The mere fact that an accusation arose from a
heated controversy does not strip the statement of its
defamatory content where a person of ordinary intelligence
would nonetheless interpret the statement to impute a crime.
Finally, FSI argues that the statements made by FSI were
true. “The truth of a statement is a defense to a claim
for defamation.” Gustafson v. City of Austin, 110 S.W.3d
652, 656 (Tex.App.-Austin 2003, pet. denied). This defense
“does not require proof that the alleged defamatory
statement is literally true in every detail; substantial
truth is sufficient.” Id. FSI argues that its statements
were substantially true because the jury found that three
of the defendants violated 18 U.S.C. § 1030(a)(4)
and that FSI’s report to the Allen Police Department was
made without actual malice.
However, the jury specifically found that FSI’s theft
allegations were not substantially true. At most, the jury
findings would be inconsistent, requiring a new trial.
Willard v. The John Hayward, 577 F.2d 1009, 1011 (5th Cir.
1978). Thus, FSI’s argument is properly addressed in
connection with its argument that the district court should
have granted a new trial based on inconsistent jury
findings, which is discussed later in this opinion. For
purposes of the district court’s denial of FSI’s motion for
judgment as a matter of law, the only question is whether
the jury had a legally sufficient basis for finding that
the allegations were not substantially true, and we are
satisfied that defendants’ testimony provided such a basis.
C. Defendants’ Cross-Appeal
Defendants raise in their cross-appeal two issues related
to the district court’s treatment of several documents
that allegedly show additional defamatory statements by
FSI. First, defendants argue that the district court
incorrectly granted summary judgment dismissing their
claims that FSI defamed the corporate defendants in the
documents. Second, defendants contend that the district
court erred by failing to submit those documents to the
jury as additional instances of defamation against the
individual defendants, which was equivalent to judgment as
a matter of law for FSI on those issues. See Turlington v.
Phillips Petroleum Co., 795 F.2d 434, 444 (5th Cir. 1986)
(“The district court below failed to submit this issue to
the jury, in effect granting [the opposing party] a
directed verdict on that theory of recovery.”).
The documents at issue are e-mails and letters sent by FSI
employees or agents to various parties. Exhibit 34 is a
February 2004 e-mail from Michael Roehrs accusing either
his mother or Daniel Roehrs of “supporting child
molesters.” Exhibit 60, which is a January 2004 letter from
the new FSI management team to business associates after
the transition in power, notified the recipients of the
change and asked for their assurance that they “will not
manufacture any proprietary FSI parts or utilize FSI design
features for any non-FSI personnel or former FSI
employees.” The letter also asked the recipients to let FSI
know immediately if contacted by former FSI employees.
Exhibit 61 is an October 2004 letter from FSI’s attorneys
to the Defense Supply Center in Columbus, Ohio (the
“DSCC”), which said that “certain confidential and
proprietary information and trade secrets . . . of FSI have
been misappropriated and stolen by Applied Optical
Systems.” The letter then asked that the DSCC “refrain from
releasing any information submitted by AOS . . . in order
to protect FSI’s trade secrets and confidential
proprietary information which have been wrongfully taken by
certain individuals at AOS and unlawfully distributed.”
In Exhibit 74, an October 2004 e-mail to officials of the
DSCC, Michael Roehrs wrote that “The Minority Group (Now
known as Applied Optical Systems and/or Optical Cabling
Systems) have begun using our intellectual property and
trade secrets and are entering the market.” The e-mail also
stated that “they have provided stolen proprietary
information to” the DSCC and that “they are using the
government as a tool to launder our proprietary information
and trade secrets.” Finally, Exhibits 90-92 were letters
from FSI’s lawyers to three companies stating that “FSI
asserts and has reason to believe that these companies are
in possession of and/or have acquired FSI’s confidential
proprietary and business information and trade secrets. FSI
also believes that one or more of these companies are
using, benefiting from, and/or disseminating FSI’s
confidential proprietary and business information and trade
secrets.”
The district court held that the documents were not capable
of defamatory meaning because they did not “make[] any
specific allegations that the entities stole FSI
proprietary information or knew it to be stolen, or
directly accuse[] the corporate defendants of wrongdoing.”
The court determined that only Exhibit 74 was even arguably
defamatory, but that the e-mail “was intended to update the
[DSCC] on a good-faith dispute between FSI and the
corporate defendants about whether the information the
corporate defendants were submitting was FSI proprietary
information.” Accordingly, the court determined that Exhibit
74 was mere “hyperbolic language” alerting the DSCC “that
the information the corporate defendants submitted was the
subject of litigation between the two parties and stat[ing]
FSI’s theory of the case, albeit in somewhat stronger terms
than its pleadings.”
As we discussed previously, the district court’s role was
to construe each statement in light of the surrounding
circumstances to determine how the statement would be
perceived by a person of ordinary intelligence. Gray, 941
S.W.2d at 329. If this inquiry shows that a statement
falsely and unambiguously imputes criminal conduct, it is
defamatory per se. Gray, 941 S.W.2d at 329. If the
statement is ambiguous or cannot be fully understood
without the use of extrinsic evidence, the statement is not
defamatory per se, and extrinsic evidence can be considered
only under a defamation per quod theory. Moore, 166 S.W.3d
at 386.
Here, the district court properly held that two of the
documents were not capable of defamatory meaning towards
the corporate defendants. Exhibit 34, in which Michael
Roehrs accuses his mother or Daniel Roehrs of “supporting
child molesters,” does not mention the corporate defendants
at all. Exhibit 60, in which FSI notified business
associates of the change in management, contains no
statements that could impute any crime, merely asking the
recipients not to manufacture FSI parts or use FSI features
for former employees.
However, Exhibits 61 and 74 are reasonably capable of
defamatory meaning, and in some respects are almost
identical to the defamatory statements that the district
court ultimately submitted to the jury. Exhibit 61, sent by
FSI’s attorneys to the DSCC, stated that AOS
“misappropriated and stole[] FSI’s trade secrets,” and that
FSI’s trade secrets were “unlawfully distributed” by AOS to
the DSCC. These statements plainly impute a crime, and
their context, which encourages the letter’s recipient to
refrain from releasing information submitted to them by
AOS, supports the defamatory nature of the statements.
Further, Exhibit 74, an e-mail from Michael Roehrs to the
DSCC, accused AOS and OCS of “provid[ing] stolen
proprietary information” to the DSCC, and stated that these
acts were done to “launder [FSI’s] proprietary information
and trade secrets.” Texas law criminalizes the knowing and
unconsented “communicat[ion] or transmi[ssion of] a trade
secret,” TEX. PEN. CODE ANN. § 31.05(b), and despite
the district court’s belief that the e-mail was merely
intended to update the DSCC as to the litigation at issue
here, the statements alleging transmission of stolen trade
secrets went beyond such a purpose.
Accordingly, the district court erred in granting summary
judgment on the corporate defendants’ defamation claims
based on Exhibits 61 and 74. The allegedly defamatory
statements in Exhibits 90-92 present a closer question, and
the district court should reconsider its decision on those
exhibits in light of this opinion.[fn13]
However, the district court properly refused to submit any
of these documents to the jury as substantive evidence of
defamation of the individual defendants. “For a defamatory
statement to be actionable, it must refer to an
ascertainable person.” Robertson v. Sw. Bell Yellow Pages,
Inc., 190 S.W.3d 899, 902 (Tex.App. — Dallas 2006,
no pet.). A person is ascertainable “if he is named in the
statement or if those who know the person would understand
that the statement was referring to the person.” Ledig v.
Duke Energy Corp., 193 S.W.3d 167, 180 (Tex.App.-Houston
[1st Dist.] 2006, no pet.). Further, “a member of a group
has no cause of action for a defamatory statement directed
to some or less than all of the group when there is nothing
to single out the plaintiff.” Eskew v. Plantation Foods,
Inc., 905 S.W.2d 461, 462 (Tex.App.-Waco 1995, no writ).
Whether a party is ascertainable is a question of law for
the court, but is submitted to the jury if the language is
ambiguous or of doubtful import. Ledig, 193 S.W.3d at 180.
Defendants first argue that Exhibit 61 was directed not
only at AOS, but the individual defendants as well.
However, the language of the letter attributes criminal
action to AOS, not to the individuals who work for AOS, and
is incapable of defamatory meaning against the individual
defendants. See Ledig, 193 S.W.3d at 180 (holding that
statements about a company’s actions did not defame a
member of the company’s senior management). The letter does
refer to information “wrongfully taken by certain
individuals at AOS,” but nothing identifies any particular
individual defendant.[fn14] Similarly, Exhibit 74 refers to
“[t]he Minority Group (Now known as Applied Optical Systems
and/or Optical Cabling Systems)” and alleges current
criminal behavior. Although the letter references a past
designation of the individuals as a group of minority
owners in FSI, the context of the letter — which
refers to that group’s present status as AOS and OCS and
alleges present crimes — shows that the crimes are
only attributed to the named companies. Further, Exhibits
90-92 make no reference at all to any of the individual
defendants, mentioning only the acts of the corporate
defendants.
Defendants also point to Exhibit 57, which alleges that
“[c]ertain individuals have admitted under oath that they
violated” the CFAA, but the exhibit does not identify any
particular individuals. Finally, Exhibit 34 may accuse
Daniel Roehrs of “supporting child molesters,” but
defendants fail to identify any crime that such an
allegation imputes.
D. FSI’s Motion for a New Trial
Accompanying FSI’s post-verdict motion for judgment as a
matter of law, the company moved in the alternative for a
new trial. In this appeal, FSI challenges the district
court’s denial of a new trial, alleging that the jury
verdict contained inconsistent answers to the special
interrogatories and that the jury finding on defamation was
improperly influenced by the spillover prejudice of
inadmissible evidence. “We review a district court’s ruling
on a motion for new trial for abuse of discretion.” Int’l
Ins. Co. v. RSR Corp., 426 F.3d 281, 300 (5th Cir. 2005).
This court also gives “great deference to the district
court ruling when it has denied the new trial motion and
upheld the jury’s verdict.” Id.
1. Inconsistent Jury Findings
“If the jury gives inconsistent answers to special
interrogatories, the case must be remanded for a new
trial.” Willard v. The John Hayward, 577 F.2d 1009, 1011
(5th Cir. 1978). In determining whether answers are
inconsistent, we look to “whether the answers may fairly be
said to represent a logical and probable decision on the
relevant issues as submitted.” FDIC v. Fid. & Deposit Co.,
45 F.3d 969, 977 (5th Cir. 1995) (citation omitted). A
jury’s answers “should be considered inconsistent, however,
only if there is no way to reconcile them.” Willard, 577
F.2d at 1011. This court makes “a concerted effort to
reconcile apparent inconsistencies in answers to special
verdicts if at all possible.” Ellis v. Weasler Eng’g Inc.,
258 F.3d 326, 343 (5th Cir. 2001).
FSI argues that two different jury findings contradict the
jury determination that FSI falsely and maliciously accused
defendants of being thieves. First, FSI contends that the
jury finding that three of the defendants violated 18
U.S.C. § 1030(a)(4) is equivalent to a finding that
those defendants were thieves. Second, FSI argues that the
jury’s determination that FSI filed the police report of
computer theft without malice establishes that FSI’s
accusations that defendants stole the intellectual property
on those computers were made without malice as well.
However, each of these findings can be reconciled. First,
the finding that three defendants violated §
1030(a)(4) did not necessarily establish that the
defendants were thieves. Section 1030(a)(4) deals with
unlawful access of computer systems to further fraud. 18
U.S.C. § 1030(a)(4). Although the jury found that
three defendants violated this section, and that their
unlawful access caused a loss to FSI totaling $36,000, the
determination did not require a finding that the defendants
stole trade secrets or anything else. Section 1030(a)(4)
does require a finding that the violator obtained something
of value by means of the unlawful access, but the value
need not be a trade secret or even something that was
stolen. The jury could have found that the value obtained
by defendants inhered in the temporary use or possession of
computer hardware,[fn15] as FSI suggested in its closing
arguments,[fn16] or some other value that was obtained
without theft.
Additionally, the finding that FSI did not act with actual
malice in filing the police report of computer theft does
not establish, as FSI claims, that the report of theft was
true or that later statements were made without malice as
well. As the jury was instructed, “actual malice means that
the party making the publication acted with actual
knowledge that it was false or with reckless disregard of
whether it was false or not.” Accordingly, the jury finding
on the police report does not mean that the jury believed
that the allegations of theft were actually true, but
merely that FSI believed it was true to the extent
necessary to avoid liability. Further, the jury could have
determined that FSI sincerely believed when the police
report was filed that the defendants stole computer
equipment, but recklessly disregarded the truth when FSI
accused defendants of stealing the company’s intellectual
property in statements made two months later. The
statements are therefore easily reconcilable.
2. Spillover Prejudice
In United States v. Edwards, 303 F.3d 606, 639 (5th Cir.
2002), this court considered whether evidentiary “spillover
from invalid claims can be a basis for granting a new
trial.” We stated that to make such a claim, a party must
“[a]t a minimum . . . show that [it has] experienced some
prejudice as a result of the joinder of invalid claims,
i.e., that otherwise inadmissible evidence was admitted to
prove the invalid claims.”[fn17] Id. at 640. FSI argues in
this appeal that the jury’s defamation findings were
improperly prejudiced by other allegedly defamatory
statements that were admitted by the district court and
submitted to the jury even though the court held that they
were nondefamatory as a matter of law. Defendants, in
addition to arguing that the evidence was not prejudicial,
contend that FSI did not properly preserve a spillover
prejudice argument, only raising relevance objections to
the evidence when introduced at trial.
Unlike Edwards and similar spillover prejudice cases from
other circuits, this is not a situation where one of
several claims was held invalid and the reviewing court
must determine whether evidence properly admitted for the
invalid claim had a prejudicial effect on the jury’s
determination of the other claims.[fn18] Rather, this
appeal involves evidence that was admitted by the district
court, over FSI’s objections, for the valid defamation
claims discussed in the previous section, and there is no
need to discuss cases that apply a standard prejudice
inquiry to unique procedural circumstances.[fn19] The
relatively straightforward question here — preserved
for appeal by FSI’s relevance objections — is
whether the district court abused its discretion in
admitting the evidence as relevant.[fn20] See United States
v. Hicks, 389 F.3d 514, 522 (5th Cir. 2004). Even if the
district court improperly admitted the evidence, we will
not reverse if the error was harmless.[fn21] Id.
The evidence at issue here consists of the same documents
involved in defendants’ cross-appeal. The district court
determined in its order on the motion for a new trial that
the statements in the e-mails and letters, “while perhaps
not defamatory on their face, were relevant to the question
of whether FSI defamed the defendants,” specifically on the
question of malice because “much of this evidence
illustrated the circumstances surrounding the parties’
dispute, as well as FSI’s recklessness about the truth of
its allegations.”
FSI’s sole argument against this holding is to suggest the
unsupported proposition that nondefamatory statements cannot
be probative of actual malice in a defamation per se case.
However, this court has established that “a court or jury
may infer actual malice from objective circumstantial
evidence.” Brown v. Petrolite Corp., 965 F.2d 38, 47 (5th
Cir. 1992); see also Harte-Hanks Commc’ns, Inc. v.
Connaughton, 491 U.S 657, 668 (1989); Zerangue v. TSP
Newspapers, Inc., 814 F.2d 1066, 1070 (5th Cir. 1987). The
evidence can show “negligence, motive, and intent such that
an accumulation of the evidence and appropriate inferences
supports the existence of actual malice.'” Brown, 965 F.2d
at 47 (quoting Bose Corp. v. Consumers Union of United
States, Inc., 692 F.3d 189, 196 (1st Cir. 1982)).
Accordingly, the district court did not abuse its
discretion in admitting the statements at issue as evidence
relevant to the malice inquiry.[fn22] All of the statements
were consistent with defendants’ malice argument that the
defamation claims were part of “an unbelievable smear
campaign” involving “a calculated and relentless attempt by
[FSI] that will go to any lengths to destroy [defendants]
completely.” Although not admitted as substantive evidence
of defamation, the documents illustrated the circumstances
in which the defamatory statements were made and the state
of mind of the FSI employees who made them, and were thus
relevant evidence from which actual malice could be
inferred. Finally, the jury instructions limited the jury’s
purview to three specific statements, and there is little
likelihood that the jury was confused by the additional
evidence.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
denial of FSI’s motion for judgment as a matter of law and,
in the alternative, for a new trial, as well as the
district court’s grant of judgment as a matter of law on
defendants’ claim that the individual defendants were
defamed in e-mails and letters, REVERSE the district
court’s grant of partial summary judgment on defendants’
defamation counterclaim with regard to the corporate
defendants, VACATE the district court’s entry of a
take-nothing judgment on FSI’s § 1030(a)(4) claim,
and REMAND this case for entry of judgment on the jury’s
§ 1030(a)(4) verdict and for further proceedings
consistent with this opinion. Each party shall bear its own
costs.