No. C000619
California Court of Appeals, Third District
December 12, 1989
Superior Court of Sacramento County,
No. 310945,
Lloyd Allan Phillips, Jr., Judge.
NOTICE:
Opinion certified for partial publication - Pursuant to California Rules of
Court, rule 976.1, this opinion is certified for publication with the exception of parts III and IV.
COUNSEL:
Sedgwick, Detert, Moran & Arnold, Stephen W. Jones and Frederick D.
Baker for Defendant and Appellant.
Friedman, Collard & Poswall and John M. Poswall for Plaintiff and Respondent.
JUDGES: Opinion by Sparks, J., with Blease, Acting P. J., and Sims, J., concurring.
OPINION: In this malicious prosecution action we are called upon to resolve the clash between the claimed right to enjoin a trade libel and the constitutional right of free speech. The case had its genesis in an earlier but unsuccessful attempt to obtain an injunction against the publication of a report concerning the safety of plastic pipes for domestic water use. The published report was first filed in the record of the governmental agency conducting hearings on the question and was then later disseminated elsewhere. We resolve the conflict in favor of free speech.
The central question is whether the defendant, a manufacturer of pipe resin,
had probable cause to file an earlier action against the plaintiff, an attorney for a pipe trade council. The underlying dispute between the parties arose out of documents relating to the safety of the proposed expanded use of plastic pipes for plumbing purposes. The prior action sought to enjoin an alleged trade libel that defendant's product contained a carcinogen and to obtain a declaratory judgment that its product does not represent a danger to human health. The issue turns on whether, given the facts known to defendant, the prior action was legally tenable as a matter of law. We hold it was not because the constitutional guaranties of free speech prohibit a court from enjoining the dissemination of documents and information which formed part of the public debate on a matter of public health and safety. [FN1]
Defendant Shell Oil Company (Shell) appeals from a judgment entered on a jury verdict in favor of plaintiff Raymond J. Leonardini awarding him compensatory damages in the amount of $ 197,000, and punitive damages in the amount of $ 5 million. Shell raises a number of objections to the judgment. It first argues that the trial court erred by directing a verdict against it on the probable cause issue and this error mandates reversal. Shell next claims that the court's instruction on probable cause misstated the law and was prejudicial. Its third contention is that the trial court committed reversible error in admitting expert legal testimony on probable cause. The fourth contention is that it was reversible error to admit evidence on the toxicity of certain fittings. The last two contentions relate to damages. Shell asserts that the compensatory damage award was both grossly excessive and unsupported by the evidence. Finally, it argues that the $ 5 million punitive damage award was excessive as a matter of law. We resolve the probable cause issue in favor of plaintiff in the published portion of this opinion. In the unpublished part we consider the remaining contentions. Finding no reversible error there we shall affirm the judgment.
This case began in a high stakes, public clash over the use of polybutylene pipe in this state for drinking water. Shell sought approval of the unrestricted use of the pipe without any environmental impact report. Plaintiff advocated that the public officials charged with the responsibility for health and safety independently test the pipe system before exposing Californians to potential health risks. How that struggle was waged is the story of this lawsuit.
Plaintiff is an attorney. After becoming a member of the State Bar of California, he worked for a number of years in the Department of Consumer Affairs. Ultimately, he attained the position of assistant cabinet secretary of the state Department of Consumer Affairs. Eventually plaintiff left government service to start a private practice in Sacramento. During all relevant periods plaintiff had one primary client, the California Pipe Trades Council (Council). The Council is an organization of plumbers' and pipe fitters' unions. Representatives of the Council advised plaintiff that hearings were scheduled to commence concerning the unrestricted use of plastic pipe for plumbing, including drinking water. Among other things, plaintiff was retained by the Council to represent it in connection with those plastic pipe proposals. Plaintiff then undertook to familiarize himself with the health and safety issues affecting plumbers and pipe fitters. He asserted that his primary concern centered on health and safety issues, although he conceded that increased competition from plastic pipes could be an economic issue with plumbers and pipe fitters. As part of his preparation, plaintiff assembled information about the health problems related to the installation and use of plastic pipes.
During 1979 and 1980 the Commission on Housing and Community Development (Commission) was considering the expanded use of plastic piping for potable (drinking) water purposes. The Commission held public hearings, invited public comment and debate and maintained a public record of all the material submitted to it on the question. In addition to written comments, the Commission also took testimony from officials of public agencies and others interested in or concerned with the use of plastic pipes. The Commission also retained its own scientific consultant, Dr. Marc Lappe, who was the head of the state hazard alert system. The essential question before the Commission was whether the state of scientific information was such that plastic pipe could safely be approved for carrying drinking water or whether independent testing was required. Shell and other manufacturers of plastic pipes and their components, as well as various representatives of trade associations, were active participants in these hearings. Shell and other supporters of the use of plastic pipes submitted various studies and scientific tests which they asserted showed that the pipe was safe and additional testing unnecessary.
The primary forms of plastic pipe at issue were PVC (polyvinyl chloride), CPVC (chlorinated polyvinyl chloride), and polybutylene. Plastic pipes are petrochemically based and most of the manufacturers of plastic piping are petrochemical companies. Shell apparently does not make plastic piping itself; it is, however, the only manufacturer of the resin which is the sole ingredient of polybutylene pipe. Polybutylene pipe differs from PVC and CPVC pipe in that it is flexible and does not use chemical solvents for installation. Instead, it requires heat fusion or fittings for installation.
During the Commission's review a study was commissioned at the James Montgomery Laboratory (Montgomery) to test PVC and CPVC piping for leaching of chemicals which could have potential health effects. Polybutylene was not the subject of the testing by that laboratory because the ingredients of the piping, as revealed by Shell, did not "ring an alarm" concerning possible health hazards. But Shell did not reveal to the state authorities that the polybutylene pipe system used an additional plastic, a polyacetal fitting with the trade name of Celcon, as a coupler. Mr. Steven Pregun, an organic chemist for Shell, in a letter to a customer, later described this coupling material as an "albatross" around the neck of the polybutylene pipe system. Shell's policy was that if the state did not discover any health problems with the system on its own and did not specifically ask for that information, Shell would not volunteer it.
The Montgomery study revealed that potentially hazardous chemicals could be leached into water from PVC and CPVC pipes. These chemicals were believed to be from the solvents used in installation and possibly from plasticizers added during manufacturing. These dangerous chemicals had never been disclosed to the State of California by the manufacturers of PVC or CPVC. Quite the contrary, they had represented to the state that the pipes were completely safe.
In the spring of 1980, Assemblyman Lou Papan of the California Legislature sponsored a concurrent resolution asking the Commission to halt approval of plastic pipes until such time as the toxic substance alert system had made findings of its own. In a response foreshadowing the suit against plaintiff, Shell told one of its representatives that "they have a battery of attorneys to handle people like that and that they'll turn it over to their legal department." Shell in fact responded by sending a letter to Assemblyman Papan threatening to take "appropriate legal action" against him if he did not desist from lumping polybutylene with other plastics.
As a result of the Montgomery study and other information, the Commission in November 1980, ordered the preparation of an environmental impact report (EIR) on the proposal for increased usage of PVC and CPVC pipes. It did not, however, require an EIR on the use of polybutylene pipe at that time. In the meantime plaintiff made an independent investigation to determine what studies, if any, had been done on PVC and CPVC. He contacted the National Sanitation Foundation and discovered their results were based upon tests made in 1955, dealt with inorganic chemicals and did not employ current technology. He personally visited both the federal Food and Drug Administration (FDA) and the Department of Environmental Protection and learned they had no information on the subject.
Following the Commission's determination, plaintiff arranged for California Analytical Laboratories, Inc. (CAL), an independent laboratory, to perform tests on polybutylene pipe. The tests were commissioned and paid for by the Council. Plaintiff testified that he had representatives of the Council deliver some polybutylene pipe to CAL. CAL then conducted tests on the pipe and on December 31, 1980, it prepared a report which was submitted to plaintiff. [FN2] The report reflected analyses of two pieces of pipe. With respect to one of the pieces the report indicated the presence of bis (2-ethylhexyl) phthalate (BEHP), more commonly known as di (ethylhexyl) phthalate (DEHP), at estimated levels of 50 to 500 parts per million (ppm). The possible presence of DEHP in polybutylene pipe could raise health concerns since it had recently been shown to be carcinogenic when fed to rodents in high doses (3,000 to 12,000 parts per million). Plaintiff sent the December 31, 1980, report to Dr. Lappe. Dr. Lappe forwarded the report to the Commission, noting that the results were disturbing in view of the animal carcinogenicity of DEHP and Shell's representation that plasticizers such as DEHP were not used in polybutylene. At some time the Commission determined to hold further hearings on the use of polybutylene pipe.
Following the disclosure of the CAL report, Shell hired Radian Corporation
(Radian) to test polybutylene pipe leachates. Shell provided four leachate
samples to Radian, and no DEHP was detected in those samples. In a follow-up analysis Radian obtained pipe samples, performed the leaching experiments itself using both water and hexane, and found no DEHP beyond what were described as background levels. [FN3]
In conjunction with the hearings, plaintiff prepared a booklet entitled "Health Hazards Associated With Plastic Pipe, A Status Report." The report was written with the intent of explaining the nature of the hearings and the issues which were involved. Plaintiff caused this booklet to be submitted into the public record of the hearings. Attached as an exhibit to the booklet was a copy of the CAL report, dated December 31, 1980. Plaintiff also included in the booklet a chapter on the use of polybutylene pipe for potable water. He suggested that because polybutylene is part of the generic plastic pipe grouping it may have stabilizers and plasticizers added to it. The report went on: "In early 1981, the California Department of Health Services evaluated research on polybutylene pipe that for the first time, was not authorized and not submitted by Shell Chemical Company. The results were alarming.... In particular, the tests conducted by the California Analytical Laboratories found 50-500 ppm of DEHP (a known animal carcinogen) in the pipe itself. Subsequent tests on other polybutylene pipe used for flexible connections to plumbing fixtures also found DEHP. [para.] The results were all the more disturbing because the representative of Shell Chemical Company had testified on the public record that polybutylene did not use DEHP...." (Italics in original.) Plaintiff quoted Dr. Lappe's letter, written immediately after he received the December 31, 1980, CAL report, in which he indicated it was disturbing that the Commission had been given apparently misleading testimony by Shell concerning the ingredients of polybutylene pipe. With respect to the Radian tests, plaintiff stated that the tests were commissioned by Shell to counter the substantive findings of the CAL tests and, with reference to CAL's criticism of the Radian testing, he asserted the test was "so flawed as to be of little value."
Plaintiff gave about 80 copies of the booklet to his client, the pipe trades council, for distribution. The Council "wanted to explain it to their members so they could understand the context of the controversy." He testified that he prepared the booklet and gave copies of it to the Council with the knowledge, and in fact with the intent, that it would be distributed to anyone who requested a copy. Nevertheless, he did not have any control or say over what the Council actually did with the copies of the booklet. He retained 12 copies in his office for distribution to anyone who desired one. Shell presented evidence that the booklet was the subject of widespread distribution by plaintiff and the Council.
On April 20, 1981, the Commission conducted a hearing to determine whether polybutylene pipe should be the subject of an EIR. At the hearing Dr. Lappe testified that he found the Radian test results reassuring that polybutylene pipe did not present a health risk due to DEHP. He followed his testimony with a letter to Commission confirming that view. Representatives of Shell appeared and opposed an EIR for polybutylene pipe. They suggested that a speedy resolution could be obtained by a set of additional tests to determine whether there really was a cancer-causing material in polybutylene pipes made from its resin. Plaintiff opposed this approach. Instead, he sought to have an EIR prepared. "I wanted polybutylene plumbing systems to be tested by an independent governmental agency whose responsibility was to certify the health and safety of this product before it was put into use by the public." As plaintiff later testified, "[G]iven the reality that we are talking about water, we are not talking about shoes or neckties or something like that, we're talking about an element basic to life, that it is incumbent upon the government to rely upon independent tests, not the manufacturers'.... [para.] And it was my belief, and the belief of a lot of people that before you approve it, make sure you've asked and answered and tested that product as thoroughly as you can before you approve it."
The public dispute escalated to statewide, even national, proportions. Contestants on both sides of the issue were quoted in national newspapers and magazines. Editorials appeared in various newspapers. Opinion pieces were published on both sides in newspapers. Public officials joined in the debate and called for testing. Shell itself sent a letter to interested parties across the country telling them that the information about the polybutylene controversy "is part of the public record and is available to anyone who wishes to write us." Shell described the controversy as a "big lie" paid for by the plumbers.
But Shell, according to one of its disgruntled consultants to the polybutylene division, found that plaintiff "was being too effectual at hearings. And if he continued on the road that he was pursuing, he was going to wind up getting polybutylene pipe in that same E.I.R. that he was suggesting needed to be concentrated for PVC and solvent leaching problem with CPVC and PVC." Such an outcome, in Shell's view, would be a "total disaster." Shell's management became "very emphatic about doing whatever was necessary to see if they could eliminate [plaintiff] and his tenaciousness from the hearings." Plaintiff "was just really creating a hornet's nest and something needed to be done with him, . . ." That something, as we shall see, was the filing of a lawsuit in the federal court. In retrospect, Shell had correctly foreseen the difficulties because the Commission ultimately rejected its approach and ordered the preparation of an EIR on polybutylene pipe.
In 1981 additional, independent testing of polybutylene was conducted. The
East Bay Municipal Utility District became concerned over reports of carcinogens in polybutylene pipe and conducted tests which were negative for DEHP. The United States Navy put a Florida base on bottled water while it tested its polybutylene piping system. The tests were negative for DEHP. Radian obtained pipe from the same lot as the pipe which had been tested by CAL in December 1980. Radian tested the pipe and sent pieces to four independent laboratories for testing. The results were negative for DEHP beyond background levels.[FN4]