Title: DIGITAL DESIGN GROUP, INC. v. INFORMATION BUILDERS

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

DIGITAL DESIGN GROUP, INC. v. INFORMATION BUILDERS  DIGITAL DESIGN GROUP, INC. v. INFORMATION BUILDERS 2001 OK 21 24 P.3d 834 72 OBJ 640 Case Number: 92018 Decided: 02/27/2001 Mandate Issued: 06/01/2001 DIGITAL DESIGN GROUP, INC. Plaintiff/Appellee/Cross-Appellant v. INFORMATION BUILDERS, INC., Defendant/Appellant/Cross-Appellee and THE STATE OF OKLAHOMA, ex rel., THE COMMISSIONERS OF THE LAND OFFICE Defendant CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION III Honorable Carolyn R. Ricks, Trial Judge ¶0 The Oklahoma Commissioners of the Land Office (Commissioners) hired the appellee, Digital Design Group (Digital) to design and implement a mineral management computer system. The contract required Information Builders, Inc.(Information Builders), to conduct peer review of Digital's work. As the project progressed, Information Builders wrote three letters evaluating the project at the request of the Commissioners' Management Information System director. Subsequently, the Commissioners terminated its contract with Digital and Digital sued Information Builders, asserting claims for libel and breach of contract. The jury returned a verdict against Information Builders and awarded actual and punitive damages. The trial court entered judgment on the jury verdict and denied Digital's motion for costs and prejudgment interest. Information Builders appealed. Determining that the libel claim was time-barred and that Digital had failed to prove contract damages, the Court of Civil Appeals affirmed in part, reversed in part and remanded with instructions for the trial court to enter judgment in favor of Information Builders. We hold that the discovery rule applies to the libel claim. When facts about the injury's discovery are disputed the question of when the plaintiff knew or should have known is a fact question for the jury to decide. Under the unique facts presented, submission of the statute of limitations defense to the jury was waived. However, submission of the contract claim to the jury resulted in prejudicial error because of the probability that the jurors were misled by its intermingling with the claim for libel damages. COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT REVERSED AND REMANDED FOR NEW TRIAL. Gladys E. Cherry, John M. Rowntree, Jr., Stephen G. Solomon, Oklahoma City, Oklahoma, for Appellee/Cross-Appellant Clyde A. Muchmore, George W. Dahnke, Murry E. Abowitz, Oklahoma City, Oklahoma, for Appellant/Cross-Appellee KAUGER, J.: [24 P.3d 836] ¶1 Two issues are presented on certiorari: 1) whether the discovery rule applies to a libel claim; FACTS ¶2 In the late 1980's, the Oklahoma Commissioners of the Land Office (Commissioners), contacted the appellee/cross-appellant, Digital Design Group (Digital), about designing and implementing a mineral management computer system for the state of Oklahoma. Digital is a Colorado based computer engineering firm which designed systems for the land offices of Colorado and North Dakota. In May of 1990, the Commissioners executed a contract with Digital in the amount of $380,000.00 to design and develop a computer software system to manage Oklahoma's mineral interests. ¶3 The contract required the use of FOCUS, a computer software database management system developed and licensed by the appellant/cross-appellee, Information Builders, Inc. (Information Builders). In a letter dated June 1, 1990, the Commissioners notified Information Builders that it would be using FOCUS, and that a peer review of Digital's system designs would be needed and coordinated between Digital, the Commissioners and Information Builders. The Commissioners/Digital contract also provided that: 1) the Commissioners were responsible [24 P.3d 837] for obtaining the license to use FOCUS; 2) Digital would pay Information Builders for peer review services; and 3) the Commissioners would reimburse Digital for payments made to Information Builders, not to exceed a total of $7,500.00. ¶4 On September 5, 1990, Information Builders wrote to Digital agreeing to review Digital's preliminary database design. Information Builders estimated that it would take eight to twelve hours to review the design, and "identify all issues, if any, that require additional research, clarification or documentation." The cost quoted for the review was $75.00 per hour plus transportation and out-of-pocket expenses. At Information Builders' request, Digital's president signed and returned the original letter to authorize Information Builders to begin the peer review. ¶5 Representatives from Digital and Information Builders met on September 6, 1990, to begin a review of the preliminary database design. On September 17, 1990, Digital forwarded Information Builders a revised database design. Digital continued to work on the system from September 1990 through December 1990. During that period, Information Builders's involvement was minimal. ¶6 The Commissioners' Management Information Systems director (computer director) served as the Commissioners' project administrator. The Commissioners also formed a steering committee to oversee the project. The steering committee and Digital agreed that the system should be designed in phases. From the outset of the project, the computer director expressed concern with Digital's plan to design the system piece by piece rather than developing an overall design for the entire system before developing individual segments. The computer director continued to express concern with Digital's methodology, administration, and development of the system, insisting that the entire database should be designed first. The computer director's concerns were addressed during a December 10, 1990, meeting between the Commissioners' project steering committee, Digital, and Information Builders. ¶7 At the December 10 ¶8 However, in January 1991, the newly elected Governor of Oklahoma replaced the Commissioners' secretary, and the new acting secretary re-appointed the computer director to manage the project and supervise the contractor. On January 28, 1991, the computer director wrote to Information Builders expressing concern with Digital's design and development of the project. He directed Information Builders to stop any review which it may have been conducting for Digital, and he asked Information Builders to prepare a letter containing an evaluation of the current status of the project and possible alternatives. ¶9 On February 4 and 11, 1991, Information Builders responded to the computer director's request by two similar letters. Both letters commented on the history and status of the project and provided recommendations for the system. Information Builders offered: to assist in developing project management procedures; to review the system and database design and codes; and to "tune" the system for FOCUS. At the computer director's request, Information Builders expanded on the February 11 ¶10 In a March 1, 1991, memorandum to Digital's president, the computer director expressed concern with the system design and poor communications. The memorandum also related that Information Builders had identified several concerns after reviewing Digital's programming, and that it would be documenting those concerns. The memorandum ordered Digital to stop development of all programing while continuing to work to resolve outstanding problems. ¶11 On March 11, 1991, in response to another Commissioners' request, Information Builders notified the Commissioners that it believed it could complete the system within the remaining budget of $350,000.00. The Commissioners' secretary notified Digital by letter dated March 22, 1991, that she intended to recommend to the Commissioners that Digital's contract be terminated. She also directed Digital to cease any further work on the project. The Commissioners terminated the contract at their next meeting. ¶12 On March 20, 1992, Digital sued the Commissioners and Information Builders, asserting claims for libel, slander, breach of contract, tortious interference with contract, and breach of fiduciary duty. Digital and the Commissioners settled prior to trial, but Digital proceeded to jury trial against Information Builders. During the trial, the slander claim was dismissed, and the trial judge allowed only the libel and breach of contract claims to be submitted to the jury. The jury returned a verdict against Information Builders awarding $968,161.00 in actual damages and $737,500.00 in punitive damages. The trial court entered judgment on the jury's verdict, and it denied Information Builders' alternative motions for judgment notwithstanding the verdict or motion for new trial. The trial court also denied Digital's motion for costs and prejudgment interest. ¶13 Information Builders appealed the jury verdict, and Digital counter-appealed from the trial court's denial of its motion for costs and prejudgment interest. The Court of Civil Appeals determined that Digital's libel claim was time-barred, and that Digital had failed to prove any damages with regard to its breach of contract claim. It reversed and remanded with instructions for the trial court to enter judgment in favor of Information Builders, and it also affirmed the trial court's denial of Digital's motion for costs and prejudgment interest. Digital filed a petition for certiorari which we granted on October 16, 2000. I. ¶14 THE DISCOVERY RULE APPLIES TO THE LIBEL CLAIM. ¶15 In the trial court, Digital alleged that "Information Builders made false, unwarranted and malicious written statements to the effect that [Digital] was not competent and was not properly performing its duties under its contract with the Commissioners." Digital's libel claim was based on the letters Information Builders sent to the Commissioners' computer director in February of 1991. As an affirmative defense, Information Builders asserted that the libel claim was barred by the one year statute of limitations for libel actions. ¶16 The limitations period for a libel action is set out in 12 O.S. 1991 §95 , which provides in pertinent part: "Civil actions other than for the recovery of real property can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards: . . . Fourth. Within one (1) year: An action for libel, slander, assault, battery, malicious prosecution, or false imprisonment . . ." Neither Digital nor Information Builders dispute that the controlling limitations period for the libel action is one year. The only dispute is over when it begins to run. [24 P.3d 839] Information Builders insists that Digital's claim was time-barred as a matter of law because: 1) the one-year limitations period for libel actions began to run upon the publication of the alleged defamatory material; 2) the letters were sent to Commissioners' computer director in February of 1991; and 3) Digital's action was not filed until March 20, 1992. ¶17 Digital urges us to apply the common law discovery rule to libel actions. The discovery rule allows the limitation period in certain tort cases to be tolled until the injured party knows or, in the exercise of reasonable diligence, should have known of the injury. ¶18 A. The discovery rule applies to libel actions when the publication is likely to be concealed or published in a secretive manner which would make it unlikely to come to the attention of the injured party. ¶19 An action accrues when a litigant can first maintain an action to a successful conclusion. ¶20 We have never determined whether the discovery rule may be utilized in libel actions. However, several other jurisdictions have addressed the question. The trend among those courts is to apply the rule in limited situations, for example ----- when the publication is likely to be concealed from the plaintiff or published in a secretive manner which would make it unlikely to come to the attention of the injured party. ¶21 The facts here suggest that the alleged defamatory letters are similar to the confidential or secretive publications which typically fall within the discovery rule. The Commissioners specifically requested information from Information Builders regarding Digital's performance, and Information Builders was told not to disseminate the information contained in the February 1991, letters to anyone other than Commissioners' computer director. This request was made even though Information Builders was hired to review Digital's work and provide input to Digital. Ultimately, Digital did not discover the letters until it learned of its contract termination and consequently made an open-records request. ¶22 This Court has allowed the use of the discovery rule in a variety cases ------ all of which involved situations in which the injury was concealed from the plaintiff or the injury [24 P.3d 841] was unlikely to come to the attention of the injured party. ". . .Oklahoma follows the discovery rule allowing limitations in tort cases to be tolled until the injured party knows or, in the exercise of reasonable diligence, should have known of the injury. The rule is applied to delay the running of the statute of limitations. It, much like the doctrine of adverse domination, arises from the inability of the injured, despite the exercise of due diligence, to know of the injury or its cause. The purpose of the rule is to exclude the period of time during which the injured party is reasonably unaware tha[t] an injury has been sustained so that people in that class have the same rights as those who suffer an immediate ascertainable injury. . . ." We agree with Digital's assertion that the discovery rule should apply to its libel action. The application of the discovery rule is consistent with our prior case law and with the trends in other jurisdictions. ¶23 B. When facts about the injury's discovery are disputed, the question of when the plaintiff knew or should have known is a question of fact for the jury to decide. Nevertheless, under the unique facts presented, submission of the statute of limitations defense to the jury was waived. ¶24 Once it is determined that the discovery rule applies, the question becomes: When did Digital know (or with reasonable diligence should have known) of the alleged libelous statements which gave rise to this lawsuit? ¶25 Digital argues that: 1) Information Builders made the same argument when its motion for summary judgment was denied, its demurrer to the evidence was denied, and finally its motion for directed verdict on its limitations defense was denied; 2) each time, Digital, responded with evidence which would permit a reasonable jury to conclude that its lawsuit was timely filed; and 3) ultimately, at the close of the evidence, Information Builders did not submit its limitations defense to the jury. The gravamen of Digital's argument is that Information Builders' failure to present its statute of limitations defense to the jury constitutes a waiver of the defense. Digital insists that a jury verdict is conclusive as to all disputed facts, and it points to evidence which it offered at trial that would support a jury finding that it did not know or could not have known of the letters until, at [24 P.3d ] least, after March 22, 1991, making its action timely. ¶26 Reasonable persons might have reached different inferences or conclusions even from the undisputed facts. From the evidence at trial, the jury could have inferred that Digital, despite the exercise of due diligence, was unaware and could not have been aware of the publication and its resulting injury before March 22, 1991. However, a jury could also have concluded from the evidence that Digital, through the exercise of reasonable diligence, should have known of the publication and discovered it and its alleged injury much earlier, which would have made Digital's libel action untimely. ¶27 In Graham v. Keuchel, 1993 OK 6, ¶61, 847 P.2d 342 , we held that the limitations issue must be submitted to the jury when the facts about the injury's discovery are disputed. Graham involved a medical malpractice action in which the discovery rule was applicable. The critical determination was whether the plaintiff knew or should have known that she was injured. Because the evidence regarding this issue was conflicting, the question of when the plaintiff knew or should have known was a question of fact for the jury to decide. Pursuant to Graham, the question of when the plaintiff knew or should have known was a question of fact and a determination for the jury. ¶28 However, this cause presents unique circumstances because the question was not submitted to the jury. No instruction regarding the issue of the statute of limitations was given to the jury or proposed at the trial level; nor were any exceptions made to the exclusion of such an instruction. ¶29 Under the unique facts presented, we agree with Digital that Information Builders waived submission of its defense to the jury. In its answer, Information Builders asserted the statute of limitations defense. However, its sole contention at trial was that the limitations period began to run upon publication as a matter of law. This contention was rejected when the trial court denied Information Builders' demurrer to the evidence and motion for directed verdict. ¶30 Digital provided evidence which would have permitted a reasonable jury to conclude that its lawsuit was timely filed. The burden of proof that an action or claim is time-barred is upon the party asserting the defense. II. ¶31 SUBMISSION OF THE CONTRACT CLAIM TO THE JURY RESULTED IN PREJUDICIAL ERROR BECAUSE OF THE PROBABILITY THAT THE JURORS WERE MISLED BY ITS INTERMINGLING WITH THE CLAIM FOR LIBEL DAMAGES. ¶32 In the trial court, Digital sought damages based upon: 1) Information Builders' breach of contract to provide peer review services; and 2) Information Builders' tort of defamation which Digital alleged injured its reputation and caused it to lose business of other state agencies. ¶33 In order to recover on its breach of contract theory, Digital needed to prove: 1) formation of a contract; 2) breach of the contract; and 3) damages as a direct result of the breach. ¶34 At trial, Digital presented an expert witness to testify as to the tort damages. ¶35 Although, Digital was also apparently seeking lost net profits which it suffered from the cancellation of the Commissioners' contract, the only evidence relating to this issue was that Digital was to have received the gross contract price of $350,000.00 had it completed the work. No evidence was presented at trial from which the jury could have determined the loss of net profits on the contract with the Commissioners. Because of a pre-trial ruling that the testimony had not been properly disclosed in discovery, the trial court precluded Digital's only witness who would have testified as to such net lost profits. [24 P.3d 845] ¶36 It is error for the trial judge to submit an issue not supported by competent evidence to the jury. ¶37 Although Information Builders does not specifically challenge a particular jury instruction on appeal, the issue is clearly contained within their argument that contract damages were not established and should not have been submitted to the jury. A review of the record reveals that the jury was instructed regarding the general measure of damages. However, neither the instructions nor the verdict form distinguished between contract damages or libel damages. CONCLUSION ¶38 The common law discovery rule in libel actions is applicable when the publication is likely to be concealed from the plaintiff or published in a secretive manner which would make it unlikely to come to the attention of the injured party. The question of when the plaintiff knew or should have known of the alleged libelous statements which gives rise to the cause of action is a critical determination for the jury to decide. Conflicting evidence was adduced at trial regarding this issue. However, the burden of proof that an action or claim is time-barred is upon the party asserting the defense. ¶39 The evidence did not establish that the loss of net profits were contemplated by the parties at the time they contracted nor did it establish lost net profit damages to a reasonable certainty.35 No evidence was presented at trial from which the jury could have determined the loss of net profits on the contract claim. Additionally, it is impossible to tell from the verdict form which damages the jury attributed to which claim. Because the evidence presented at trial was [ 24 P.3d 846 ] insufficient to support giving instructions on the contract claim, the trial court erred in submitting Digital's contract theory to the jury. COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT REVERSED AND REMANDED FOR NEW TRIAL. ¶39 HARGRAVE C.J., KAUGER, SUMMERS, BOUDREAU, WINCHESTER, JJ., concur. ¶40 HODGES, J., concurs in result. ¶41 LAVENDER, J., concurs in part; dissents in part. ¶42 OPALA, J., dissents. ¶43 WATT, V.C.J., not participating. FOOT