Title: American Communications Network Inc. v. Williams

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
AMERICAN COMMUNICATIONS NETWORK, 
INC., ET AL. 
 
 
            OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.  Record No. 012699 
September 13, 2002 
 
GLENN WILLIAMS 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Kathleen H. MacKay, Judge 
 
I. 
 
In this appeal of a judgment in favor of a plaintiff in a 
defamation action, we consider whether the alleged defamatory 
statements constitute opinions or are true and are, therefore, 
not actionable. 
II. 
 
Plaintiff, Glenn S. K. Williams, filed his amended motion 
for judgment against American Communications Network, Inc., 
ACN Energy, Inc., and others.1  Pertinent to this appeal, the 
plaintiff alleged that American Communications Network and ACN 
Energy committed acts of defamation against him by publishing 
a statement in a confidential private placement memorandum 
that was disseminated to approximately 20 energy companies.  
At the conclusion of a trial, the jury returned a verdict in 
favor of Williams in the amount of $500,000.  The defendants 
argued in the circuit court that the statements contained in 
                     
1 The circuit court granted the remaining defendants' 
motions to strike the plaintiff's evidence and those 
defendants are not litigants in this appeal. 
the private placement memorandum could not form the basis of a 
cause of action for defamation because the statements are 
either true or constitute opinions.  The circuit court 
disagreed with the defendants and entered a judgment 
confirming the verdict.  The defendants appeal. 
III. 
 
American Communications Network provides 
telecommunications and utility services to customers.  
American Communications Network is the parent company and sole 
owner of ACN Utilities, Inc.  ACN Utilities, Inc. owns ACN 
Energy, which is engaged in the business of purchasing and 
selling electric and natural gas energy. 
 
Williams was hired to serve as chief executive officer of 
ACN Energy.  American Communications Network terminated 
Williams' employment in June 2000.  Williams presented 
evidence at trial that prior to his termination, American 
Communications Network had experienced acute cash shortages, 
was on the brink of filing for bankruptcy protection, and had 
begun liquidation of its energy operations. 
 
Williams, who had extensive experience as a management 
consultant in the energy industry, testified that he was hired 
to help American Communications Network compete in the 
deregulated energy markets.  He discussed with the management 
of American Communications Network, before he was hired, the 
 
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fact that "the markets were very competitive" and that because 
of the rapid deregulation of the energy industry, "business 
rules had not been developed in [that] industry."  Williams 
also warned American Communications Network's management that 
there were numerous business risks and uncertainties that the 
company would encounter as it entered the deregulated energy 
markets.  Two months before he was terminated, American 
Communications Network's board of directors publicly stated 
that Williams' job performance was excellent and that his 
accomplishments were "amazing."  Williams testified that he 
was terminated because American Communications Network did not 
have sufficient capital to finance its energy operations and 
not because of any deficiencies caused by him. 
 
After Williams was terminated, American Communications 
Network retained Allegiance Capital Corporation, an investment 
banking firm, in an effort to raise over $40,000,000 in new 
capital.  Allegiance Capital's employees drafted a private 
placement memorandum that American Communications Network and 
ACN Energy ultimately approved.  The confidential private 
placement memorandum, which was sent to approximately 20 
energy companies, contained the following statements that 
Williams alleged are defamatory: 
 
"In June 2000, American Communications Network 
replaced the management team of ACN Energy due 
to its failure to establish effective 
 
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operations.  The prior management made two key 
mistakes: 
 
"1.  It did not have the organizational 
infrastructure needed to support the 24 markets 
it was aggressively entering.  The complexity 
overwhelmed the organization such that basic 
business processes were not established prior 
to entering new markets. 
 
"2.  It decided to create, in house, a proprietary 
billing system rather than initially leveraging 
off the local distribution company's (LDC) 
capability of cost-effectively billing on 
behalf of the Company.  Without the requisite 
information technology (IT) and commercial 
organization in place to accommodate 24 
different markets (each with its own unique IT 
and commercial issues), the company delayed 
sending bills to a significant number of 
customers." 
 
IV. 
 
The defendants argue that the circuit court erred in 
entering a judgment confirming the jury verdict because, as a 
matter of law, the statements contained in the private 
placement memorandum are not actionable.  The defendants 
contend that the statements constitute opinions or that 
Williams has conceded the truth of each statement.2  
Responding, Williams asserts that the defamatory paragraphs 
contain demonstrably false statements, not pure expressions of 
opinion, and that the statements are a combination of opinion 
and false statements of facts that are actionable. 
                     
2 Contrary to Williams' assertions in his brief, the 
defendants raised these contentions in the circuit court. 
 
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In Chaves v. Johnson, 230 Va. 112, 119, 335 S.E.2d 97, 
101-02 (1985), we stated the following principles that are 
equally pertinent here: 
 
"Pure expressions of opinion, not amounting to 
'fighting words,' cannot form the basis of an action 
for defamation.  The First Amendment to the Federal 
Constitution and article 1, section 12 of the 
Constitution of Virginia protect the right of the 
people to teach, preach, write, or speak any such 
opinion, however ill-founded, without inhibition by 
actions for libel and slander.  '[E]rror of opinion 
may be tolerated where reason is left free to combat 
it.'  Thomas Jefferson's First Inaugural Address 
(1801).  'However pernicious an opinion may seem, we 
depend for its correction not on the conscience of 
judges and juries but on the competition of other 
ideas.'  Gertz v. Robert Welch, Inc., 418 U.S. 323, 
339-40 (1974). 
 
"It is for the court, not the jury, to 
determine as a matter of law whether an allegedly 
libellous statement is one of fact or one of 
opinion.  Slawik v. News-Journal, 428 A.2d [15, 17] 
(Del. 1981); Catalano v. Pechous, [387 N.E.2d 714, 
721 (Ill. App. Ct. 1978)]; Rinaldi v. Holt, Rinehart 
& Winston, Inc., [366 N.E.2d 1299, 1306 (N.Y. 
1977)]." 
 
 
In Williams v. Garraghty, 249 Va. 224, 233, 455 S.E.2d 
209, 215 (1995), we also held that pure expressions of opinion 
cannot form the basis of a defamation action, but we pointed 
out that  
"[f]actual statements made to support or justify an 
opinion, however, can form the basis of an action 
for defamation.  See Swengler v. ITT Corp., 993 F.2d 
1063, 1071 (4th Cir. 1993) (construing Virginia 
law).  It is for a court, not a jury, to determine, 
as a matter of law, whether an alleged defamatory 
statement is one of fact or of opinion." 
 
 
5
 
Applying these principles to the alleged defamatory 
paragraphs that are the subject of this appeal, we hold, as a 
matter of law, that the alleged defamatory statements are not 
actionable.  The statements contained in the alleged 
defamatory paragraphs are either true or constitute opinion.  
The first sentence of the first alleged defamatory paragraph 
states:  "In June 2000, American Communications Network 
replaced the management team of ACN Energy due to its failure 
to establish effective operations."  The plaintiff admitted 
that the management team was replaced in June 2000.  The 
plaintiff also admitted at trial that the term "effective 
operations" includes the timely submission of bills to 
customers and that when he was the chief executive officer, 
ACN Energy failed to bill substantial commercial and 
industrial energy customers.  Additionally, the question 
whether ACN Energy failed to establish effective operations is 
a matter of opinion that cannot form the basis of a defamation 
action. 
 
The next portion of the first alleged defamatory 
paragraph states:  "The prior management made two key 
mistakes:  1.  It did not have the organizational 
infrastructure needed to support the 24 markets it was 
aggressively entering.  The complexity overwhelmed the 
organization such that basic business processes were not 
 
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established prior to entering new markets."  The question 
whether ACN Energy had the appropriate infrastructure 
necessary to support its marketing efforts is a matter of 
opinion.  Additionally, the plaintiff admitted that mistakes 
were made when he was the chief executive officer.  He 
admitted that substantial commercial and industrial customers 
were not billed for energy that they had purchased from ACN 
Energy.  When Williams testified about the lack of 
organizational infrastructure, he agreed that ACN Energy 
needed cash, customer support, information technology 
specialists, and software.  He also testified that he was 
responsible for the energy division and that American 
Communications Network had placed "zero limits" on him.  He 
stated:  "Our organization was overwhelmed.  It was 
predominantly due to the lack of cash and lack of support from 
the parent company." 
 
Williams contends that the statements "basic business 
processes were not established [by ACN Energy] prior to 
entering new markets" and ACN Energy "was aggressively 
entering" 24 markets without adequate organizational 
infrastructure, are false statements of fact.  We disagree.  
These statements must not be considered in isolation as 
Williams seemingly suggests but, rather, we must consider 
these statements in relationship to the opinions and facts 
 
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contained in the paragraphs at issue, along with Williams' 
admissions.  These statements, when considered in that 
context, cannot form the basis of a defamation action because 
they are either true or constitute opinions.  For example, the 
record indicates that the concept of basic business processes 
includes sufficient billing procedures, yet Williams admitted 
that substantial customers were not billed.  And, as we have 
already stated, even though the issue whether ACN Energy had 
an adequate organizational structure is a matter of opinion, 
Williams admitted that in many respects, that structure was 
deficient. 
 
The last alleged defamatory paragraph states that prior 
management "decided to create, in house, a proprietary billing 
system rather than initially leveraging off the local 
distribution company's (LDC) capability of cost-effectively 
billing on behalf of the Company.  Without the requisite 
information technology (IT) and commercial organization in 
place to accommodate 24 different markets (each with its own 
unique IT and commercial issues), the company delayed sending 
bills to a significant number of customers."  Even though 
Williams believed that ACN Energy had leveraged "off the local 
distribution company's capability," he acknowledged that each 
market had unique information technology and business 
processes, and he admitted that ACN Energy delayed sending 
 
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bills to customers and failed to bill substantial commercial 
customers. 
 
We recognize that in a proper case, factual statements 
that support an opinion can form the basis of an action for 
defamation.  However, in the record before us, the plaintiff 
has admitted the truth of the factual statements that relate 
to the opinions, and he cannot disavow his admissions.  As we 
stated in Massie v. Firmstone, 134 Va. 450, 462, 114 S.E. 652, 
656 (1922): 
"No litigant can successfully ask a court or jury to 
believe that he has not told the truth.  His 
statements of fact and the necessary inferences 
therefrom are binding upon him.  He cannot be heard 
to ask that his case be made stronger than he makes 
it, where, as here, it depends upon facts within his 
own knowledge and as to which he has testified." 
 
Accord Patterson v. Patterson, 257 Va. 558, 563, 515 S.E.2d 
113, 116 (1999); Henderson v. Henderson, 255 Va. 122, 126-27, 
495 S.E.2d 496, 499 (1998); CSX Transportation, Inc. v. 
Casale, 250 Va. 359, 364, 463 S.E.2d 445, 448 (1995). 
V. 
 
The circuit court erred by entering an order that 
confirmed the jury verdict because the statements in the 
alleged defamatory publication are either opinion or have been 
admitted as true.  In view of our holding, we need not 
consider the litigants' remaining arguments.  Accordingly, we 
 
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will reverse the judgment of the circuit court, and we will 
enter final judgment in favor of the defendants. 
Reversed and final judgment. 
 
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