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Wainwright v. Tyler

Court of Appeals of Louisiana, Second Circuit

June 27, 2018


          Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 599, 021 Honorable Craig Marcotte, Judge

          HARPER LAW FIRM, APLC, Jerald R. Harper Anne E. Wilkes Counsel for Appellants.

          PETTIETTE, ARMAND, DUNKELMAN, WOODLEY, BYRD & CROMWELL, L.L.P., Edwin H. Byrd, ABRAMS & LAFARGUE, L.L.C., Julie Mobley Lafargue Counsel for Appellees.

          Before MOORE, GARRETT, and McCALLUM, JJ.

          GARRETT, J.

         The plaintiffs, Michael H. Wainwright and T. Scott Pernici, filed a defamation suit against the defendants, Ollie Tyler, Mayor of Shreveport, and Brian Crawford, Chief Administrative Officer for Shreveport. The defendants filed a special motion to strike the petition under La. C.C.P. art. 971, which was granted by the trial court. The petition was stricken and the defendants were also awarded attorney fees. The plaintiffs appeal. For the following reasons, we affirm.


         In order to understand the chain of events leading up to this litigation, some background information gleaned from the record is necessary. The City of Shreveport was made subject to a consent decree requiring it to repair the city water and sewerage infrastructure. The city sought to obtain some funding for the project through the Louisiana State Bond Commission. In connection with this process, a new billing structure was implemented through city ordinances. Pernici, a Shreveport businessman who had previously served on the Architect and Engineer Selection Committee for the city, claimed that in 2015, he could not reconcile his water bill with the new rates set in the ordinance. He contacted Wainwright, a former Shreveport resident who now lives in North Carolina. Wainwright is a lawyer and was a former lobbyist for the city. They claimed that they determined how the billing errors were made and how to correct them. Based upon their experience and other contingency fee contracts the city had routinely awarded in the past, they thought the city would be willing to pay them 25% of the additional revenue gained for the first four years after the billing error was corrected.

         The plaintiffs contacted Justin Haydel with Manchac Consulting Group, Inc. ("Manchac"). According to the plaintiffs, Haydel was an expert in municipal water systems and billing, and they sought his expertise to be sure they correctly interpreted the ordinance, identified the billing error, and "identified the likely party responsible for the error."

         Manchac sought a meeting with William Bradford, the city attorney. Before informing the city of the billing error, Manchac required that Bradford sign a nondisclosure agreement ("NDA"), which would prevent the city from using any of the information without paying for it. Bradford signed the NDA. The plaintiffs later claimed that they were undisclosed principals to the NDA.[1] Manchac then made a presentation with the information regarding the billing error.

         On June 8, 2016, Manchac repeated the presentation, this time to Bradford, Crawford, and Barbara Featherston, Director of the Department of Water and Sewerage. Crawford and Featherston signed the NDA before the presentation. Manchac also presented a Revenue Enhancement Agreement, which included the proposal for payment for information about the billing error and possible future involvement by Manchac with the city water department.

         After the presentation, Charles Grubb, a former Shreveport city attorney under several administrations, corresponded with Bradford on behalf of Manchac in an attempt to negotiate payment for the information. In a letter dated July 18, 2016, Grubb indicated that the city had proposed paying 10% of the new revenues derived from correction of the billing error, from February 15, 2015, to July 1, 2016, a period of approximately 18 months. Grubb offered a counterproposal stating that Manchac would be willing to accept two payments of $250, 000 each, along with contracts for engineering and consulting work on the sewerage project. The city was given until August 12, 2016, to accept the offer. When it did not do so, the offer was withdrawn.

         According to the plaintiffs, after Manchac's presentation, the city immediately used the "privileged" information to correct the underbilling, without permission and without payment. They claim the error was corrected, beginning with the August 2016 water bills.

         On August 29, 2016, Wainwright emailed a lengthy, single-spaced letter to Tyler.[2] He stated that he was contacted by "an acquaintance" who thought there was something wrong with the water billing, and they discovered the problem. They then enlisted the aid of Manchac and Grubb, and presented the information to the city. In his letter, Wainwright said:

I researched the ordinance language as well as the motivation for adoption of the new rate structure. I concluded the City was not only in violation of its own ordinance, but that error was resulting in revenue shortfalls that impacted the City's debt servicing of the bond financing used to fund remedial actions to comply with the City's consent order regarding water & sewerage upgrades.

         According to Wainwright, correction of the error would result in more than $1.6 million in additional revenue to the city in the next year. Wainwright stated:

At the onset we understandably anticipated that the City would be elated to learn that by correcting its previously unknown error, the City could immediately increase its revenue by tens of thousands of dollars every year for the foreseeable future. . . . Our expectation was that the City would be only too happy to reasonably compensate us by paying a reasonable percentage of this "new found" money for a limited time period .....
Our original proposal was to give the City the option to either adopt or reject the findings and recommendations. If the City elected to reject, no compensation would be due, but if the City adopted/implemented the recommendations, we would be paid ¼ of the savings or enhanced revenue realized by the City for the initial four year period. Candidly, we felt the City would accept this proposal. It was inconceivable that any entity, including the City would not jump at an opportunity to substantially increase its revenues in exchange for paying a reasonable, time-limited percentage of those revenues. . . .

         The letter outlined the difficulties that had been encountered in striking a deal with the city and the belief that the city had used the information to correct the billing error without paying for the information. The letter alluded to "political fallout" that would occur if it became known that high-volume water users were undercharged, while low-volume users were charged the full amount. Wainwright proposed that the city execute an agreement implementing the proposed payment plan in exchange for the retroactive authorization of the right to use the information. Wainwright continued:

Frankly, I am both mystified and shocked by the City's bad faith conduct and it's [sic] blatant, willful violation of the NDA. We came to the City with the expectation of receiving thanks for making it possible for the City to quietly, and discreetly correct a very costly error. Such correction will literally mean millions of new dollars to the City coffers. Instead we have been dismissed, or characterized as adversaries, because we had the audacity to request a reasonable compensation that would be paid out of a portion of the first four years' of new dollars. Remember, we did not create the problem, the City did. And the City did not find the solution, we did. And, absent our bringing the error to the City's attention, these huge loses [sic] would have gone on and on.

         Wainwright concluded the letter with the following paragraph:

Absent such an agreement, we will reluctantly accept an adversarial role because it is the only position the City has left us. Unfortunately, fulfilling that role will not be possible without all of this being made public. That in turn, will inevitably draw the attention and interest of those who have been adversely affected by the shortfall in revenue and to others who will find it irresistible for their own political gain. It's hard to believe the City has distorted our good intentions into this.

         That same date, Tyler sent an email to Bradford, Crawford, and Featherston, forwarding Wainwright's letter. The email provided as follows

         Attorney Bradford:

Please see the attachment in the email below. It appears that we are [being] blackmailed by this company. Please peruse it very carefully with Mr. Crawford and Ms. Featherston. We need to get in front of this situation.
I suggest we think about sharing the information regarding the water billing error with Council members. I don't like being bullied [or] blackmailed. Do you have any other legal advice for me?

         Wainwright and Pernici are involved in a business entity called Sand Beach Properties, LLC ("Sand Beach"). In October 2016, Sand Beach filed suit against the city for breach of the NDA. Although that suit is separate from the matter at issue here, which was not filed until March 2017, it also involves the water billing issues.

         According to Tyler's affidavit submitted in this suit, Wainwright made a public records request to the city in August 2016 for documents related to the billing error. Tyler's email, set forth above, was included in the documents produced by the city. On October 12, 2016, the Shreveport Times ("Times") published a story outlining the billing error and how it was brought to the attention of city officials, including the demand for payment and the plaintiffs' involvement. In the article, Tyler is quoted as saying that the demand for payment amounted to being "blackmailed." Public records documents were used in writing the story. The record is unclear about how the Times reporter came into possession of the public records documents and the email at that time. In any event, a later article by the same reporter indicates that she got the information from Pernici.

         On October 13, 2016, the Times published a video story on its website about the billing controversy. The story showed signatures on the NDAs, internal emails from Featherston, letters between Bradford and Wainwright, and Tyler's email, referred to above. Also included in the video story was an audio interview with Tyler, in which she said:

I stand by my statement that we will not be bullied or blackmailed into a situation where citizens' interests in the funds are possibly being extorted - I'm saying possibly - or, or for personal gain.

         On October 14, 2016, the Times printed a response from Tyler to the information in the newspaper article. In her comments, Tyler referenced "outside parties" who brought the billing error to the city's attention and demanded payment for the information. Tyler said, "I have been steadfast in my convictions not to allow the City to be extorted or blackmailed on the backs of the citizens." She also stated:

The fact that most of these outside parties have former ties or employment with the City gave me grave concern about the true source of this discovery and the motivation behind their efforts. I have been very transparent throughout my administration and will continue to do so. Consequently, we are providing all documentation and information related to this matter to the Department of Justice for its review.

         She further said that, because the city refused to give in to the demands of "outside parties," they provided misleading information to the State Bond Commission which could impede the city's ability to meet the mandates of the consent decree. Reports about the billing controversy were also carried on other media and news outlets.

         On or about October 14, 2016, Crawford was interviewed on KEEL radio about the dispute. He referred to an individual "who does not live in our state" who wrote a letter saying he discovered the billing error and wanted money and, if he didn't get money, he would make the error public. Crawford termed this "kind of like a shakedown thing." He then noted that the city learned from the newspaper article that a local businessman said he was the person who discovered the error and wanted to be paid. He said they brought in the Justice Department, which brought in the FBI, stating that it was "hard to fathom that just the random citizen out there would have stumbled across this information and we're trying to determine who inside the City had access to this information[.]" He also said that those involved had contacted the State Bond Commission in an attempt to derail some of the city's bond funding.

         On March 2, 2017, the plaintiffs filed the present defamation suit against Tyler and Crawford. They claimed they were private citizens who had been defamed by the defendants. They cited Tyler's response to the Times print article, as well as the interview published on the Times website. The plaintiffs pointed out the numerous times that Tyler's statements about blackmail and extortion were repeated by various media outlets. They cited the statements made by Crawford in his KEEL radio interview. The plaintiffs alleged that the use of the words "blackmail, extortion, holding the city hostage, bullying, and shakedown" were "purposely designed and calculated to produce harm and create the negative impression" those words would "naturally engender in the minds of average persons."

         They also alleged that the use of those words, coupled with references to the Department of Justice, carried the inference that Wainwright and Pernici engaged in criminal activity and this constituted defamation per se.

         The defendants filed an answer and a special motion to strike the petition and to recover attorney fees under La. C.C.P. art. 971, Louisiana's anti-Strategic Lawsuit Against Public Participation ("anti-SLAPP") statute. They argued that, in the instant controversy, the plaintiffs are limited purpose public figures complaining of comments regarding matters of public concern. They contended that their comments on such public figures' activities, involving a matter of public concern, were protected speech. Further, under La. C.C.P. art. 971, once it was shown that comments were made on an issue of public concern involving limited purpose public figures, the burden shifted to the plaintiffs to show a probability of success on their defamation claims. Because the plaintiffs were limited purpose public figures, the defendants contended that the plaintiffs had to show that the statements were made with actual malice. Since the plaintiffs could not meet this burden of proof, the defendants urged that the motion to strike be granted, the plaintiffs' petition be dismissed with prejudice, and attorney fees be awarded to them.

         Attached to the motion were affidavits from Tyler and Crawford. Tyler said that, in July 2016, Crawford, Bradford, and Featherston informed her of the billing error and that the information was revealed to them in a meeting with Manchac and Grubb. She instructed that the error be corrected to insure compliance with the city's ordinance. She was told of the demands for payment from Manchac and did not know that Wainwright and Pernici were involved. Tyler averred that on August 22, 2016, the city received a public records request from Wainwright seeking records regarding water rates and billing from June through August 2016. Wainwright's letter to her was received on August 29, 2016, and she took it as a threat. When the city refused to pay, it was contacted by a Times reporter who said she had documents from the public records request which included Tyler's email. In talking with the reporter, Tyler said she expressed her opinion that the actions of the outside parties possibly amounted to extortion or blackmail. Tyler said she first learned of Pernici's involvement through the Times article.

         Before the newspaper article was published, Bradford told Tyler that the director of the Louisiana State Bond Commission called the city and said it had been contacted regarding the water billing issue. Tyler thought it was a reasonable inference that the outside parties contacted the State Bond Commission. At the time of her comments, she harbored no ill will toward Wainwright and Pernici and never used their names in any comments to the press. Tyler stated that all comments were based upon her understanding of the facts and she had no actual awareness that any statements were false.

         Crawford's affidavit was substantially similar to Tyler's. In speaking about Wainwright and Pernici, Crawford stated that both individuals had previously been heavily involved in government activities. He had been told that Pernici was connected with the water department's meter reading services during the administration of a former mayor, Keith Hightower. Crawford knew that Wainwright had business relationships with Hightower and Pernici.

         Regarding the present controversy, Crawford said in his affidavit:

During our investigation of this matter, and before any media coverage or publicity concerning the tiered water rate billing error, I became aware that several city employees in the Water and Sewerage Department Billing Office were aware in 2015 that the Ordinance was not being applied correctly, and had notified the third party billing software company (Systems and Software), but had not reported that to their supervisor. Based on this and my understanding of the billing error, when weighing the plausibility of a random citizen discovering the complex error through the monitoring of friends' water bills or whether individuals within the City, who we now knew had actual knowledge and intimate details of the error and who could have possibly been involved in its disclosure (intentionally or unintentionally) to the City's detriment and other's gain, it gave me great concern that the City had been set up and laws may have been broken. Also, Manchac's representative had given me an altered and different version of how the error was discovered, outright claiming they had found the error because they were an engineering firm and had the capability to do so based on their subject matter expertise and history of making similar analysis [sic] in other municipalities. This we now know was deceptive and an untruth. Based on the culmination of these details, and the increasing number of parties that appeared to be involved in the matter, including former and current City personnel or those with previous affiliations or associations to the City, the only way it could be properly investigated would be to go through outside enforcement agencies. My statements regarding these agencies in no way referred to any one individual or organization but to the entirety of the multifaceted matter as a whole.

         The plainitffs filed a lengthy opposition to the motion to strike which included affidavits from the two plaintiffs. Wainwright's affidavit provided:

I have never proposed, suggested, requested, or demanded that the City or Mayor Tyler or CAO Crawford or Water Department Director Featherston or City Attorney Bradford pay anyone, including but not limited to, Manchac Consulting Group, Inc., Justin Haydel, Charles Grubb, Scott Pernici, or me, any sum of money outside of my requests to Mayor Tyler and City Attorney Bradford, contained in my letters, that the City agree to pay just compensation to the disclosing parties for the valuable information that enabled the City to substantially increase its revenues.

         Wainwright also stated the following:

Neither I, nor anyone acting on my behalf, ever phoned or otherwise communicated with any one [sic] at the Louisiana State Bond Commission at any time other than a Public Records Request I made of an after-the-fact listing of attorneys who were paid for work relating to the latest bond issuance made to finance water & sewerage infrastructure.

         Wainwright claimed that he never initiated or attempted to schedule a press conference on this matter. He maintained that his contact with the media had been at the initiation of the media.

         Pernici executed an affidavit in which he said he never negotiated with the city for payment for any Revenue Enhancement Agreement, he never called a press conference or sought publicity for himself in connection with the water tier litigation, and he denied initiating contact with media sources. Pernici said that he only responded to "perhaps half a dozen" press inquiries on this matter. He also denied contacting the State Bond Commission at any time other than a public records request made with his knowledge by Wainwright for a list of attorneys who were paid for work relating to the bond issue to finance the water and sewerage infrastructure. In addition to the affidavits, a plethora of documents was also filed. The defendants' reply was accompanied by the filing of additional documents.

         The motion was argued on May 2, 2017. The court found that La. C.C.P. art. 971 applied to this matter, the speech at issue dealt with matters of public concern, and the statements were made in furtherance of the defendants' right to free speech in connection with a public issue. The trial court reasoned that the statements were subjective opinion and the plaintiffs failed to prove the probability of success on their defamation claim. The trial court signed a judgment granting the defendants' motion to strike and ordering the plaintiffs to pay attorney fees to the defendants in the amount of $18, 832.70. On appeal, the plaintiffs claim that the trial court erred in finding that the plaintiffs did not prove the probability of success on the merits of their defamation claim and in finding that La. C.C.P. art. 971 applied to the present case because such a finding is contrary to the legislative purpose and spirit of the statute.

         DEFAMATION ...

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