American Communications Network Inc. v. Williams

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."
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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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