Businesses may rejoice in this decision out of the Second District of California finding that a dissatisfied customer spewing falsehoods online could, in fact, be found liable for committing libel against her contractor. In the case of Paglia & Associates Construction, Inc. v. Hamilton (2023) Case No. B313864, the Court ruled that a client's bashing of her contractor online was not privileged despite the fact that the two were embroiled in a review by the Contractors State License Board. The litigation privilege did not apply where the writings were not sufficiently connected to the litigation.

Facts of the Case

Defendant Hamilton's house was damaged when a tree fell on it. Safeco covered the damage and recommended Vincent T. Paglia & Associates to make the repair. Hamilton signed a repair contract and agreed to the repairs suggested by Paglia. Paglia informed Hamilton that the repair process would be quite involved because the home was built in 1923 and was not in compliance with current building codes. Hamilton was unhappy with the finished product and filed a complaint with the Contractors State License Board. She claimed (among other things) that Paglia failed to level the yard, failed to install attic vents, and did not provide a proper driveway width. She also began to post attacks regarding Paglia's work online via Yelp and other sources such as her blog. Some, but not all of her posts referenced the State Contractors Board.

Paglia brought a suit against Hamilton for libel per se citing Hamilton's blog and Yelp postings as examples of her false and defamatory statements. In total, Paglia listed more than 20 statements that they claimed were libelous. Hamilton filed a special motion to strike that sought to strike Paglia's entire complaint rather than specific portions. The court denied the motion and Hamilton appealed.

What Constitutes Libel?

Libel is a false and unprivileged written publication tending to injure a victim's occupation." Civ. Code § 45. Libel per se is present when the "words require no explanation and thus are actionable without a showing of special damages." Slaughter v. Friedman (1982) 32 Cal.3d 149, 153.

The Court looked with particular interest at Hamilton's posting that stated that Paglia committed "hard fraud." The accusation of "hard fraud" is libel on its face as that pronouncement would tend to directly impact Paglia's profession and business in a negative manner. Hamilton asserted the litigation privilege as well as claiming that her statements were true and/or merely opinions.

The Litigation Privilege

Hamilton argued that because her claims against Paglia were reported to the Contractors State License Board, her statements were protected by the litigation privilege. California's litigation privilege is contained in Civil Code section 47 and states that "A privileged publication or broadcast is one made in "the proper discharge of an official duty, or in any legislative proceeding, judicial proceeding, or in any other proceeding authorized by law."

The litigation privilege is meant to protect communications made in judicial or quasi-judicial proceedings "to achieve the object of the litigation that has some connection or logical relation to the action." Silberg v. Anderson (1990) 50 Cal.3d 205, 211-212. The main purpose underlying this exception is to "afford litigants and witnesses complete access to the courts without fear of later harassment by derivative tort actions…. The litigation privilege thus allows citizens to communicate freely with public authorities combatting wrongdoing." Id.

Hamilton argued that she was protected by the litigation privilege because the matter was under consideration by the Contractors State License Board which is an agency of the state. Although the Court conceded that the case was under consideration by the Board, it also noted that Hamilton's online postings were not sufficiently connected to the proceedings. To the contrary, the Court treated the postings like press releases as they were made for the purpose of communicating with the public at large.

California courts have noted that the litigation privilege has limits. and have held that the litigation privilege does not extend to "litigating in the press." Rothman v. Jackson (1996) 49 Cal.App.4th 1134, 1149. "Such an extension would not serve the purposes of the privilege; indeed, it would serve no purpose but to provide immunity to those would inflict upon our system of justice the damage which litigating in the press generally causes; poisoning of jury pool and bringing disrepute upon both the judiciary and the bar." Id.

Although Hamilton is correct in her claim that the litigation privilege extends to protect proceedings before an agency as well as a court, she is incorrect in her belief that her online writings fall within that privilege. The Court characterized her writings as press releases, which fall under the exception of "litigating in the press." Thus, her online postings did not have a sufficient connection to the litigation and were not useful to the outcome. In fact, the majority of her writings were simply aimed at disparaging Paglia's business, and many did not even mention the Contractors State License Board at all. The Court held that the litigation privilege does not allow a litigant to air grievances or attempt to win over public opinion in support of their cause. Therefore, the Court concluded that her writings online were not protected by the litigation privilege, and she was not insulated from potential liability.

Truth and Allegedly Libelous Statements

Hamilton also argued that her statements were true but provided no evidentiary basis for this claim. She wrote online that Paglia committed "hard fraud" by destroying undamaged structures. Paglia explained the need for extensive construction beyond the tree damage repair to bring the structure up to code. The required additional work was mandatory to comply with local laws and proved extensive as the home was built in 1923. The Court found that the facts showed that Paglia performed his work in an appropriate manner and not with fraudulent intent. This would mean that Hamilton's postings were untrue, so this defense fails as well.

Opinions and Libel

Finally, Hamilton contended that she is not guilty of libel because she was only expressing an opinion. On this front Courts ask, "whether a reasonable person could conclude the statement declares or implies a provably false assertion of fact." Edward v. Ellis (2021) 72 Cal.App.5th 780,790. Here, the Court reasoned that because it could be factually determined whether Paglia's work was completed to bring the structure up to code or not, Hamilton's pronouncements online could be disproven. Given this, the Court found that her online outbursts were an attempt to share her inaccurate version of the facts; not merely to express her opinion.

Comfort for Business Owners

The finding in this case provides some degree of comfort for business owners. The threat of online posts portraying a business in a negative light is a constant fear in today's landscape. Negative reviews and public proclamations of faulty work can damage a business's reputation and directly impact their ability to obtain new clients. This case supports the premise that a customer who has filed a formal complaint either with an agency or the court, may not always hide behind the litigation privilege if they spew false facts and accusations online against a business.

Perhaps the knowledge that the threat of libel looms over consumers who choose to post false and unsupported writings will quell this trend. Only time will tell, but at least in the current case, the pendulum swung in favor of protecting business rights.

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