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DELTA CHEMICAL CORP., LEE MAUBERET AND ROSS HEIDINGSFELDER VERSUS BILL LYNCH AS THE INSPECTOR GENERAL FOR THE STATE OF LOUISIANA, OFFICE OF THE INSPECTOR GENERAL OF THE STATE OF LOUISIANA, LOUISIANA STATE RACING COMMISSION AND SANDRA JONES

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NO. 2007-CA-0431 COURT OF APPEAL FOURTH CIRCUIT STATE OF LOUISIANA

APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2001-19425, DIVISION "I-14" Honorable Piper D. Griffin, Judge ****** JUDGE MAX N. TOBIAS, JR. ****** (Court composed of Judge James F. McKay, III, Judge Michael E. Kirby, Judge Max N. Tobias, Jr.) George D. Fagan Wendy L. Rovira LEAKE & ANDERSSON, L.L.P. 1100 Poydras Street 1700 Energy Centre New Orleans, LA 701631701 COUNSEL FOR PLAINTIFF APPELLANT Charles C. Foti Attorney General Carey B. Daste, Special Assistant Attorney General E. John Litchfield, Special Assistant Attorney General BERRIGAN LITCHFIELD SCHONEKAS MANN TRAINA & BOLNER, LLC 201 St. Charles Avenue, Suite 4204 New Orleans, LA 70170 COUNSEL FOR BILL LYNCH AS THE INSPECTOR GENERAL FOR THE STATE OF LOUISIANA, OFFICE OF INSPECTOR GENERAL OF THE STATE OF LOUISIANA REVERSED; REMANDED. February 27, 2008

The plaintiffs, Delta Chemical Corp. ("Delta"), Lee Mauberret, and Ross Heindingsfelder (hereinafter collectively referred to as "the plaintiffs"), appeal a judgment awarding the defendants, Bill Lynch as the Inspector General ("IG") for the State of Louisiana and Office of the Inspector General of the State of Louisiana, attorney's fees and costs in the total amount of $20,000.00. After reviewing the record and applicable law, we reverse the judgment and remand the matter to the trial court for a determination of attorney's fees consistent with this opinion. In May 2000, the plaintiffs filed a defamation suit against Bill Lynch as the Inspector General for the State of Louisiana and Office of the Inspector General of the State of Louisiana, the Louisiana Racing Commission ("the Commission"), and Sandra Jones based upon two reports prepared and published by the IG. The reports dealt with the plaintiffs' attempt to obtain a brand name contract from the Louisiana Office of State Purchasing ("State Purchasing").1 The draft and final reports issued by the IG in 1999, concluded, among other things, that Delta's brand
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Brand name contracts are awarded when a demand is established for a specific brand of product. A manufacturer or supplier has a distinct pricing advantage when bidding on its own brand and is often awarded the contract. The brand name contract gives the sole supplier of a given item the advantage of not having to bid on its products when they are sought by a state agency. 1

name contract had been improperly awarded and recommended that State Purchasing rescind Delta Chemicals brand name contract.2 The defendants' filed a special motion to strike in 2000; it was eventually argued before the trial court on 27 May 2005. Without providing reasons, the trial court rendered judgment, denying the defendants' motion and awarding plaintiffs reasonable attorney's fees and costs. The IG and the Commission both filed applications for supervisory writs. This court granted the supervisory writs, reversed the judgment of the trial court, and dismissed the IG and the Commission from the lawsuit. In addition, we remanded the matter to the trial court to award reasonable attorney's fees and costs to the IG. The trial court subsequently awarded the sum of $20,000.00. This appeal followed. The plaintiffs assign five errors for our consideration. First, they argue that our previous rulings were manifestly erroneous and should be reversed. Second, they contend that the award of attorney's fees to the IG is in derogation of common rights and is inconsistent with the legislative purpose and intent of La. C.C.P. art. 971. Third, they maintain that the trial court made the attorney's fees award without considering the appropriate factors for making such an award. Fourth, they insist that the trial court failed to consider mitigating factors when

The plaintiffs initially filed suit against the defendants on 23 May 2000 in Jefferson Parish. The Commission excepted to venue in Jefferson Parish pursuant to La. R.S. 4:145.1, which provides that the Commission may only be sued in the parish of Orleans. All defendants filed a special motion to strike, as well as a motion to stay discovery, pursuant to La. C.C.P. art. 971. On 26 September 2000, the trial court deferred ruling on the motion to strike, but granted the Commission's exception and transferred this matter to the Civil District Court for the Parish of Orleans. The plaintiffs unsuccessfully petitioned the Louisiana Fifth Circuit Court of Appeal and Supreme Court for reversal of the transfer order.

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determining the amount of attorney's fees to be awarded. Finally, they assert that the award of attorney's fees is excessive and not supported by any evidence. The plaintiffs sell water treatment chemicals for use in commercial/industrial heating, ventilation, and air conditioning systems. In 1998, the plaintiffs sought to acquire a brand name contract from State Purchasing. According to the record, State Purchasing requires three letters of intent from three state agencies in order to establish the demand for a specific product. The IG's reports quote State Purchasing requirements accordingly: "These letters must include those items that the agency intends to purchase or rent, and the correct packaging, including the anticipated annual usage per item, and letters must be signed by proper administrative personnel." Beginning in February 1998, three state agencies prepared five letters for State Purchasing requesting that the plaintiffs be awarded a brand name contract. Halbon Terry Sharp, a maintenance foreman at Southeast Louisiana Hospital ("Southeast"), prepared two letters of intent on behalf of the hospital for State Purchasing. The first letter listed nine chemicals along with the hospital's intended usage amounts. The second letter listed 24 chemicals along with the hospital's intended usage amounts. Both letters begin accordingly: "Please see that Delta Chemical Corp. is approved to bid on a brand name contract. We anticipate using the following items." The IG's reports state: The hospital has purchased only nine chemicals, of which some were not included on the first list, and not in the quantities anticipated. Mr. Sharp confirmed that Delta Chemical supplied him the information for the two letters. The letters are false as they pertain to the hospital's usage. Joseph Vinturella, administrator for the hospital, said the proper procedure would have been for

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the purchasing office to have sent any letter of intent to State Purchasing. Helene Huddleston, site facilitator for Delgado College's ("Delgado") Kenner office, also prepared two letters of intent for State Purchasing at the request of the plaintiffs. The first Huddleston letter contained a list of seven chemicals and the respective anticipated usages. The second mirrored the second Southeast letter. The IG's reports found that Delgado's Kenner office is leased, performs no maintenance on its air conditioning system, and thus has no use for the plaintiffs' products. In fact, the reports note that Delgado's Kenner office never bought or used any products from the plaintiffs. Ms. Huddleston acknowledged preparing the letters of intent to the IG, but disclaimed any knowledge of the chemicals listed or how the usage rates were devised. She told the IG that Delta gave her the list of chemicals and usage rates and stated that she could not remember whether she composed the letters herself or copied them from other sources. The IG spoke with Joseph Toomy, a Delgado Vice Chancellor, who stated that Ms. Huddleston should not have prepared the letters of intent on Delgado's behalf. Rather, Mr. Toomy stated that George Gray, the supervisor of heating and cooling systems, was the person who should have sent the letters of intent. The IG spoke with Mr. Gray, who stated that he knew nothing about letters or Ms. Huddleston. Further, Mr. Gray told the IG that Delgado could not have used the amount of chemicals listed in the two letters on all of it's campuses in a year. The letter prepared by the Commission contained the same list of 24 chemicals and the same usage amounts as found in Southeast and Delgado letters. Like Delgado, the Commission leases its facility, and thus has no need for Delta
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products. Sandra Jones, a buyer for the Commission, allegedly signed the Commission's letter of intent. Ms. Jones denied signing the letter, and an unnamed Commission official asserted that the Commission had no knowledge of the letter. The IG's reports recount these facts accordingly: The letter was signed "Sandra Jones, Purchasing Clerk/LSRC." Ms. Jones stated that she did not sign the letter and has no knowledge of Delta Chemical. She said she would not have identified herself as a purchasing clerk on a letter and instead would have only put "Purchasing" on the title line under her signature. Ms. Jones said she uses a computer when she writes a letter and noted that her name/title were not the same font as the rest of the letter but instead were typed in. Ms. Jones stated that she is currently a buyer for the Racing Commission, but that at the time of the letter she was a clerk 3. The letterhead was an old style no longer used at the time in early 1998. The undated letter was not stamped received by State Purchasing as were the others, nor was any mailing envelope found in the State Purchasing file. The IG spoke with plaintiff Mauberret. According to the reports, Mauberret initially claimed that he dealt with Jones, who he contacted at the suggestion of his sister Catherine, a veterinarian for the Racing Commission. According to the IG's reports, Mauberret later changed his story and claimed that he spoke with someone at the Racing Commission office but that he did not know whom. The final report attaches the letter in question as well as a document with an undisputed Jones' signature. Mauberret claimed that he left a list of chemicals with a person there. However, the Inspector General's reports note that none of the people who would have had contact with him recalled Delta Chemical Corp. is approved to bid on a brand name contract. We anticipate using the following items." In one column the document states: "Anticipated Annual Usage" and then lists the quantity. The list is the same for all three agencies. The IG concluded that: (1) the foregoing conditions may be in violation of La. R.S. 14:133, concerning the filing of false public records; (2) Halbon Terry

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Sharp improperly submitted false letters of intent overstating the types and quantities of the plaintiffs' products used by Southeast; (3) Ms. Huddleston improperly signed and submitted false letters of intent as Delgado's Kenner office had no need or intent to purchase the plaintiffs' products; (4) the Commission had no need or intent to purchase products from the plaintiffs; (5) the Commission letter was a forgery, but the IG noted in the final report that he did not know who forged the letter; and (6) the plaintiffs solicited letters of intent to purchase its products from three state agencies, two of which had no use for them, and that Delta provided information that was used in false submissions to State Purchasing. Accordingly, the IG recommended that: (1) Delgado should take proper disciplinary action concerning Ms. Huddleston; (2) State Purchasing should take appropriate action in regards to the plaintiffs' brand name contract; (3) State Purchasing should consider "debarment proceedings;" and (4) the District Attorney for East Baton Rouge Parish and the State Board of Ethics should review the IG's report. The plaintiffs' petition noted that State Purchasing failed to renew its brand name contract when it lapsed in September 1999; however, the petition also stated that State Purchasing awarded the plaintiffs a new brand name contract in February 2000. The plaintiffs secured the services of Mary Ann Sherry, a document examiner. Ms. Sherry's report reveals that she examined photocopies of the Sandra Jones letter of intent as well as several other photocopied documents obtained from the Commission that exhibit undisputedly Ms. Jones' signatures. Ms. Sherry concluded that the writer of the undisputed signatures also wrote the disputed signature. Accordingly, the plaintiffs sent a copy of Ms. Sherry's

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conclusion to the IG and asked him to rescind his report. The IG declined the request and the defamation lawsuit followed. The primary issue before the court concerns the reasonableness of the attorney's fees and costs awarded to the IG. In this regard, we apply the manifest error/clearly wrong standard of review.3 The IG's office was created 1 April 1988, by executive order of Governor Buddy Roemer, BR 88-10.4 It was recreated by Governor Edwin Edwards through Executive Order EWE 92-59. The Office was continued by both Governor M. J. "Mike" Foster, Jr. and Governor Kathleen Babineaux Blanco. Executive Order BR 88-10 provides in pertinent part: NOW, THEREFORE, I BUDDY ROEMER, Governor of the State of Louisiana, by virtue of the authority vested in me by the Constitution and Laws of the State of Louisiana, do hereby establish in the Executive Department, Office of the Governor, Division of Administration, the Office of State Inspector General, to examine, investigate, and make recommendations with respect to the prevention, and detection of waste, inefficiencies, mismanagement, and abuse in all the state agencies, boards, commissions, authorities, task forces, departments and divisions of the executive branch of state government. [Emphasis added.]5 In its first assignment of error, the plaintiffs urge the court to reconsider its prior rulings in this case that were addressed through the defendants filing of
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The granting of a special motion to strike pursuant to article 971 presents a question of law. Appellate review regarding questions of law is simply a review of whether the trial court was legally correct or legally incorrect. Dixon v. First Premium Ins. Group, 05-0988, p. 5 (La. App. 1 Cir. 3/29/06), 934 So. 2d 134. On legal issues, the appellate court gives no special weight to the findings of the trial court, but exercises its constitutional duty to review questions of law and renders judgment on the record. Clements v. Folse ex rel. Succession of Clements, 01-1970, p. 5 (La. App. 1 Cir. 8/14/02), 830 So. 2d 307, 312. 4 Authority for the establishment of the IG's office is found in La. R. S. 39:7 and 39:8. 5 We note that the Executive Orders 88-10 and 92-59 creating and recreating the IG's office do not authorize the IG to issue subpoenas in order to perform investigations. See, 12:3 La. Reg. 211 (4/20/88); 14:4 La. Reg. 1042 (8/20/92). Instead, all covered agencies are required to "extend full cooperation and all reasonable assistance to the state inspector general and his designees." 7

applications for supervisory writs. The plaintiffs argue that the law of the case doctrine should not apply because the prior decisions are erroneous and result in manifest injustice to them. In Day v. Campbell-Grosjean Roofing & Sheet Metal Corp., 260 La. 325, 330, 256 So. 2d 105, 107 (La. 1972), the Supreme Court stated: With regard to an appellate court, the "law of the case" refers to a policy by which the court will not, on a subsequent appeal, reconsider prior rulings in the same case. This policy applies only against those who were parties to the case when the former appellate decision was rendered and who thus had their day in court. Among reasons assigned for application of the policy are: the avoidance of indefinite relitigation of the same issue; the desirability of consistency of the result in the same litigation; and the efficiency, and the essential fairness to both parties, of affording a single opportunity for the argument and decision of the matter at issue. Nevertheless, the law-of-the-case principle is applied merely as a discretionary guide: Argument is barred where there is merely doubt as to the correctness of the former ruling, but not in cases of palpable former error or so mechanically as to accomplish manifest injustice. Further, the law-of-the-case principle is not applied so as to prevent a higher court from examining the correctness of the ruling of the previous court. See also, Zatarain v. WDSU-Television, Inc., 95-2600, p. 10 (La. App. 4 Cir. 4/24/96), 673 So. 2d 1181, 1186 ("This court generally applies the `law of the case' doctrine when reviewing an issue decided on supervisory writs as part of the appeal of the case following a trial on the merits, except when it finds either that the previous decision is based on palpable error or that manifest injustice would result."). In Trentecosta v. Beck, 96-2388, p. 10 (La. 10/21/97), 703 So. 2d 552, 559, the Supreme Court defined defamation as a tort involving the invasion of a person's interest in his or her reputation and good name. In Costello v. Hardy, 03-1146, p.

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12 (La. 1/21/04), 864 So. 2d 129, 139, the Supreme Court enumerated the following four elements that are necessary to establish a cause of action for defamation: (1) a false and defamatory statement concerning another; (2) an unprivileged publication to a third party; (3) fault at least amounting to negligence on the part of the publisher of the information; and (4) resulting injury. The Court also stated that the fault element is often considered in the jurisprudence to be actual or implied malice. Id. The Court also stated that: "The fault requirement is generally referred to in the jurisprudence as malice, actual or implied." Id. In Sassone v. Elder, 626 So. 2d 345, 353-54 (La. 1993), the Supreme Court stated: Plaintiffs in effect claim defamation by innuendo. In defamation by implication or innuendo, the court must distinguish between statements of opinion and statements of fact. In the case of opinion, if the defendant states non-defamatory facts on which he bases his derogatory opinion, he is not liable for defamation unless the opinion indicates the existence of other facts which are defamatory and would justify the forming of the opinion. Restatement (Second) of Torts

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