FILED

JAN 29 2010

NOT FOR PUBLICATION

MOLLY C. DWYER, CLERK

U.S . CO U RT OF AP PE A LS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JM MARTINAC SHIPBUILDING No. 08-35754

CORPORATION,

D.C. No. 2:06-cv-01544-JCC Plaintiff - Appellant,

* v. MEMORANDUM

THE STATE OF WASHINGTON, by and through its DEPARTMENT OF

TRANSPORTATION; DOUGLAS B.

MacDONALD, Secretary of Transportation, in his individual capacity;

W. MICHAEL ANDERSON, Acting

Assistant Secretary and Executive Director, WSF, in his individual capacity; SAMUEL J. KUNTZ, Chief Financial Officer, WSF, in his individual capacity; and LAURENS ZUIDWEG, Director of Vessel Engineering, WSF, in his individual capacity,

Defendants - Appellees.

Appeal from the United States District Court

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. 1 for the Western District of Washington John C. Coughenour, District Judge, Presiding

Argued and Submitted October 13, 2009 Seattle, Washington

Before: CUDAHY, ** Senior Circuit Judge, and RAWLINSON and CALLAHAN, Circuit Judges.

This action involves claims for relief that arise out of purported government

misconduct and Martinac's failed bid to construct car ferries for Washington

State's Department of Transportation (WSDOT) pursuant to Substitute House Bill

(SHB) 1680. JM Martinac Shipbuilding Corporation (Martinac) challenges the

district court's order dismissing all of its claims against WSDOT and several of its

officials. We hold that the district court properly dismissed most of Martinac's

claims, but that it erred in holding that Martinac's defamation and commercial

disparagement claims (defamation claims) could not be subject to tolling pursuant

to the discovery rule. On remand, the district court should allow discovery to

determine whether the discovery rule applies to Martinac's defamation claims and

** The Honorable Richard D. Cudahy, Senior United States Circuit Judge for the Seventh Circuit, sitting by designation. 2 whether they may proceed based on actionable statements not protected by any

governmental privilege. 1

1. The present action is not moot because Martinac seeµs damages for past

conduct. Sisµiyou Reg'l Educ. Project v. U.S. Forest Serv., 565 F.3d 545, 559 (9th

Cir. 2009) (internal citations omitted). Barring several exceptions not applicable

here, even if a governing body repeals or amends the legislation about which the

plaintiff complains, his action for damages for past conduct remains a live

controversy. See, e.g. Parents Involved in Cmty. Schs. v. Seattle Sch. Dist. 1, 551

U.S. 701, 719-20 (2007).

2. Martinac's freestanding RICO claims fail because it did not adequately plead

RICO standing. 'Without a harm to a specific business or property interest - a

categorical inquiry typically determined by reference to state law - there is no

injury to business or property within the meaning of RICO.' See 18 U.S.C. y

1964(c); Canyon County v. Syngenta Seeds, Inc., 519 F.3d 975 (9th Cir. 2008)

1 Because the RICO claims may survive based on injury related to the defamation claims, the district court may decide whether RICO claims may proceed on this basis and decline to exercise supplemental jurisdiction if they may not. Alternatively, it should retain jurisdiction and maµe further findings on the defamation claims before addressing the possible surviving RICO claims.

3 (quoting Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005) (en banc), cert. denied,

546 U.S. 1311 (2006)). Washington does not allow suits for bid preparation costs

for disgruntled bidders, and, therefore, Martinac has no RICO standing as

determined by reference to state law. Peerless Food Products, Inc. v. Washington,

835 P.2d 1012, 1018-19 (Wash. 1992) (en banc); see also Bellingham Am. Pub.

Co. v. Bellingham Pub. Co., 258 P. 836, 837 (Wash. 1927).

3. The district court also properly dismissed as precluded Martinac's RICO and

common law claims based on Appellees' actions upheld as proper by a state court.

See, e.g., Rains v. Washington, 674 P.2d 165, 169 (Wash. 1983) (en banc). To the

extent the challenged actions pre-date SHB 1680 or were not addressed in the state

court ruling, they are not barred by collateral estoppel.

4. In Washington, defamation claims are subject to a two-year statute of

limitations.2 Wash. Rev. Code y 4.16.100(1). Martinac seeµs to toll the statute of

limitations through equitable tolling and the discovery rule. The district court

properly determined that equitable tolling does not apply. Washington courts have

not yet applied equitable tolling to defamation claims, and Martinac does not allege

2 Neither party nor the district court made a meaningful distinction between the commercial disparagement and defamation claims, and this Memorandum will treat them identically.

4 that Appellees concealed their allegedly defamatory statements or lulled Martinac

into failing to timely file its claims. See, e.g., Thompson v. Wilson, 175 P.3d 1149,

1154 (Wash. Ct. App. 2008).

The district court improperly concluded that the discovery rule does not

apply. The discovery rule may apply to Martinac's claims because it is unclear

whether Martinac could have immediately µnown of the cause of its injuries. See

Matter of Estates of Hibbard, 826 P.2d 690, 696 (Wash. 1992) (en banc); see also

Kittinger v. Boeing Co., 585 P.2d 812, 814-15 (Wash. Ct. App. 1978) (applying the

discovery rule to a libel claim). Given that there is no indication that Martinac

participated in the meetings or chains of correspondence in which the allegedly

defamatory statements were made, and neither party contends that transcripts of the

meetings or copies of the letters or reports were available to Martinac, it is unclear

when Martinac learned of its injury. What a person should have µnown at the time

is a question of fact, with the burden on the defendant. See, e.g., August v. U.S.

Bancorp, 190 P.3d 86, 93 (Wash. Ct. App. 2008) (citing Mayer v. City of Seattle,

10 P.3d 408, 413 (Wash. Ct. App. 2000)).

Because the district court found the claims time barred, it did not address

Appellees' argument that the contested statements are absolutely privileged. See

5 Liberty Banµ of Seattle, Inc. v. Henderson, 878 P.2d 1259, 1269 (Wash. Ct. App.

1994). Washington provides absolute immunity for high-ranµing officials who

maµe statements that have 'more than a tenuous relation to his or her official

capacity.' Aitµen v. Reed, 949 P.2d 441, 449 (Wash. Ct. App. 1998); Stidham v.

Wash., 637 P.2d 970, 972-73 (Wash. Ct. App. 1981). The existence of an absolute

privilege is a question of law for the court. Liberty Banµ, 878 P.2d at 1269. Inferior

state officers are protected only by qualified privilege, and the plaintiff may show

that the speaµer lost his privilege through abuse. See Wood v. Battle Ground Sch.

Dist., 27 P.3d 1208, 1220 (Wash. Ct. App. 2001). A privilege is abused if the

speaµer µnows that the statement is false or shows recµless disregard for its truth or

falsity - i.e., actual malice. See id. Martinac concedes that MacDonald and

Anderson, the ex-Secretary of Transportation and Washington State Ferries ex-

Executive Director, respectively, were senior government officials entitled to

absolute immunity for statements more than tenuously related to their official

capacity, but contends that Zuidweg, Director of Vessel Engineering and Kuntz,

Chief Financial Officer, are not.

Most of the allegedly defamatory statements that Martinac identifies include

statements to the legislature, the Governor, and a legislative delegation. These

6 statements by MacDonald are absolutely privileged. See, e.g., W ASH. R EV. C ODE

yy 47.01.101, 47.56.030 In addition, at least two statements appear to be non-

actionable opinions: MacDonald's characterization of the Martinac proposal in his

questions and Zuidweg's claim that he did not µnow enough about the proposal to

answer questions. In contrast, MacDonald's statements made outside the 2003

meeting purportedly involved union representatives and unµnown people in an

informal setting, rather than in the course of a formal meeting with members of the

Washington state government to whom MacDonald is statutorily required to report.

We cannot conclude as a matter of law that these statements made in an informal

setting are protected by an absolute privilege as more than tenuously connected to

his official duties. The district court's decision on the defamation claims are

remanded to allow further fact-finding pursuant to the discovery rule (depending

on its choice as to the RICO claims as specified in footnote 1).

5. The district court properly dismissed Martinac's claims for intentional and

wrongful interference with prospective economic advantage and civil conspiracy to

commit the same. As discussed above, because Martinac cannot seeµ money

damages for its bid preparation costs under Peerless, its wrongful interference

claims were properly dismissed. See, e.g., See Pac. Nw. Shooting Parµ Ass'n v.

7 City of Sequim, 144 P.3d 276, 281 n.2 (Wash. 2006) (listing the elements of

wrongful interference).

6. The district court properly dismissed Martinac's fraud claims and properly

exercised its discretion to decline to retain jurisdiction over them. Even if the

Peerless line of cases did not bar Martinac from collecting damages related to the

SHB 1680 bid process and bidding activities undertaµen prior to SHB 1680ùs

enactment, Martinac's fraud claims fail because Martinac does not adequately

plead reliance. Kirµham v. Smith, 23 P.3d 10, 13 (Wash. Ct. App. 2001) (listing the

elements of fraud). Specifically, at no point does Martinac plead that it developed

its 130-car ferry based on WSDOT's representations. In addition, the district court

did not abuse its discretion in declining to retain any fraud claims that might be

properly repleaded. A district court may properly decline supplemental jurisdiction

once it has dismissed all claims over which it had original jurisdiction (here, the

RICO claims). See 28 U.S.C. y 1367; Dream Palace v. County of Maricopa, 384

F.3d 990, 1022 (9th Cir. 2004). If, however, Martinac does have viable defamation

claims, the district court should consider whether these allow standing for RICO

purposes and whether this holding changes the district court's discretionary

determination regarding Martinac's request to replead the fraud claims.

8 7. The district court properly dismissed Martinac's negligence claims for failure to

plead that Appellees' actions created a special relationship with Martinac. See

Babcocµ v. Mason County Fire Dist. No. 6, 30 P.3d 1261, 1267, 1269-70 (Wash.

2001) (en banc).

AFFIRMED as to all claims except the defamation claims which are

REVERSED AND REMANDED for further proceedings consistent with this

memorandum.

9

FILED

JM Martinac Shipbuilding Corp. v. Washington, No. 08-35754 JAN 29 2010 CALLAHAN, CIRCUIT JUDGE, concurring and dissenting: MOLLY C. DWYER, CLERK

U.S . CO UR T OF AP PE A LS

I concur in the majority opinion to the extent that it affirms the district

court's Rule 12(b)(6) dismissal of Martinac's complaint for failure to state a claim.

I dissent from the majority's remand to the district court of Martinac's defamation

and commercial disparagement claims (the 'defamation claims.')

As to the defamation claims, I part company with the majority where it

remands Martinac's defamation claims to the district court to determine whether

the discovery rule saves the claims from the two-year statute-of-limitations.1 See

W ASH. R EV. C ODE y 4.16.100(1). I would hold that we need not resolve the

applicability of the discovery rule to the defamation claims, because all of the

alleged statements in issue are either privileged or non-actionable opinions. See

Corbally v. Kennewicµ Sch. Dist., 973 P.2d 1074, 1077 (Wash. Ct. App. 1999)

(non-actionable opinions); Aitµen v. Reed, 949 P.2d 441, 449 (Wash. Ct. App.

1998) (absolute privilege).

The majority opinion identifies only one set of statements as not being

privileged as a matter of law - Defendant MacDonald's statements made during

1 I agree with the majority that equitable tolling is inapplicable because Martinac does not allege that Defendants acted with bad faith, acted deceptively, or offered false assurances that allowed the statute of limitations to lapse. See Thompson v. Wilson, 175 P.3d 1149, 1154 (Wash. Ct. App. 2008). and outside of a 2003 meeting with Governor Gary Locµe and representatives of

labor unions. On remand, then, the district court need only determine whether the

discovery rule applies to Defendant MacDonald's statements made at the 2003

meeting.

I would hold that MacDonald's statements at the 2003 meeting are

privileged. To receive absolute immunity under Washington law, a government

official (1) must be within the class of officials absolutely entitled to publish

defamatory matter; and (2) his or her statements must have more than a tenuous

relation to the individual's official capacity. Liberty Banµ of Seattle, Inc. v.

Henderson, 878 P.2d 1259, 1268-69 (Wash. Ct. App. 1994). The majority agrees

that MacDonald is a 'senior government official entitled to absolute immunity for

statements tenuously related to [his] official capacity.' Majority Opinion at 8. Our

difference, then, concerns whether MacDonald's statements at the 2003 meeting

were unrelated to his official capacity.

Martinac's allegations in the Complaint show that MacDonald's alleged

statements are related to his position. MacDonald, as Secretary of Transportation,

is authorized to advise the governor and legislature with respect to matters under

his department's jurisdiction. W ASH. R EV. C ODE y 47.01.101. Accordingly, when

MacDonald met with the governor to discuss the failure of Referendum 51

(concerning a proposed transportation plan), Compl. j 67, the meeting had more than a tenuous relation to MacDonald's official capacity, even if representatives of

labor unions and others were involved. MacDonald's immunity also extends to his

comments to the governor about Martinac, and other aspects of his department's

ferry procurement worµ. The majority cites no authority for its implication that the

presence of union officials or other third parties deprives a state official's statement

of its immunity under Washington law, and I µnow of no such authority.2

Accordingly, I would hold that third parties' presence is irrelevant, and

MacDonald's statements made at the 2003 meeting are absolutely privileged.

Since I would affirm the district court in its entirety, I dissent from the

majority's remand of Martinac's defamation claims.

2 To rule that an official's statements are not privileged if made in the presence of anyone other than parties to whom the official has the duty to report seems impractical. For instance, if the Secretary of Transportation addressed the Washington legislature about his department's worµ, all members of the public would have to leave the chambers in order for the Secretary to retain his absolute privilege against defamation liability.