$340,622 judgment rejected

CARSON CITY -- The Nevada Supreme Court on Thursday threw out a $340,622 judgment against the Clark County School District that had been granted an educational software company.

Justices in a 3-0 decision said Virtual Education Software Inc. (VESI) had not been defamed by a letter and e-mail sent by Associate Superintendent George Ann Rice in 2002 or proven in a Clark County District Court trial that a drop in its business had been caused by that communication.

VESI provides computer-based education courses for teachers. By passing additional education courses, teachers can increase their salaries under collective bargaining agreements.

Rice decided in October 2002 that the courses did not have sufficient academic rigor to comply with the collective bargaining agreement, and denied pay increases to teachers who had completed them.

Virtual Education Software Inc. learned of her decision and wrote e-mails demanding the school district accept the courses "before legal means need to be pursued," according to the court decision.

Rice responded in a letter that the courses could be completed in three to five hours and tests could be passed without reading any materials.

Two of her employees had done that, Rice stated.

There also was no safeguard to determine that the appropriate teacher actually was taking the test, she said.

Rice also wrote three e-mail messages to teachers in response to inquiries about why their additional pay had been denied.

Virtual Education Software Inc. sued the school district, alleging defamation and other harm. The school district moved to dismiss the lawsuit.

A Clark County jury dismissed some of VESI's claims, but kept the four defamation claims and awarded the company a $161,024 judgment and attorney fees. The total award was $340,622.

The school district appealed that decision to the Nevada Supreme Court.

The court found Thursday that the letter Rice wrote VESI was "absolutely privileged" communication that she could write in response to the company's "threat to file a civil lawsuit."

The court cited numerous previous cases where communication between lawyers that might have been construed as defamatory could not be admitted in court because it was privileged.

If the school district's lawyer had written the letter to VESI, the court said that letter would be privileged and that "absolute privilege should be extended to Dr. Rice.

"Consequently, we extend the protection of the absolute privilege to instances where a nonlawyer asserts an alleged defamatory communication in response to a threatened litigation or during a judicial proceeding," the court stated in its decision.

Rather than a claim for defamation, VESI "more appropriately" should have sued for "business disparagement," according to the court.

But VESI also failed to establish during the trial the elements necessary to make a claim for losses because of "business disparagement," the court also decided.

The company would have to show "the general decline of business" was the result of the disparaging comments and not other elements.

As far as the three messages to teachers, the court concluded a jury could conclude they contained false and disparaging information.

But VESI failed to prove the school district intended to cause the company business losses or acted with malice.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.